This article was posted by Henry Curtis this morning on Ililani Media. It covers the next step in the possible merger between HECO and NextEra. This directly relates to our second teach-in covering “Energy on Maui.”
http://www.ililani.media/2016/05/nextera-heco-phase-2-puc-decision.html
NextEra-HECO Phase 2: The PUC Decision
By Henry Curtis
On the first day, December 3, 2014, NextEra announced that it was going to acquire the Hawaiian Electric Companies.
On the 517th day, May 2, 2016, the Applicants, the Consumer Advocate, and the intervenors filed their Reply Briefs.
Now the Public Utilities Commission must sift through all of the filings – – the testimony, exhibits, evidentiary hearing transcripts, and briefs – – to reach a decision. Yes, no, or yes with conditions.
Most Parties filed Reply Briefs yesterday. Here is the latest breakdown of positions taken.
| YES | HECO, MECO, HELCO, NextEra |
| NO | Government: Consumer Advocate (CA), Department of Business, Economic Development & Tourism (DBEDT), County of Hawai`i (COH), County of Maui (COM) |
| NO | Public Interest Groups: Friends of Lana`i (FOL), Ka Lei Maile Ali`i Hawaiian Civic Club (KLMA), Life of the Land (LOL), Puna Pono Alliance (PPA), Sierra Club |
| NO | Industry: Hawaii PV Coalition (HPVC), Hawaii Solar Energy Association (HSEA), Tawhiri Power, The Alliance for Solar Choice (TASC), The Gas Company (Hawai`iGas) |
| Yes, if with Conditions | Blue Planet Foundation (BPF), Hawaii Island Energy Cooperative (HIEC), Renewable Energy Action Coalition of Hawaii (REACH), Sun Edison, Ulupono Initiative |
| No Position | Hawaii Renewable Energy Assn (HREA) |
Some Parties, if they did file Reply Briefs, did not email them to other Parties. But based on previous submissions: No for Office of Planning (OP), No for Hina Power Corporation. Yes, if conditions for Sun Power. Limited Participation for both AES Hawaii and Kauai Island Utility Cooperative (KIUC).
Binary Decision
The Consumer Advocate along with many other parties recognized that the Applicant has presented the Commission with a choice: accept or reject but do not impose conditions. EarthJustice, the attorney for Sierra Club, called this the binary choice.
“Having failed to meet their burden of proof, the Consumer Advocate recommends that the Merger be rejected in its entirety.”
The County of Maui also addressed NextEra`s up or down position. “The Applicants frame this merger as a false choice between the “status quo” if the merger is denied, or “lower rates, better reliability, and more clean energy” if the merger is approved.
The County of Maui disagrees and believes that the Commission’s watershed decision is actually a choice between strengthening and entrenching the status quo, if the merger is approved, or choosing to create utilities-of-the-future, consistent with the Inclinations white paper, if the merger is denied.
The County of Maui recommends that the Commission choose to create island-specific, utilities-of-the-future and deny the proposed merger.”
The County of Maui stated that “at best, the commitments might temporarily mitigate some of the symptoms of an unsustainable vertically integrated utility business model. At worst, a reliance on unverifiable commitments could result in unmet promises, widespread exposure to financial uncertainty, diminished competition leading to increased costs and decreased consumer choice, stranded assets, and increased consumer costs over the long term.”
The Aloha Spirit
Life of the Land, Ka Lei Maile Ali`i Hawaiian Civic Club, and Puna Pono Alliance (“Joint Parties”), filed separate motions and Information Requests but joined together in filing testimony, cross examining witnesses and filing briefs.
“One of the most absurd statements made by NextEra is that, `Despite the commitments made by Applicants across the ranges of the utilities’ business, there are Parties who in a sense do not want anything to change.`
All Parties want change, but not necessarily what NextEra wants. To downplay opposing views doesn’t reflect the Aloha Spirit. Different groups are entitled to have different positions. The public gains from having multiple positions debated.
NextEra adds more fuel to the fire by asserting that Parties which disagree with NextEra, lack common sense and are unreasonable. NextEra claims that some Parties believe that “NextEra Energy should not have any meaningful role in management of the utilities. To any sensible mind, this is both unreasonable and unacceptable.”
The Path Forward
A number of parties address the Path Forward. “The public interest requires Hawaii’s utilities to be willing partners that show leadership in Hawaii’s clean energy transformation. DBEDT is particularly troubled by NextEra’s failure to go beyond generalities on this critical issue.”
Life of the Land, Ka Lei Maile Ali`i Hawaiian Civic Club, and Puna Pono Alliance assert “the single greatest error in meeting the State’s clean energy goals is going down the wrong path. By contrast, NextEra asserted, ʻThe greatest single vulnerability in meeting the State’s clean energy goals is the Hawaiian Electric Companies’ limited financial resources.ʻ”
The County of Hawai`i asserted, “the significant attention these proceedings have garnered indicate the importance of this issue to Hawai`i’s future and to the entire nation.
“Although they express support for the State’s renewable energy goal, Applicants’ commitments and vision for the clean energy transition are illusory. NextEra’s focus is on utility-scale renewable energy, and it is not clear what role distributed solar generation will play in their plans for the HECO transition.”
The County of Maui stressed that HECO does not serve just one population. The issue is “whether approval of the Proposed Transaction would be in the best interests of the State’s economy and the island communities of Maui, Molokai, Lanai, Oahu, and Hawaii.”
The Hawaii Solar Energy Association focused on feelings. “NextEra’s balance sheet notwithstanding, nothing else in this record much matters unless the acquirer’s heart and soul is dedicated, to paraphrase the Commission, to the realignment of the utility business model with customer interests and public policy goals.”
“NextEra’s calculated opaqueness makes it unknowable if the change proposed is preferable to the status quo. NextEra further muddies the water by asserting that the status quo is somehow immutable; that the HECO companies are simply incapable of dealing with the immense task before them without a change of ownership. HSEA finds that this is patently false.”
The Alliance on Solar Choice addressed the future. “NextEra is committed to imposing an outdated utility-centric business model that is fundamentally at odds with empowering customers to manage their energy use and bills and the increasingly non-traditional utility business functions that the HECO Companies must perform to meet the State’s renewable energy goals.”
The First Impression was a key concept for the Consumer Advocate. “The Merger represents the most significant event that would affect Hawaii’s energy industry, Hawaii’s economy (which relies on affordable, reliable energy), and Hawaii’s residents. The Merger also represents a potentially powerful catalyst that could positively (or negatively) Hawaii’s clean energy transition efforts.”
“As opposed to providing the Commission and parties their best efforts and offer from the beginning, the Applicants have not taken advantage of the opportunities to establish a good first impression, have failed to meet their burden of proof.”
Life of the Land, Ka Lei Maile Ali`i Hawaiian Civic Club, and Puna Pono Alliance asserted that the choice of paths is critical.
“With the exception of lip service, and paraphrasing some Commission concerns, the new plans continue on the old path. Thus HECO and NextEra are both heading in the wrong direction. NextEra asserts they can get us to their destination faster and more efficiently. So what. Mussolini made the trains run on time. Getting on the right path or trajectory is far more important.
NextEra jumped into the fray during a time of tremendous instability. Hawai`i is in the midst of a period of disruptive innovation. The Public Utilities Commission and the energy stakeholders are transforming the energy arena. The comparison must be between a future point on the NextEra path versus a future point on the non-merged path.”
Ontological Impossibility
According to The Alliance for Solar Choice (TASC), “the evidentiary record, NextEra’s track record in Florida and its work in Hawaii with the HECO Companies demonstrate that NextEra does not hold that vision for Hawaii’s future.”
Hawaii PV Coalition`s “opinion arises from NextEra’s systematic and brazen attempts to manipulate the regulatory environment in Florida, as described in disturbing detail in Mr. Skop’s testimony. HPVC is also shocked by NextEra’s cynical support – contemporaneous with this docket – of a misleading “smart solar” Florida ballot initiative aimed to defeat a grassroots initiative to enable third-party solar options that are available in Hawai`i and across the country.
NextEra cannot credibly claim to support distributed solar generation in Hawai`i while simultaneously opposing customer access to solar through ballot initiative.”
Hawaii Solar Energy Association took it one step further. “NextEra and the other regulated utility companies in Florida have done their utmost to keep the disruptive DG Genie in the bottle. In Hawaii public policy, reality and customer preference will all mandate NextEra to embrace precisely the opposite.”
“HSEA believes this is an ontological impossibility for NextEra – to become two entities equally committed to opposing core beliefs. The record provides us with no faith that NextEra’s management is capable of developing the necessary split personality to operate successfully and with public support and enthusiasm in Hawaii. NextEra’s attempt to explain the relative paucity of DG in Florida as a function of their success – inexpensive electricity – just doesn’t wash.”
“Money and a few good men (and women) alone will not solve what ails HECO. Nor will the knee-jerk utility tendency to impede DG, energy efficiency or whatever else the Edison Electric Institute and the unreconstructed bond rating agencies think threatens shareholder returns.”
“NextEra is openly hostile to adding rooftop solar in Florida,” according to Life of the Land, Puna Pono Alliance and Ka Lei Maile Ali`i Hawaiian Civic Club.
“They spent big money to prevent Florida residents from having the right to express their opinion on a ballot initiative. Other states with lower rates have higher solar penetration. Yet NextEra insists that rooftop solar makes no sense in Florida.
During the evidentiary hearing several NextEra lawyers pleaded with witnesses to except this. The Applicants insisted over and over that there are compelling reasons beyond NextEra for low rooftop solar penetration in Florida. While numerous parties entered credible evidence, the Applicants persisted in the myths.”
Empty Slogans
Earthjustice on behalf of Sierra Club asserted that NextEra`s “opening brief still recites the same empty slogans and one-dimensional rationales seen throughout this case: praising NextEra’s size and capabilities, yet failing to provide NextEra’s vision and plans for Hawai`i, and offering a lopsided deal grossly favoring Applicants’ self-interests over the customer and public interests.”
Consumer Advocate asserted that “the proposed transaction, while argued by Applicants to be a generous mix of putative benefits, is offset by new and significant regulatory risks, unquantified costs, and complexities.”
“In its filings in this proceeding, the Consumer Advocate has provided ample evidence to support its analyses and its recommendations. The same cannot be said for Applicants who have generally relied on a “trust us” approach to convincing the Commission.”
The Consumer Advocate also focused on the volume of responses provided by the Applicants.
“While Applicants may have provided volumes of documents, the quality of those
documents are of questionable reliability, lacking in details, not substantive, and should not be accepted by the Commission. The quality of the data will not allow the Commission to find that Applicants’ claims that they will provide substantial benefits are supported.”
Rates
NextEra stresses that they wanted to impose a four-year moratorium on rates. The Consumer Advocate pointed out that this wasn`t the whole picture.
“Applicants’ condition only relates to a base rate moratorium. However, among the Applicants’ conditions is that existing cost recovery mechanisms remain intact.
As a result, if Applicants’ conditions are accepted as is, Applicants would still be allowed to impose possibly significant rate increases through the RAM, the proposed Above the RAM Cap, REIP, PPAC, IRP and ECAC mechanisms.
The “value” of the Applicants’ rate case moratorium is unquantifiable and should be viewed as a poor attempt to suggest significant value when there is none.”
Life of the Land, Ka Lei Maile Ali`i Hawaiian Civic Club, and Puna Pono Alliance opined that the Applicants propose to freeze the “rate base” while undergoing a capital intensive program that will be paid for by ratepayers through a variety of price adjustment mechanisms. This is in fact a de facto rate hike.
Commission Decision
State agencies believe that the choice is simple. “The Commission would be on firm ground to the extent it issued an order rejecting the proposed change of control outright,” according to DBEDT.
“The Commission also has authority to conditionally approve the proposal. In their Opening Brief, the Applicants address this authority, suggesting that any attempt by the Commission to attach conditions to the flawed proposal would be unsuccessful.”
The Consumer Advocate concluded, “Applicants have taken the position that it is their way or no way. Thus, it appears that the Commission is left with only one option — the Commission must deny the Merger.”
Life of the Land, Ka Lei Maile Ali`i Hawaiian Civic Club, and Puna Pono Alliance noted that NextEra has sought to remove Commissioners who delve to deeply into their activities.