Category Archives: Energy

Former PUC chair says solar industry pursing narrow self-interest in opposing NextEra buyout

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Remember Mina Morita, the former 7-term state representative from Kauai who went on to chair the Public Utilities Commission from 2011 until early this year and push the PUC in positive directions?

Henry Curtis described her career in a post on his Ililani Media blog in January 2014:

She was elected to the state House in 1996 where she served seven terms, six as Chair of the House Committee on Energy and Environmental Protection.

For the past three years she has served as Chair of the Hawai’i Public Utilities Commission (PUC).

Representative Mina Morita was instrumental in passing major energy legislation, including net energy metering, renewable portfolio standards, energy efficiency portfolio standards, greenhouse gas emission reduction targets and dedicated funding for energy and food security programs through a carbon tax on petroleum products.

Clearly, she has been a key participant in expanding Hawaii’s shift to renewable energy sources, and no shill for the energy corporations.

So I was quite interested to stumble across her new blog, Mina Morita Energy Dynamics, which is highly critical of the solar industry’s aggressive attacks on the proposed Hawaiian Electric-NextEra merger.

Here’s what Morita had to say a couple of days ago about The Alliance for Solar Choice: “Lurking in the background, purely to protect its own self interest and increase its market share, its motivation is a bigger threat to Hawaii’s electrical system” than NextEra.

In another post in early June, she wrote:

First of all, let me clarify – I am neither for or against the merger nor am I for or against rooftop solar or distributed generation. However, I am pragmatic and concerned that people are reacting emotionally and taking positions and making decisions that may not be cost-effective and provide only short-term gains for a few. The guerrilla tactics being used by these two entities through the press and social media only detract from real issues, the technical and economic challenges that Hawaii’s electric systems face in transforming a system to benefit all.

Are TASC and KULOLO (Keep Our Utilities Locally Owned and Locally Operated) acting in the public interest for the public good? I’m not sure, but it sure looks and smells like corporate business as usual to me. With the Sierra Club as the “local” front man, it’s just a move to increase rooftop pv market share and a promotion of self-interest wrapped up as democratization of power generation. I cannot help but feel that Hawaii is being used as the poster child to preserve net metering programs and what happens here will influence and affect these companies’ profitability nationwide thus their active interest, concern and the distractions.

The post then runs through the founding members of TASC and ends with this observation:

The local effort to stop the big corporate takeover isn’t so “local.” And if you think local ownership is the panacea you are living in la-la land. Sorry to be so harsh but this lack of understanding of what is happening to our electric system is serious and cannot be left to the un- and ill- informed.

It seems to me that hers is a voice that we need to carefully listen to and fully consider.

Speaker Souki stocked up on shares of Hawaiian Electric before merger announcement

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Sometime in the year before Hawaiian Electric Industries and NextEra Energy announced their proposed merger, House Speaker Joe Souki at least doubled his investment in Hawaiian Electric. And when the share price jumped after the merger was announced, he enjoyed another boost in his investment’s value.

That’s the story that emerges from a review of Souki’s financial disclosure forms filed with the State Ethics Commission as required by the ethics law.

There’s not necessarily anything wrong with Souki’s investment in HE shares, but it raises the question of whether he might have benefited from a whispered hint in advance of deal’s public disclosure that put him in the way of the investment opportunity.

Here’s what the record shows, based on reports filed by the Maui representative.

On June 1, 2012, Souki filed an annual financial disclosure that reported he owned 729 shares of Hawaiian Electric Industries. At the time, the stock was trading for just over $27 per share, which meant his total investment was worth approximately $20,000.

From his report:

2012 financial disclosure

In November 2012, Souki was elected Speaker.

The following year, Souki filed the required disclosure on July 9, 2013. In it, he reported there had been no change in his Hawaiian Electric holdings during the prior year.

2013

During the 2013 session, the ethics law was changed to require legislators to file their annual financial disclosures by the end of January, rather than by the end of May.

Souki did file a financial disclosure on January 27, 2014, in time to meet the new deadline. But the report was essentially blank. It did not contain the required information.

For example, in the section where he should have reported his investment in Hawaiian Electric, Souki reported “None.”

none

A month later, on February 25, 2014, well after the filing deadline, Souki then submitted an amended disclosure. This time around, he reported the value of his Hawaiian Electric investment had jumped to category “E”, meaning it was worth at least $50,000 but less than $100,000.

[text]

The company’s shares at that time were trading just slightly over $25, which meant that he now owned between 2,000 and 4,000 shares, far more than the 729 shares valued at just $20,000 he reported back in 2012 and 2013.

The increased investment came in the period between July 2013 and February 2014.

The HEI/NextEra merger was not publicly announced until December 3, 2014.

After the deal was announced, the company’s stock price rose from about $24 to over $33 per share. As TheStreet.com reported, “Hawaiian Electric Industries (HE) Stock Soaring Today on Merger Announcement.” Those holding the stock enjoyed an overnight gain, on paper at least, of more than 16%.

However, the deal began to fall into place much earlier.

The merger timeline was spelled out in a document filed with the Securities and Exchange Commission (see section beginning on page 30), which disclosed that “the HEI board has regularly assessed whether shareholder value could be enhanced through a spin-off or a sale of either ASB Hawaii (American Savings Bank) or Hawaiian Electric, as well as the viability of potential business combinations of HEI with other companies.”

So merger speculation was not foreign to the HEI board.

And NextEra arrived on the island scene in 2011 with several energy projects, “including potential solar and wind generation and undersea cable projects and, later, battery storage projects.”

According to this report, NextEra’s interest in a merger was first floated during a May 2014 meeting between Mr. James Robo, Chairman and CEO of NextEra, and Connie Lau, President and CEO of Hawaiian Electric.

Were there hints among insiders in the months preceding the formal offer that NextEra was sniffing around?

We may never know. But it will be interesting to see what Speaker Souki says about the rather timely boost in his Hawaiian Electric investment.

According to Souki’s 2015 financial disclosure, there has been no change in his stock holdings since that 2014 report.

Disclosure: I also own shares in Hawaiian Electric Industries.

Hawaiian Electric: “A collection of small utilities”

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Following last Tuesday’s special meeting of Hawaiian Electric Industries to vote on the proposed merger with NextEra Energy, several company officials met informally with groups of shareholders to answer questions.

Some of those present were unhappy that the questions weren’t addressed during the meeting so that everyone in attendance could hear the answers.

Jeff Watanabe, board chairman of HEI, was later asked about this.

He responded that there are specific rules that have to be followed in situations like this when a scheduled meeting is adjourned. The company has to take into account that there are other shareholders who did not attend.

“You don’t want to do a whole lot on the record beyond what is on the agenda,” he said.

HEI chairman Watanabe was very good in fielding questions in the informal setting. He was not defensive. or overbearing, nor did he talk down to shareholders. He listened and responded pretty directly to questions.

He said a couple of things that are well worth sharing.

First, he repeated the observation that Hawaiian Electric, especially via HECO, has already absorbed more renewable energy, and especially more rooftop solar, than other utilities across the country.

“We’re way ahead of anybody else,” Watanabe said.

But this creates the company’s biggest problem. It’s infrastructure will need major upgrades to accommodate further amounts of renewables.

“The kind of change we need to make is enormous,” Watanabe said.

He threw out the figure of $800 million a year in expenditures to make the necessary improvements, an expense that would have to be shouldered by customers.

He said the board of directors had to consider how to go about making and financing these improvements.

And although Hawaiian Electric is one of our state’s largest companies, it is not a large utility.

“What a lot of people don’t realize,” Watanabe said, “is that Hawaiian Electric is not one utility. It is a collection of small utilities which are not interconnected.”

“Our credit ratings are just above investment grade,” Watanabe said, and any hiccup could drop the company’s debt down below investment grade, increasing borrowing costs and making those upgrades harder to pay for.

So one thing the HEI board was looking for when deciding how to tackle the huge infrastructure investment was the financial stability and deeper pockets of a corporate partner. That’s what led them into the discussions with NextEra, which he described as “the darling of the utility sector.”

Watanabe also introduced a distinction between “community solar,” which benefits everyone sharing the grid, and “rooftop solar,” which primarily benefits the individual homeowners.

Currently, owners of rooftop solar systems are receiving a subsidy in the amount they are paid for excess energy that is sold back to Hawaiian Electric, he said.

“I am one of those who have a rooftop system, and I’m benefiting at the cost of other subscribers who cannot put rooftop solar.”

These include people living in condominiums, renters, and in areas that don’t get enough sun to make solar attractive.

“It’s fundamentally a mafter of equity,” Watanabe said. “A lot of retired people, and others who can’t afford the cost of solar systems, are subsidizing rooftop solar for those who can afford it.”

Even without subsidies, Watanabe called solar “a hell of a deal.”

“What’s driving rooftop solar is the fact that our rates are high,” Watanabe said.

“So if you (NextEra) are anxious to have more community solar so everybody could benefit,
about the last thing you want to do is to raise rates, because that’s what drives rooftop solar,” he said.

In Florida, where NextEra’s rates are low, there isn’t as much demand for solar, Watanabe said.

When asked about dividends, Watanabe said NextEra had committed to retaining the same payout as HEI, and when the spinoff of American Savings is complete, the newly independent company may pay a dividend of its own.

The result, he said, is a possible overall dividend increase.

Stockholder vote on NextEra takeover set for Tuesday morning

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Hawaiian Electric’s special shareholders meeting is set for tomorrow (Tuesday) morning in Honolulu. The company’s shareholders are being asked to vote in favor of the proposed takeover by NextEra.

Here are a couple of energy-relate items I’ve flagged in recent days.

First, there the lawsuit filed against a nonprofit utility in Arizona by SolarCity, the country’s large rooftop solar installer.

Solacity is challenging the fees tacked on to the electric bills of customers who have photovoltaic systems but still want to be connected to the power grid in order to draw electricity for use at night or at other times when their rooftop systems don’t produce enough power.

Solarcity argues that the fee is so high that it effectively makes rooftop solar uneconomical, that the fees are not related to actual costs incurred by the utility, and that they are instead an illegal use of the utility’s monopoly in their market.

It’s going to be interesting to see where this case goes.

Then there was the announcement by Tesla owner, Elon Musk, about the new line of home batteries for homes and businesses his company will be taking into mass production. The Powerwall home battery system is designed to store power generated by rooftop solar systems and use it to provide backup power.

Deliveries are expected to begin this summer.

Of course, sorting out the hype from the reality isn’t easy, and it’s looking like the new battery systems aren’t going to play well with rooftop solar, at least in the short term. This article from Bloomberg news tells that sad tale.

The commercial-size battery systems are going to come ready to be managed via smart grid software maker, EnerNOC. As I understand it, this could potentially allow a utility to eventually manage a whole network of solar powered and battery equipped homes as part of its overall grid. If I understand it correctly, it could be a breakthrough in how to better integrate individual homes into community power networks.

Back here in Hawaii, I’ve heard that Hawaiian Electric is aggressively soliciting proxies from stockholders using a telemarketing firm. We’re talking crossing the line in aggressiveness, in at least one case that was brought to my attention. Is this a signal that Hawaiian Electric is worried about whether it will be able to get the 75% vote in favor of the deal that it requires?

We’ll see tomorrow, I guess.