80It came close, but now NextEra Energy Inc. likely will fade from the headlines in Hawaii. Read more
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It came close, but now NextEra Energy Inc. likely will fade from the headlines in Hawaii.
The state Public Utilities Commission rejected NextEra’s bid to buy Hawaii’s largest electric utility, and barring any reversal of that decision, the would-be new owner of Hawaiian Electric Industries Inc. will be heading back to Florida.
Whether that is cause for celebration or mourning depends on whom you ask.
>> Headquarters: Juno Beach, Fla.
>> Revenue: $17.5 billion
>> Employees: 14,300 in 27 states and Canada
>> CEO: Jim Robo
>> Founded: 1924
>> Subsidiaries: NextEra Energy Inc., Florida Power & Light
HAWAIIAN ELECTRIC
>> Headquarters: Honolulu
>> Revenue: $2.6 billion
>> Employees: 3,918
>> CEO: Connie Lau
>> Founded: 1891
>> Subsidiaries: Hawaiian Electric Co., Maui Electric Co., Hawaii Electric Light Co., American Savings Bank
NextEra billed itself as “a leading clean energy company” and “the world’s largest generator of renewable energy from the wind and sun.”
It runs Florida Power & Light Co. with 4.8 million customers and proudly touts its low rates, reliability and use of new technology such as smart meters. J.D. Power’s electrical utility survey released this month said FP&L had the highest customer satisfaction among all electrical utilities in the South.
Eric Silagy, president and CEO of FP&L, said earlier this month that the average electricity bill for FPL customers is 30 percent lower than the national average.
The residential rate in Florida was 11.07 cents per kilowatt-hour in April compared with the average national electrical rate of 12.96 cents per kilowatt-hour, according to the U.S. Energy Information Administration. In Hawaii the rate was 26.93 cents per kilowatt-hour.
NextEra’s other major subsidiary is NextEra Energy Resources, a major provider of wind power in the U.S. with 110 wind farms in 19 states.
Environmental concerns
| MORE:
» The utilities commission cites distrust of NextEra |
Proponents said that NextEra’s big balance sheet and experience with renewable energy would help Hawaii move away from fossil fuels.
“NextEra Energy has the resources and experience to not only help us reach our clean-energy goals, but also to accelerate the process and deliver long-term cost savings to customers and businesses,” Alan Oshima, Hawaiian Electric Co.’s president and CEO, said during the review process. “NextEra Energy is the right partner for Hawaiian Electric and the right partner for Hawaii.”
But not everyone was on board with that narrative.
Detractors said NextEra is a bad fit for Hawaii because it is too far away to effectively manage a business in Hawaii, would view Hawaii as a tiny part of its overall operations, favors the old utility model of central power generation, has discouraged rooftop solar panel systems and relies heavily on nuclear power.
NextEra critics, including Gov. David Ige, questioned the company’s commitment to Hawaii’s goal of generating 100 percent of its electric power from renewable sources by 2045. NextEra has said it wants to convert some HEI power plants to liquefied natural gas, which Ige said would only delay the state’s move to renewables.
At NextEra’s Florida power company, 68 percent of its electricity comes from natural gas, 23 percent from nuclear, 5 percent from third parties, 4 percent coal and less than 1 percent oil and solar.
NextEra is a proponent of nuclear. It generates electricity from eight commercial nuclear power units in Florida, New Hampshire, Iowa and Wisconsin.
The Florida utility’s heavy reliance on natural gas is a concern for some local environmental groups.
Marti Townsend, executive director of the Sierra Club of Hawaii, said she is worried about the company’s use of natural gas because of the environmental impacts of fracking. Fracking, or hydraulic fracturing, is a process where water, sand and chemicals are pumped underground to break apart rock and extract natural gas. Environmentalists say the process can contaminate local water supplies and cause earthquakes.
The bottom line
Local critics have accused the company for valuing its bottom line over ratepayers.
“NextEra bet big on natural gas and passed additional costs on to ratepayers, which Florida’s Public Council called ‘unfair’ to consumers,” said state Rep. Chris Lee (D, Kailua-Waimanalo). “Legislators I’ve spoken with in Florida have warned that NextEra looks out for NextEra, and consumers tend to be collateral damage.”
During the first quarter NextEra’s Florida utility requested a base rate adjustment that would increase customer bills by 2.8 percent every year from January 2016 through 2020. FP&L said the increase would allow for more investments to modernize its power plant system and improve the reliability and resilience of its grid for its customers.
About $8 million was collected during the three months ending March 31 from a rate increase to pay for the modernization of the Port Everglades natural-gas power plant that was placed in service in April. Customers will pay approximately $216 million for the power plant over the year.
Townsend and Lee said they are concerned about the barriers FP&L has placed on adopting residential solar-energy systems.
Rooftop solar panels, which are popular in Hawaii, are not a priority for the company. At NextEra’s Florida utility there are roughly 3,000 rooftop solar systems among its 4.8 million customers, compared with HEI’s utility subsidiaries, which have more than 71,000 rooftop solar systems among 450,000 customers. NextEra has said few of its Florida customers have adopted rooftop solar panels because of the company’s low electricity bills.
A recent trend toward declining electric-power sales — due to greater efficiency and self-supplied power — has led some electric companies to look toward mergers and acquisitions as a way to continue growing.
NextEra is looking to buy regulated utilities. In addition to HEI, NextEra might be looking to buy Oncor Electric Delivery Co., a leading Texas electrical utility, for $17 million to $18 million, according to recent news reports.
NextEra has a track record in Hawaii.
NextEra Energy Transmission was looking to build an undersea power cable connecting Maui to Oahu in 2013. The company spent more than $10 million assembling a team, acquiring site control, developing viable cable routes and undertaking preliminary engineering studies. The undersea cable is still waiting on a decision from the PUC.
NextEra Energy Resources said in December it plans to build roughly 17 megawatts of solar facilities on three separate military installations on Oahu.
REACTIONS TO THE DECISION
The Hawaii energy community reacts to the state PUC decision to reject NextEra Energy Inc.’s purchase of Hawaii’s largest electrical utility.
Jeff Ono
Consumer advocate
“We’re not assuming that this proceeding is over yet. Applicants are reviewing the PUC’s order and evaluating whether they are willing to accept the PUC’s decision or will seek a reconsideration. … Although we agree with the PUC that the applicants did not promise adequate customer benefits and provided inadequate support of the merger, we are reviewing the order to determine if any clarification to the order may be necessary.”
Dawn Lippert
Co-founder and director, Energy Excelerator
“Looking through the lens of innovation, we believed that the Hawaiian Electric and NextEra merger made sense for Hawaii. Our thought process has been to first, respect the PUC’s decision making process; second, recognize that execution is key for transformation; and third, fight hard to accelerate the pace of innovation in Hawaii.”
State Rep. Chris Lee
House Energy and Environmental Protection Committee
“This decision is a huge win for local consumers and affirms that from this day forward major utility decisions must make the interests of local residents a priority, that the centralized utility monopoly must change, and that replacing one monopoly with an even bigger one isn’t the answer people are looking for. There are far better alternative options that will save consumers significantly more money and more quickly get us off our reliance on imported fossil fuels.”
Isaac Moriwake
Attorney, Earthjustice
“NextEra made this a no-brainer. Outright rejection of the takeover was the only realistic option. NextEra refused to provide its plans for Hawaii, other than to give us a ‘bigger HECO.’ Based on its opposition to clean energy in Florida and failure to chart a different path in this state, NextEra is not what Hawaii wants or needs.”
Marti Townsend
Director, Sierra Club of Hawaii
“Hawaii is committed to a 100 percent clean energy future. We need partners that will help advance our critical economic and environmental goals, and not businesses focused solely on their short-term gain.”
Kyle Datta
General partner, Ulupono Initiative
“We thank the PUC for performing such a thorough investigation of the proposed merger agreement. We trust that the commissioners and staff did their due diligence and did not find the terms to be in the best interest for the people of Hawaii. We believe that the principles the PUC adopted in this merger — the need for guaranteed rate credits, firm enforceable commitments to accelerate renewable energy, provisions for fair competition and a level playing field, and protecting ratepayers from risk through ironclad ring fencing — should be applied to any future suitor.”
KEY DATES LEADING TO THE BUSTED DEAL
Florida-based NextEra Energy Inc. and Hawaiian Electric Industries Inc. announce that NextEra plans to purchase HEI’s electrical utilities for a total of $4.3 billion and spin off HEI’s subsidiary American Savings Bank.
NextEra and HEI file an application with the state Public Utilities Commission.
NextEra says the acquisition would result in approximately $60 million in customer savings over four years. NextEra promises not to seek a rate increase for four years and not to lay off workers for two years after the sale closes. HECO and its headquarters would remain in Honolulu. NextEra would also continue its current level of corporate giving.
The state PUC allows 28 groups, from state agencies and environmental groups to solar companies, to be official intervenors in the sale’s review.
Gov. David Ige announces he is opposed to the sale.
The state Consumer Advocate says he opposed to the sale.
Jennifer Sabas, longtime aide to the late U.S. Sen. Daniel K. Inouye, is hired by NextEra as a consultant.
PUC begins public hearing sessions on Maui, Molokai, Lanai, Kauai and the Big Island.
PUC holds public listening session on Oahu.
PUC begins trial-like hearings for NextEra’s purchase of HEI.
An email from HEI CEO Connie Lau says NextEra views its purchase of HEI as a “snack” on its way to buying other regulated electric utilities.
PUC ends trial-like hearings.
The contract between HEI and NextEra expires.
Gov. David Ige appoints Tom Gorak, the PUC’s chief counsel, to take the place of outgoing PUC Commissioner Michael Champley. Ige says he appointed Gorak because his views align with the governor’s.
PUC votes to not approve the HECO Companies and NextEra Energy's joint application for change of control by Honolulu Star-Advertiser on Scribd
PUC release supplement – July 15 by Honolulu Star-Advertiser on Scribd