Category Archives: Energy

Whistleblower Complaint Targets Top Officials at the Public Utilities Commission

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The State Senate Committee On Commerce And Consumer Protection, chaired by Sen. Jarrett Keohokalole, has an interim hearing scheduled this morning at 9:30, open in person and by live stream on the Senate YouTube channel.

It looks like a lot of energy policy wonk stuff.

In 2018, the Legislature passed the Hawaii Ratepayer Protection Act, directing the PUC to implement performance-based regulation (PBR), which took effect in 2021 for a five-year term. The PBR framework uses alternative regulatory mechanisms to align utility incentives with performance and policy goals. This briefing will provide an update on the framework and its implications on electrical utilities and rate payers in the future.

But a tip last night suggested I take a good look at the agenda.

And there’s the “easter egg” waiting to be found.

Item #4: Briefing on PUC Whistleblower Complaint Process

And, there attached to the other briefing materials regarding the PUC’s performance-based regulation of Hawaiian Electric, is a 6-page complaint by an anonymous whistleblower which describes disarray and disfunction in an important part of the agency, and pointing fingers at the current PUC chair, Leo Asuncion, and the recently appointed Chief of Policy and Research, Randy Baldemor.

The inclusion of a discussion of the whistleblower complaint process on the hearing agenda, coupled with disclosure of the complaint among the public briefing materials, shows the committee is taking this complaint seriously and not trying to sweep it under the proverbial rug.

Here are some excerpts from the whistleblower complaint. The full letter appears below.

• As you are aware, the Public Utilities Commission plays a critical role in safeguarding the reliability and safety of Hawaii’s electric, gas, water, and sewer utilities, as well as Young Brothers; ensuring the affordability and fairness of utility rates; overseeing HECO’s securitization and liability cap; and advancing Hawaii’s renewable energy goals.

However, the Commission’s ability to carry out this mission is currently being undermined by a toxic and ineffective work environment caused by the new Chief of Policy and Research, Randy Baldemor. We ask that the internal operations of the PUC be promptly and thoroughly investigated, and corrective action taken to address serious ethical and human resources concerns.

• At the PUC’s annual holiday party in December 2024, Chair Leo Asuncion announced that his friend, Randy Baldemor, would be the new Chief of Policy and Research—the top technical and policy advisor for the three Commissioners. Leo told everyone that Randy also lives in Hawaii Kai and they barbeque together with HECO executives.

• It was a running joke at the PUC-new minimum qualification requirements for Chief – “likes to barbecue with Leo and HECO execs” and “lives by Chair Asuncion in Hawaii Kai.”

• The PUC Chair, Leo Asuncion, has created an environment where staff feel unable to share feedback, as he has been unreceptive to previous concerns and remains closed off to input. This has led to a tense atmosphere, where employees have no safe internal channels for raising concerns without retaliation.

• Randy had zero experience in public utility regulation.’ He has zero experience working in electric, gas, water, wastewater, and/or telecommunications industries. He has zero experience with Young Brothers. He has also clearly demonstrated he has zero knowledge of utility regulation and no understanding of utility systems and technologies. Accordingly, he is incapable of leading his team and appropriately
advising the Commission on all regulated industry policy matters [which is a primary job requirement].

• He is not capable of performing the duties of the Chief of Policy and Research due to his complete lack of regulatory and industry experience and apparent disinterest in learning about utilities.

• As COO of HTA, Randy was investigated by the Hawaii State Ethics Commission for accepting multiple courtesy upgrades to business class flights and hotel accommodations while traveling on official state business. He directed staff to solicit these upgrades. (See: Resolution of Charge 2017-4 at https://files.hawaii.gov/ethics/advice/ROC2017-4.pdf)

Of the four people fined, Randy received the biggest fine [$6,000], because he directed staff to seek upgrades for him. The Ethics Commission apparently specifically chose not to fine HTA staff directed by Randy to seek upgrades.

An HTA staff person stated: “Anyone who questioned Randy or George got fired or was asked to resign.

• No one wants to question Randy because of his temper.

• To verify the concerns raised in this letter, the legislature could conduct anonymous interviews with those who work most closely with Randy. This includes his 10 staff in the Policy Branch and many of the 10 staff attorneys, who can all confirm his unprofessional conduct and lack of qualifications.

The person who tipped me to the complaint commented: “Wasn’t me but I agree! Only scratches the surface.”

Hawaii Public Utilities Commission whistleblower complaint by Ian Lind on Scribd

Another look back at the NextEra deal

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All the public discussion of the pending global settlement of Lahaina Fire litigation has made one thing clear: Hawaiian Electric, one of the nation’s smallest electrical utilities, has limited financial resources to contribute to the overall settlement. This “ability to pay” apparently was taken into account during settlement negotiations, which recognized that pushing Hawaiian Electric into bankruptcy would create a whole new set of problems for the entire state.

That sends me back to a question I raised a year ago: Would Hawaii have been better off if Next Era Energy’s proposed purchase of Hawaiian Electric in 2014 had gone through?

You may recall that Next Era, one of the country’s largest energy corporations, offered to purchase Hawaiian Electric for a bit over $4 billion. The deal was nixed by the Public Utilities Commission in July 2016 in the face of almost united political opposition from the state’s political establishment.

Admittedly, I never understood exactly what was behind the politics of the opposition. To me, it seemed a lot like the 1950s when the Big Five companies, at the center of the island’s suger-era power structure through their network of interlocking directorates, tried to keep national retailers from pushing into Hawaii. Sears was the first major firm to break through the political and economic blockade and open up a store in Honolulu in 1941.

Although I never heard it discussed, there may have been deep concern within Hawaii’s Democratic-controlled power structure that NextEra, based in Florida, would be pushing far more conservative political ideas reflecting those Florida roots and the far-Right slide of Florida policy makers?

But as a much larger entity, NextEra would have brought its deep corporate pockets into Hawaii, which would have undoubtedly rattled existing relationships in business and government.

But it would also have brought the financial strength to borrow funds at lower costs, meaning additional resources that could have potentially been available to mitigate fire risks, and would have certainly been able to fund a larger contribution to the Lahaina Fire settlement.

Given the experience of the past year, would a different decision be made today?

See:

In hindsight, was it a mistake to reject NextEra Energy? August 20, 2023

California utility’s plan to move power lines underground hits consumer resistance

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A consumer group in California is opposing a proposal by PG&E to move 10,000 miles of its electrical transmission lines underground to avoid future wildfires caused by downed lines, according to a story on Monday in the Mercury News, formerly known as the San Jose Mercury News.

The plan, similar to what has started to be discussed in the wake of the deadly Lahaina fire, is being criticized as adding financial pain to consumers already stressed by increasing utility rates and general rates of inflation.

“We have a real affordability crisis for utility costs,” according to Mark Toney, executive director of a consumer group, The Utility Reform Network, or TURN. “One of the biggest cost drivers is this massive expense for burying 10,000 miles of PG&E power lines.”

TURN is promoting an alternative plan to insulate power lines rather than move them underground, similar to what is being done by Southern California Edison, which operates in the Los Angeles area.

TURN estimates the cost of insulation at $800,000 per mile. The utility says that moving lines underground will cost between $2.8 million and $3.3 million per mile.

PG&E estimates its cost to go underground will run between $15 billion and $30 billion, and the company is asking for approval to pass the cost on to consumers, as would likely happen here.

High cost has been the major reason that utility wires have been run above ground on poles, despite their vulnerability to fire, earthquakes, and other disasters, and it is sure to be central to Hawaii’s discussions over how to best avoid a future repeat of the Lahaina fire.

See:

“Buried treasure: Building the business case for undergrounding,” Utility DIVE, August 21, 2023

“‘Not a simple operation’: Why many Duke Energy power lines aren’t underground,” WCNC (Charlotte, NC), August 14, 2023

“Hawaiian Electric Lawsuit Is More Evidence That Electric Grids Across the U.S. Need Updating,” TIME, August 18, 2023

“A solution for California’s wildfire safety deficit,” Stanford News Service, August 7, 2023

In hindsight, was it a mistake to reject NextEra Energy?

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I recommend Andrew Gomes story on Hawaiian Electric in today’s Honolulu Star-Advertiser (“Maui fire will reshape Hawaiian Electric”).

Gomes ably summarizes events and reporting of the past week on the Lahaina fire’s impact on Hawaiian Electric Industries, Inc., the parent company with subsidiaries that provide electricity on all Hawaiian islands except Kauai.

The company has been rocked by turmoil as the financial markets have responded to the public rush to judgement over who to blame for the fire and resulting death and destruction. In the process, the company’s stock price plunged over 60% during the week. A headline in the Wall Street Journal said it directly, “Hawaii Fires Turn a Safe Investment Into a Big Risk.”

The company’s bonds were similarly hit as “bondholders have unloaded the company’s debt at steep discounts,” the WSJ noted.

At the end of Gomes’ story, former legislator and PUC Chair, Mina Morita, is quoted at length. In my view, her comments are quite instructive. Morita traces the situation back to the political opposition that scuttled the proposed acquisition of Hawaiian Electric by the Florida-based NextEra Energy.

Mina Morita, a former PUC chairperson who lives on Kauai where the utility company is a nonprofit cooperative owned by ratepayers, said past state leaders and regulators rejected an opportunity that could have put Hawaiian Electric in a stronger position to address challenges of modernizing its grid for mandated renewable energy expansion while also addressing other high priorities like mitigation of long-known wildfire risks.

In 2014, Hawaiian Electric agreed to being acquired by Florida-based utility giant NextEra Energy Inc. for $4.3 billion. The administration of then-Gov. David lge opposed the deal, and it was killed in 2016 by a 2-0 vote by the PUC then led by [former state Senator Randy] Iwase, with one new member abstaining.

Ige was criticized for altering the PUC’s membership while the deal was pending, and Morita, who was replaced by Iwase, said Hawaiian Electric would have been in a better position to meet challenges if the deal had been approved.

“NextEra, in my opinion, was one of the few companies which had the financial backbone, technical expertise and management skills to take on this transformation for a new utility business model, largely utilizing renewable resources, to make Hawaii the utility model for the world,” Morita said. “To just say it was a political decision by the lge administration to squash the merger is an understatement.

“That costly political decision has caused HECO to hobble through a mandated business model transformation taxing its limited capacity. This would be similar to demanding to have an old race car become a new race car but you have to upgrade or change all the parts and fuel the race car, and train your pit crew with hardly any money while the car is still racing and you’re not allowed to lose ”

Morita doesn’t suggest that the Maui disaster wouldn’t have happened if the NextEra deal had been done. In fact, she said a rush to judge Hawaiian Electric isn’t fair.

“I am concerned that the rush to put the blame directly on HECO is like cutting off your nose to spite your face,” she said. “HECO operates a critical and necessary infrastructure that serves the public good. The costs to operate and maintain this important infrastructure is largely borne by the ratepayer. There are so many complex technical and financial parts that HECO had to weigh given competing priorities. Any large investments or expenditures ultimately have to be approved by the PUC for cost recovery, impacting rates. Unfortunately, there were many political decisions that set HECO on an uphill trajectory where its pathway just to operate a well-functioning utility was a steep uphill climb.”

The state’s political focus on clean energy put pressure on Hawaiian Electric to order its priorities in the same way.

After the PUC’s rejection of the NextEra deal, Governor David Ige commented, as quoted by Civil Beat.

Hawaii Gov. David Ige, who was strongly opposed to the merger deal, released a statement thanking the commission and stakeholders for a “historic process.”

“This ruling gives us a chance to reset and refocus on our goal of achieving 100 percent renewable energy by 2045,” he said, referring to the state mandate he signed into law last year.

The Wall Street Journal also quoted Morita and others.

“You have to look at the scope and scale of the transformation within [Hawaiian Electric] that was occurring throughout the system,” said Mina Morita, who chaired the state utilities commission from 2011 to 2015. “While there was concern for wildfire risk, politically the focus was on electricity generation.”

The drive to reach the renewable goals also preoccupied private energy companies working with Hawaiian Electric and state energy officials, said Doug McLeod, a consultant who served for several years as the Maui county energy commissioner.

“Looking back with hindsight, the business opportunities were on the generation side, and the utility was going out for bid with all these big renewable-energy projects,” he said. “But in retrospect, it seems clear, we weren’t as focused on these fire risks as we should have been.”

In any case, there’s a lot of food for thought here.

See:

“NextEra merger dead, Hawaii turns to realizing a 100% renewables future,” Utility Dive, July 25, 2016

“State Rejects Sale Of Hawaiian Electric to NextEra Energyt,” Civil Beat, July 15, 2016

“Do criticisms of HEI-NextEra deal move us towards a desired energy future?” iLind.net, July 21, 2015