HONOLULU (HawaiiNewsNow) - The state Public Utilities Commission has rejected Florida-based NextEra's proposed merger with Hawaiian Electric, saying the deal posed too many risks to ratepayers and the promised benefits were "inadequate and uncertain."
In a 2-to-0 decision announced Friday, the panel said pledges that the $4.3 billion sale would result in rate credits for consumers were based on faulty or "unrealistic assumptions" about the future.
The third member of the PUC, newly-appointed member Thomas Gorak, abstained from the vote but said he supported the panel's conclusions.
"The commitments just in general terms were fairly vague. There were no mechanisms to ensure that they would in fact happen," said Delmond Won, PUC executive officer.
The decision is a significant blow to Hawaiian Electric, which had argued the merger would provide the kind of valuable expertise and financing needed to modernize HECO's grid, bring down costs, and bolster renewable energy in the islands.
In a joint statement, HECO and NextEra said only, "We are in receipt of today's PUC order and are currently reviewing it."
The PUC did note that its decision doesn't preclude HECO from seeking a different partner or from renewing discussions with NextEra.
The controversial proposed sale of the state's largest utility was first announced in December 2014, and was approved by Hawaiian Electric's shareholders six months later, before going to the commission for review.
Critics of the deal, including Gov. David Ige, have questioned whether it would result in energy savings for Hawaii consumers, who pay the highest electricity costs in the nation. They also questioned whether NextEra would help Hawaii meet its aggressive renewable energy goals.
"This is a victory for the consumer," said Robert Harris, spokesman for the Alliance for Solar Choice. "At the end of the day, it's going to result in, hopefully, decisions being made that actually reduce the price of power and ensure that we're really moving towards Hawaii's clean-energy future."
Henry Curtis, executive director of Life of the Land, said NextEra is "simply not the right fit for Hawaii."
Now that the merger has been rejected, he added, "we can get on with the serious business of figuring out how to advance Hawaii's goals."
The governor came out against the deal in July 2015, saying it would result in a "loss of local control."
In a statement Friday, Ige said the PUC ruling "gives us a chance to reset and refocus" on the state's renewable energy goals.
"No matter who owns the company, the energy vision for Hawaii remains very clear -- 100 percent renewable energy with a transformation to a customer-center utility focusing on smart meters, smart grid, distributed local solutions, and as much consumer choice as possible," he said.
Supporters of the merger, meanwhile, say they're disappointed by the decision and say it could have negative impacts for years to come.
"Many of us in the business community were hopeful that would go through given the quality of NextEra's balance sheet and the capital that Hawaiian Electric really needs to upgrade our electrical infrastructure," said developer Stanford Carr. "It's going to be very challenging in the future to attract any other company or capital group to look at financing Hawaiian Electric's needs in the future."
The PUC's hearings on the business deal, which would have been one of the biggest in the state's history, wrapped up March 1.
All along the way, PUC Chairman Randy Iwase said he was on no specific timeline to come to a decision. He has also said the commission would review more than 100,000 pages of documents and hundreds of pages of transcripts in making a call.
Among the panel's other key conclusions:
- Some $60 million in pledged credits to ratepayers were not guaranteed, and would have had a relatively small impact on monthly bills.
- The sale would have put HECO at risk in a NextEra bankruptcy.
- It was unclear whether NextEra could meet the state's goal to achieve 100 percent renewable energy by 2045.
- There weren't enough assurances that mainland management would have made decisions in the interests of Hawaii ratepayers.
Hawaiian Electric Industries supplies power to about 450,000 customers, or 95 percent of Hawaii's population, through its electric utilities: Hawaiian Electric Company, Hawaii Electric Light Company, and Maui Electric Company.