The Alliance for Solar Choice, a national lobbying group for rooftop solar, plans to intervene in the pending sale of the parent company of Hawaii’s major electrical utilities. The group is questioning whether the sale is in the public interest.
Juno Beach, Fla.-based NextEra Energy Inc. said in December it plans to buy Hawaiian Electric Industries for $4.3 billion. In January the two companies filed an application seeking approval from the state Public Utilities Commission. The companies hope to complete the sale this year.
NextEra Energy has said it can bring down electrical rates in Hawaii, which are the highest in the nation at 35.06 cents per kilowatt-hour in November, according to the U.S. Energy Information Administration. Residential customer electric bills for NextEra’s Florida utility, Florida Power & Light Co., are approximately 25 percent lower than the national average of 12.46 cents.
During a conference call on the company’s fourth-quarter earnings, Constance Lau, president and chief executive officer of HEI, said the sale would bring positive changes for Hawaii customers, including the fact that NextEra would not raise base electrical rates for four years, saving customers an estimated $60 million.
The Alliance for Solar Choice, or TASC, wants to evaluate whether the promised savings would lead to the best rates for customers over time, said Robert Harris, a Hawaii representative for the group.
"TASC has concerns about the application and wants to be involved to insure the best interests of Hawaii are represented," Harris said.
Harris said TASC plans to intervene and will likely hire James Van Nostrand, associate professor at West Virginia University and director of the Center for Energy and Sustainable Development in the WVU College of Law.
Van Nostrand has written on several merger transactions involving investor-owned utilities, including Sydney-based Macquarie Bank’s acquisition of Seattle-based Puget Sound Energy in 2010 and Glasgow, Scotland-based ScottishPower’s acquisition of Portland-based PacifiCorp in 1999.
The NextEra and HEI application is concerning, Van Nostrand said.
Van Nostrand said NextEra’s promise not to raise rates over four years doesn’t go far enough.
The ability of NextEra to borrow money at lower rates and its financially healthy position should help bring rates down, Van Nostrand said.
According to Van Nostrand, not going before the PUC for a rate increase for four years is not a benefit, but a loss for electrical utility customers because the PUC doesn’t get to examine the company’s finances and transfer the reduced costs to customers.
"Customers would not see the immediate benefits from NextEra’s lower debt cost and better credit rating if the company’s finances are not presented before the PUC," he said. "If they do all of the things they say they are going to do, they wouldn’t be able to justify a rate increase. In fact if they go before the PUC, you might get a rate decrease."
The pending review by the PUC will prove that NextEra’s commitments do provide substantial savings for customers, said Rob Gould, spokesman for NextEra.
"We disagree with the characterizations of our proposed commitments. Of note, we’re proposing certain other important commitments, including $60 million in quantified customer savings that the company would forgo," Gould said. "That said, these matters will be fully addressed as part of the pending PUC review, and we look forward to participating in that process."
Along with the fixed base rate, Van Nostrand said other statements in the application are not as customer-focused as they originally seem, including the advisory board and promised local management.
At a review in January, many lawmakers said they were concerned about Hawaii’s say in how the company will operate if the deal was approved and what the acquisition would mean for current HECO employees.
In the application, the companies promised that "Hawaiian Electric will continue to be locally managed, with no involuntary workforce reductions for at least two years post close."
The location might be local but the people might not be, said Van Nostrand.
"All it says is that whomever we put in place in those positions, they are going to be based in Honolulu," he said.
Because NextEra is headquartered in Florida, the company said that there would be a local advisory board of six to 12 people who would help guide decision-making.
"NextEra Energy has committed to establish a local, independent advisory board to be made up of six to 12 members, all of whom will have substantial ties to the Hawaii community. The purpose of the board will be to provide input on matters of local and community interest," the companies said in the application.
The advisory board outlined in the application does not secure a level of local control on company matters, Van Nostrand said.
"They have no power. They provide input," he said. "The advisory board is nonsense."
The companies’ promise in the application of no involuntary layoffs for two years does not guarantee that the HECO staff size would remain unchanged, Van Nostrand said.
"That’s code for ‘We are going to merge these companies together and shed some bodies,’" he said. "There are some positions that are going to be duplicative."
