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A bill that would give the state’s counties the power to acquire electric utility property through eminent domain has passed second reading in the state House of Representatives, but it doesn’t appear headed out of the House.
Meanwhile, a companion bill is languishing in committee in the Senate.
The lack of action in either House or Senate means the bill is likely to die this session.
On Feb. 2, the House Committee on Energy and Environmental Protection recommended passage of the measure. Then, on Feb. 8, the full House approved it on second reading, although West Maui Rep. Angus McKelvey voted “aye” with reservations.
Then House lawmakers referred the bill to two committees: the Consumer Protection and Commerce Committee, chaired by McKelvey; and the Judiciary Committee, chaired by Oahu Rep. Karl Rhoads. Recommendations for approval from those two committees would be needed for the eminent domain bill to advance to the House for a required third reading vote before it would cross over to the Senate, McKelvey said Friday.
Following criticism of Maui County’s push for an alternative utility ownership or business model by former Public Utilities Commission Chairwoman Hermina “Mina” Morita, McKelvey said there’s “no support in committee” for the proposal to extend the counties’ eminent domain powers specifically to acquire private utility assets.
He said he had discussed the bill with his committee members, and they were “not thrilled at all.”
McKelvey said he would have preferred that such a substantive policy measure come to the Legislature from the Hawaii State Association of Counties and not be unveiled in a press conference or “popped out of thin air” just days before the opening of the lawmakers’ session.
Without support from the Judiciary and Consumer Protection committees, the bill “dies,” McKelvey said, unless the Senate advances its version of the bill. As of Friday, the Senate companion bill had been referred to four committees, none of which had scheduled a hearing.
McKelvey said that he and Rhoads had not discussed the bill or taken any action to schedule a joint hearing.
In her blog “Energy Dynamics,” Morita said last month that the PUC already had clearly shown its expectation that electric utilities would move forward under an alternative business model, eventually evolving into an independent system operator. The PUC foresees Hawaiian Electric companies getting out of the power generation business and, instead, managing and dispatching energy from geographically dispersed operators and supporting clean, alternative energy generated by customers, including those with rooftop solar panels.
Maui County’s request for expanded eminent domain power came as the administration of Mayor Alan Arakawa commissioned a $71,000 study by Oklahoma City-based consultant Guernsey to analyze alternate forms of utility ownership and business models. In a report released last month, Guernsey recommended that the county seek a new private entity to oversee Maui’s electric grid while leaving power generation and transmission in the hands of Maui Electric Co. That would be the opposite approach foreseen by the PUC.
In her blog, Morita said that the county could reach its goal by letting the “PUC do its job in clearly articulating its expectations of Hawaii’s electric utilities . . . and then holding the utilities accountable.”
In addition to giving the counties the ability to manage public utility property, the eminent domain bill also would exclude electric utilities owned and operated by a county from the definition of a “public utility” and regulation by the Hawaii Public Utilities Commission.
Written testimony submitted as part of an Energy and Environmental Protection hearing on the eminent domain bill showed where positions were staked on the matter.
Strong opposition to the bill came from Kevin Katsura, assistant deputy general counsel in the legal department of Hawaiian Electric Co., which includes subsidiary Maui Electric Co.
The bill “is not prudent and could have serious unintended consequences,” said Katsura, who referred to the Guernsey study.
“The (Guernsey) report acknowledges electric rates would likely increase for Maui customers after a change to a municipally-owned or cooperative model,” he said. “The report concludes significant investments in the electric grid are needed to achieve the state’s clean energy goals, and yet notes that limited access to capital is a disadvantage of a municipally-owned or cooperative utility model.”
Katsura told lawmakers that, under a municipal-ownership model, “state and county governments could lose hundreds of millions in revenue taxes and fees currently paid by Hawaiian Electric Cos.”
He noted that, in 2014, HECO paid more than $300 million in revenue taxes.
“Any revenue loss could force tax increases to pay for critical public services,” he said.
Also, as a government agency, a county-owned electric utility could not provide charitable contributions unless funds were specifically appropriated for that purpose, Katsura said. He added that HECO companies provide an estimated $2.2 million in community contributions and support a wide array of community needs.
Support for the eminent domain bill came from the Alliance for Solar Choice and the Sierra Club of Hawai’i, Oahu group.
The alliance testified that the measure is unnecessary because Hawaii law already gives the counties broad authority to exercise eminent domain. However, the group supported the measure to clarify the issue and to prevent litigation later.
The alliance “supports a robust discussion about the future of Hawaii’s electrical power generation and distribution,” the group testified. “Hawaii is going through a period of tremendous change. Hawaii should consider public ownership over the electric utility as a means to take advantage of lower cost renewables and to ensure customer choice. At the very least, the public interest dictates that all options should be on the table.”
Anthony Aalto, chairman of the Sierra Club of Oahu, testified in strong support of the bill.
“Hawaii is leading the nation in the shift to a noncarbon, clean, renewable energy future,” he said. “We have the highest per capita penetration of rooftop solar in the country. We are at the cutting edge of wave energy, wind energy, hydrogen fuel cells, ocean thermal energy conversion, sea water air conditioning, algae biofuels, geothermal, residential battery storage, smart grid, microgrid and distributed energy technologies,” he said. “These technologies hold out the hope of vast savings for the people of Hawaii by ending the practice of sending billions of dollars overseas every year to pay for the importation of oil, coal and gas.”
The new technologies also create the possibility of a “new pillar in Hawaii’s economy – one which will create thousands of well-paid blue- and white-collar jobs,” Aalto said.
What’s less clear about the future, he said, is whether the “stockholders of our statewide utility will be rewarded by the intrusion of these cutting-edge technologies into the old, vertically integrated, centralized, utility-monopoly model,” he said.
And, he maintained that integration of such new concepts “will lead to lower electricity sales, not a welcome idea for a for-profit corporation whose profits are linked to the sale of electricity.”
“In order to ensure that corporate interests do not block our progress to achieving the state’s energy goals, it may become necessary to allow not-for-profit or municipal ownership of the utility on each island,” Aalto said.
Each island needs to have the flexibility to explore cooperative or municipal ownership of power utilities, he said.
HECO’s Katsura defended the current investor-owned model for an electric utility, saying it has been “very effective in providing the significant amounts of funding needed to ensure safe and reliable service in one of the most capital-intensive businesses. This access to capital is even more critical to make the investments needed to achieve our state’s 100 percent renewable energy goal.”
Katsura said that because a county-owned utility would not be a “public utility” under Hawaii law, the public’s interest would not be overseen by the PUC and the state consumer advocate.
“Operating an electric utility and ensuring safe and reliable service for customers, especially on a small island grid with increasing levels of renewable energy that surpass anywhere else in the country, is an extremely complex undertaking,” Katsura said. “The specialized utility focus and experience of the PUC and the consumer advocate provides critical oversight. This protection for customers would not exist if the utility is municipally owned.”
* Brian Perry can be reached at bperry@mauinews.com.