Hawaii rejects Florida utility's buyout offer after concerns about costs, clean energy

Published July 18, 2016

NextEra Energy, the parent company of Florida Power & Light, Florida's largest electric utility, canceled its $2.63 billion bid to purchase Hawaiian Electric Industries Inc. on Monday after the deal was rejected last week by Hawaiian state regulators.

NextEra will pay Hawaiian Electric a $90 million breakup fee and as much as $5 million for expenses related to the nearly two-year review that led to the failed takeover, the companies said Monday in a joint statement.

The Hawaii Public Utilities Commission voted 2-0 Friday against the proposal after concluding that the deal posed too many risks to ratepayers and the promised benefits were "inadequate and uncertain."

Hawaii has adopted a policy of ending its dependence on fossil fuels and becoming 100 percent reliant on renewable energy by 2045.

Regulators asked NextEra and Hawaii Electric for specifics about how they would achieve the goal of 100 percent renewable energy, but details were not forthcoming, according to the 410-page order released Friday by the commission.

"Applicants' (NextEra's) reluctance to provide details of their vision and the mechanisms by which the HECO Companies will meet the state's clean energy goals is of major concern to the Commission," the report stated.

Concerns over NextEra's track record with renewables at FPL also prompted opponents to claim that the merger would not help Hawaii meet that goal.

Opponents to the merger included Hawaii Gov. David Ige, a Democrat, and dozens of interveners who expressed concern that the merger would raise electricity rates in the state, which are already the highest in the nation. Supporters included the local electrical workers union, the Hawaii Department of Defense and local chambers of commerce.

NextEra promised the merger would lower utility rates by as much as $60 million, but according to a February poll by Honolulu Civil Beat, most Hawaii residents believed the merger would lead to higher rates.

NextEra, based in Juno Beach, is the largest wind- and solar-generation owner in North America. Its purchase of Hawaii Electric was seen by utility industry watchers as an opportunity for the company to test its handling of renewable energy and rooftop solar operations as the practice threatens to take hold across the nation.

Utility mergers and acquisitions are becoming increasingly common as electricity demand has flattened with the advent of energy-efficient appliances and the increase in photovoltaic rooftop solar systems. Because of Hawaii's high electricity rates, rooftop solar and energy storage are seen as economical for many consumers, and the state has the highest solar penetration in the nation.

NextEra is reported to be turning its attention now to buying for Oncor Electric Delivery Co., the largest power distributor in Texas.

"They don't face the same regulatory challenges as they did in Hawaii," Bloomberg Intelligence analyst Stacy Nemeroff said in a report. "Oncor doesn't own generation."

The ruling does not preclude Hawaiian Electric from seeking a different partner or from renewing discussions with NextEra in the future, however, the commission ruled.

The ruling was a bit of vindication for Nathan Skop, the former Florida PSC commissioner whose term was not renewed by a legislatively controlled nominating commission in 2010.

He testified before the Hawaiian regulators on behalf of the Sierra Club, an opponent, and was critical of what he considered to be a lack of transparency by NextEra and FPL with regulators.

Information from Bloomberg News was used in this report. Contact Mary Ellen Klas at Follow @MaryEllenKlas.