Saturday, July 23, 2016

Two Hawai`i Energy Conferences This Week: Military & Ethics

By Henry Curtis
Hawai`i`s fourth major energy conference of this year will be held on Wednesday and Thursday at Pearl Harbor. Only two members of the media are registered to attend, Pacific Business News reporter Kathleen Gallagher, and myself.

RIMPAC is the world's largest international maritime warfare exercise. It is held biennially in Hawai`i, during June and July of even-numbered years.
Topics being discussed during DETC @ RIMPAC will include the National Defense Authorization Act, Cyber Security, Biofuels, Water, Waste, and Test Bed Capabilities.
I had an opportunity to talk with the only state legislator who signed up for the conference. Representative Mark Nakashima supports renewable energy based hydrogen for its energy storage capabilities.
After the conference there will be a tour of key Pearl Harbor energy innovation sites, focusing on microgrids, a hydrogen refueling station, a waste-to-energy system, and an energy trailer.

Thursday evening there will be a panel discussion on “Ethics in Energy and the Environment” held at the University of Hawai`i, Mānoa. The event is sponsored by the William S. Richardson School of Law, the Shidler College of Business and the Hawaii State Bar Association. RSVP suggested.
The speakers on ethics will be HECO President Alan Oshima, Consumer Advocate Jeff Ono, former Congressperson Colleen Hanabusa, and Covanta CEO Stephen Jones. Covanta owns the H-Power garbage-to-energy facility on O`ahu.
Hanabusa is Chairwoman of the Honolulu Authority for Rapid Transportation (HART), the entity overseeing he development of rail, and also serves on the Hawaii Gas Board of Directors.
There were three Hawai`i-based energy conferences this year.
In January there was the surprisingly informative, but somewhat expensive, Fifth Annual Hawaii Power Summit sponsored by Electric Utility Consultants, Inc. (EUCI). That was followed by the Maui Energy Conference in March, and the GreenBiz Group VERGE conference in June.
There are several special anniversaries for late July.

On July 26, 1969, following the first moon walk, Apollo 11 astronauts Neil Armstrong, Edwin Aldrin, Jr., and Michael Collins, arrived at Pearl Harbor aboard the carrier Hornet.
On July 28, 1945, a B-52 Bomber crashed into New York City`s  Empire State Building, between the 78th and 80th floors, carving an 18-by-20-foot hole in the building.
On July 29, 1959, Qantas Empire Airways started the first commercial jet aircraft service linking Hawaii to Australia and San Francisco.
On July 29, 1971, recently deceased Maui County Mayor Elmer Carvalho, and Life of the Land, file suit against the U.S. Navy to stop the bombing of Kaho’olawe. Cravalho served as speaker of the Territorial and State House from 1959-67 and as Maui Mayor from 1969-79.
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Will Darby Duplicate Iselle`s Impacts?

By Henry Curtis

Tropical Storm Darby was located 150 miles east south east of Hilo at 11 pm last night, and was moving west at close to 10 miles per hour. Darby is expected to hit the island of Hawaii today.
Gov. David Ige signed a pre-landfall emergency proclamation.
“I urge residents and businesses to follow emergency instructions, prepare for the storm and take steps to protect your families, employees and property. The state is standing by to assist the counties — particularly Hawai`i and Maui counties — which are expected to be the first to feel the impact of Tropical Storm Darby.”
Big Island residents remember Tropical Storm Iselle, which struck the island in August 2014.
Iselle knocked out HELCO transmission lines which caused Puna Geothermal Ventures (PGV) to shut down its Puna geothermal facility. None of the air emission monitors were working when the plant had an unscheduled release of toxic hydrogen sulfide gas.
Members of the Puna Pono Alliance reported that over 100 people experienced health impacts. Some blacked out. Civil Defense told residents who felt sick to leave the area but the roads were impassable.
Puna residents wonder if PGV will shut down ahead of Darby, or stay on-line risking another accidental emission which may further impact the health of Puna residents.
The National Weather Service issued a report at 11 pm last night that “a tropical storm warning is in effect for the Big Island and Maui County.”
“A tight pressure gradient between a surface high centered far NNW of the islands and approaching Darby is causing locally gusty trade winds. The strongest winds observed so far this evening have occurred at Kealakomo in Hawaii Volcanoes National Park, where north winds of 25 to 35 mph with gusts up to 52 mph are being caused by a combination of the approaching tropical storm and favorable terrain funneling.”
“It should be noted, as we saw with Tropical Storm Iselle in 2014, damaging wind gusts could occur well away from the core of the system due to unusual local terrain effects like gap winds and channeling between the islands.”
“Heavy rainfall associated with Darby will continue to spread northwest over the other islands during the weekend. As a result, a Flash Flood Watch remains in effect from late tonight through Sunday afternoon for Maui County and the Big Island, and for Saturday evening through Sunday afternoon for Oahu.”
“Swells associated with the captured fetch from Darby are already affecting the islands, and a high surf warning is in place for east facing shores of Maui and the Big Island, with a high surf advisory in place for exposed east facing shores of the remaining islands. There is a possibility that we may have to expand the High Surf Warning to include east facing shores of islands currently in the advisory, but this is expected to hinge on the eventual track that Darby takes.”
Some residents wonder if the large number of Pacific storms last year and this year are part of a normal storm cycle or part of a new normal due to rising ocean water temperatures caused by global warming.
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Friday, July 22, 2016

New solar and battery appliances threatens traditional utility operations

By Henry Curtis

The Public Utilities Commission (PUC) require that Hawaiian Electric Company (HECO) customers who install rooftop solar and/or batteries get permission to do so from the utility.

But the marketplace has developed new technology that is functionally different from traditional solar and batteries.

There are solar panels and battery systems available in the marketplace today that are like appliances. They can be plugged into any outlet by anyone. They are as simple as plugging in a toaster or hair dryer.

Orison Tower is 9-inches wide, 34-inches tall, and has a weight of 40 pounds. One can easily imagine putting a lamp shade over the top, which emits a bluish light. The Orison Panel is a rectangular flat wall-mounted panel measuring 22-by-28-inches.

The growth in Plug-and-Play (PnP) or Do-It-Yourself (DIY) solar and batteries are being the current reach of the utility and the regulator.

Solar panels can be hung off railings or place on a lanai or patio. 

Traditional solar panels require inverters to convert direct current (DC) to alternating current (AC). By contrast the Orison units are appliances associated with the Internet Of Things (IOT).

At the VERGE Hawaii 2016 conference, Orison Energy had a display booth. 

Life all other battery companies attending the conference, Orison representatives made it clear that their system was designed to provide storage for those who obtained power from the local electric utility, that is, grid-tied customers.

I spoke with Orison Founder, President and CEO Eric Clifton. “Our major sales model is through the utilities. We are partnering with utilities around the world right now.”

Unlike traditional battery companies which offer hard-wired systems, or the Tesla Power Wall which can provide storage for the whole house, Orison aims smaller.

“The major push for this is small-scale scalable energy storage for residential customers. …All of our competitors are looking at single family detached with solar on it. We`re everything else. Think Shanghai.  Think Manhattan. Think San Francisco.”

The smaller units can be linked together within buildings.

All storage companies at the conference stated that they work closely with, and support, the traditional grid. But as Orison noted, this can be the main grid or the micro grid. A number of people are approaching them about off grid storage.

But the future is coming. For customers who exist in areas that have maxed out the amount of solar that the utility feels are safe for the given distribution circuit, these devices can be installed anywhere.

This is not to suggest that the approach is good for the grid. 

But rather, as many speakers stated at the conference, the marketplace will develop and market technology that will meet the needs of the customer. As technology is developed which easily interfaces with wall sockets, the need for expensive rooftop installations may decrease.

A power strip can transfer power from an Orison Tower to critical devices when the grid goes down or when a customer wants to test the idea of disconnecting from the grid.

These devices also enable customers to separate their load into components that are grid-tied and those that are not grid-tied, resulting in a hybrid approach to dealing with the local utility.

The HECO Companies are currently working on additional drafts of their Power Supply Improvement Plans. 

These plans do not include the idea that customer-sited plug-and-play systems will play any meaningful role at any point in the next 30-years.

The utility is focused on planning for the Smart Grid, as opposed to Smart People relying on Smart Homes and Smart Businesses. Where people plug Smart Devices into a Dumb Grid, or leave the grid altogether.

The utility is focused on centralized renewables and centralized storage. 

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Thursday, July 21, 2016

End of an Era: NextEra Energy is Leaving Hawai`i

By Henry Curtis

NextEra Energy filed motions with the Public Utilities Commission to withdraw as a party in Hawaiian Electric Company`s Power Supply Improvement Plan (PSIP) proceeding.

NextEra also filed motions to withdraw from two Public Utilities Commission investigatory proceedings examining whether Big Wind and Inter-Island Cables might be in the public interest. 

This puts the kybosh on NextEra`s plans to build Maui`s fourth wind generation facility. The wind facility was planned for DHHL property along the South Maui coast heading towards Hana.

The Public Utilities Commission closed the HECO-NextEra merger proceeding.

HECO has requested that the Public Utilities Commission close three dockets related to the importation of Liquefied Natural Gas (LNG), all of which were really NextEra proposals.

NextEra`s proposed solar generation facility was rejected months ago because it was at the higher end of various solar proposals submitted by HECO to the Public Utilities Commission.

Thus all NextEra projects in Hawai`i are pau.

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Spotlighting the True History of Hawai`i

By Henry Curtis

There is a war on between those who are currently falsifying history, and those who are recreating the actual historical record, based on uncovering the actual underlying documents.

The National Endowment for the Humanities and the Library of Congress are working on developing an Internet-based, searchable database of U.S. newspapers. Currently more than 11 million articles are available from 1836 and 1922. This includes dozens of Hawaii newspapers.

Various groups within Hawai`i are working to digitalize newspapers, journals and governmental records written in Hawaiian. This is key to understanding history, since those who overthrew the Hawaiian Kingdom spent 40 years writing and teaching a false history that must now be exposed.

According to old-school history, Thomas Edison invented the incandescent light bulb. King Kalākaua visited Thomas Edison in 1881 to see if he could electrify Hawai`i. The first use of electric lights in Honolulu occurred in 1886.

In reality, nearly two dozen inventors had “invented” the incandescent light bulb before Edison. But Edison had refined the technique by using better filament material and higher bulb vacuum. Edison was also a master at safeguarding his inventions: he accumulated 1,093 patents in the U.S. and over 1,000 patents elsewhere.

The Pacific Commercial Advertiser wrote about illuminating Honolulu two years earlier, on Tuesday, April 15, 1879.

HMS Triumph

Two English warships, the HMS Opal and the HMS Triumph visited Hawai`i in April 1879.  

On Tuesday April 15, 1879, King Kalākaua, Governor Dominis, cabinet members, justices, and other governmental people visit the Triumph.

Replacing earlier wooden ships, the ironclads were powered by coal and had iron plating. The HMS Triumph was an ironclad flagship.

“His Majesty by invitation performed the operation of firing simultaneously by electricity, five of the twelve tons guns. The party also witnessed the explosion of a torpedo, one of the smaller size, out which threw the water to a surprising height.”

That evening the Triumph demonstrated the power of coal-fired electric lights. The HMS Triumph turned on its electric spotlight.

“On Tuesday evening following the King's visit to the Triumph, many of the good people of Honolulu were surprised and delighted by the exhibition from that ship of the wonderful electric light, of which we had read and heard, but which few of our citizens had ever seen.

For nearly two hours the brilliant illumination was continued, by turns exhibiting with wonderful distinctness the mountains and valleys, the cocoanut groves of Waikiki, the shipping in port and the buildings of the city.

The light was so brilliant that a person standing on the side of Punchbowl about two and-a-half miles from the ship read a pencil memorandum without difficulty.”

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Wednesday, July 20, 2016

Hawaiian Electric Company waging policy through media releases

By Henry Curtis

With NextEra gone as the acquirer of Hawaiian Electric Company (HECO), what is next?

HECO filed three applications with the Hawai`i Public Utilities Commission in May 2016, regarding the importation of Liquefied Natural Gas (LNG) and the building of a new LNG-fired Kahe Generation Station.  

Yesterday HECO filed a press release with the media announcing that the applications have been withdrawn.

“Following the termination of the proposed merger with NextEra Energy, the Hawaiian Electric Companies today withdrew their applications for approval of a liquefied natural gas contract with Fortis Hawaii Energy Inc, plans to upgrade Kahe Power Plant to use natural gas, and a waiver from competitive bidding to upgrade the plant.”

Several groups had filed motions to intervene in one or more of the proceedings. 

HECO did not notify them of the withdrawal of the dockets. Rather the intervenors had to learn about the closing of the regulatory proceedings through the media.

The intervenors were Life of the Land, Blue Planet Foundation, Ulupono Initiative, AES Hawaii, Hawaii Renewable Energy Alliance, Center for Biological Diversity, Sierra Club, Hawai`i Department of Business, Economic Development, and Tourism (DBEDT), and The Gas Company, LLC, dba Hawaii Gas.

Two other open regulatory proceedings will probably continue, although perhaps in a modified way. The HECO Companies Power Supply Improvement Plans (PSIPs) released in April and the HECO Companies Smart Grid proposal, were both heavily influenced by NextEra.

HECO pushed an inter-island high-voltage transmission line for decades, then said it was not needed. Following NextEra`s the proposed acquisition of HECO, the cable was put back on the table. Now it may be taken back off the table.

Every gallon of gasoline imported into Hawai`i for use in vehicles is taxed. Some of the tax is in the form of a Barrel Tax that is used to finance employment at DBEDT and the University of Hawai`i, Mānoa. Both institutions have used some of the money to study inter-island high-voltage transmission cables.

Some have wondered why a Big Island resident who drives a car but lives off the grid, has to subsidize studying possible electric cables between Maui and O`ahu. 

Perhaps more significantly, none of the Barrel Tax is used to study whether staying on the grid or getting off the grid is more cost effective, for either the individual choosing to leave, or for those who remain on the grid. Rather it is assumed that the status quo of remaining grid-tied makes sense. 

Today half of all people use only cell phones. Imagine if the phone deregulation revolution in the 1990s had started with the caveat that, only those who committed to keeping land lines, could benefit from the telecommunication transformation.

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Monday, July 18, 2016

PUC Provides Guidance Document for Future Utility Mergers

Selfie: Henry Curtis with PUC Chair Randy Iwase in front of PUC Building

By Henry Curtis
The Hawaii Public Utilities Commission issued a series of White Papers attached to Decisions and Orders issued on April 28, 2014. 

These guidance documents were meant to shift the Commission from being reactive, to be proactive, to guide future utility policy.
The most famous of these was the “Commission's Inclinations on the Future of Hawaii's Electric Utilities Aligning the Utility Business Model with Customer Interests and Public Policy Goals." 
The "Inclinations” document was attached to the rejection of the HECO Companies Integrated Resource Planning (IRP) Report (Docket No. 2012-0036), starting on pdf page 84.
Continuing that trend, the Commission attached a guidance document to the rejection of the HECO-NextEra merger proposal. 

The Commission rejected the approach advocated by Office of Planning witness Scott Hempling, of filing a Request For Proposals, and seeing which potential buyer offered the best deal for regulators and electric customers.

Instead, the Commission focused on what the floor should look like for any bidder. Presumable those not meeting the floor would be immediately denied. 

One item not mentioned, but many believe should be included, is that any new bidder would not immediately try to block entities from intervening in the proceedings. By filing numerous objectings to Hawai`i groups, NextEra sent the wrong initial message. 

 Commission Guidance for any Future Merger or Acquisition Proceedings
The commission has emphasized the importance of this proceeding, not only to ratepayers but to the future of the State of Hawaii. The commission also, acknowledges that Applicants, the Consumer Advocate, and the other Parties to this proceeding have invested significant time and resources since the Application was submitted in January 2015. In recognition of the critical importance of the future ownership and control of the HECO Companies, the substantial efforts by all Parties to develop the record in this proceeding, and the commission's decision in this proceeding to dismiss the Application, the commission provides guidance in this section on key elements that would be necessary to meet the public interest standard in any future applications seeking a change of control of the HECO Companies.
In offering this guidance, the commission has focused on six key areas that have been the subject of considerable attention and debate in this proceeding. These key areas include: ratepayer benefits, mitigation of risks, achievement of the State's clean energy goals, competition, corporate governance, and the HECO Companies' transformation. The commission views these key areas as foundational for any future applications, but in selecting these areas for additional discussion, does not preclude consideration of other topics and areas that may be relevant to the specific circumstances of future applications.
A. Ratepayer Benefits
Principle: Applicants should provide ratepayer benefits that are meaningful, certain, and direct in the short-term, and that effectively and accountably insulate customers from bearing the costs of the merger/acquisition, transition, and integration. Ratepayer benefits, in conjunction with other clearly- supported direct benefits, should also provide short-term and long-term value that is commensurate with costs and risks assumed by customers as a result of the merger/acquisition.
The commission expects that any future application will meet the following standards at a minimum:
(a) The application should provide benefits to customers in the short- and long-term that are substantial and certain enough to be meaningful. These benefits can be provided in many forms, including rate reductions, rate freezes, grid improvements, improvements in safety and reliability, etc., but must provide net positive value to customers.
Once such commitments are made, any potential rate credit adjustment relief should be subject to commission approval and limited to (1) changes in governmental policy, rules or taxes which significantly affect the HECO Companies' base rate revenue requirements; (2) catastrophic damage to electric grid infrastructure due to acts of God or terrorism; and (3) Mobile- Sierra doctrine standard of public interest requirements. (See United Gas Pipe Line Co. v. Mobile Gas Serv. Corp., 350 U.S. 332 (1956 and Fed. Power Comm'n v. Sierra Pacific Power Co., 350 U.S. 348 (1956) establishing the public interest application of the "just and reasonable" standard.)
Pre-funding of rate credit commitments by the acquiring entity, similar to what was required in the recent Exelon Pepco merger, should be provided to provide a benefit bridge akin to a down payment until significant, longer term benefits take effect as shown by mechanisms that demonstrate net benefit.
(b) Any rate plan should effectively contribute to the provision of short-term and long-term benefits that are commensurate with the costs and risks assumed by customers as a result of any proposed change of control.
(c) The application should clearly and accountably insulate customers from bearing costs resulting from the change of control, transition, and integration implementation.
B. Mitigation Of Risk
Principle: Proposed ring fencing measures should protect the HECO Companies' customers from the impacts of possible bankruptcy or other major problems that may occur in the future with respect to other members of an applicant's corporate family.
The commission concludes that requiring any applicant seeking authority to own/operate a public utility in Hawaii to provide certain basic protections as a pre-condition for approval is both reasonable and necessary. Moreover, any potential applicant seeking authority from the commission to own or operate a public utility must be willing to take all reasonable, prudent, and necessary steps to insulate the public as well as investors from the uncertainties associated with other business interests the applicant has or might have now or in the future.
The investor-owned Utility sector is widely recognized and respected for its durability and resiliency. Its track record over decades of providing Safe, reliable, and affordable service evokes trust and confidence on the part of the public. Its dedication and devotion to the communities served by its members has generated considerable benefit to. Our, state and our economy.
In some measure, the financial success of this industry and the benefit it has provided the public is, attributable to the following:
• strong third-party oversight {both regulatory and investor oversight);
• relatively predictable capital requirements;
• modest strategic ambitions;
• consistent financial discipline; and
• manageable market conditions.
The commission considers it important to the people of Hawaii now and in the future to preserve and protect the benefits that have been afforded in the past. In the face of changing public expectations and corporate business models, it is essential that the commission entertain changes to the regulatory framework for the public utilities for which it is responsible. For, this reason, guidance regarding what is expected in the future is warranted.
The commission fully respects the right of any business enterprise to pursue its business interests in a manner that satisfies its investors. Furthermore, the commission fully respects the right of any business enterprise to engage in ownership and operation of a public utility. The commission has no intention of purposefully designating entire segments of the investor community as unqualified candidates simply because their business interests may introduce risks that this community and this commission have not previously experienced.
Instead, the commission finds that the public's interests are better served by adopting a set of "threshold" principles that if accommodated by an applicant balance the risks and benefits of broader participation in the market. The measures proposed herein provide meaningful protections to the public without compromising the strategic ambitions, managerial efficiency, or economic value of the regulated enterprise.
These protective and preventive measures are designated as "ring-fencing." Their express purpose is solely to preserve and protect the benefits that have come to be expected from prudent and proper management of a public service company. They are meant not only to reassure the public that its expectations will be realized in the future but to minimize risks from unforeseeable acts that might endanger that realization.
Commitments need to be made to prevent inappropriate movement of capital out of the HECO Companies to the parent company in any post-merger structure. A merger severance clause provision should be set forth that would enable the commission, based upon the occurrence of pre-defined conditions and after an investigation and hearing, to order the parent to divest the HECO Companies. Such a clause would allow the HECO Companies to extract themselves from an untenable financial position under the parent if such action is found by the commission to be warranted and justified.
Thus, at a minimum, an applicant must clearly demonstrate the willingness to:
• form a qualified Bankruptcy-Remote Entity {"BRE") to serve as the sole owner of the regulated utility, and to:
o provide a written non-consolidation opinion from a recognized professional services firm attesting to the strength of the measures taken by the Applicant on behalf of the entity and to submit any such opinion for review and approval during the change of control proceeding; and
o demonstrate that the approved BRE is operational prior to closing the transaction and is designated by the Applicant as the sole repository of any equity interest in the regulated utility;
• submit a written non-consolidation opinion from a recognized professional services firm attesting to the separateness of any holding company, corporate parent, or other financial entity assuming control of the BRE; the opinion should clearly enunciate the extent to which the holding company, corporate parent, or other financial entity has any claim on the BRE that might be construed as subject to consolidation;
• appoint a disinterested independent party to the BRE Board of Directors with no economic interest (the appointee may be an individual' or an administration company. in the business of protecting special purpose entities) to assume responsibility for reviewing and approving any petition for voluntary bankruptcy, liquidation, or receivership agreed to by the Board of Directors prior to issuance of any such petition no matter who seeks such a petition;
• appoint a Board of Directors for the BRE with at least one-third as independent directors; such directors must meet all material respects of the rules and regulations promulgated in the NYSE Listed Company Manual (Section 303A) and, in addition:
o no independent Director can serve as a Director of the parent corporation or any affiliate of either the parent or the utility; and
o no independent Director has a past or present business relationship within the past 10 years with any affiliate, subsidiary, or parent company of the utility;
• hold out notices of separateness of the BRE to all lenders in negotiating any new debt and acknowledge such separateness in all new debt instruments - including those associated with the proposed transaction; (This constitutes formal notification to any debtholder that there is no recourse on default, eliminating any implied recourse that might otherwise be construed from representations of the issuers or agents.)
• submit for commission review and approval any proposal for the BRE to own, operate, or construct any capital asset;
• maintain separate books, records, and debt for the BRE from those of the corporate parent, its subsidiaries, and/or its other affiliates; furthermore, the BRE will maintain its own corporate and debt credit ratings, as well as ratings for long-term debt and preferred stock;
• provide an annual financial audit of the BRE performed by a recognized independent auditor;
• prohibit loans of any type to/from the corporate parent or to/from any affiliate, joint venture partners, or contractor;
• require that debt follows assets in any approved sale, transfer, or other asset disposal by the BRE; and
• reduce or suspend dividends and distributions if either (a) the leverage of the BRE exceeds the maximum regulatory debt-to-equity ratio established by the commission in the most recent rate case or (b) a majority of the independent or disinterested directors decide it is in the best interest of the BRE to retain such amounts to meet expected future requirements.
The establishment of these "threshold" principles does not in any way suggest that the commission will limit its efforts to require additional protective measures as the business interests of the applicant warrant or the public's interest demands.
C. Achievement Of The State's Clean Energy Goals
Principle: Any future applications should provide clarity on the applicant's positions on clean energy transformation and distributed energy resources ("DER") with clear affirmation of the Commission's guidance on these areas in, the Inclinations and relevant subsequent related decisions. In addition, where feasible, applicants should back the application with specific, near-term commitments to clean: energy transformation.
The commission in its Inclinations, repeatedly emphasized the importance of enabling customer choice and providing customers with options to manage their electric bills. The commission also stated that an appropriate balance of utility-scale and distributed generation ("DG") resources is required. In the Inclinations, the commission stated:
The commission supports a balanced and diverse portfolio of energy resources as the best long-term strategy to achieve the state's energy goals. This principle overarches a wide spectrum of issues, such as firm versus variable resources, types of renewable resources (e.g., wind, solar, biomass, hydro, geothermal, and waste to energy, etc.), geographic location, and utility-scale versus distributed resources. (Inclinations at 5)
The commission expects that any future applications will demonstrate support, consistent with the Inclinations, for a diverse portfolio of energy resources necessary to meet the state's energy goals and offer tangible, near-term commitments consistent with this guidance.
With respect to DER technologies in particular, any future applicants must recognize that DER technologies and markets are evolving, and that developing a sustainable, competitive DER market is essential for meeting the State's clean energy goals. Potential applicants must indicate a willingness to actively participate in .and contribute to advancing these efforts,
Furthermore, potential applicants must acknowledge that customer energy solutions can also provide grid solutions that, in some cases, may be more cost-effective than traditional grid investments. Any future applications will demonstrate commitments to encourage and utilize customer demand response options, including customer-sited energy storage, and to provide ancillary services and other grid support services where demand response is the more cost effective option. Plans should set forth how the HECO Companies would utilize the full technical capabilities of advanced inverter technologies to provide maximum grid benefits and the timeline for implementation post-merger closing.
Potential applicants must commit that the HECO Companies will work collaboratively with stakeholders to develop a long term DER market structure which would enable DER to sustainably provide value to all customers on the grid. (Commission's Inclinations at 15-16, observing the importance that plans address "[t]he utilization of grid support functionality embedded in advanced inverters, customer-sited energy storage, and energy management systems to provide ancillary services").
Finally, future applicants should consider making firm commitments to open and transparent transmission-and-distribution planning and interconnection processes, as well as specific support and funding for clean energy demonstration projects.
D. Competition
Principle: Applicants must demonstrate that their proposal will promote robust competition in Hawaii's energy markets. Any proposed measures should ensure that projects (1) with the best customer value consistently win competitive solicitations; (2) employ best practices for bidding and procurement; (3) protect confidential and proprietary information of competitors; and (4) clarify the role of oversight for any proposed changes to the competitive bidding process.
 proposed change of control raises legitimate concerns about possible affiliate abuse and potential impacts on competition. Potential future applicants should present a complete proposal at the time of the application that will address how the applicants intend to conduct solicitations that will promote robust competition that ultimately delivers the best value for the HECO Companies' customers.
However, there is need to distinguish between adverse effects on competition Versus adverse effects on a competitor.
Concerns should focus on the effects on the former not the latter, so that competition is not further diminished. The commission has a major role in ensuring the equivalent outcome of a well-functioning wholesale competitive market in Hawaii. (See H.R.S. §§ 269-141 to -149) As the commission pointed out in the Inclinations, the wholesale power market is not working optimally so as to result in providing the lowest cost project prices to benefit utility customers. Past bidding strategies appear to be driven by simply pricing below the HECO Companies' avoided oil costs and not by lowest, project development costs. (Inclinations at 3-5.)
This situation is exacerbated by HECO's current Power Purchase Agreement ("PPA") negotiation process, which is uncertain, lengthy, and replete with numerous complaints from Independent Power Producers ("IPPs"). The commission previously provided guidance to the HECO Companies regarding how to improve their capabilities, as well as the bidding, contracting and project management process.
In addition, the HECO Companies have sought a number of waivers from the formal Competitive Bidding Framework solicitations.
The merger docket is not the appropriate venue to thoroughly address and resolve competitive market issues, some of which exist regardless of whether a merger is proposed for the HECO Companies. An examination of the Competitive Bidding Framework appears to be warranted even without considering the implications of any future merger proposal.
E. Corporate Governance
Principle; Applicants should provide documentation of the proposed, corporate structure and clearly demonstrate how the proposed structure will ensure a meaningful, representative role for local governance and Hawaii stakeholders.
Commitments need to address reasonable concerns regarding corporate governance and local representation in corporate decision-making. In future applications, applicants should submit a complete set of corporate governance documents to support the proposed corporate structure, clearly delineate the roles of any local board of directors or advisory group, and demonstrate how input from local stakeholders will be factored into corporate decision-making that affects Hawaii.
Such documents should include a Delegation of Authority {"DOA") document included in the application. The DOA will delineate, among other things, levels of expenditures and defined categories of management decisions that can be authorized solely by HECO Companies' management without approval of parent entities. Subsequent changes to the DOA would be subject to commission review and oversight.
Corporate governance documents should enhance local input, into parent entity decision making related to or affecting Hawaii’ through mechanisms such as the addition of a qualified Hawaii resident as an independent director to the parent board of directors, and periodically holding parent board of directors and shareholder meetings in Hawaii.
F. HECO Companies' Transformation
Principle: Applicants should provide specific commitments that reflect the critical importance of transforming the HECO Companies into a customer focused, cost efficient, and performance driven electric utility. These commitments would provide the strategy for how the acquiring utility intends to transform and improve the HECO Companies' performance.
The commission expects that any future applications will demonstrate how the acquiring entity will address the transformation of the HECO Companies, and provide a merger integration plan that sets forth near and long-term strategies for achieving and maintaining affordable and stable electric rates for each island service territory, while providing excellent customer service and reliability within twelve-months post-merger closing.
This demonstration would include submission of a merger integration plan that identifies the commitments and actions that would supplement the HECO Companies' current executive leadership team with a meaningful number of senior level executives from the acquiring entity to assist in corporate transformation and to. provide additional leadership.
The plan should also identify the process that will be utilized to measure and track actual performance in implementing the transformation commitments and conditions in a proposed merger, including submission of annual reports to the commission.

Finally, the plan should identify the, amount and timing of the expected merger synergies for programs and staffing, priority transformation actions and costs to achieve them, and the potential impact on local utility employment levels.
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HECO-NextEra Merger Deal is Officially DEAD

By Henry Curtis

The HECO-NextEra Energy merger deal is dead. The 593-day battle has ended. NextEra will continue to develop renewable energy projects in Hawai`i. HEI CEO Connie Lau will not receive her mega-million-dollar golden parachute. 

NextEra Press Release issued this morning (July 18, 2016)

NextEra Energy, Inc. (NYSE: NEE) and Hawaiian Electric Industries, Inc. (NYSE: HE) (HEI) today announced the termination of their plans to merge, effective immediately. The decision was driven by the Hawaii Public Utilities Commission’s (PUC) order to dismiss the companies’ merger application.
“As a result of the PUC’s order, we have terminated our merger agreement,” said Jim Robo, chairman and chief executive officer, NextEra Energy. “We wish Hawaiian Electric the best as it serves the current and future energy needs of Hawaii, including helping the state meet its goal of 100 percent renewable energy by 2045. Looking forward, NextEra Energy remains extremely well-positioned to execute on our strategy and deliver exceptional results for our customers and shareholders.”
“We appreciate NextEra Energy’s interest in Hawaii and in our company,” said Connie Lau, HEI’s president and chief executive officer and chairman of the boards of Hawaiian Electric and American Savings Bank. “All of us at HEI, Hawaiian Electric and American Savings Bank remain committed to serving our customers, and we look forward to working together with communities across our state to realize the clean energy future we all want for Hawaii and to ensure a vibrant local economy.”
Bloomberg News reported on the news.
NextEra Energy Inc. canceled its $2.63 billion bid to purchase Hawaiian Electric Industries Inc., and may now concentrate on efforts to buy the largest power distributor in Texas.
NextEra will pay Hawaiian Electric a $90 million breakup fee and as much as $5 million for expenses related to the failed takeover, the companies said Monday in a joint statement. The Hawaii Public Utilities Commission voted 2-0 Friday against the proposed transaction saying the companies failed to show it was in the public interest.
The decision may allow Juno Beach, Florida-based NextEra to focus on its pursuit of Oncor Electric Delivery Co., Bloomberg Intelligence analyst Stacy Nemeroff said Monday. NextEra, the largest wind- and solar-generation owner in North America, is said to have submitted a bid to buy the Texas utility company, according to people familiar with the talks.
Environmental and rooftop solar groups had opposed the merger, citing concerns about NextEra’s support of home solar installations and saying the company had pushed back against the systems in its home state of Florida.

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Sunday, July 17, 2016

LAWSUIT filed: Hermina Morita vs. Thomas Gorak

By NextEra 

Starn O'Toole Marcus & Fisher attorneys Mark J. Bennett and Mateo Caballero represent Hermina Morita in a civil lawsuit (S.P. No. 16-1-0251 ECN) filed on Friday against Thomas Gorak. 

The suit was filed in First Circuit Court, 777 Punchbowl St.

HERMINA M. MORITA, Petitioner/Plaintiff, vs. “THOMAS GORAK, STATE OF HAWAII, JOHN DOES 1-50, JANE DOES 1-50, DOE CORPORATIONS 1-50, and/or OTHER DOE ENTITIES 1-50, Respondent/Defendants.

Hermina Morita favors selling HECO to NextEra.

Mark J. Bennett  served as Attorney General of Hawaii from 2003 to 2010 during the Linda Lingle administration. He represented NextEra is several proceedings before the PUC including Big Wind, the Inter-Island Cable and the proposed HECO-NextEra merger.

The gist of the suit is the alleged improper appointment of Thomas Gorak to the Hawaii Public Utilities Commission.

The lawsuit stated, “Since July 1, 2016, Thomas Gorak has wrongfully claimed, wrongfully occupied, and usurped the office of Commissioner of the HPUC, an office of the State of Hawaii. 

Thomas Gorak has no legal right to do so, because Michael Champley is still the lawful officeholder and Commissioner of the HPUC and will remain so, unless and until Thomas Gorak is confirmed by the Senate of the State of Hawaii as an HPUC Commissioner.”

The lawsuit asserted that there are many more people who will be named in the suit.

“Defendants JOHN DOES 1-50, JANE DOES 1-50, DOE CORPORATIONS 1-50, and/or OTHER DOE ENTITIES 1-50, are persons or entities whose identity is currently unknown to Morita, but who may have acted in concert with or on behalf of the Defendants, or whose actions may have resulted in harm to Morita for which Morita seeks relief in this Complaint. Morita will identify any such Doe Defendants after discovery has taken place.”

Morita asserted in the lawsuit that she has standing to bring the suit because of various items.

“Petitioner and Plaintiff Morita is a citizen and resident of the Island of Kauai, State of Hawaii, and a taxpayer and registered voter of the State of Hawaii. Morita is a member of the Kauai Island Utility Cooperative, a public utility regulated by the Hawaii Public Utilities Commission ("HPUC"), and was the former Chair of the HPUC. …Morita has been materially harmed and damaged by the above, and otherwise has standing, including pursuant to Haw. Rev. Stat. § 659-4."

CHAPTER 659 deals with QUO WARRANTO. Specifically, Hawaii Revised Statutes §659-4 deals with Quo Warranto Petitions.  “The order is obtained by petition addressed to a circuit court, setting out facts sufficient to show a right to the order, and sworn to if the application is made by a private individual.”

The case notes the that section states, "Appellant's petition sufficiently stated that appellant was a resident, taxpayer, and qualified voter of Maui County, thus establishing appellant's standing to bring petition.  74 H. 394, 846 P.2d 894 (1993)."

Starn O'Toole Marcus & Fisher issued a press release which included a quote from Morita.

"I filed this complaint because this is an important matter of law that can only be resolved by the judiciary of the State of Hawaii and it must be decided as soon as possible to protect the integrity of the PUC--whose decisions affect every Hawaii resident and business--from undue political interference and to preserve the separation of powers between the legislative and executive branches of government.

I believe Thomas Gorak had no legal right to take office without the Senate's approval of his nomination, and his having done so puts at risk all PUC proceedings and every decision and order in which he participates."

Apparently Morita believes that since the Senate has been unable to muster enough opposition to take legal action, therefore she needed to file the suit.

Who is financing the suit is unclear.

Other entities may file amici briefs. 

An Amicus Curiae (Latin, friend of the court; plural, amici curiae) is someone who is not a party to a case and offers information that bears on the case, but who has not been solicited by any of the parties to assist a court

This may take the form of legal opinion, testimony or learned  treatise  (the amicus brief) and is a way to introduce concerns ensuring that the possibly broad legal effects of a court decision will not depend solely on the parties directly involved in the case. 

The decision on whether to admit the information lies at the discretion of the court. The phrase amicus curiae is legal Latin.

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Saturday, July 16, 2016

HECO-NextEra Merger Not Pau

By Henry Curtis

UPDATE (July 18, 2006):  HECO-NextEra Merger Deal is Officially DEAD

The Public Utilities Commission issued a final decision in a contested case proceeding, rejecting the proposed HECO-NextEra merger.

Connie Lau and Jim Robo

HECO and Nextera, the aggrieved parties, have four options.

First, NextEra can walk away, and perhaps pay HEI $95 million. The issue of who gets the money -- shareholders, HEI management, or cost recovery by Consumer Advocate and intervenors  -- will follow.

Second, NextEra can appeal the decision to the Hawaii Supreme Court. Per HRS §269-15.5 and the Hawaii Rules of Appellate Procedure, NextEra has 30 days to file.

Third, the Commission Order dismissed, but did not dismiss with prejudice. Thus NextEra can review the Commission`s Merger Guidance document, talk terms with HECO, and file a new or modified application with the Commission.

Fourth, HECO and NextEra can file a Motion for Reconsideration with the Commission, asking the Commission to modify their position.

Some people believe that this is probably the most likely option, and would buy time for NextEra to consider other options.

The Commission`s Rules of Practice and Procedure state that the aggrieved party or any other party must file a motion for reconsideration “within ten days after the decision or order is served upon the party.”

Two days are allowed for NextEra to receive a snail mail copy, even though the Commission electronically sent copies to all Parties on Friday. Thus NextEra will “officially” be notified on Tuesday, July 19. The motion for reconsideration must be filed within ten days henceforth.

Other parties have five workdays to file responses. Assuming NextEra files on Friday, July 29, the responses must be filed by August 5.

Any party can file a Motion for Reconsideration to request that the Commission clarify, reverse, strengthen, or modify, any portion of the decision, and perhaps the Guidance document.
The DCCA Division of Consumer Advocacy (Consumer Advocate) issued a press release explaining its thoughts regarding the Commission decision.
 “The PUC’s decision to dismiss the proposed merger is warranted given the fact that the merger would have provided HEI shareholders and executives with substantial benefits with very little in quantifiable benefits to consumers.  While the Hawaiian Electric Companies and NextEra made many claims about how the proposed transaction would benefit Hawaii, the majority of the purported customer benefits were either temporary or illusory.”
 Consumer Advocate Jeff Ono asserted, “We’re not assuming that this proceeding is over yet,” adding that “Applicants are reviewing the PUC’s order and evaluating whether they are willing to accept the PUC’s decision or will seek a reconsideration of Order No. 33795.  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.”

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