Friday, August 26, 2011


The Devil is in the Details

By Henry Curtis

State energy policy is painted in broad brush strokes by state legislative committees.

Then the Hawai`i Public Utilities Commission (PUC) is left with filling in the blanks.

 The Hawai`i Supreme Court has opined that utility policy is established by the PUC. The Court will overturn procedural errors  but will not second guess the PUC on policy issues.

 This was firmly established in the 1990s when various communities favored allowing HECO to build a transmission line in Ewa but requested that the transmission line be undergrounded and built away from residential areas. HECO and the PUC rejected the communities approach. Sixteen county and state legislators appealed. Their attorney was Colleen Sakurai (now known as Congresswomen Colleen Hanabusa). On appeal the Supreme Court sided with the PUC.

 How the new Abercrombie Administration and the new PUC Chair Hermina Morita will alter long-established traditions at the PUC is largely unknown. This article reviews the PUC record up until Abercrombie’s New Day.

How were PUCs created?

 There are many different names for utility regulatory commissions across the country.

 All but one state created utilities commissions  from 1907-21. They were created to “regulate” utilities which were charging exorbitant rates for electricity.

 These state commissions were established to protect incumbent privately-owned utilities from losing market share to municipally-owned utilities which were undercutting them by charging reasonable rates for electricity.

 Here in Hawai`i in 1913 the Gas Company proposed competing head-to-head against HECO. HECO agreed to be regulated by the newly created PUC in exchange for being designated as a monopoly.

 Following enactment of the law, the owners of HECO sold their company to the interlocking Atherton-Cooke missionary families, who then controlled HECO for the next three decades. During the 1920s the Outdoor Circle got HECO to agree to bury urban electric lines in Honolulu.

 The PUC has “general supervision ...over all public utilities"  including all non-government-owned electric and gas companies, private water and wastewater companies,  telecommunication companies, and transportation companies.

The Commission

 The PUC is reactive, sluggish and passive, at least according to their last four outside audits  (1961, 1975, 1989, 2003).

 As a result of the 1975 audit, the legislature separated the regulatory-oriented PUC and the consumer-oriented Division of Consumer Advocacy. The former is now administratively attached to the Department of Budget and Finance, while the latter is now a division within the Department of Commerce and Consumer Affairs (DCCA).

 There was  a lack of direction given by  the Legislature in 1976 when the Consumer Advocate was split off from  the PUC. The Consumer Advocate seized the initiative and took most of the PUC staff with them, crippling the PUC.

 It wasn’t until the Lingle Administration that the PUC began rebuilding their independent analytical capabilities.

 The 1989 audit led the PUC Commission to hire their own attorneys instead of relying on the Hawai`i Attorney General.

 In the early 1990s the Legislature doubled the amount of ratepayer money going to support the PUC, but simultaneously limited the PUC’s use of the funds, and created a mechanism whereby all surplus funds would be siphoned off to support the General Fund.


 How the PUC makes its decisions is unknown. By and large, the press does not attend PUC hearings.

Traditionally Life of the Land is the only intervenor on environmental and public interest issues.

 The PUC currently has 3 Commissioners, although at various times in the past they have had 5 or 7 members. Unlike other state agencies where there must be party diversification (the 7 member Board of Land and Natural Resources (BLNR) has 3 Republicans, 3 Democrats, and 1 independent), PUC Commissioners can all be from the same party.

 Traditionally, the Chair makes all the decisions, which has led skeptics to believe that the other Commissions may just be there as window dressing. Could the lure of high-three retirement benefits  be the motivating factor?

 Les Kondo was the most public example of a Commissioner issuing minority reports on PUC decisions. This provided a window into the arcane PUC decision-making process. Les Kondo is the former director of the Office of Information Practices and the current executive director of the Hawaii State Ethics Commission. As an an engineer and attorney he sought to understand utility policy and make thoughtful decisions. He was willing to file dissenting arguments, which are common in the court system, and were virtually unheard of at the PUC.


 Legislators must file financial disclosure forms which can be reviewed by the public. PUC Commissioners must also file disclosure forms, but they are not available for public scrutiny. Last session a bill requiring disclosure was introduced into the Legislative process, but quietly disappeared.

The PUC will more often than not summarize different positions of parties and then state their position without giving any explanation.  In several recent cases the PUC has stated that utility requests are not allowed by law and cannot be accepted, however, the Commission will make an exception and do it anyway.

The Hawai`i PUC practically never allow intervenors into rate cases, while the California PUC does, and in fact will compensate intervenors who are successful in saving ratepayer money. California has several groups that regularly intervene in PUC actions including The Utility Consumer Action Network   and The Utilities Reform Network

The Consumer Advocate

 In Hawai`i, consumers are represented by the Division of Consumer Advocacy (DCA), while in California they are represented by the Division of Ratepayer Advocates (DRA). A comparison is useful.

 The Hawai`i Consumer Advocate never supports intervention by third parties in regulatory proceedings before the Hawai`i PUC. The California Ratepayer Advocate does, and has printed information to explain how to intervene, and well as to show how intervenors have saved ratepayers money, thus encouraging intervention by others.

 The Hawai`i Consumer Advocate is located in a locked office in a hidden section of a building while the California Ratepayer Advocate comes out into the community.

 The Hawai`i Consumer Advocate believes that the PUC must focus solely on rates and does not have the authority to require an EIS, while the California Ratepayer Advocate “advocates for customer and environmental protections.”

 The Hawai`i Consumer Advocate has a community liaison but the position is vacant and has been since almost its inception. The California Ratepayer Advocate has a consumer friendly webpage interface and a media contact person.

 The last public positions stated by the Hawai`i Consumer Advocate are that the utility is going too slowly in adopting biofuels; that climate change is irrelevant; that the Commission should not look at environmental impacts; that Big Wind is crucial; that there should be a long delay in requiring the utility to buy electricity from ratepayer-owned  rooftop solar systems (via feed-in tariffs) while the utility contemplates updating their reliability standards; and that the utility should pay top-dollar for untested non-commercially proven microwave technology while there is another renewable energy option that could provide the same benefits at half the cost. To subsidize this expensive solution, the Consumer Advocate recommends that O`ahu ratepayers pay $25M/year for 20 years to subsidize this Big Island project.

Who needs an advocate, the utility or the consumer?

Green Energy

 The Commission has or will shortly take up several bad proposals that are being presented as  “green” proposals. These include Big Wind (Lana`i and Moloka`i wind energy feeding into O`ahu), Aina Koa Pono (expensive biofuels produced in Pahala for the HELCO Keahole Generator), and Hu Honua (a proposed biomass project in Hamakua).


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