The utility sector is in the middle of what some have called “merger mania”. Between 2010 and 2014, 18 utility mergers were approved. But this was not the case in Hawaii, where Florida-based NextEra failed in its attempt to take over Hawaii’s main utility, Hawaiian Electric Industries (HEI).
The proposed merger generated fierce opposition from local individuals and organizations. Four factors stand out as critical to this rejection:
- Hawaii’s high solar adoption rate;
- Hawaii’s geography;
- Lack of utility customer buy in; and
- Lack of political support.
Hawaii has the highest electricity rates in the nation. Ninety-one percent of its energy is imported from the mainland. As a result, Hawaii is home to more rooftop solar per capita than any other state. There are 77,000 rooftop solar systems for a population of 1.4 million people, according to Henry Curtis, Executive Director of the Hawaii community action group Life of the Land. Solar power is institutionalized in Hawaii to a degree that is rare or nonexistent in other states.
This has given Hawaiians a possessive attitude towards renewables to a greater degree than the citizens of almost any other state. When the U.S. Department of Energy and the State of Hawaii launched the Clean Energy Initiative plan (for 100 percent renewable energy by 2045) in 2008, the public was supportive.
“Ultimately, what it comes down to is that the merger was seen in the context of the clean energy transition, and NextEra was not giving the attention it deserved to that issue,” said Richard Wallsgrove, policy director for Blue Planet Foundation, a local nonprofit organization committed to clean energy.
Curtis believes Hawaii’s geography affects its approach to renewables. “Hawaii is embarking on a path towards far greater amounts of renewable energy, without interconnected island grids, without large hydro resources, and with limited and controversial geothermal on one island,” Curtis said. “People in Hawaii like rooftop solar and like decentralized, island-by-island solutions.” This reality clashed with NextEra’s centralized, top-down, corporate approach.
Both Curtis and Wallsgrove agree that just about everything was wrong with NextEra’s community relations. Curtis points out that NextEra’s headquarters in Juno Beach, Florida, is further in distance from Honolulu than it is from either Casablanca or Buenos Aires, implying that geographic separation may have engendered mistrust of the corporation on the part of Hawaiians.
“On issues of labor, competition, rates, costs, benefits, risks, the local advisory board and interaction with the local community, they [i.e., NextEra] were of the ‘trust us’ mode,” Curtis said. “We [Hawaiians] were of the ‘show us’ mode. NextEra sought to buy off communities. They preferred small group community meetings where they could say things that aren`t challenged and where they could make promises that aren’t binding. They were just the latest community disrupters. They thought we were stupid.”
Curtis added that the corporation “used very aggressive tactics, relying on high-powered lawyers and lobbyists, to substitute for a substantive effort to work with local residents in coming up with a sustainable path forward.” He also claimed that the only supporters of the merger were those who would have benefited financially from it.
One major “red flag,” for those who otherwise would have been on the fence about the deal, was the poor record of NextEra’s main subsidiary, the utility Florida Power and Light (FPL), regarding renewable energy. One notable (and typical) instance involved the Florida Public Service Commission’s termination of FPL’s Sunshine Energy Program because the majority of the funds collected from customers were used for marketing and administrative costs, rather than for constructing solar facilities.
“In Florida, Consumers for Smart Solar [partly backed by FPL] was organizing a referendum against third-party solar.” Wallsgrove said. “It tried to squash the third-party ownership model. Not sure if that red flag flipped people’s view, but it’s possible. There was concern that the same movement could squash community solar in Hawaii. This generated unanimous animosity among solar providers in the state.”
Matters were made even worse for NextEra in Hawaii when Jim Robo, the Chairman and CEO of the company, in an interview with Pacific Business News, publicly announced his personal preference for large industrial solar projects over rooftop solar.
“The [Robo] article was interpreted as hostile to distributed solar,” Wallsgrove said. “You have this very strong public affection and interest in solar in Hawaii. This set things on a track that made it difficult [to get approval] without a transparent plan… which NextEra did not provide.”
In short, in a situation in which the company would have experienced an uphill battle even with the most favorable public relations, NextEra, in fact, created the worst possible PR for itself.
As to why and how the grassroots resistance to the merger emerged so rapidly and in such a widespread manner, Wallsgrove said, “To some degree – and I suspect a large degree – the mobilization appeared to be organic. My gut feeling is that a variety of things in Hawaii (energy prices, lots of awareness about rooftop solar power, the 100% renewable energy vision, etc.) combined to make the public in Hawaii keenly aware about energy issues. This type of awareness and engagement is a recipe for mobilizing the public, both for and against issues.”
Curtis unfavorably contrasted NextEra’s approach to that of two offshore wind companies who met with the community even before submitting their proposals to the Bureau of Ocean Energy Management (BOEM). To Curtis, this was the smart way to go about getting approval for one’s project.
Curtis also claimed that Governor David Ige’s firm opposition to the NextEra deal was important: “The change in governors [from Neil Abercrombie to Ige] helped to hasten their defeat.”During the hearings process, both the state’s Department of Business, Economic Development and Tourism, which heads the state Energy Office, and the Office of Planning opposed the sale, and the governor backed them. A spokeswoman for the governor was quoted at the time as saying that NextEra “does not have the experience and expertise to take the state where it wants to go.”
The overriding reason for Ige’s strong and consistent opposition to the NextEra proposal appears to have been his steadfast commitment to the state’s target of 100 percent renewable energy by 2045. As he noted in this broadcast interview, it is a view that he believes his constituents ardently share. “We’ve seen how the whole [Hawaiian] community has really galvanized around that commitment,” he said.
One positive byproduct of the Hawaiian hearings process was a lively debate about just what “the public interest” actually consisted of. According to Wallsgrove, the people who testified “covered the whole spectrum of what the public interest was, and because of this, NextEra couldn’t fake it: they couldn’t convince the regulators that what they were offering was in the public interest as the community defined it [emphasis ours].”
Another related byproduct of the process was an examination of viable alternatives to the private investor-owned utility model that NextEra offered. “Microgrids are going to grow with or without utility support,” Curtis said. “The idea of municipal grids and cooperatives are gaining traction within Hawaii, including within the business sector.”
Both Wallsgrove and Curtis agree that, in a controversial merger, the number of voices at the table is crucial. “The more groups at the table, the more likely that viable solutions will emerge,” Curtis said.
“Whether the community is looking to stop a potential merger, or whether they just want to see whether or not it meets the public interest, the more parties that join the discussion, the more effective the community will be in the process,” Wallsgrove said.