Opponents of a solar farm on Maui are raising questions about the bidding process used to select projects and negotiate contract terms between developers and the Hawaiian Electric Cos.

The filing by the Pono Power Coalition is one of the latest salvos in an ongoing challenge to Innergex Solar’s Paeahu solar project and is a new avenue for attacking large renewable energy projects.

The company says its photovoltaic array system with battery storage could produce enough electricity to power 7,300 Maui homes.

Innergex proposed the project in response to a 2018 request for proposals issued by Hawaiian Electric Industries’s affiliated utilities — Oahu-based Hawaiian Electric Co., Maui Electric Co. and the Big Island’s Hawaii Electric Light Co. Seven projects submitted in response to the RFP have been approved by the Hawaii Public Utilities Commission. But Paeahu has been slowed down by Pono Power’s intervention in the regulatory process.

Photovoltaic PV solar at Daniel Inouye Airport.
Hawaii needs a number of new photovoltaic solar projects, such as this one at Daniel K. Inouye International Airport, over the next two decades. But some projects face pushback from community groups. Cory Lum/Civil Beat/2017

A key part of the process is the regulatory approval of the contracts, known as power purchase agreements or PPAs, between the developers and utilities. The contracts lock in projects that can impact ratepayers and Hawaii’s environment for decades, and Hawaii law often allows interested parties to intervene in the PPA approval process.

Pono Power’s filing in the Paeahu PPA approval case comes amid rising concern about development of renewable energy projects. Protesters on Oahu have sought to block a wind farm planned for the North Shore community of Kahuku by AES Corp. Meanwhile, Hawaiian Electric has another request for proposals pending, the largest in the company’s 128-year history, asking developers to build even more renewable energy projects and sell the power to the utility.

Such large-scale distributed power generation projects are central to the state’s energy plan, which calls for largely weaning Hawaii off fossil fuel to produce electricity by 2045. But it remains to be seen whether communities will embrace the reality of having a proliferation of large solar and wind farms in their backyards.

Lance Collins, Pono Power Coalition’s attorney, acknowledged that it’s important to get renewable energy projects online to address the climate crisis. But he said it’s also important to make sure developers are not short-cutting the law.

“The problem is we have to make sure all these other laws designed to protect society also are complied with,” said Collins.

Pono Power is gearing up for a contested case hearing before the PUC in December, Collins said.

Conflicting Interests?

The crux of Pono Power’s argument is that developers may have engaged in anticompetitive practices by, among other things, using the same lawyers from Honolulu’s Yamamoto-Caliboso firm to represent them when bidding and negotiating terms of energy sales contracts with the Hawaiian Electric affiliates.

Hawaii’s legal ethics rules governing conflicts of interest generally prohibit a lawyer from representing a client if there is “a significant risk that the representation of one or more clients will be materially limited by the lawyer’s responsibilities to another client.” This means a lawyer generally couldn’t represent multiple parties in a competitive bidding process; however, the rules do allow clients to waive the conflict in many circumstances.

“As a general rule, they cannot go forward unless they get informed consent of the clients,” said Randy Roth, a retired law professor who taught the course in professional responsibility at the University of Hawaii, William S. Richardson School of Law.

Collins said questions about legal ethics were outside the scope of the issues he has raised, which instead focus on antitrust allegations.

In testimony submitted in the case, Sumner LaCroix, a University of Hawaii economist, says aspects of the process — chiefly the competitors all using the same lawyers – “increase the likelihood of anticompetitive behavior and successful price fixing in the bidding process for these projects.”

Pono Power isn’t the only party to raise such questions. Hawaiian Electric has also raised concerns about the 2018 RFP bidding and negotiation process.

And so has the Hawaii Consumer Advocate, Dean Nishina. According to the Consumer Advocate, four developers with seven PPAs before the regulators all used lawyers from Yamamoto-Caliboso, who were present at one or more meetings or on emails: Jennifer Lootens, David Morris, Dean Yamamoto and Wil Yamamoto.

“Hawaiian Electric, Hawaii Electric Light, and Maui Electric each indicated that they had ‘several concerns when the Company became aware that the same attorney(s) were representing all of the developers named to the Final Award Group,’” Nishina said in a March 2019 document submitted to the PUC as part of a project being developed on Maui by AES Corp.

“While the Company assumes and has no indication to suggest otherwise that each bid was submitted without collusion, the fact that multiple bidders possibly utilized the same legal counsel during their bid preparation did raise concerns as to whether bids were, in fact, submitted independently and without the sharing of information or guidance from their shared legal counsel,” HECO wrote in a document cited by the Consumer Advocate.

Like Hawaiian Electric, Nishina’s office also concluded there was no evidence of collusion; however, the agency wrote, “At the same time, the Consumer Advocate is concerned that having one attorney lead negotiations for all four developers’ PPAs gives rise to, at a minimum, the appearance of impropriety.”

Still, neither Hawaiian Electric nor Nishina pushed the issue. The AES submitted statements that it didn’t gain an advantage from sharing counsel with other developers. And the PUC ultimately approved the PPA, noting among other things that independent observers assigned to monitor the bidding process “did not identify terms that appeared unreasonable resulting from the PPA negotiations.”

Kahuku Windmill Demonstration sign along Kamehameha Highway in Kahuku.
The challenge to Maui’s Paeahu comes as Kahuku residents on Oahu are protesting a new wind farm. Cory Lum/Civil Beat

Nishina did not respond to a written request for comment.

Dean Yamamoto, Yamamoto-Caliboso’s founder and managing member, was not available for comment.

Doug Codiga, the attorney for Innergex’s Paeahu project, declined to comment.

Jay Griffin, the chairman of Hawaii’s PUC, said he could not comment on a pending matter.

Hawaiian Electric declined interview requests but issued a statement acknowledging it raised concerns during “Phase 1” of the RFP process.

“For Phase 2 of the RFP, Hawaiian Electric proposed that the same lawyer not be able to represent more than one developer during PPA negotiations,” wrote Shannon Tangonan, a spokeswoman for the Hawaiian Electric companies. “Instead of prohibiting dual representation by the same lawyer, the Phase 2 RFP approved by the PUC requires that lawyers involved in multiple PPA negotiations sign a certificate or affidavit certifying that they have not shared information obtained from one developer with another developer during the RFP process.”

“Hawaii’s Changing Economy”  series is supported by a grant from the Hawaii Community Foundation as part of its CHANGE Framework project.

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