An application has been put forward to Hawaii’s regulator to approve NextEra Energy’s proposed merger with the state's main electric utility, Hawaii Electric Co (HECO), a move the two bodies have claimed will boost Hawaii's clean energy ambitions.
Under the terms of the filing to the Hawaii Public Utilities’ Commission (PUC), HECO said, the utility will not ask to increase the general rate base applied to its customers for four years following the transaction. In addition, the benefit to customers in savings will be worth around US$60 million, HECO said.
The two companies announced their intention to merge in December, with the deal reportedly worth US$4.3 billion, although many commentators described it as a “takeover” of HECO, with NextEra Energy set to assume US$1.7 billion of HECO’s debt. A website set up to promote the move touts the benefit to shareholders of both.
NextEra Energy and HECO claimed on a press release that the merger is in part intended to “strengthen and accelerate Hawaii’s clean energy future”. The island state has set itself an ambitious goal of meeting 65% of its electricity generation from solar by the year 2030. The target is also meant to be achieved in tandem with tripling installed rooftop solar capacity and lowering consumer energy bills by 20% by that time.
In a separate filing with the US Securities and Exchanges Commission (SEC), required for mergers and acquisitions by publicly traded companies, NextEra Energy claimed its “proven track record of reducing oil dependence, improving fuel efficiency and lowering emissions” would be a good fit for helping HECO achieve one of its key goals of moving its generation portfolio to cleaner energy sources.
The merger, HECO and NextEra have said, should leave Hawaiian Electric managed by local workforce and should not lead to involuntary redundancies at HECO for at least two years.
NextEra Energy Hawaii’s president Eric Gleason said his company believed the merger could lead to a “more affordable clean energy future for Hawaii”.
“We share Hawaiian Electric's vision of increasing renewable energy, modernizing its grid, reducing Hawaii's dependence on imported oil, integrating more rooftop solar energy and, importantly, lowering customer bills, and we believe our combination will help to accelerate Hawaii's clean energy transformation,” Gleason said.
Hawaii is per capita among the most oil-dependent states in the US, consisting of small islands without their own fossil fuel resources. Its energy isolation has led to the rapid growth of solar, with as many as one in 10 customers’ houses in some service areas sporting rooftop solar. According to HECO, 11,000 new PV systems were installed in 2014. In addition, several of the state’s islands have installed large-scale battery systems to mitigate the variability of solar output and to provide grid stability.
HECO solar plan
In related news, HECO put forward a new rooftop solar plan on 20 January to the Hawaii PUC, which essentially amounted to charging customers who newly joined local net energy metering (NEM) schemes for their residential PV systems for use of the grid.
In common with similar discussions going on elsewhere in the US and around the globe, HECO claimed this would be a fairer way of distributing the cost of using the grid among all ratepayers. The company’s vice president of customer service Jim Albert was quoted as saying that the yearly “cost shift” away from customers with rooftop solar increased in 2014 by US$15 million from US$38 million the previous year to US$53 million.
However, while HECO highlighted this supposed cost shift, the majority of these figures appeared to be made up of the amount solar system owners saved on their electricity bills, rather than the transferred burden of grid operating costs that were conferred onto non-solar residents. A statement from HECO included the lines:
"...many NEM customers are able to lower their bills to the point that they do not help pay for the cost of operating and maintaining the electric grid. As a result, those costs are increasingly being shifted from those who have solar to those who don’t. The new transitional programme would create a more sustainable system and ensure the costs of operating and maintaining the electric grid are more fairly shared among all customers."
In return for being granted the rate rise for solar residents, HECO said the new programme, “Transitional Distributed Generation”, could allow the capacity of solar that neighbourhood electrical networks could take on to be doubled.
The rooftop solar plan faces opposition from local and national solar industry groups, which made their own filing with the local PUC. Local organisations Hawaii PV Coalition, Hawaii Solar Energy Foundation, Blue Planet Foundation and the national rooftop solar advocacy group The Alliance for Solar Choice, as well as national environmental law non-profit Earthjustice made a filing asking that the merger and related plans are not considered until a number of existing issues are resolved including regulations on interconnection.