HOUSE OF REPRESENTATIVES

H.B. NO.

1566

TWENTY-NINTH LEGISLATURE, 2017

 

STATE OF HAWAII

 

 

 

 

 

 

A BILL FOR AN ACT

 

 

relating to the public utilities commission.

 

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 


     SECTION 1.  The public utilities commission issued Order No. 32695, at the initiation of the Hawaiian Electric Company, Inc., and NextEra, Inc., merger proceeding (Docket No. 2015-0022), which states:  "Since HRS §269-19 does not contain specific criteria or standards for the commission to consider in the transfer or assignment of a franchise, the commission historically, in its review of applications for the sale of public utility assets and the transfers of certificates of public convenience and necessity (CPCN) and franchises, pursuant to HRS §269-19, has utilized the same standards of review found at HRS §269-7.5 for guidance, to wit, that the applicant is "fit, willing, and able properly to 'perform the service proposed.'"

     The consumer advocate noted that other mergers of major utilities have reached settlement agreements stipulating that a "substantial net benefit" exists for the merger.  The legislature finds that there is a need to implement public policy guidelines regarding the "substantial net benefit" standard that are flexible enough to address the unique character of each merger or acquisition transaction.

     The legislature finds that because the NextEra proceedings began with a proposal for takeover under a status quo "no net harm" standard, the public utilities commission proceedings lasted an extended eighteen months as intervenors, the consumer advocate, and commissioners negotiated toward a standard of substantial public benefit.  This cost nearly $700,000 in consultant fees at the public utilities commission, considerable staff time, and significantly delayed other pending dockets, delaying electric bill savings for consumers.  Instead, beginning future merger proceedings under a standard of substantial net benefit may help prospective utilities produce a viable deal better in line with consumer interests and save significant time and cost, and will ensure the interests of the people are made a priority.

     The purpose of this Act is to adopt "substantial net benefit" as the standard for a transfer or assignment of an electric utility and specify certain guidelines to address when examining whether a "substantial net benefit" exists.

     SECTION 2.  Section 269-19, Hawaii Revised Statutes, is amended to read as follows:

     "§269-19  Merger and consolidation of public utilities.  (a)  Except as provided in subsection (b), no public utility shall sell, lease, assign, mortgage, or otherwise dispose of or encumber the whole or any part of its road, line, plant, system, or other property necessary or useful in the performance of its duties to the public, or any franchise or permit, or any right thereunder, nor by any means, directly or indirectly, merge or consolidate with any other public utility without first having secured from the public utilities commission an order authorizing it so to do.  Every [such] sale, lease, assignment, mortgage, disposition, encumbrance, merger, or consolidation[,] made other than in accordance with the order of the commission shall be void.

     (b)  A public utility, under circumstances that it deems exigent and in its judgment require a response that rapidly restores one of its customers to normal, or near normal, operating status in order to prevent serious disruption of essential public services, or to avoid serious risk to public safety, or to mitigate severe economic losses to that customer, may transfer, assign, or otherwise dispose of its property without prior approval from the public utilities commission as required in subsection (a); provided that in so doing:

     (1)  The public utility does not unduly hinder or degrade the public utility's operation with respect to its services or other customers;

     (2)  The public utility is duly compensated for its property; and

     (3)  The public utility reports in detail to the public utilities commission within thirty days of any [such action] transfer, assignment, or other disposal of property, unless otherwise approved by the public utilities commission for good cause shown.

     For purposes of this subsection, "property" does not include real property.

     (c)  The specific standard for the public utilities commission to consider in the transfer or assignment of an electric utility shall be substantial net benefit.  The public utilities commission may establish reasonable criteria for specific mergers.

     (d)  In determining whether there is a substantial net benefit, the public utilities commission may consider whether:

     (1)  The proposed transaction is in the public interest, including whether:

         (A)  Approval of the proposed transaction would be in the best interests of the State's economy and the communities served by the public utility;

         (B)  The proposed transaction, if approved, would provide significant, quantifiable benefits to the public utility's ratepayers in both the short- and long-term beyond those proposed by the public utility in recent regulatory filing;

         (C)  The proposed transaction, if approved, would impact the ability of the public utility company's employees to provide safe, adequate, and reliable service;

         (D)  The financing and corporate restructuring proposed in the application is reasonable;

         (E)  Adequate safeguards exist to prevent cross subsidization of any proposed affiliates and to ensure the public utilities commission's ability to audit the books and records of the public utility, including affiliate transactions;

         (F)  Adequate safeguards exist to protect the public utility's ratepayers from any business and financial risks associated with the operations of the transferee or assignee;

         (G)  The proposed transaction, if approved, would enhance or detrimentally impact the State's clean energy goals; and

         (H)  The proposed transaction, if approved, would potentially diminish competition in Hawaii's various energy markets and, if so, what regulatory safeguards are required to mitigate any adverse impacts;

     (2)  The applicants are fit, willing, and able to properly provide safe, adequate, reliable electric service at the lowest reasonable cost in both the short- and the long-term, including whether the proposed transaction, if approved, would:

         (A)  Result in more affordable electric rates for the public utility's ratepayers;

         (B)  Result in an improvement in service and reliability for the ratepayers of the public utility;

         (C)  Improve the public utility's management and performance; and

         (D)  Improve the financial soundness of the public utility;

     (3)  The proposed transaction, if approved, would in any way diminish the public utilities commission's current regulatory authority over a public utility, particularly if the ultimate control of the public utility would reside outside of the State;

     (4)  The financial size of the transferor or assignor relative to the transferee or assignee would result in a diminution of regulatory control by the public utilities commission;

     (5)  The transferee or assignee has been subject to compliance or enforcement orders issued by any regulatory agency or court; and

     (6)  Any conditions are necessary to ensure that the proposed transaction is not detrimental to the interests of the public utility's ratepayers or the State and to avoid any adverse consequences and, if so, what conditions are necessary."

     SECTION 3.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 4.  This Act shall take effect on January 1, 2018.

 

INTRODUCED BY:

_____________________________

 

 


 


 

Report Title:

Public Utilities Commission; Merger

 

Description:

Establishes "substantial net benefit" as the public utilities commission's standard for a transfer or assignment of an electric utility and specifies certain guidelines to address when examining whether a substantial net benefit exists.

 

 

 

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.