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Hawaii PUC rejects NextEra's bid for Hawaiian Electric

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Hawaii PUC rejects NextEra's bid for Hawaiian Electric

The Hawaii Public Utilities Commission has rejectedNextEra Energy Inc.'sproposed $4.3 billion dealfor Hawaiian Electric IndustriesInc. and its utilities HawaiianElectric Co. Inc., HawaiiElectric Light Co. Inc., and Maui Electric Co. Ltd., collectively known as the HECO Companies.

In its 2-0 vote on July 15, the PUC said NextEra andHawaiian Electric failed to show the deal is in the public interest, describingproposed ratepayer benefits as inadequate, adding that the companies did notoffer "sufficient protection" to the HECO Companies or its customers.

The PUC also cited among its concerns the companies' cleanenergy commitments, the merger's effect on local governance and the deal'seffect on competition to local energy markets.

PUC Commissioner Thomas Gorak — in late June to fill the thirdseat on the commission — abstained from signing the PUC's decision and order,leaving commission Chair Randall Iwase and Commissioner Lorraine Akiba to vote.

"[I]n dismissing the Application, the Commissionemphasized that it is not precluding the HECO Companies from seeking anotherpartner, or from renewing discussions with NextEra. As part of its decision,the Commission included a section that provides guidance on key elements thatshould serve as the foundation for any future applications seeking a change ofcontrol of the HECO Companies," the PUC said in a news release.(Docket No. 2015-0022, Order No. 33795)

In a statement released late July 15, NextEra and HawaiianElectric said: "We are in receipt of today's PUC order and are currentlyreviewing it."

The order, including appendices, runs more than 400 pages.In it, the PUC noted that there was no global settlement reached amongstakeholders regarding the acquisition and that state agencies, including thestate's consumer advocate, all opposed it.

"Specifically, the commission finds that while NextErais fit, willing, and able to operate the HECO Companies and can potentiallyprovide assistance with transformation of the HECO Companies, the proposedmerger conditions, as filed and updated, do not provide sufficient benefits oradequately address legitimate concerns and risks directly related to theproposed transaction," the PUC said in the order.

Elaborating, the commission said its review of theapplication was based on five areas of concern: benefits, risks, clean energycommitments, local governance and competition.

Benefits pledged to ratepayers, such as rate credits, "areboth inadequate and uncertain," the PUC said. The commission said NextEradid not adequately protect Hawaiian Electric from risks at its othersubsidiaries. The companies' commitments to the state's clean energy goals wereunclear and lacked detail. Corporate governance pledges were also unclear. And,the PUC said, the companies did not explain how they would fairly bringcompetition to Hawaii's energy markets.

Hawaii Gov. David Ige has opposed the NextEra/Hawaiian Electric merger, expressingthe belief that the Florida-headquartered company has not demonstrated acommitment to helping Hawaii reach its 100% renewable portfolio standard goalby 2045.

In a statement, the governor said, "The proceedinghelped define the characteristics and parameters of Hawaii's preferred energyfuture. We look forward to creating a process to find the best partner in theworld. No matter who owns the company, the energy vision for Hawaii remainsvery clear — 100% renewable energy with a transformation to a customer-centeredutility focusing on smart meters, smart grid, distributed local solutions, andas much consumer choice as possible."