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Hawaii PUC fight spills into the courts following merger vote

Afight over the Hawaii Public Utilities Commission spilled into the courts July15 following the commission's decision late the previous week to rejectNextEra Energy Inc.'sapplication to acquire HawaiianElectric Industries Inc.

FormerPUC Chair Mina Morita recruited former Attorney General Mark Bennett and filedsuit in the state's 1st Circuit Court against the state on July 15, the sameday the PUC issued its order against the merger. Morita challenged the legalityof Gov. David Ige's recent decision to move PUC General Counsel Thomas Gorak totake a seat as the state's third PUC commissioner with the June 30 expirationof Commissioner Michael Champley's term. The suit also names Gorak individually.

"Ibelieve Thomas Gorak had no legal right to take office without the Senate'sapproval of his nomination, and his having done so puts at risk all PUC proceedingsand every decision and order in which he participates," Morita said in apress release Bennett issued along with a copy of the lawsuit.

Morita,who has supported the merger, contends the governor was required by law to keepChampley in office as a holdover appointment until the Senate convenes in 2017to confirm his replacement. The state's currentattorney general, Doug Chin, however, has stated that the governor isauthorized under the state constitution to appoint a successor when anincumbent's term expires. The appointment will expire at the end of the nextsession of the Senate unless that body confirms the appointment.

Gorakabstained from voting on the NextEra-HEI merger application, so the PUCdecision against it was 2-0 with Commission Chair Randall Iwase andCommissioner Lorraine Akiba making the decision. But he expressed his"full support" for the decision and the order's findings according toa press release from the PUC, stating that he did not want the focus on"the concerns raised by some regarding his participation in the decision."

Morita,in a July 17 blogpost, tied Gorak and the merger vote together.

"Whilesome may say Tom Gorak, Governor Ige's controversial appointment to replaceCommissioner Michael Champley on July 1, did not sign the Order, I do not doubtthat his influence is reflected in this outcome as both Chief Counsel and anunlawful commissioner. One does not have to sign the order to exert undueinfluence," she wrote.

SenatePresident Ronald Kouchi has also questioned the legality of Gorak's appointment and hascalled for a court review, but Bennett said by phone that Morita's suit is"totally independent" of Kouchi's efforts, though both may share somecommon concerns. "She did this as a public service because she felt thisneeded to be challenged in court," Bennett said, continuing that she hasno other motivation but is very knowledgeable from her experience as formerchair of the House Energy Committee and former chair of the PUC.

Moritawas also critical of the PUC's order dismissing the application, saying it avoided astraight up-or-down decision "falsely giving the appearance that adecision was made."

Inits order the PUC said it made its decision without prejudice and stated HEIand the HECO Cos. could pursue another partner or seek another proposal fromNextEra. Since NextEra and HEI announced July 18 that they were terminating their plansto merge, the latter scenario appears unlikely.

ThePUC's long list of requirements for any deal could also keep away othersuitors, according to Morita.

ThePUC ordered that anyfuture applications should address ratepayer benefits, mitigation of risks, thestate's clean energy goals, competition, corporate governance and the transformationof the HECO Cos. "The commission views these key areas as foundational forany future applications," the PUC said.

Thecommission expressed concerns that the NextEra-HEI application's lackedassurances for local control and said future applicants would have to clearlydemonstrate the extent that HECO managers would be delegated sole authoritywithout approval of parent entities.

Thecommission also said that applicants would have to show how they wouldtransform and improve HECO's performance to make it customer-focused andperformance-driven with strategies for achieving affordable and stable electricrates for each island, "while providing excellent customer service andreliability within twelve months post-merger closing."

HEIPresident and CEO Connie Lau said in a July 18 , "While the mergerwould have provided significant benefits for Hawaii, HEI remains a strongcompany that is well-positioned to achieve our goals and provide long-termvalue for our customers, community, employees and shareholders."

TheHawaiian Electric Cos., or HECO, are Hawaiian Electric Co. Inc., andMaui Electric Co. Ltd.