Energy Dynamics

HSC Oral Arguments/Morita v Gorak, State of Hawaii

noreply@blogger.com (Energy Dynamics) — Tue, 19 Dec 2017 20:28:00 +0000

On December 7, the Hawaii Supreme Court (HSC) heard oral arguments for the lawsuit I filed challenging the interim appointment of Thomas Gorak to the Hawaii Public Utilities Commission by Governor Ige in June 2016. It will have a broad affect on how nominations and appointments are handled in the future for all boards and commissions should the definition of vacancy be expanded to include the end of a set term. Here's the HSC's description of the case and link to the oral arguments:

This appeal concerns Governor David Ige’s 2016 appointment of Thomas Gorak to the Public Utilities Commission (“PUC”). According to Hawaii Revised Statutes (“HRS”) § 269-2 (governing the PUC), which incorporates HRS § 26-34 (governing the selection and terms of members of boards and commissions), PUC commissioners are appointed after the Governor nominates them and the Senate confirms the nomination.

Prior to Gorak’s appointment, the PUC consisted of Commissioners Randall Iwase, Lorraine Akiba, and Michael Champley. Champley’s term was set to expire on June 30, 2016. During the regular legislative session of 2016, Governor Ige did not nominate Champley’s successor, and no successor was confirmed. After the close of the 2016 legislative session, on June 29, 2016, Governor Ige announced that Gorak would replace Champley on an interim basis, effective July 1, 2016.

As authority for his appointment, the governor cited article V, section 6 of the Hawai i State Constitution. That section is titled “Executive and Administrative Offices and Departments,” and it states, in relevant part, the following:
When the senate is not in session and a vacancy occurs in any office, appointment to which requires the confirmation of the senate, the governor may fill the office by granting a commission which shall expire, unless such appointment is confirmed, at the end of the next session of the senate.

Champley, for his part, informed the governor that he intended to stay on as a hold-over commissioner, citing to HRS § 269-2(a), which provides that each PUC member “shall hold office until the member’s successor is appointed and qualified.”
On July 1, 2016, Gorak was sworn in as a PUC commissioner. Later that month, Hermina M. Morita challenged the appointment via a Complaint and Quo Warranto petition filed against Gorak and the State of Hawai i in the Circuit Court of the First Circuit. Morita argued that Champley remained the lawful office holder, citing HRS § 269-2, as well as HRS § 26-34(b), which provides, in relevant part, “Any member of a board or commission whose term has expired and who is not disqualified for membership under subsection (a) may continue in office as a holdover member until a successor is nominated and appointed. . . .”

The parties filed cross-motions for summary judgment. After a hearing, the circuit court concluded that a vacancy on the PUC occurred when Champley’s term expired, and that Governor Ige validly appointed Gorak as interim commissioner under article V, section 6. The circuit court also concluded that Morita lacked standing to pursue declaratory relief. The circuit court thus granted Gorak and the State’s motion for summary judgment and denied Morita’s cross-motion for partial summary judgment. Morita appeals from the circuit court’s Final Judgment in favor of Gorak and the State and against her.

On appeal, Morita raises as error the circuit court’s conclusions that (1) a vacancy occurred at the expiration of Champley’s term; (2) Governor Ige validly appointed Gorak to the PUC; and (3) she lacked standing to pursue declaratory relief.

The crux of this case is the word "vacancy." In American jurisprudence an office vacancy is defined as empty as a result of a resignation or death of the office holder. There is agreement that the Governor can use his constitutionally given Interim Appointments Power to fill a vacancy and appoint someone to a board or commission when the Senate is not in session. However, the State of Hawaii is attempting to expand the definition of vacancy by now including the end of a set term. Governor Ige did this through a 2016 Attorney General opinion which supplanted two previous opinions which have stood for more than 30 years.

There is a specific provision in State law (HRS 269-2) regarding the appointment of PUC commissioners, stating that each PUC member "shall hold office until the member's successor is appointed and qualified." On its face, the law purposely avoids a vacancy when a PUC commissioner's term ends. In this lawsuit, the State argues that the Interim Appointments paragraph specifically does not state the words "as provided by law" although it is stated in following paragraphs. Interestingly, the State is not arguing to declare any holdover laws unconstitutional.

Another interesting aspect to this case is that Article V, Section 6 of the Constitution covers cabinet appointments to the 9 principal departments of the Executive Branch. The PUC is not one of these principal departments. The PUC is a creature and extension of the Legislature, formed by statute and is given its authority through the Legislature, not the Constitution.

As I mentioned earlier, this case will have an impact on all boards and commissions; how candidates are nominated and appointed with the advise and consent of the Senate. It will help to clarify if the term "appointed and qualified" requires Senate confirmation to be able to nullify the current Attorney General's opinion which states that the Governor alone can "qualify" a candidate.

KEDB - Kauai Energy Conference, Monday June 19, 2017

noreply@blogger.com (Energy Dynamics) — Tue, 13 Jun 2017 03:35:00 +0000

Taking advantage of panelists and speakers arriving next week to participate in the VERGE Hawaii 2017: Asia Pacific Clean Energy Summit in Honolulu, the Kauai EconomicDevelopment Board (KEDB) is holding its energy conference on Monday, June 19 at the Kauai Marriott. To address how businesses are and can adapt to a low-carbon future, the conference's theme is “Educate, Collaborate and Accelerate” and will focus on recent developments in clean energy and energy efficiency on Kauai and throughout Hawaii to help mitigate the challenge of climate change and its impact on our environment and economy.

The KEDB conference could not have been more timely. With Trump's announcement to withdraw from the Paris Agreement, the burden to take on the global challenge of climate change will fall on the shoulders of state, county and city governments and business leadership.

Why should you attend? The three-track conference (see page 2 of the link) has something for everyone:

The Energy Savings Track: The objective of this track is to provide practical information to aid a business owner or manager in making informed decisions to achieve energy cost savings. Brush up on the latest opportunities to reduce energy usage to help your bottom line. Learn how do your use detailed energy consumption data to create savings. Get an opportunity to talk to the experts in this

Clean Transportation: Get into the discussion on how can Kauai move to clean, low carbon fuels for ground transportation? Is there demand for electric vehicles and infrastructure? Is the future near for more car sharing and autonomous vehicles? Are there cost-effective and affordable clean fuel choices for heavy duty vehicles and equipment like buses and trucks? What kinds of partnerships are required to accelerate the adoption of clean fuel options?

Low Carbon Future: Learn how Hawaii's major fossil fuel using sectors, electricity, ground and air transportation sectors are currently working towards a low-carbon future. Discuss with energy expert KateGordon on how we can ensure that our visitor‐based economy continues to thrive in a low carbon future? Knowing that change is on the horizon, what opportunities exist to improve our long‐term performance and simultaneously help our community prosper?

CLICK HERE FOR MORE INFORMATION OR TO REGISTER

Gorak Nomination: The End Justify the Means?

noreply@blogger.com (Energy Dynamics) — Tue, 25 Apr 2017 00:43:00 +0000

On Friday, the Senate Committee on Commerce, Consumer Protection & Health heard Governor's Message No. 703, the nomination of Thomas Gorak for Hawaii Public Utilities Commissioner (PUC). As I walked the hallways of the Capitol after testifying at the hearing against the Gorak nomination, the underlying chatter amongst Gorak's supporters was that my lack of support and the Committee's denial was just sour grapes over the HECO-NextEra decision.

Really? When does the end really justify the means? I bet if the tables were turned and the merger had been supported by a Governor who wanted a favorable decision using the same tactics to remove and replace a sitting Commissioner two weeks before the biggest decision ever made at the PUC, these "supporters" would be filing the complaint along side me. We all know the Governor could have sent a timely nomination, seeking the required advice and consent by the Senate prior to the Senate adjourning but he didn't. Simply put, the timing of the Governor's actions and the optics look and smell like political meddling in a major decision while dissing the Senate's power and authority to advice and consent.

This legal controversy over how Governor Ige threw out Commission Michael Champley and replaced him with Gorak is now working its way through the Courts. To determine if the lower court ruling was wrong, there are three issues the Court will examine by interpreting the Constitution and state laws: (1) what constitutes a vacancy and did a vacancy exist at the expiration of Commissioner Champley's term on June 30, 2016, (2) does the Constitution override the state law on a holdover Commissioner and the Senate's duty to advise and consent to "qualify" a nominee, and (3) did I have standing to pursue the Quo Warranto Petition against Gorak.

Given Gorak's role as PUC Chief Counsel, I do not believe there is a way to extricate an evaluation of Gorak's character in the nomination process from this legal controversy until the legal issues are resolved by the courts. Here's what I said in my testimony:

. . . I believe Mr. Gorak shirked his duties as the PUC’s Chief Counsel by aiding the Governor’s agenda to improperly throw out Commissioner Michael Champley and subsequently allowing the Governor to name Mr. Gorak as Commissioner Champley’s replacement. I feel this was contrary to his duties and responsibility as the PUC Chief Counsel and not in accordance with the Hawaii Rules of Professional Conduct. Rule 1.13(h) of the Hawaii Rules of Professional Conduct states:

If a government lawyer knows that an officer, employee or other person associated with the government is engaged in action, intends to act or refuses to act in a matter related to the lawyer's representation that is a violation of a legal obligation to the government or the public, or a violation of law which reasonably might be imputed to the government, the lawyer shall proceed as is reasonably necessary in the best interest of the government or the public.
In his role as PUC Chief Counsel, Mr. Gorak should have been well aware of the laws specific to the PUC. If he were to claim plausible deniability one would have to question either his ethics or competency in that role. I sincerely believe Mr. Gorak exhibited a huge character flaw when he allowed himself to become a political pawn, throwing the need to maintain the integrity and independence of the PUC to the wayside at a time when the credibility of the PUC was being severely tested. The removal of Commission Michael Champley, the holdover Commissioner and the de jure officer, was contrary to State law and two previous Attorney General Opinions which have been in effect for almost 40 years.

Click here for my testimony before the Senate Committee.

Click here for the opening brief on my appeal before the Intermediate Court of Appeals.

In taking the action to deny Gorak's nomination, Chair Roslyn Baker said, "The truly important issues that are at stake here are the legitimacy of how Mr. Gorak has come to hold the position of a Commissioner, the constitutional authority of the Senate to advise and consent, and the effect, that any action by this Committee, will have on ongoing consideration of the Senate's constitutional authority by the Intermediate Court of Appeals."

As I said in an earlier blog post, "We all should be concerned about this unchecked power which Judge Nacino's ruling gave to Governor Ige as it affects other boards and commissions too.

Gorak's nomination comes with a lot of baggage and there is no way to untangle and extricate possible complicity issues until this legal controversy is settled by the Courts. Let process prevail!

2017 KIUC Board Election - Please Vote For Me

noreply@blogger.com (Energy Dynamics) — Tue, 21 Feb 2017 02:26:00 +0000

Last week the 2017 Kauai Island Utility Cooperative (KIUC) board election ballots were mailed to members. The deadline to submit your ballot by mail or electronically is by noon, Saturday, March 18, 2107. Please vote for me - Mahalo, Mina

Why Am I Running For the KIUC Board?

I want to serve our Kauai community by using my past experience. For over 19 years, as a politician and regulator, I have held leadership roles in energy policy development and utility regulation. If given the privilege and honor to serve the cooperative, I will use this experience to work collaboratively with other board members and our community to strategically shape and sustain our cooperative to provide excellent electricity service and value for our Kauai community.

But while there is always ample coverage about renewable energy generation, it is only one part of the total energy system equation. To help to keep rates from increasing we must keep costs under control, increase productivity and efficiency, make wise investments and seek some growth. My primary objective is to advocate for accessibility, fairness and opportunity for all members to benefit from clean energy policies and programs to manage their electricity bills. As the coop delves into modernizing the electric system, our community needs to understand the technical and economic challenges to do so, therefore, I view educating and engaging coop members to be an important responsibility of a board member and an important component to advance Kauai's clean energy transformation.

I also believe a well-round board which seeks experience, gender and geographic diversity will benefit our cooperative and its democratic principles.

A Little About Me

I was born and raised on Lanai, where my father was the game warden and my mother a pineapple field worker. After graduating from Kamehameha, I attended the University of Hawaii briefly then moved to work in Washington, D.C. for U.S. Senator Hiram Fong. When I returned to Hawaii, I was offered a job at Princeville. I have called Hanalei Valley home since 1977 where my husband, Lance, raised our two daughters. We now have four granddaughters (ages 11, 9, 9 and 3) and like all families worry about our children and grandchildren's future and ability to survive the high cost of living on Kauai.

What I Can Contribute

As a State Representative, I authored and led the enactment of many of the state’s most significant laws that has shaped Hawaii’s energy landscape. As a regulator (Chair of the Hawaii Public Utilities Commission), I had to learn and understand all parts of the electric utility business from financing, engineering to operations. My practical experience and success in building consensus positions with my peers (legislators and fellow commissioners), the public, public utilities and other special interests throughout my political/public service career, I think, can be of benefit as a member of the board.

What I Will Commit To

As a regulator I embraced three objectives to help guide my decisions. I believe the following objectives, which I will commit to, can also be applied to important decisions a KIUC board member must make on strategies to advance Kauai electric system to benefit its customers/members.

#1 - Lower, more stable electric bills for all customers through a strategy of a diverse portfolio of resources and technologies by encouraging prudent timing for new investments to optimize all assets, whether utility or customer-based, to achieve efficiency, cost-effective benefits and value to Kauai’s electric system.

#2 – To balance the maximum use of cost-effective renewable energy resources while protecting the electrical system performance to maintain reliability in a rapidly changing system operating environment.

#3 – Advocate for accessibility, fairness and opportunity for all electricity customers/members to benefit from clean energy policies and programs to manage their electricity bills.

Work Experience (partial)

Current Blog, Energy Dynamics

Energy Consultant

Mar 2011-Jan 2015 Chairperson/Commissioner, Hawaii Public Utilities Commission

Nov 1996-Mar 2011 Hawaii State Representative, Hawaii State House of Representatives

1999-2011 Chair, House Committee on Energy & Environmental Protection

1994-1997 Business Manager, Kilauea Point Natural History Association

1990-1994 Business Manager, Kong Lung Store/Kong Lung Center

Other Experience

Current Board Member, Hale Halawai O Hanalei (The Hanalei Community Center)
Member, Hawaii Energy Policy Forum

1993-1996 Commissioner, Kauai Police Commission

1990-1993 Commissioner, Kauai Planning Commission

Publications

Co-Author - Clean Energy from the Earth, Wind and Sun: Learning from Hawaii's Search for a Renewable Energy Strategy, William S. Pintz and Hermina Morita, published by Springer, December 2016. (http://www.springer.com/us/book/9783319486765)

Contributor - Infrastructure Risk Management: Assessing and Managing Dynamic
Exogenous Risk, authored a chapter entitled, “Designing Regulation Around Technological
Innovation: Experiences from Hawaii,” PEI Alternative Insights, June 2015.

Researcher, Interviewer, Photographer - Center for Oral History, Social Science Research Institute,
University of Hawaii at Manoa’s project Lanai Ranch: The People of Koele and Keomuku
published in July 1989.

2017 Legislative Session Opens January 18

noreply@blogger.com (Energy Dynamics) — Wed, 11 Jan 2017 21:46:00 +0000

Preceding the opening of the 2017 Hawaii Legislature on Wednesday, January 18, the Hawaii Energy Policy Forum will be holding its annual legislative briefing tomorrow, January 12, 1:30 to 4:30 p.m. with the theme, "Finding Continuity: Whatever Happened To . . . ?"

The keynote speaker will be Gavin Bade, the Washington, D.C. based Editor of Utility Dive. Utility Dive describes itself as a provider of news and analysis for energy and utility executives covering topics like energy technology and trends, regulation, policy and politics. He has been asked to give an analysis of the national energy situation under a new administration and what bodes for Hawaii.

Mr. Bade was a speaker/participant in the 2016 Maui Energy Conference and he and other Utility Dive writers have been providing thoughtful and thorough analysis on Hawaii's clean energy quest. In yesterday's Utility Dive, Mr. Bade writes about Kauai Island Utility Cooperative's (KIUC) signed deal with AES Corporation for a dispatchable solar/storage project at 11 cents/kWh.

In the Hawaii energy realm, a big topic as the 2017 legislature opens will be energy storage. Solar installers will be lobbying lawmakers for energy storage tax credit primarily for systems sited with residential rooftop solar systems. Recently, the Department of Taxation released its 2016 annual report on tax credits for the Tax Year 2014. In their best estimates, $112,130,000.00 was paid out in Renewable Energy Income Tax Credit (REITC), comprising 35.2% of all tax credits paid. It is likely that the same taxpayers that benefited from the REITC will be the same taxpayers to benefit from an energy storage tax credit.

While the Honolulu Star-Advertiser continually laments about the collapsing numbers of new solar installation, when will lawmakers stop and think about Hawaii residents who are not benefiting from our current clean energy policies but are subsidizing, through electricity rates and tax credits paid out of the States general fund these largely out of state corporate solar entities who are installing systems that are producing electricity when there is no demand?

On Kauai, KIUC negotiated deals, with no state subsidies, to buy electricity a lower cost through dispatchable solar/storage contracts to benefit its operating system and entire customer base lowering cost. On the other hand, for the rest of the State, solar companies will be showing up at the Legislature to ask for more handouts just to give more benefits to the individuals who already have benefited from lucrative and highly subsidized policies like net energy metering and the renewable energy income tax credit and then forcing the Hawaiian Electric Companies to buy back electricity at present high and uncompetitive rates adversely affecting its customers without rooftop solar.

We are way beyond the need for renewable energy generation policies to develop and subsidize nascent concepts and technologies - it time to move on and to ensure that public and ratepayer monies are used to make the critical investments for a robust electricity grid/platform to advance the public good and not step into areas where competitive markets should be established.

Trump + Energy = An Uncertain Future

noreply@blogger.com (Energy Dynamics) — Thu, 10 Nov 2016 00:13:00 +0000

Last night I could not bear to watch or listen to the presidential election results. After a sleepless night, it was time to confront my fears, a Trump presidency with a Republican congress.

For the past year, I have been watching the Hawaii clean energy initiative deteriorate to a mishmash of just stuff with sound bites. Unfortunately, there is nothing being said or done to create the needed vision for a cohesive implementation strategy for a systemic energy transformation. Yes, you have a bunch of politicians chanting 100% renewable energy but that's all you have. Quite frankly, after championing energy issues for my 20-years in public service, then watching it all fall apart (except for Kauai) over the past year, it has been difficult to blog about Hawaii's energy future as I find it so uninspiring now.

Waking up this morning, like Hawaii, the decarbonization of our nation's energy sector faces an uncertain future. While I may still find it difficult to write about energy issues, there are people like Gavin Bade, the editor of Utility Dive doing this important work to keep the public informed. Today he reveals energy Trumpisms, giving insight to this new administration's energy ideology in "All bets are off: 4 takeaways on what President Trump means for the power sector."

Hanging in Balance

noreply@blogger.com (Energy Dynamics) — Wed, 28 Sep 2016 19:19:00 +0000

Hawaii's clean energy systems is a delicate balance of power, literally and figuratively.

Literally, each second of each day, Hawaii's electric utilities must carefully manage the supply of electrons coming from many different sources to provide safe, affordable and reliable electricity to match their customer's usage to balance the grid to avoid brownouts or blackouts.

Figuratively, there is a carefully crafted balance of power between the executive, legislative and

judicial branches of government in the Hawaii State Constitution. A decision by Judge Edwin Nacino, outlined in a August 26 minute order and a subsequent September 19 judgment, which ruled in favor of placing Thomas Gorack on the Hawaii Public Utilities Commission and dismissed all other counts throws this balance of power off-kilter. Seemingly, the judgement places a finger on one side of the scale leaving more questions than answers as the ruling was contrary to well settled principles, previous attorney general opinions and the legal definition of "vacancy."

In part, Judge Nacino's minute order ruled:

. . . the Court accepts defendants' arguments which included that a vacancy occurred upon the expiration of Mr. Champley's term of office. Thus, the Court finds Governor Ige's interim appointment of Mr. Gorack when the Senate was not in session to be valid and subject to all other limitations found in Article V, Section 6, paragraph 5 of the Hawaii Constitution.

There is no disagreement on the Governor's constitutionally given power to make an interim appointment when there is a vacancy and the Senate is not in session, however, a change in the legal definition of what constitutes a vacancy may now open the door to an abuse of power if the Governor shirks his or her responsibility to timely submit future nominations of public utility commissioners or for other boards and commissions to avoid the Senate's constitutional given right to give its advice and consent before an appointment is made.

This whole case turns on the plain language of one word - vacancy. My attorney, the former Attorney General, Mark Bennett, and I continue to contend that, despite the fact that Commissioner Michael Champley's term had expired, the office did not become vacant because (1) the constitution grants the Legislature the power to make laws governing terms and removal of members of boards and commissions not specifically address in the Hawaii constitution, (2) the Legislature, wanting to avoid a vacancy, did pass a law stating that the incumbent Commissioner shall serve (beyond the expiration of his/her term) until his/her successor is appointed and qualified and (3) the phase "appointed and qualified" includes the requirement for the Senate to give its advice and consent on a nominee and, until Senate confirmation, the holdover Commissioner remains as the officer de jure, a person who is legally entitled to remain in that position even though the term had expired.

Although the legislative intent of past constitutional conventions and previous attorney general opinions were presented and argued in the Senate's amicus curiae and plaintiff's filings, the Judge's ruling did not offer a deep dive into nor did it make any kind of determination on the constitutionality of the holdover provision in State law nor did it question the power given to the Legislature to define the terms and removal members of boards and commission for positions not specifically addressed in the constitution but delegated to the Legislature.

In my opinion, if the Constitution and statute were correctly interpreted, as it was prior to this suspect "appointment," Governor Ige would have two options (1) make a timely nomination during the legislative session to receive the Senate's advice and consent where the appointed and qualified nominee would assume the office on July 1 upon the expiration of a board member or commissioner's term; or (2) call the Senate back into session during the interim to consider a potential nomination to receive the Senate's advice and consent where the incumbent Commissioner would step down upon the nominee receiving Senate confirmation.

Conversely, using Governor Ige's arguments in this lawsuit and now with Judge Nacino's ruling, the Governor office can abuse its power and can now easily avoid the responsibility of making timely nominations during the regular legislative session thereby avoiding the Senate's right to advice and consent and replace people on boards and commissions on July 1 (terms usually end on June 30), allowing his candidate sit without scrutiny until the following legislative session.

We all should be concerned about this unchecked power which Judge Nacino's ruling gave to Governor Ige as it affects other boards and commissions too. But more so and ironically, the Public Utilities Commission's unique authority, which includes administrative, quasi-judicial and policy responsibilities, is conveyed to it by Legislative action and approval. As an agency that must be independent, the PUC should be viewed as an extension of the Legislature, not a department under the Executive branch. This is the primary reason why the Senate's advice and consent regarding Public Utility Commissioners is important with a requirement in law that a PUC commissioner to holdover until his or her successor is confirmed by the Senate.

Solar Politics In Nevada

noreply@blogger.com (Energy Dynamics) — Wed, 27 Jul 2016 20:07:00 +0000

Utility Dive's Editor, Gavin Bade, is covering the National Association of Regulatory Utility Commissioners (NARUC) conference in Nashville, Tennessee this week and writes about a speech given by Nevada PUC Commissioner, David Noble, who headed up Nevada's net-metering proceedings and who was not reappointed by Governor Sandoval. I am sorry to see Nevada lose a good commissioner who, in trying to make good regulatory decisions based on facts, stood up to toxic personalities like the fired and ousted Bryan Miller, the former Senior Vice President of Public Policy for Sunrun and former spokesperson for The Alliance for Solar Choice (TASC).

Bade reports:

While press reports and solar lobbyists painted the decision as a “disastrous” for the rooftop industry, Noble said it was the solar industry that failed to constructively engage with the regulatory process.

“One of the problems in the case before us is the rooftop solar companies decided to take an approach of an all-or-nothing, and basically promoted that there should be no change from retail rates,” he told fellow regulators. “When you take an all-or-nothing approach there's a possibility you're going to lose and that's exactly what happened because they put on an inferior case.”

While Noble said he would have made the comments regardless, Utility Dive learned Gov. Brian Sandoval (R) will not reappoint him to another term at the end of this year — a fact the governor’s office confirmed to Utility Dive this morning.

“I just caution all commissioners to listen to all sides but be very wary,” Noble said. “Words are one thing, actions are another.”

Commissioner Noble gives the backstory to the Nevada solar-net metering proceedings. A must read for people who want to hear a different perspective than the aggressive, scripted and coordinated political positions of these types of businesses and organizations like TASC, which are self-serving.

Battle Fatigue: Time to Get To Work/Put Up or Shut Up

noreply@blogger.com (Energy Dynamics) — Wed, 20 Jul 2016 07:34:00 +0000

For a long time, Governor Ige and State Representative Chris Lee have intimated that there are other parties interested in purchasing the HECO Companies. The Hawaii Public Utilities Commission own order (page 263) stated, "The HECO Companies' attributes that were attractive to NextEra are still available to other potential suitors."

This afternoon the Board of Directors of Hawaiian Electric Industries (HEI) made it clear in a press release that it is not interested in sizing up potential suitors:

The business and affairs of HEI are managed under the direction of its boards of directors. In accordance with its fiduciary duties, the boards have determined that it is in the best interests of the company and all of the stakeholders that it serves – including shareholders, customers, employees and communities – to remain independent and to work toward realizing the clean energy future and vibrant local economy we all want for Hawaii. In this regard, and despite statements reported in the media about other unnamed parties rumored to be interested in acquiring HEI, the company is not currently in discussions with any other party regarding a business combination and does not intend to initiate any such discussions.

Simply put, politicians and regulators should not be in the matchmaking business to effect a forced marriage on a private business. If certain politicians and the regulator are not happy with the performance of the HECO Companies and its control and operations of Hawaii's electricity franchises then Legislators should use their legislative powers to revoke the franchises and put them up for auction rather than to keep pressing suitors on an unwilling seller.

Rather than seek the limelight and press coverage to just offer intimations, if these politicians think there are better ownership/business model options then they should be held accountable to outline the framework and the follow-up actions to use the State's revocation and condemnation powers to start an adversarial proceeding for a takeover of the electricity system. And, did I say . . . be held accountable for their actions and subsequent decisions.

The HECO-NextEra merger Order states, "As part of their statutory mandate, the HECO Companies must continue to operate to provide safe, reliable, reasonably priced electric service, while meeting the challenges of the current market in general and the various State renewable energy goals in particular." The Order also states, "In the commission's view, the time has come for the HECO Companies to finalize and put into action their plans for achieving the State's clean energy transformation." However, the sentence before that says, "Although there has been progress on each of these issues [dockets on power system improvement plan, distributed energy resources, demand response programs, community solar], the commission observes that progress by the HECO Companies has been very slow."

In general, decision and orders coming from the Commission itself has been very slow. Perhaps certain politicians should be more concerned about and investigate the dysfunction within the Commission and the questionable occupation of a commissioner's seat rather than matchmaking for the HECO Companies.

HEI Stock Takes A Hit - Nexit: A Big Puka To Fill

noreply@blogger.com (Energy Dynamics) — Tue, 19 Jul 2016 01:19:00 +0000

Given its perverse political and regulatory climate, it should not be a surprise that NextEra Energy is exiting Hawaii. The downward decline in Hawaiian Electric Industries' stock price shown below correlates to Governor Ige's appointment of Tom Gorack on June 29, the release of the Hawaii Public Utilities Commission (HPUC) Order on Friday and NextEra's subsequent exit early this morning. Between the period of June 29 and 4 p.m. today, when the stock market closed, my estimate of local value destruction (shares with Hawaii ties) is around $120,000,000.

I wrote a post on July 1 on the fallout of the Gorack appointment. What I said is worth repeating as the PUC's actions and NextEra's exit are no longer speculative, resulting in value destruction affecting Hawaii shareholders and the likelihood of higher financing costs which, ultimately, will be passed on to electricity customers.

. . . given HECO's weakening financial position and lacking a stabilizing factor like NextEra's financial strength, the future outlook does not bode well given all this uncertainty. Prior to the merger application, HECO's credit rating by Standards and Poor was BBB-, one notch above non-investment grade. The merger application stabilized HECO's credit worthiness with a neutral outlook given NextEra's strong financial position. With Hawaii's unstable regulatory and unfriendly business climate, and without a strong financial partner, there could be a propensity to affect HECO's credit rating downward, without any cushion or safety net, it would be to non-investment grade level.

Who pays for the additional cost for these added risks of regulatory uncertainty and financial instability - the HECO customer - in HECO having to pay higher interest rates for access to capital thereby resulting in higher electricity costs.

Like Brexit, it is much too late for regrets. Without a clear pathway to ensure a stable business climate and an improved regulatory environment, the damage will be ongoing with increased costs passed on to electricity customers. With Nexit now in place, the $60 million in rate credits and potential $1 billion in state-wide benefits that the Hawaii Public Utilities Commission refused to acknowledge disappears. What remains is the price tag for the needed infrastructure improvements to realize the State renewable energy goals with no corresponding savings to help offset the price tag. There is no Plan B by the PUC/Ige Administration on how to recover these customer savings offsets except to hope for a generous suitor to appear.

Governor Ige comment on the PUC's Order stated:

No matter who owns the company, the energy vision for Hawaii remains clear - 100 percent renewable energy with a transformation to a customer-centered utility focusing on smart meters, smart grid, distributed local solutions, and as much consumer choice as possible.

Who owns the company does matter to give Hawaii the best chance for success by minimizing risk, maintaining service accessible and reliable and keeping rates affordable. Linear thinking and relying on mantra-like soundbites like "100% renewables" or "no-fossil fuels" or even "local values" or "local ownership" does the public a disservice, as it is vague and insufficient to convey the difficulty and reality of the technical challenges and the cost and effort that will be required to attain such a future.

One's vision must align with the practical realities of execution and with one's values on how to achieve the vision with integrity. Nexit created a big implementation puka for Hawaii's 100% renewable vision to fill.

PUC Merger Decision: Politics Under Guise of Illusionary Regulation

noreply@blogger.com (Energy Dynamics) — Mon, 18 Jul 2016 03:01:00 +0000

The Hawaii Public Utilities Commission's (PUC) action on the Hawaiian Electric Company (HECO) and NextEra Energy merger application, dismissing the application without prejudice and closing the docket, seemed more like a cowardly way to a conclusion. Steeped in flawed logic, rather than one based in well-reasoned findings and conclusion of law, it deliberately avoids a straight up or down decision based on the merits of the merger application.

The Order is illusionary, falsely giving the appearance that a decision was made. The Order states that HECO-NextEra can reapply using the guidance outlined in Appendix A. However, if NextEra walks away, the PUC will simply say that was NextEra’s choice, as they were given a chance to submit a new application. As issued, this is a devious way to accomplish a political decision to accommodate Governor Ige’s opposition to NextEra rather than a fair regulatory review under a well-established framework of regulatory standards and precedence to evaluate a business transaction between two private parties.

It appears that rather than relying on an up or down decision based on the typical fit, willing and able and do no harm regulatory standards supported by findings of fact, the dismissal order articulated an unreasonable high bar applicable only to the HECO-NextEra merger application. In my opinion, if the PUC had issued an Order for approval with conditions (incorporating all the elements of the guidance document) or a denial listing the demands that were not met, this would have allowed an opening for a motion for reconsideration and eventually an appeal by the applicants. But since a dismissal without prejudice may not be taken as a final decision by the PUC, the applicants may not be able to appeal the Order.

But more importantly, an up or down decision, with a raised bar, would have set a new precedence and standard for all other future change in control applications - a bar so high it would make it impossible for other potential suitors to meet. If the PUC/Ige Administration only motive was to discourage NextEra but not other potential suitors, a dismissal without prejudice judgment would have limited application and its contents discretionary for use in future change in control applications as it is likely not a final decision.

This outcome has put HECO and NextEra in a no-win situation, either go through hell again in politically charged environment subjected to arbitrary actions and great uncertainty or to just walk away.

Are there really other potential suitors? I think any credible company would assess Hawaii’s current business/regulatory climate and run in the opposite direction. This morning's Star Advertiser mentions Twenty First Century Utilities, a new concept start-up whose Chief Executive Officer background is in private equity and finance and who has never run an electric utility before. Putting things in perspective, on one hand you have NextEra, ranked 183 by Fortune 500 and the top performing electric utility for 2016 and the premier renewable energy developer in the nation with solid financial and operational history and on the other hand you have a brand new start-up, dabbling with a new business concept with no financial or operational history.

How stupid would we be to risk the operations of our electric utility, an essential service that we all rely on, to private equity interest to experiment on - are our memories so short we have forgotten the disastrous sale of Verizon Hawaii (Hawaiian Telcom) to The Carlyle Group, a private equity firm which lacked telecommunications experience?

While Hawaii makes a lot of hoopla over rooftop solar and other distributed energy resources (energy storage, demand response technologies), about 95% of our electricity usage is still dependent on electricity supplied by the electric utility. The PUC’s executive summary states that the merger benefits do not outweigh risks but the Order lacks an objective assessment of such risks. The Order picks apart the near-term $60 million in rate credits, while it ignores the significant long-term merger synergies to be gained from this strategic transaction. And, most importantly, it fails to acknowledge that the rate credits are to happen while making new capital investments. As I mentioned in a previous post:

Who pays for the additional cost for these added risks of regulatory uncertainty and financial instability - the HECO customer - in HECO having to pay higher interest rates for access to capital thereby resulting in higher electricity costs.

In the Power Systems Improvement Plan, when discussing investments required for Hawaii's renewable future it said:

Achieving 100 percent renewable energy takes substantial capital investments. All options, whether the Preferred Plans or other candidate plans, require substantial amounts of capital, compensated for by customer savings over time. The total capital investments over the next 30 years for Hawaii is estimated to be $25.8 billion (in nominal dollars), of which the utility may invest 53%, or $13.6 billion. The balance may be made by project developers, customers, and the State (via tax incentives).

With the kinds of antics happening under the Ige Administration, it looks like the anticipated savings will be wiped out and the cost of HECO borrowing money to make the necessary investments for a modern electrical system will be going up. Hawaii's 100% renewable future is getting pretty expensive . . . mainly by self inflicted stupidity.

I had hoped that the independence and integrity of the PUC would give merger application a fair shake to be judged on regulatory merits. However, I was not prepared for the lengths this administration would go to cause the deterioration of Hawaii’s regulatory environment. While some may say Tom Gorack, Governor Ige’s controversial appointment to replace Commissioner Michael Champley on July 1, did not sign the Order, I do not doubt that his influence is reflected in this outcome as both Chief Counsel and an unlawful commissioner. One does not have to sign the order to exert undue influence.

Now, sadly, what we are left with is a Public Utilities Commission lacking credibility during a very important time of transition and transformation in our State.

Hawaii PUC Fiasco: An Unfortunate But Great Opportunity For A Civics Lesson

noreply@blogger.com (Energy Dynamics) — Sat, 02 Jul 2016 22:56:00 +0000

Though unfortunate, it's got drama, intrigue, complex characters, suspense, policy, law and order - but it's not The West Wing (which I miss) but the Hawaii Public Utilities Commission's commissioner appointment process. Who would have thought this once obscure, little understood agency steeped its own esoteric language and proceedings is now in the national limelight with Wall Street and everyone else waiting with bated breath.

And though unfortunate, it is a great opportunity for a civics lesson to understand the separation of powers, the hierarchy of laws, the delegation of authority, the role of regulation, the making of policy and, ultimately, figuring out how far a State agency can intrude into a business transaction between two private parties under the guise of protecting the public interest and whether facts, logic, reason and the rule of law will prevail or succumb to an abuse of power.

Separation of Powers - The key to resolving whether Governor Ige naming Tom Gorack is a lawful act starts with the Hawaii State Senate asserting its right or authority in giving advice and consent in the nomination and appointment process for boards and commission and in this case, for a PUC commissioner. This authority is given by the Hawaii State Constitution (Article 5, Section 6):

Except as otherwise provided in this constitution, whenever a board, commission or other body shall be the head of a principal department of the state government, the members thereof shall be nominated and, by and with the advice and consent of the senate, appointed by the governor. The term of office and removal of such members shall be as provided by law. Such board, commission or other body may appoint a principal executive officer who, when authorized by law, may be an ex officio, voting member thereof, and who may be removed by a majority vote of the members appointed by the governor.

Hierarchy of Laws - the next step is in determining whether the constitution is primary or if the constitution allows for more specific language to be enacted in laws. Again, this delegation is found in the Hawaii State Constitution (Article 5, Section 6):

The governor shall nominate and, by and with the advice and consent of the senate, appoint all officers for whose election or appointment provision is not otherwise provided for by this constitution or by law. If the manner of removal of an officer is not prescribed in this constitution, removal shall be as provided by law.

Then one goes to the Hawaii Revised Statutes to find the more specific law on the selection and terms for PUC commissioners (Section 269-2) and for the selection process in general (Section 26-34) and deferring back to Section 269-2 for specifics :

(a) There shall be a public utilities commission of three members, to be called commissioners, and who shall be appointed in the manner prescribed in section 26-34, except as otherwise provided in this section. All members shall be appointed for terms of six years each, except that the terms of the members first appointed shall be for two, four, and six years, respectively, as designated by the governor at the time of appointment. The governor shall designate a member to be chairperson of the commission. Each member shall hold office until the member's successor is appointed and qualified. Section 26-34 shall not apply insofar as it relates to the number of terms and consecutive number of years a member can serve on the commission; provided that no member shall serve more than twelve consecutive years.

Governor Ige argues that his constitutional sanctioned powers gives him the authority to fill a board or commission vacancy when the Hawaii Senate is not in session. This is correct and can be found in Article 5, Section 6:

When the senate is not in session and a vacancy occurs in any office, appointment to which requires the confirmation of the senate, the governor may fill the office by granting a commission which shall expire, unless such appointment is confirmed, at the end of the next session of the senate. The person so appointed shall not be eligible for another interim appointment to such office if the appointment failed to be confirmed by the senate.

However, Section 269-2 anticipates the possibility of a PUC commissioner term expiring when no successor has been "appointed and qualified" to avoid a vacancy situation:

Each member shall hold office until the member's successor is appointed and qualified.

Then we have conflicting Attorney General interpretations. There are two opinions and two
advisory letters on this subject. However, an Attorney General Opinion has more force and weight than just an advisory letter. So I'll refer to Attorney General Opinion 80-4 which is on point with regard to this situation. As the Opinion points out, this issue is well-settled and not something we have to have a Hawaii specific precedent as the current attorney general's letter seem to imply.

Drama - Ironically, we have a reprieve with the 4th of July weekend when we celebrate the colonies' separation from the British and embarked on the founding of our country, one based on democracy and the rule of law.

Come Tuesday and in the following days, we will see whether the rule of law will be pursued or ignored in two possible venues. The first would be the Senate asserting its constitution given duty and right to retain its powers of advice and consent. The second is the right of any individual to start a quo warranto proceeding (Chapter 659) to petition the court to order Tom Gorack to state the authority under which he can claim to be a PUC commissioner.

Here, it appears to be well-settled that given the language of the PUC statutes, that as a hold-over, Commissioner Mike Champley, who has been physically locked out of the PUC but has not resigned, is the de jure officer, that is someone who is legally entitled to the office as clarified in Attorney General Opinion 73-7.

Several weeks ago I wrote a post entitled "Searching for Prudence" to help understand the role and responsibilities of the PUC. The independence and integrity of the PUC is at stake and it is now a search for justice, an exercise to strengthen democracy through the separation of powers and respect for the rule of law. Will facts, logic, reason and the rule of law prevail or will we succumb to an abuse of power making Hawaii look like some Podunk republic open to backdoor politics. If the later and this fiasco is "local values", then we should be glad NextEra doesn't have it.

Fallout from Ige's PUC "Appointment" - An Overview of Day 2

noreply@blogger.com (Energy Dynamics) — Sat, 02 Jul 2016 06:35:00 +0000

Yesterday, the Governor's office released to the press the June 27 Attorney General letter advising him that according to the constitution he can make an interim appointment. In general, I do not disagree with the Governor's authority, given by the constitution, to name an interim board or commission member when a vacancy exists. But in a PUC holdover situation there are specific laws to address the ending of a term with no successor in place. Therefore, unlike most boards and commissions, the PUC statutes intentionally avoids the creation of a vacancy when a member's term ends. And, as I have stated before, the law is clear that Commissioner Mike Champley shall remain in office, and is legally entitled to that office until his successor's nomination receives the advice and consent of the Senate to become qualified. The Attorney General's June 27 letter (which does not have the same force and effect as an Attorney General Opinion) appears to base its findings on just the vacancy part of the constitution and it is a very weak as the letter admits:

". . . the appointment could face legal challenge because there is no definitive Hawaii case confirming that where there is a de jure holdover statute, a vacancy exists at the expiration of a term of office to allow an interim appointment."

Contradicting the June 27 letter, while there may not be Hawaii specific cases there is settled law cited in a March 27, 1980 Attorney General Opinion No. 80-4 which states:

Where a statute specifies that the incumbent shall continue to hold office until his successor is appointed and qualified, it is well settled that the incumbent retains
his office as a de jure officer and no vacancy exists at expiration of the incumbent's term. Therefore, the interim appointment power of the governor is not activated.

How clearer can you get that this is an unlawful action by the Governor?

There have been several press comments about Senate challenging the Administration and asking the courts for some kind of ruling to preserve its powers to advise and consent on a nominee. Civil Beat reporter, Nathan Eagle reports that yesterday Commissioner Michael Champley was told to turn in his keys although Champley communicated to officials that this should not be construed as him giving up his position. Tom Gorack was sworn in at 8:00 a.m. in the Governor's office.

Now, who will or can challenge the legality of Tom Gorack taking office? Who will remains an unknown but anyone can file a petition in a challenge called quo warranto where the petition (Hawaii Revised Statutes 659-4) is filed in circuit court stating the facts. Then burden is on the respondent (Gorack) to answer why he thinks the law does not apply to him and he is legally entitled to hold the office. It would appear, with the language "until his successor is appointed and qualified" and with AG Opinion 80-4 citing the well established principles, it would be difficult to argue against Commission Champley as a de jure officer, that is someone who is legally entitled to hold the office.

The Fallout - Political Interference On The Backs of Hawaii's Residents & Businesses

For many families utility stocks are usually viewed as less risky and favored investments to build financial security unlike riskier tech stocks. It is common to find that utility stocks are held by retirees because reliable dividends help to supplement their monthly pension or social security incomes. According to the HECO/NextEra merger application, about 25% of HEI shares are owned locally. The night before the Gorak announcement shares closed at $34.50. Since the announcement, the shares have been hovering around $32.00, an approximately 9% drop in value, equating to $62 million of local value destruction in Hawaii in one day.

Utility stocks are also favored by many institutional investors. So what may not be as transparent as the above are the affected Hawaii residents with pension benefits or have mutual funds whose investment portfolios include HEI shares.

But more importantly, given HECO's weakening financial position and lacking a stabilizing factor like NextEra's financial strength, the future outlook does not bode well given all this uncertainty. Prior to the merger application, HECO's credit rating by Standards and Poor was BBB-, one notch above non-investment grade. The merger application stabilized HECO's credit worthiness with a neutral outlook given NextEra's strong financial position. With Hawaii's unstable regulatory and unfriendly business climate, and without a strong financial partner, there could be a propensity to affect HECO's credit rating downward, without any cushion or safety net, it would be to non-investment grade level.

Who pays for the additional cost for these added risks of regulatory uncertainty and financial instability - the HECO customer - in HECO having to pay higher interest rates for access to capital thereby resulting in higher electricity costs.

In the Power Systems Improvement Plan, when discussing investments required for Hawaii's renewable future it said:

Achieving 100 percent renewable energy takes substantial capital investments. All options, whether the Preferred Plans or other candidate plans, require substantial amounts of capital, compensated for by customer savings over time. The total capital investments over the next 30 years for Hawaii is estimated to be $25.8 billion (in nominal dollars), of which the utility may invest 53%, or $13.6 billion. The balance may be made by project developers, customers, and the State (via tax incentives).

PUC "Appointment" Subverts the Law

noreply@blogger.com (Energy Dynamics) — Thu, 30 Jun 2016 17:55:00 +0000

Several weeks ago, I began my post, "Searching for Prudence" with the following:

For those steeped in the regulatory realm, the Hawaii Public Utilities Commission (PUC) merger decision and order will be thoroughly dissected and scrutinized given its ramifications. But, unfortunately, outside that realm, there is a woeful lack of understanding on the role and scope of the PUC's responsibility, the need for each commissioners' and the staffs' expertise and independence to actively participate and deliberate to arrive at best decision possible and the endurance of this institution to think and act beyond political cycles and to earn the respect of regulated entities under its charge, by establishing clear performance expectations, conduct fair proceedings and dispense well-reasoned decisions and to gain the public's confidence in its ability to fulfill and advance the public interest.

Before one gets caught up in the debate whether Tom Gorack, the Governor's choice to replace Commission Michael Champley, is "qualified" for the position or not, and if this appointment was to "influence" the outcome of the merger decision, the question that should be asked is whether the Governor had the authority to make this interim "appointment" when Commissioner Champley's term expires today, June 30, 2016.

First let me say that I am not an attorney but I can read. The law (269-2(a)) and a related Attorney General Opinion (73-7) on this subject is pretty clear that Commissioner Champley "shall hold office until the member's [Champley] successor is appointed and qualified," thus he is legally entitled to remain as a PUC Commissioner in a hold-over capacity until the appointment process is completed.

The sequence of an appointment of a Commissioner to the Public Utilities Commission is as follows; (1) a candidate is nominated by the governor, (2) the candidate's nomination is sent to the relevant Senate committee for a public hearing to be vetted (3) when the candidate receives the committee's approval, the nomination is sent to the full Senate for a vote (4) earning the Senate's approval, the nomination is thereby given the Senate's advice and consent for the Governor to make the appointment of the candidate as a Public Utilities Commissioner. In this sequence and only "by and with the advice and consent of the Senate" can the Governor make an appointment and thus the appointee is qualified.

I tried to compile what I have read in a question and answer format below to understand the constitution, the related laws and Attorney General Opinion that affects the appointment process:

What is the Governor’s authority to nominate candidates to boards and commissions?

Article V, Section 6, Executive and Administrative Offices and Departments, of the Hawaii constitution grants the Governor’s authority to nominate candidates to boards and commissions. The most relevant part states:

The governor shall nominate and, by and with the advice and consent of the senate, appoint all officers for whose election or appointment provision is not otherwise provided for by this constitution or by law. If the manner of removal of an officer is not prescribed in this constitution, removal shall be as provided by law.

Can the Governor fill a vacancy when the Senate is not in session?

Article V, Section 6 states:

When the senate is not in session and a vacancy occurs in any office, appointment to which requires the confirmation of the senate, the governor may fill the office by granting a commission which shall expire, unless such appointment is confirmed, at the end of the next session of the senate. The person so appointed shall not be eligible for another interim appointment to such office if the appointment failed to be confirmed by the senate.

Does the constitution allow for the law to prescribe the nomination process and removal of an officer?

Article V, Section 6 states:

Are there laws that prescribe the selection and terms of members of boards and commissions other than the constitution?

Chapter 26-34 generally prescribes the selection and terms of members of boards and commissions.

Are there laws other than Chapter 26-34 that are specific to the selection and terms of commissioners of the Hawaii Public Utilities Commission?

Chapter 269-2 outlines the qualifications, selection process and terms of PUC commissioners.

Does the law address the status of a PUC commissioner whose term has expired when a successor has not been qualified?

Section 269-2(a) explicitly states “Each member shall hold office until the member’s successor is appointed and qualified.”

Can the Governor conclude that a vacancy exists because a PUC commissioner’s term has expired?

No, in the situation of a PUC commissioner there is consideration for a “holdover” situation. Section 269-2(a) is unambiguous that if there is no qualified successor for the expired member’s term that the member shall hold office until the member’s successor is appointed and qualified.

Also, Attorney General Opinion 73-7 states:

Where a statute or a constitutional provision provides for a fixed term of office and until a successor is appointed and qualified, upon the expiration of the fixed term, the incumbent continues to hold the office de jure until his successor is appointed and qualified. State v. Watson, 45 A.2d 716.

What is the status of Commissioner Champley?

After July 1, 2016, in accordance with the constitution and relevant statues and past Attorney General opinions, Commissioner Champley “shall hold office until” his “successor is appointed and qualified.”

Some have commented on the fact that Commissioner Champley himself was an interim appointment and so was current PUC Chair, Randy Iwase. With regard to Commissioner Champley, in accordance with the constitution, Governor Abercrombie made the interim appointment because a vacancy existed to fill an uncompleted term. The vacancy was due to the resignation and departure of Commissioner Carlito Caliboso. Subsequently, in the next legislative session Commissioner Champley was nominated, and by the advice and consent of the Senate, was appointed.

In the case of Chair Iwase, I submitted a letter of my intent not to seek reappointment in December 2014 and left the date of my resignation open to allow for a smooth transition of the chairmanship when a candidate was selected. The announcement of Randy Iwase was made on Friday, January 16 (the day before a long weekend and before I could start the process of my own termination) and he was placed in position just before the opening of 2015 Legislature on January 21 to be considered an interim appointment. In both cases vacancies were created through the resignations of a Commissioner who did not complete his term and a Chair who was in a hold-over position.

Here, Governor Ige is trying to force a vacancy pushing Commissioner Champley out prematurely and subverting the law and the right of the Senate to advice and consent in the process. Thereby, one can only surmise the timing of this announcement and the public comments of the Chair regarding the merger decision why these types of political antics are being played out now given the Governor's vocal opposition to the HECO-NextEra merger application from the onset and wanting to "align" Commissioners consistent with his views. It's a very sad day in Hawaii when a decision as important as this application is tainted with political interference and cannot be decided on its merits or demerits alone by the regulator.

But more importantly, if one cannot interpret the plain reading of statutes that govern the selection and terms of the PUC commissioners and if one is not committed to protecting the integrity and independence of the PUC by speaking up and to advise the Governor that this travesty is not pono, then what is the value of a Chief Counsel in serving the PUC. I spent most of my legislative career trying to reform, modernize and build the reputation of the PUC with my legislative colleagues, which, at the time, included the Governor, as a fair and capable regulatory agency by finding the resources to build its capacity. My heart is heavy today watching yesterday's political farce destroy an important institution where I had grown to love and respect the staff I worked with.

Hawaii's Utility Future: A Car Or A Road

noreply@blogger.com (Energy Dynamics) — Sat, 11 Jun 2016 20:13:00 +0000

In a recent television interview with KHON2's Gina Mangieri, Hawaii Public Utilities Chair, Randy Iwase used a small car (HECO) going down the road as a metaphor to ascertain whether there is a need for a bigger car (NextEra). With all due respect to the Chair, the car metaphor does not convey how the utility of the future should be envisioned nor does the metaphor convey the function and value of a modernized electric grid.

“Those in favor of the merger may say, how is it in the interest of the public if the merger fails and HECO can’t afford to do all the things it has to do alone by 2045?” Always Investigating [Gina Mangieri] posed to Iwase. “There was nothing in the hearing, for the record,” Iwase replied. “Two high officials in Hawaiian Electric, testifying at the hearing, said that they can move forward standing alone… even without NextEra. “What you have is Hawaiian Electric moving along in their car and along comes a big car saying, ‘We want to buy your car and you come along with us,'” Iwase added. “The question is, can that car still travel the road, the smaller car? And the answer they gave us was yes, it can.

Yes, at one time HECO was the only the car on the road, a one way road built by HECO to shuttle electricity, starting where the HECO generator was located, delivered at the end of the road where the HECO customer used the electricity. Today, in the context of transforming and modernizing our electric system, it is more than just determining whether the small HECO car can handle when the future is not a linear pathway.

Now, as electricity flows in two directions, customers can be either be generating or consuming electricity. Today, it is the road (my metaphor for the electric grid) that is more substantial than the HECO car. How that road gets maintained, developed and improved, how easily other cars carrying a variety of products and services are allow to merge onto multiple networks interconnected via a road system, how congestion points on the road system are addressed, how road safety is addressed, how reliable the delivery of these products and services by various vehicles are, how tolls to access the road are fairly assessed, how electricity is fairly price or how road taxes are apportioned by all users of the road and what about all those new navigation systems or the newer, faster car models that are whizzing by - are the challenges that get more complex as we try to develop a "clean, lean, ultra-reliable, customized, connected and communal" electric system.

These are the challenges that the small car must navigate as the road it is responsible for transforms into a vast system of connected networks of electricity producers and consumers. Henry Ford may have mass produced the Model T, but it was the network of the interstate highway system that had a major impact to transform the landscape of the United States, its economy, connectivity and how people choose to live, work and play.

In a presentation at the 2016 Energy Thought Conference, Anne Pramagiore, the President and CEO of Commonwealth Edison Company describes the evolution and revolution of the electric grid. The significance of the electrical grid architecture to evolve to an energy platform to capture the power of networks is described by Ms. Pramagiore in the following excerpts:

Platforms are the dominating business model of the 21st century unlike the pipeline business model of the 20th century where the focus was on product, pushing it through a linear pipeline of mass production, mass marketing and, ultimately, a mass sale.

The platform focus is on the interaction or connecting individual producers and consumers in a low friction, customized experience utilizing robust feedback loops and deep data pools, all this culminating in value creation.

The platform features a shift from product to interaction, from the sale to the experience, from tightly defined roles like buyer and seller to constantly morphing participation migrating around an ecosystem like prosumers [someone that can generate as well as consume electricity]. From data largely locked in the pipeline to data distributed out through the ecosystem. From a linear process to a multi-dimensional activity. And all this is constructed on the building blocks of infrastructure, data and transactions.

. . . the electric grid is being redesigned through digital and other technological breakthroughs has the capacity to become one of the most impactful platform architecture of the millennium, facilitating the migration of power across the grid in an efficient manner, inviting a multitude of actors, buyers and sellers of energy services and information to interact on the grid as the ecosystem generates all the benefits networks have to offer. Enhancing choice by incorporation of multiple energy options and clean forms of energy, to energy use structured and priced by time of day to options to use no energy at all. Generating efficiency by incenti[viz]ing energy flows or disincenti[viz]ing energy usage at the right time at the right place at the right price. Creating opportunities by facilitating the creation of a 21st century marketplace of the people.

It is unfortunate that those that buy into parochial politics cannot escape linear thinking and keep falling back into mantra-like soundbites like "100% renewables" or "no-fossil fuels" or even "local values" without paying attention to the reality of the situation and the cost and effort of what it will take to attain such a 100% renewable future or what it means to put one's values into practice.

One's vision must align with the practical realities of how to achieve and its much more than determining small car or big car. And, sadly, it is patently unfair to think the small car would denigrate and undervalue its own worth publicly - the public, those with self-interest, some politicians and the regulator has done that for them.

Searching for Prudence

noreply@blogger.com (Energy Dynamics) — Fri, 10 Jun 2016 04:17:00 +0000

Whether you are in support or are against, a decision in the HECO/NextEra merger application will elicit strong opinions on the outcome. No other recent regulatory decision will have as much impact on the daily lives of most of Hawaii's residents and businesses as this decision. No other regulatory decision will affect the pace, scale and cost of Hawaii's clean energy transformation on electricity customers as this decision. And, probably, rivaling the State's transportation systems (harbors, airports, highways and with the rail system included), no other sector will have as much new public and private sector infrastructure investments that are related to this decision.

For those steeped in the regulatory realm, the Hawaii Public Utilities Commission (PUC) merger decision and order will be thoroughly dissected and scrutinized given its ramifications. But, unfortunately, outside that realm, there is a woeful lack of understanding on the role and scope of the PUC's responsibility, the need for each commissioners' and the staffs' expertise and independence to actively participate and deliberate to arrive at best decision possible and the endurance of this institution to think and act beyond political cycles and to earn the respect of regulated entities under its charge, by establishing clear performance expectations, conduct fair proceedings and dispense well-reasoned decisions and to gain the public's confidence in its ability to fulfill and advance the public interest.

To help understand how the PUC should interact and deliberate, the concept of prudence, described in an Energy Law Journal article entitled "The Prudent Regulator: Politics, Independence, Ethics, and the Public Interest," by Dr. Janice Beecher, Director of the Institute of Public Utilities at Michigan State University, gives insight and valuable food for thought. I bolded certain passages for emphasis.

On institutional stability and endurance:

Prudence is a principle central to the theory and practice of public utility regulation, a hallowed standard of review by which utility behaviors and decisions are judged. The concept of prudence might well be applied to the institution of regulation itself and those responsible for its endurance. By nature and necessity, regulation is a political process, but by design it works best with a substantial degree of independence and when regulators are deeply committed to the ethical performance of their charge. The prudent regulator considers their own behavior not in narrow terms of technical compliance with codes of conduct, but in broader terms of institutional stability. The price of imprudence is paid not only by those whose impropriety betrays the public's trust but by the very institutions they are entrusted to service. Adopting an institutional perspective, this review idealizes the prudent regulator by examining the intricately related and largely inseparable constructs of politics, independence, and ethics, and the transcendent imperative of regulation in the public interest.

A prudent regulator:

The prudent regulator knowingly and authentically embodies all of these virtues - dedication to public service, obligation to the public interest, intellectual curiosity, personal humility, political independence, judicial demeanor, and commitment to ethics - as well as an understanding and appreciation of why they matter fundamentally to the institution. Good and prudent regulators are a necessary condition for good regulation - regulation in the public interest that is reasoned equitable, and efficacious.

On public interest:

The good regulator embraces the public interest, appreciates the daunting obligation to it, and accepts the often agonizing process of discovery. Easier to sense than to define or instill, the public interest is divined not through opinion polls or political expediency but by deliberative weighing of subordinate interests in the context of a social compact to pursue a larger common good. The calculus of the public interest in many respects is a process of elimination, informed by politics but guided by established principles, educated instincts and the artful blending of science and conscience.

On intellectual curiosity:

The intellectually curious [regulator] appreciate complex and multi-disciplinary problems and solutions, apply critical thinking skills, exhibit healthy skepticism, appreciate empirical analysis and welcome constructive debate. Regulators are more than likely to find themselves outside of their intellectual comfort zone. The public-interest mandate, along with the mental rigor of the work, also argue for self-awareness and bringing a healthy dose of personal humility to the task of regulating, which at times may seem antithetical to the political ego and immodesty required of those who seek high office. Hubris, obstinacy, and stridency are clearly contraindicated.

On independence:

Good regulators are generally non-ideological, non-dogmatic, and without agenda or parochial motive. Given the political context and import of their position, the regulator cannot be apolitical, but whether elected or appointment, their service in office should be impartial, unbiased, and nonpartisan not just with respect to political parties, but all parties of interest. Commissioners dispense a specialized form of justice and are well served by adopting a judicial demeanor, temperament, and disposition. The judgelike commissioner is circumspect but decisive and incapricious in the discharge of their duties. Also working to their advantage in the commission cultural model are maturity, sensibility, patience and collegiality. Last and certainly not least, good regulators demonstrate a conscientious and uncompromising commitment to ethics.

On political influence:

Policy ends cannot justify political means of subverting independent regulation. On matters of policy, executives and lawmakers must find constructive methods of authoritative expression other than the politically motivated and potentially capricious dismissal of lawfully appointed regulators engaged in lawful regulatory functions. . .

Commissioners operating in good faith to serve the public and public interest, however, should be secure in their appointments, unencumbered by political meddling and its chilling effects, and free to respectfully dissent from the policy preferences of those in power.

Like all politics, regulatory politics become pernicious when slighter political interests, including the self-interest of politicians, overwhelm the public interest and undermine the public trust. Excessive politicization and undue influence weakens regulation as an institution and instrument of public policy.

On regulation:

Regulation that is "too weak" when intervention is reasoned and necessary, is as bad or worse for markets and commerce as regulation that is "too strong" because weakness leads to political backlash, and paradoxically, to draconian political solutions directed toward regulators or the industries they regulate. The downward spiral of vital policy institutions can be fueled by the loss of the independence and catalyzed by ethical breaches. The charge of the prudent regulator is to transcend parochial politics and to guard with tenacity their independence, and thereby the institution they serve.

On the relationship between commissioners and staff:

How commissioners perceived their role and that of staff may be at odds with how staff perceives its role and that of the commissioners. Ideally, both will welcome a thoughtful counterpart in their pursuits and neither will settle for captive loyalty. Commissioners should expect more from staff than validation of autocratic declarations; staff should expect commissioners to come to their own conclusions deliberately and not just "rubber stamp" the recommendations made to them, including settlements negotiated by staff with other parties. Commissioners should value and utilize the experience, expertise and impartial analysis of the staff, and appreciate the sensitivities that arise when staff advice is not taken. Staff should always respect the commission's authority and avoid entrenchment, recalcitrance, or the appearance of subversion.

Relationship with the public:

Elected or appointed, the independent regulator is neither apolitical nor politically indifferent to the public. Regulators must be sensitive and responsive to their various constituents, perhaps especially the ratepayer-voter. Evershifting public values and preferences are expressed through political processes and factored into the high calculus of the public interest. Regulatory policies that disregard or defy the general will are antithetical to the public-interest doctrine. Regulatory commissions, according to [President Franklin D.] Roosevelt, must be a "Tribune of the people. . . getting the facts and doing justice to both the consumers and investors in public utilities."

In this important decision and for the sake of the PUC as an important institution, it is time to put away parochial politics, petty differences, special and self-interest advocacy and to work to truly become the tribunal "tribune of the people and to do justice" for both the consumer and public utility.

Renewable Energy - Capacity vs Capacity Factor: What metrics should we focus on?

noreply@blogger.com (Energy Dynamics) — Tue, 31 May 2016 03:05:00 +0000

While those who chant "100% renewables" or "no-fossil fuel" or "the democratization of electricity" or threaten to go off-grid while extolling the virtues of distributed energy resources to the grid may sound progressive and attractive, how the electric grid functions as a vital public infrastructure to ensure the safe, affordable and reliable delivery of an essential service to all residents and businesses of a community is rarely discussed. While some decry the monopolistic nature of electric utilities, the fact is, no matter what type of ownership model, the operations of an electric utility and the grid are still governed by same physics and economics within the same framework of rules, laws and policy.

This is the first of a series of articles of my attempt to take on some basic issues to breakdown the complexity of Hawaii's electric system and the challenge to design and make wise investments to optimize both customer and utility assets to achieve cleaner, safe, reliable and equitable electricity service while keeping the cost of electricity affordable. This is critical not only to bolster our economy but to ensure our quality of life. As we achieve higher renewable penetration levels, the decisions of what kinds of technologies we invest in and who pays will become more contentious if we fail to understand the key technical and economic tradeoffs and just rely on aggressive marketing and political soundbites when making new investments.

The following presentation, available on video at the link below, by Hawaii Public Utilities Commissioner Michael Champley is a good way to start off this education effort.

At the March 2016 Maui Energy Conference, when evaluating Hawaii's renewable energy progress, Hawaii PUC Commissioner Mike Champley posed the important question, "What metric do we look at?" In his presentation, as a panelist on "The Hawaii Renewable Energy Experience - What Can Be Replicated Nationally and Internationally," Commissioner Champley said it was important understand two competing metrics, renewable capacity versus energy penetration, or capacity factor, and walked the audience through each of his slides (some shown here) depicting our renewable progress, current challenges, future challenges and new considerations that come into play regarding key technical and economic tradeoffs.

He defined capacity (the red bar) as "the summation of all the renewable energy resources on that island's grid divided by the system peak load regardless of when it occurred, typically for each island in the evening." This is important as the most ubiquitous resource, solar, is not available during the evening system peak.

He said fast forward in a year or so and it is likely that the capacity will soon exceed 100% on the islands of Maui and Kauai and Hawaii Island and rhetorically asked, "What are the implications?" He explained, "Once you hit 100% from a capacity perspective the laws of physics take over. You got a real time match of supply and demand and if your capacity is at 100%, any additional capacity beyond that could lead to curtailment or immediate consideration of some kind of storage or load shifting."

We already see this happening on many circuits with penetration levels ranging from 100 to 250% of daytime minimum load and with the need to move to the self-supply tariff for new rooftop installations.

He then walked everyone through the renewable portfolio composition of the Hawaiian Electric Companies, noting that the bars are in descending order of the capacity factor of the resource. For example, although geothermal only accounts for 4% of renewable capacity, it accounts for 11% of renewable energy produced, likewise, solar accounts for 53% of renewable capacity but only accounts for 33% of renewable energy produced, or 8% of total electricity sales. Commissioner Champley stresses that technology (or resource) matters because the more we rely on resources with lower capacity factors, the more installed capacity we are going to need to get to 100% renewable electricity generation. Therefore, how we go beyond the 100% capacity is our next challenge and new considerations will come into play and a diversified resource portfolio is very important strategy, one that should not be overlooked.

His next slide focused on the two components of Maui's electricity cost, the black line representing operations and maintenance and fixed charges, and the red line energy cost, i.e. fuel and purchased power costs. His guess is during the 2012-2014 period, Maui's cost would have been 1-2 cents higher if not for its wind projects. But in 2015, as oil prices dropped, the situation flipped. In his opinion, this isn't a bad situation but delves into the dilemma of how to manage commodity risk and the need to assess the portfolio mix over time, not a snapshot in time.

On his last slide, the left bar is a breakdown of Maui's 2015 actual cost, and the right bar is a conceptual of future cost depending on where we choose to make future tradeoffs and investments. For example, if we make further investments in increasing wind and solar capacity, corresponding investments will need to be made in grid modernization, renewable integration and bulk storage. Therefore, will new investments be made in nascent storage technology or pump storage to store and dispatch solar at evening peak? Or will it be made in smaller and flexible fossil generators with the ability to ramp up and down with the variability of wind and solar during the day and be available to address system peak? Which solution will be less risky? Or do we do both? What solution can we afford and have the greatest system and customer benefits? Can we move forward with a no-regret solution/strategy?

The logical, economic solutions are there, but it will take the goring of some sacred cows to lay a solid foundation and cost-effective strategy to get to 100%.

A Toilet Evolution - Hiney Hygiene's Energetic Role

noreply@blogger.com (Energy Dynamics) — Sat, 28 May 2016 00:42:00 +0000

Americans are certainly beginning to notice and appreciate the comforts of an enhanced Japanese toilet seat. But today, Steve Mitnick, Editor-in-Chief of Public Utilities Fortnightly is probably the first person to marry the thought of an electrified toilet to load growth. He quotes from a Wall Street Journal article regarding electricity consumption of these toilets:

“The majority of homes in Japan are equipped with toilets that come with seats that heat up and electric bidets – more than 70% of all homes, according to a government estimate – that do consume a fair amount of electricity here.

Generally switched on year-round, toilets in Japan account for 3.9% of all household electricity consumption. The fancier ones have seats that majestically rise when a person is detected entering the bathroom, while others play music and emit pleasant odors.”

The Priceonomics article that Mitnick also references goes into more detail on history, installation costs and moderately priced alternatives. Here's an excerpt on Japan's ubiquitous toilet preference:

A whopping 72% of Japanese households now have bidet-style modern toilets. In 1980, the Japanese company Toto introduced its Washlet G Series and the modern toilet was born. Today the term Washlet, while technically a trademarked term by Toto, is colloquially used to refer to any bidet-style toilet seat.

What was most notable to this author when visiting Japan was that these toilets are everywhere. You could be hiking for hours at a mountain outside of Tokyo and at the very summit, discover the toilets in the public bathrooms are nicer than the toilets in the home of the average billionaire in the United States. In fact, the toilets in public facilities in Japan were almost all better than any toilet the author had ever encountered in America.

As a legislator, I did my share about grumbling about the disgraceful state of State Parks restrooms. Having visited Japan recently, I too was pleasantly surprised to find these fabulous toilet seats in public bathrooms and our modest accommodations. Understandably, the only place that did not have this luxury was at a shukubo, a monastery temple lodging. At the shukubo, there was a choice between the western and squat styles. In the cold early morning I quickly went back to the ice cold seat of the western style after I almost pulled out the wall pipes when I thought I was going to fall backwards while squatting. I need to work on my squats.

The only reason I have not upgraded my toilet at home is because I don't have an electrical outlet near the toilet and am not ready to dish-out the money to remodel my bathroom. But a friend who is building her new home will be installing the Toto Washlet throughout her home. I'm envious.

In the interest of growing the electricity load and adding another opportunity for aggregated

demand response and increasing hygiene, should we not mandate that all new toilets installed in Hawaii be electrified. Note I said mandated, not offer a tax credit. Just like the solar water heater mandate, the small cost to upgrade at the time of new construction or remodeling can be rolled into the over all construction cost financing package at negligible cost. Bachi (bad karma) on the architect or builder who tries to talk the homeowner out of this mandate seeking an exemption.

Or maybe we should have a TPS, toilet portfolio standard with aggressive benchmarks to establish a market floor. But that will probably become meaningless as someone will have the bright idea to amend to a 100% aspirational goal. Or should we have a no-toilet paper mandate. Cutting down trees to make toilet paper and shipping the containers to Hawaii certainly has lots of environmental impacts. The no-fossil fuel chants are getting tiresome, so how about no-toilet paper by 2045. The upside - when there's a dock strike/shipping disruption the only things flying off the shelves will be rice and spam and not toilet paper.

Yes, a clean energy transformation will require us to rethink and redesign our needs, hiney hygiene - that's something I can get behind.

IRENA Innovation Week: Highlighting KIUC as the Postcard from the Future

noreply@blogger.com (Energy Dynamics) — Thu, 12 May 2016 21:17:00 +0000

I arrived in Bonn Monday evening to participate as a speaker in the International Renewable Energy Agency (IRENA) first Innovation Week. IRENA is "an intergovernmental organization that supports countries in their transition to a sustainable energy future, and serves as the principal platform for international cooperation, a center of excellence, and a repository of policy, technology, resource and financial knowledge on renewable energy." It has 140 states and the European Union as members.

The conference opened with Germany's State Secretary Rainer Baake of the Federal Ministry of Economic Affairs and Energy mentioning that Germany hit a milestone over the weekend, 95% renewable penetration level with its sunny and breezy weather. Later in the program, Irene Canas, the Vice Minister of Energy for Costa Rica mentioned that Costa Rica was at 100% renewable penetration with their hydroelectric, geothermal and wind resources. Both countries accomplishments are impressive but cannot compare to what Kauai Island Utility Cooperative (KIUC) has accomplished in the past five months on an island grid. I had to explain to the broad audience that Germany is interconnected to a larger, continental grid that is more accommodating to the variability of solar and wind. Costa Rica primary renewables are hydroelectric and geothermal which are firm resources. To compare those two situations with KIUC would be like comparing apples and oranges.

Here's a portion of my talk:

Now I would like to cover why Kauai Island Utility Cooperative is the postcard from the future.

In 2015 KIUC’s annual energy mix was 38% renewables and 62% diesel fuel generation.

On four occasions in January 2016, KIUC obtained 90% or more of its electricity from renewables. In addition to its baseload capacities of 8% biomass, 7% hydroelectric and ramping diesel generation, KIUC achieved up to 77% solar in its power mix, the most solar ever integrated by a U.S. utility.

The 77% that drove the renewable total over 90% was only achieved for short intervals, the longest being 61 minutes on January 13. However, on average in January, solar accounted for about 62% of its generation.

Less than two months later, in March, KIUC topped that feat, integrating more than 95% renewable resources into its system with 80% system wide penetration from solar for durations between 11 a.m. and noon.

Today, solar making up close to 70% of the utility's generation mix is becoming the norm. To achieve this high integration level, KIUC has batteries strategically located for frequency and voltage control. It has upgraded its conventional diesel generators so they can be more responsive to solar variability. Air permits were modified to allow generators to run at below 50% loads. Generator governors were tuned to ramp faster. Relay protection and load shed schemes were redesigned. Solar inverters and battery inverters were adjusted to ride through wider frequency and voltage excursions.

Jim Kelly, KIUC’s communications director said, “Being an engineer in the control room is a lot more challenging than it was six months ago. There are things happening constantly and it is a real team effort to keep it in balance. KIUC grid operators have no choice but to push the envelope.”

What I learned from my experience is you can make lots of good policies but where the action really happens is in the control room. These operators are confident in their ability to push the envelope and outside of solar, they understand there are few other alternatives to meet state policy objectives, regulatory principles and KIUC's strategic plan.

KIUC has achieved a significant milestone where its avoided cost is now utility scale solar, not the avoided cost of oil. Another first for KIUC is its power purchase agreement with SolarCity for electricity from the first utility-scale solar array and battery storage system designed to supply power to the grid in the evening, when demand is the highest. The cost is slightly higher than utility scale solar but lower than the cost of operating its conventional diesel generators during evening peak.

Here is the element that I think is critical in achieving a successful transformation. The

KIUC experience relies on the processing of data and its leadership’s ability to analyze quickly and respond. As we move further away from the traditional central power design to integrating more renewable resources comprising of both utility and customer sited systems and unbundling and procuring other ancillary services typically provided by the utility, the utility's primary commodity shifts from electrons to data. This paradigm shift requires the utility to be the aggregator of data that is, the analysis and management of data for the efficient delivery and usage of the cleanest and cheapest electrons while maintaining power quality and stability of the grid at affordable rates.

I emphasize data but data is just a subset of the need to adapt to technology in general, which takes the forms of fast communication, and new methods of energy production, storage, delivery and management.

To be able to manage these opportunities and risks associated with new technologies, it will require management teams to be forward looking and rigorous in their thinking, able to develop adaptable strategies and business models, and the discipline to manage by fact and execute well. Management needs to collaborate effectively internally and externally, embrace the need for continuous change and improvement, and to diligently cultivate the organizational culture aligned with these traits.

Hawaii’s utilities need to be truly engaged with their customers and deliver a new level of service, ultimately developing stronger loyalty. Otherwise, the utilities will face the medium-term prospect of new and improved distributed energy resources technology and customer dissatisfaction combining to trigger grid defection and, ultimately, compromising the integrity of Hawaii's electricity grid and a clean energy transformation to benefit all residents and businesses, not to mention the financial viability of the utility itself. And they must do all of this amongst great uncertainty and while the utility business model and regulatory structure evolves.

I am happy to report that my presentation was well-received and while the non-technical people may not have fully grasped the challenging nature of this feat, the engineers and other technocrats sure did, were wowed and fully appreciated all the modifications that were made to be able to integrate the high penetration level. Other technical presenters referred to it in their presentations.

Kauai gave many other parts of the world the confidence of what can be accomplished in a thoughtful and methodical way when there is a commitment to a clean energy future, a good strategy, smart and dedicated people and good leadership.

Politics: Legislature Over & Closing Briefs Filed

noreply@blogger.com (Energy Dynamics) — Sat, 07 May 2016 18:50:00 +0000

In the closing days of the Legislature, StarAdvertiser reporter Kathryn Mykleseth reports Senate energy Chair Lorraine Inouye "derails two renewable energy bills." Unfortunately, what is not reported is whether these bills were worth passing at all. The State energy office office can put together a working group to come up with a consensus position on how to calculate the renewable portfolio standard to present to the Legislature next year. It is not an urgent issue. It is something that needs to be done right so there are no inadvertent consequences. I agree with Chair Inouye, clarifying the State's jurisdiction over geothermal issues is important. But, a geothermal bill should not be held hostage over a tax credit bill, which could have huge impacts on the general fund, providing more questionable subsidization for private investments in energy storage, diverting funding that should go to important public programs like public education, safety net programs and natural resource management. I just find it so ironic that people who are screaming about the 1% seem to have no problem giving renewable energy/energy storage tax credits to the same, those who keep getting the clean energy benefits, relying on the rest of us to subsidize personal gains with public funds.

Closing briefs have been filed for the HECO-NextEra merger application and all that is needed is a timely decision. I wrote the following piece for an Island Voices opinion piece which was published in the StarAdverstiser on Sunday, May 1.

Hawaii's 100% renewable goal will not happen quickly and it will not be cheap, requiring billions of dollars in infrastructure investments. For more than 35% of Hawaii’s residents, those of us over age 50, this energy system transformation is unlikely to be completed in our lifetime unless there are major technology and cost breakthroughs. This transformation is a multi-decade endeavor that must survive beyond political election cycles, requiring good analysis, planning and certainty to attract the capital for the infrastructure upgrades necessary to achieve our clean energy goals affordably.

Hawaii’s clean energy transformation cannot be achieved without a financially strong, technology savvy, analytical and data driven electric utility. To be successful, it will have to be an electric utility whose focus is on its customers and its responsibility to provide a public good under the supervision of a capable and independent regulator to monitor its performance and serve as a buffer from the antics of politics.

A 2003 study prepared for the Hawaii Energy Policy Forum identified the regulator as a significant barrier to achieving Hawaii’s clean energy future stating:

The integrity and effectiveness of the regulatory agencies is essential to a healthy utility industry and to the general welfare of the broader economy and population this industry serves. It is clear that Hawaii’s utility regulatory agencies are in need of revitalization and improvement. This is especially true if these agencies are to play an effective role in the determination and implementation of energy policy.

For more than fifteen years, as a legislator and later as the PUC Chair, I worked with key legislators [including the Governor] to give the Hawaii Public Utilities Commission (PUC) its independence and the resources it needed to reform and revitalize the agency to tackle the policy, economic and technical challenges to oversee the transformation of the electricity sector by Hawaii’s electric utilities. Recently, this effort has finally come to fruition but, unfortunately, all will be for naught if the biggest decision before the PUC, the merger application, becomes a decision of just doing the Governor’s bidding rather than the decision of a capable and independent regulator.

NextEra is recognized as a top performing utility and company nationally. There is little doubt about NextEra being financially and technically fit, willing and able, the typical standard in judging the capabilities of an entity to acquire a public utility. Other than this question of "fitness," the larger issue is whether the approval can be conditioned to satisfy a broader concern of the PUC to address public interest as defined by the PUC. It has been a failure on the part of the State parties, that the Department of Business, Economic Development and Tourism, Office of State Planning and the Consumer Advocate, have not made an attempt to negotiate a settlement to condition an approval.

We need to put into perspective the State of Hawaii's responsibilities in this very important transaction between two private businesses subject to regulation. The aforementioned State agencies are responsible for our State's business climate. The State has the ability and duty to regulate and govern the environment NextEra functions in; to align a public utility providing a public good with the public interest. However, it appears that this isn't a question of "fitness" anymore. It has become an issue of an intransigent administration refusing to negotiate in an attempt to stymie a business transaction between private companies at any cost, including the already damaged business climate in Hawaii. Unfortunately, this appears more indicative of the Ige administration lacking confidence in its ability to regulate when the State of Hawaii has the authority and power to do so.

Whether it’s a go or no go, a timely PUC decision before the June 3 walk away date allows all parties to move on rather than being held captive to further political drama.

Solar Siting: The Agriculture-Rural Dilemma & Loophole

noreply@blogger.com (Energy Dynamics) — Thu, 28 Apr 2016 00:38:00 +0000

This morning someone pointed out to me Henry Curtis' blog post on House Bill 2636 and the negative reaction to the bill by Office of Planning, the Department of Agriculture and comments by former Hawaii Island Planning Director and Board of Land & Natural Resources board member, Chris Yuen. If you are not familiar with the backstory, lacking a purpose clause it is difficult to ascertain why the bill is necessary. But, overall, they completely miss the point of the bill.

House Bill 2636, SD 2 will require a special permit approval for solar projects larger than 25 kilowatts on a single or multiple lots in conforming or non-conforming subdivisions on Hawaii Island. The bill was introduced to prevent, from happening again, the problem where a solar developer has dominated the Hawaii Island Feed-In-Tariff program with the purchase of a number of residential lots in several Ocean View subdivisions to site solar panels, which in the aggregate creates a 6.75 megawatt project. Because of the existing land use and soil classification, the siting of these multiple projects was an outright permitted use within a residential subdivision.

However, the siting of solar projects on agricultural classified lands is not the sole issue here. This bill is necessary as the result of multiple and systemic failures regarding our land use classification system, permitting processes and the misapplication of the feed-in-tariff program (FiT) by an opportunistic developer taking full advantage of failures and loopholes within various State and County agencies with disparate missions and functions and uncoordinated actions.

The problem starts with the number of substandard subdivisions that were created over 40 years ago on Hawaii Island. Not wanting to have to bear the responsibility and costs of providing county services to these remote subdivisions, these non-conforming residential subdivisions with substandard infrastructure were identified as Agriculture rather than Rural in the state land use classification system. While the Office of Planning is advocating to tackle the issue with a broad stroke, the situation needs to be addressed with finesse as it has nothing to do with the use of agricultural lands. This classification was done for the County's convenience of not wanting to provide County services rather than the use and preservation of agricultural lands for agricultural purposes. Therefore, these early subdivisions should be recognized for what they are, non-conforming residential subdivisions, not agricultural lots.

Lastly, these solar projects confounds the purpose of FIT program and in the aggregate, obviated the competitive bidding process for utility scale projects. The FIT program which was approved in 2010 by the Hawaii Public Utilities Commission (PUC) was a way to incentivize renewable energy installations with a standardized tariff for projects that were "shovel-ready," that could come online quickly. The developer went on a buying acquisition in Ocean View and while the lots sat in escrow, the developer went on to dominate the FIT program, placing these supposedly "shovel-ready" projects in the queue back in 2011. Testimony submitted to the Legislature describes the project:

The solar developer, a large overseas corporation, SPI Solar (headquartered in Shanghai) intends to build 25 solar installations, each with a capacity of 250kW, on 25 three-acre lots, among homes, in three subdivisions in Ocean View on the Big Island. 16 would go in the Hawaiian Ranchos sub-division, one in the Kula Kai subdivision, and eight in the Kona South subdivision. (Please see attached map). The last mentioned is completely undeveloped and rich in virgin ‘Ohi’a forest. There is no legal access to the eight lots that SPI plans to lease from the owners. Ocean View is a fast-growing town with about 7,000 residents. Our population doubled between 1990 and 2000, and then doubled again between 2000 and 2010. SPI Solar is able to industrialize our rural neighborhood by taking advantage of the loophole in HRS 205-2. 30,000 panels will be installed, with a combined output of 6.75 megawatts. Each lot will be bulldozed flat edge-to-edge. Each array will have 1,127 panels. Each array will cover more than two acres and will be surrounded by two six-foot-high chain-link fences with cameras and security lights added. This corporation is able to industrialize our rural neighborhood by taking advantage of a loophole in this law, a loophole that HB 2636 would close to prevent future developments.

Almost six years later, these projects still would require PUC approval for a new substation and transmission line (the applications are currently pending before the PUC) before they can be built. So much for being "shovel-ready" and with the huge drops in panel pricing, the changing energy landscape, the FIT tariff would be a huge windfall for the opportunistic developer.

Hawaii's 100% renewable goal should not be done at any cost and this type of project is no longer needed, no longer timely and, therefore, not in the public interest. Just because this is in a remote area this gross calamity should not be overlooked. This just another eyeopener as to the failure of our land-use policies and a disconnection with our energy policies.

Updates: TASC Lawsuits & SunEdison

noreply@blogger.com (Energy Dynamics) — Sun, 24 Apr 2016 22:33:00 +0000

On Wednesday, April 20, the Hawaii Intermediate Court of Appeals (ICA) dismissed two appeals filed by The Alliance for Solar Choice (TASC) contesting the Hawaii Public Utilities Commission (PUC) October 12, 2015 decision and order, in Docket No. 2014-0192, Instituting a Proceeding to Investigate Distributed Energy Resources Policies.

CAAP-16-0000075 grants the stipulation for dismissal with prejudice, TASC's appeal on the First Circuit Court's decision in Civil No. 15-1-2025-10. I covered Judge Gary Chang's ruling in my January 10, 2016 post.

CAAP-16-0000876 grants the stipulation for dismissal with prejudice, TASC's direct appeal to the ICA on the PUC's October 12, 2015 decision and order.

The ICA's dismissal with prejudice means TASC is barred from filing another lawsuit or appeal using the same claims. Meanwhile, as the 2016 Hawaii State Legislature comes to a close, there are no bills to override the PUC's decision on net-metering, nor was any bill seriously considered. I guess Bryan Miller must have overestimated the merits of TASC's lawsuit given this quote taken from GreenTech Media article on the October 12 decision and order:

Bryan Miller, senior vice president of policy at Sunrun, criticized the PUC's decision for being wildly out of step with Hawaii's politics.

“The decision will not stand," he said. "It will be reversed either in the political process or in the courts, but it will not stand one way or the other.”

On Thursday, April 21, SunEdison finally filed for bankruptcy. While certain people may want to be bitter about Hawaiian Electric Company canceling the power purchase agreements and its cautious approach concerning DE Shaw's, a creditor, offer to pick-up the projects, I think this article captures the mess that is yet to come:

SunEdison, the largest renewable-energy firm in the world and the bane of Wall Street's existence since July, filed for bankruptcy on Thursday. So story over, right? One for the books. A massive company with $11 billion in debt and an SEC investigation hanging over its head bites the dust. Not exactly. SunEdison has creditors, and those creditors are going to want things. They also may want things that SunEdison doesn't want to give them.

That is the beginning of another story. Instead of watching a stock death drop, we may be about to watch a creditor grudge match.

Beware the Panacea: Energy Storage Tax Credits & Rebates

noreply@blogger.com (Energy Dynamics) — Fri, 22 Apr 2016 02:18:00 +0000

With the end of the 2016 Hawaii Legislature in sight, final versions of bills are being hammered out. Two bills, House Bill 2291, HD2, SD1 (HB 2291) and Senate Bill 2738, SD 2, HD 2 (SB 2738), offer tax credits and rebates for energy storage, which many tout as a panacea for the over-production of solar electricity during the day to store for use during the evening peak. In my opinion, energy storage being marketed is expensive and nascent technology for bulk storage. For residential use, it is cheaper to rely on the grid and buy a back-up fossil-fueled generator for longer outages.

But the marketing hype continues to distort the economic realities of energy storage and many photovoltaic panel installers promote energy storage as a solution to continue to install at unsustainable exponential growth.

Here are two interesting articles. In mainstream media, one does not read much about Tesla's Powerwall after its big debut a year ago but this GreenTech Media review examines the cost and performance of the Powerwall and a competitor comments on the Powerwall in the following article.

Utility Dive's editor, Gavin Bade, interviewed Boris von Bormann, the CEO of Sonnen, a German storage company at the Maui Energy Conference. Interestingly, von Bormann outlines his Hawaii strategy under the self-supply tariff and comments on the payback period:

After Hawaii utility regulators decided to abandon retail rate net metering for rooftop solar systems last year, many [pv solar] installers reacted with alarm, saying it would slow adoption of rooftop solar systems.

But for residential storage, the story is much the opposite, von Bormann told Utility Dive. When the regulators ditched net metering, they replaced it with two options — a grid-supply option for customers who want to export generated electricity back to the grid and a self-supply option for those who want to generate energy for personal use only.

That second option — the self-supply tariff — provides an excellent opportunity for Sonnen’s storage product, von Bormann said. Under that option, Sonnen’s 4 kWh battery system paired with a rooftop solar system should provide a return on investment in about 6.5 years.

In general, I surmise State Legislators would be concerned about the use of the taxpayer or ratepayer collected funds being used to incentivize investments that are for the sole benefit an individual. That is why I think HB 2291 needs careful consideration and a cost/benefit analysis to understand its impacts on the general fund and SB 2738 should be killed.

Let me start with SB 2738. This bill establishes an energy storage rebate utilizing funds from the Hawaii Green Infrastructure Loan Program (HGILP). The primary purpose of the program was to provide low-cost capital to finance solar photovoltaic systems and other clean energy improvements for those who may otherwise have difficulty obtaining financing for these types of projects. The HGILP was envisioned as a self-sustaining loan program which could eventually replace the existing renewable energy income tax credit (REITC) and other cash incentives from the public benefit fee when these projects demonstrate electricity savings to reduce a customers electricity bill, moving more towards a market based approach rather than relying on tax credits or electricity ratepayer fees to incentivize installation.

This bill has the consequence of providing unwarranted subsidies to people who have already installed rooftop solar systems and have benefited from the net-energy meter tariff and the REITC which resulted in the return on investment being exceedingly fast and generous. I do not believe it is the intent of the legislature to continue to give subsidies to the same individuals and businesses who have already been subsidized and will continue to benefit for the life of these systems. The HGILP proceeds should be made available to these individuals and businesses as a loan, not a rebate.

What is disturbing is the simplistic cut and paste testimony prepared by the bill proponents that Legislators will received from their constituents which reads as follows:

I strongly support SB 2738 SD2 HD1, creating a smart rebate program that kickstarts the deployment of energy storage and helps the "little guy" be a part of Hawaii's clean energy future. This measure is a critical step in securing Hawaii’s energy future, reducing our contribution to global climate change, and reducing the cost of living in Hawaii. Much like existing rebates for CFLs, LEDs, and solar water heaters, this measure is a common-sense policy that has the long-term interests of Hawaii residents in mind.

Should this bill pass, the "little guy," the person that will not or does not have the opportunity to install energy devices on the customer side, will be screwed again as public resources and attention is diverted and focused on those that already have benefited from generous State subsidies through the REITC and do not contribute to their fair share of the public benefit fee and are likely free riders.

HB2291 amends the existing REITC into two eligible categories, a "solar or wind energy property" and "energy storage property." While I agree with the concept of a ramp-down and the sunset of the REITC, and requiring all systems to be grid-connected outlined in the bill, energy storage should be a part of a total system package when installing a new photovoltaic and storage systems, not as a separate tax credit eligible category. Again, I don't see a reason to further subsidize existing photovoltaic systems that have already utilized the REITC and have the additional advantage of net-energy metering. Also, if, under the current tax credit and tariff rates, the return on investment is 6.5 years, as stated in the Utility Dive article, what is the minimum amount of subsidies should State give for a longer but still attractive payback period? These issues need to be answered before this bill can be passed.

I find it totally ironic that as we all lament about the high cost of electricity, the political and vocal "populace" trajectory - no LNG, pro-NEM, pro-REITC - continually stick it to the "little guy", the electricity customer/taxpayer who cannot afford or do not have access to renewable and energy efficiency solutions to dramatically lower their electricity bills and must rely on the electric utility to lower its fuel and operational costs to result in lower bills. These customers tend to be renters and lower income households - families living paycheck to paycheck. Unfortunately, with these bills the benefits keep coming to the haves not the have nots.

Mergers & Aquisitions: Putting Things Into Perspective

noreply@blogger.com (Energy Dynamics) — Thu, 07 Apr 2016 17:45:00 +0000

From the onset, the Ige Administration has put attention on the issue of "localness" regarding the HECO-NextEra merger/acquisition application. Several days ago, Ian Lind reported on the possible Marriott-Starwood acquisition, which could have a humongous impact on the State's largest industry, the visitor sector, and, according to him, is getting very little attention in the news. While I was aware of the bidding war that went on between Marriott and a Chinese investment group, I really didn't think about the impacts until I read his post:

Read through the list of hotel brands and you’ll see how many properties in Hawaii will be impacted by the merger. In those areas where the two companies hotels are clustered together, it can be expected to have an increased impact.

But you wouldn’t know if from the lack of local attention to the deal and its possible implications.

Lind ends with the following:

I wonder whether such a deal will reduce competition and result in higher prices in Hawaii? Will the merger lead to reductions in executive staff, or a consolidation of suppliers? Will there be some properties jettisoned by the new conglomerate? Lots of questions, little initiative on the part of local media.

This transaction, with the trappings of an unregulated monopoly, will anyone be asking the question, "is this out of state company 'local' enough?" After all, the product and services to be provided are directly representative of Hawaii's unique qualities and values. What if the above happens? Surely employees and consumers will be on the losing end as lack of diversity, competition and employment and consumer choices are diminished. And, will anyone be questioning the influence of such a large corporation over politicians?

However, with the HECO-NextEra merger, the Ige Administration continues to "fear" an out of state company, one that would be subject to regulation by the State of Hawaii. One would think the administration would be more concerned about the effects of an unregulated monopoly like the potential of the Marriott acquisition rather than the HECO-NextEra merger.

At this link: Utility Dive analyzes the positions of the parties in the merger application after the filing of the post-evidentiary last week including the continued opposition to the merger by several state agencies.

NextEra is recognized as a top performing utility and company nationally. There is little doubt about NextEra being financially and technically fit, willing and able, the typical standard in judging the capabilities of a entity to acquire a public utility. Other than this question of "fitness," the larger issue is whether the approval can be conditioned to satisfy a broader concern of the regulator to address public interest as defined by the regulator. It is a failure on the part of the State parties, possibly at the Governor's directive, that the Department of Business, Economic Development and Tourism, Office of State Planning and the Consumer Advocate, have not made an attempt to negotiate a settlement to condition an approval.

We need to put into perspective the State of Hawaii's responsibilities in this very important transaction between two private entities. The aforementioned State agencies are responsible for our State's business climate. The State has the ability and duty to regulate and govern the environment NextEra functions in to align its business with the public interest. However, it appears that this isn't a question of "fitness" anymore. It has become an issue of an intransigent administration refusing to negotiate a possible settlement by its agencies to bring to the regulator, possibly in an attempt to stymie a business transaction between private companies at any cost, including the already damaged business climate in Hawaii. Unfortunately, its more indicative of the State lacking confidence in its ability to regulate when it has the authority and power to do so.

SunEdison Situation Dire

noreply@blogger.com (Energy Dynamics) — Wed, 30 Mar 2016 18:39:00 +0000

Travis Hoium writing for The Motley Fool gives this SunEdison update and comments on its business strategy, which goes to the heart of the problem with the HECO contracts and concerns if SunEdison continues to buildout these projects under a new project owner:

What about the financials?The latest news from SunEdison, which caused shares to plunge on Tuesday, is that TerraForm Global won't be able to file its 10-K by the March 30 deadline, due to problems with SunEdison's accounting. The Wall Street Journal is reporting that the SEC is looking into liquidity disclosures SunEdison made, which may not have been accurate.
If we can't trust a company's financials, what can we trust? But all of these problems go to the biggest problem the company has with its business.

SunEdison's biggest underlying problemHigh debt levels, a rising cost of capital, and delayed financials are bad, but the worst problem for SunEdison is that it's not executing on its own plans. As I mentioned, the company is shifting to a strategy of developing projects and selling them to third parties. But its development business doesn't appear to be firing on all cylinders.

In February, Hawaiian Electric canceled power purchase agreements for 148 MW worth of solar projects because they were months behind schedule. The details are confusing, at best, but there's no disputing that SunEdison missed major milestones repeatedly. If the company can't even get the construction of contracted projects right, how can investors trust its business. These kind of execution misses have exacerbated debt problems and led management to overextend itself.

It's the lack of execution that calls into question all of the debt and the acquisition/yieldco strategy. If there's not a steady developer behind all of that then there's a major problem. And that's the biggest problem plaguing SunEdison today. All of the debt and financial problem stem from a lack of operational execution in buying, bidding, building, and operating solar projects. If SunEdison can't get its core business right, why should anyone be interested in the stock?