Nextera HECO Merger Good Or Bad

I hadn’t paid too much attention to the whole NextEra Energy merger with HECO until I heard one of those fake sounding / too-good-to-be-true propaganda commercials on the radio today, which was pro-merger of course.

It suggested that I go to ForHawaiisFuture.com to learn more. Well, with a website name like that it must be good for Hawaii, right? Or was it just going to be smoke and mirrors? Well, now that I was interested in the story I had to research what it was and why it is so controversial.

Lots Of Misinformation Out There

Here is what I learned, and note that I went into this not knowing the pros and cons to the merger and thus tried to remain as unbiased as possible during my research. The point was to find factual information and see what sounded right and wrong along the way.

Who Is HECO?

One of the companies in question is HECO, also known as Hawaiian Electric. HECO is the utility that supplies electricity to much of Hawaii. According to their website, they’ve been providing energy to the islands for over 100 years and serve 95% of the state’s 1.4 million residents on Oahu, Maui, Hawaii Island (Big Island), Lanai, and Molokai.

If you live here, you know HECO simply because they make you cry each month when your ridiculously high electric bill arrives and you wonder which of your children you’ll need to eBay next to pay. If you don’t live here note that Hawaii has the costliest electricity rates in the nation at an average of (roughly) 37 cents per kilowatt-hour. The national average is under 12 cents per kilowatt-hour so we’re over 3x the national average.

About What You'll Have After Your HECO Bill

For 2015-2016, El Nino In Hawaii brought us unusually warm weather, which makes air conditioning a requirement for many, has been especially rough on our wallets.

Who Is NextEra Energy?

NextEra Energy is another electric utility previously known as Florida Power & Light Company (or FPL) that supplies electricity to Florida. According to their own fact sheet, they’re both the largest generator of renewable energy from wind and sun in the world (awesome!) as well as the largest operator of commercial nuclear power units in the United States (ooh, very bad!).

Shh... Nothing Dirty Here

My first concern was when I found that NextEra considers themselves a “clean energy company”. How clean can you be when you burn oil or coal, or even worse, operate nuclear power plants? There is nothing clean about these energy methods and spent nuclear waste is about as bad as it gets. Seems like we really stretch the definition of clean these days.

What’s The Merger All About?

The bottom line is that NextEra wants to control HECO for $4.3 billion. That amount includes $1.7 billion in debt that HECO has but does not include the (currently) HECO owned American Savings Bank chain. Yes, that’s right, your power company owns Hawaii’s third largest bank but let’s not worry about that in this article.

Merger, buyout, takeover, acquisition, what’s really the difference? For me, there is little difference but when it comes to a utility like HECO things have to go through the Public Utilities Commission (PUC). The PUC will listen to thoughts from the public and eventually decide if this merger can happen or not. Those hearings are starting now but it will likely be several months before a decision is reached.

Reading Between The Lines

It’s pretty tough to find an unbiased list of pros. On one side, I’m at the mercy of the information that NextEra supplies which is basically propaganda. On the other side, information comes from people who generally don’t like change, tin-foil hat conspiracy types, overly green tree huggers (you know, level 5 vegans who pocket mulch), and even some everyday folks who may simply be misinformed.

So I’m digging up some of the big issues and trying to sort things out for myself, here’s what I found on each hot topic:

Safety In Numbers

Joining a large corporation brings together a wider field of expertise in energy, technology, and know-how. That seems pretty legit, certainly technology benefits will be had that make Hawaii’s generation and grid distribution better. Things like employment benefits and job security (for some) could also be better in a larger and more stable company.
Better Prices, Maybe

With the merger, prices become better, at least for the power company. This comes in a few forms but the big two are economies of scale when it comes to research, buying equipment & supplies, and so on. The other is that a larger company can get better credit than a smaller company so when they borrow to expand they’re paying lower interest rates. This saves them money for sure, but will you really see the savings like they are? Or will those savings be turned into profit to appease the shareholders?
$465 Million In Customer Savings

NextEra says that Hawaii customers will save $465 million with the merger. Average residential customer will see a savings of $343 to $473. Still sounds great, sign me up! Only, I can’t find any specifics on those numbers. Meaning, I’ll save that much over what period of time? It says “For Years 1-5 Post Closing” on the graph. So, are we talking about saving $372 (Oahu’s estimate) over five years? If so that’s less than $75 per year or around $6 per month. That’s not even one grande-venti-moca-latte-whatever a month. Or is it $372 every year for 5 years? I assume the former, not the latter, so I’m not impressed.

Fuzzy On Rooftop Solar

Rooftop solar in Hawaii took off like crazy a few years ago. High electric prices made the payback on a rooftop solar install very fast, often just a few years. Then HECO messed it all up and slowed the process to the crawl it is today and, worse, no longer wants to buy your excess electricity at the same cost they sell it for. NextEra says that they see a clean energy future that includes “integrating more rooftop solar, transitioning to cleaner resources, achieving the state’s 100 percent renewable portfolio standard by 2045, modernizing the electric grids and lowering customer bills.” Unfortunately, they don’t spell out any details. So, it’s a positive idea without any detail behind it.

85 Commitments

Is NextEra This Committed To Hawaii?

I keep seeing NextEra talking about their commitments to Hawaii. They have 85 commitments but they note than over 50 of those are new as of August 2015. So, prior to that date they had less than 35? Why did they add 50? Best guess is that this merger is drawing a lot of negative attention so they committed to more. But if it was so great why not do that from the start? I’m not holding this against them, just point it out that it comes off as a little shady.

Big Companies Are Evil

I know, I know. I say it all the time too, you’re not paranoid if they really are out to get you. Often times a big company isn’t bad, but just as many times they are. There are countless energy related messes in the world create by big companies.

This Is The Only Good Kind Monopoly

Exxon Valdez, Enron, and the BP oil spill of more recent times come to mind. Go back in history to the Standard Oil Company (of Rockefeller fame) that was ruled a monopoly in 1911 and split into several smaller companies. Even today, some of those “small” companies like ExxonMobil and Chevron still exist and are mega corporations that some might say aren’t exactly role models. Or take another industry like automobiles and you have GM and the ignition switch scandal, Takata with faulty airbags, and Volkswagen with the whole diesel mileage scandal.

It’s hard to trust most companies of any decent size, but certainly the bigger they are the less we trust them, and sometimes for good reason. So is merging HECO with a mega corporation ($17 billion in revenues in 2014) really a good idea for Hawaii?

Can a Juno, Florida Company Really Understand Hawaii?

I see this one come up a lot. It’s tough for an outsider to move to Hawaii as I cover in various forms in our Hawaii Living: Getting Started series. It’s often harder for a big company to do it. Why? Many reasons, but probably most because the Hawaiian people haven’t had the best relations with the USA since the big sugar companies sort of took control of the islands many years ago. They’re a little untrusting to outsiders but can you blame them?

So NextEra talks a good talk and has even thrown out a few Hawaiian words in their literature. I get it, they’re in a tough spot. They could be as honest as they come and it will still be an uphill battle.

On the flip side, how can any publically traded company truly want what is best for Hawaii? Well, it almost seems illegal. From what I've read, any CEO of a publically traded company has a legal responsibility to their shareholders. Basically, it means that Job #1 is to profit. If you’re number one job is making money (profit) then that means what is best for Hawaii, legally, is second in line. Maybe profit and doing right by Hawaii often align and things are fine, but if they don’t which one wins out?

Profits Rule Publically Traded Companies

NextEra even mentions on their website that they are “focused on building long-term value for our shareholders”. To be fair, they plan to do this by “investing in energy technologies that are designed to provide affordable, clean and reliable power for our customers.” Tough call but the bottom line here is likely to be, well, the bottom line of the company (profit) that wins out.

100% Renewable Energy In Hawaii by 2045

This Is What Locally Renewable Energy Looks Like

On July 1st of 2015, Governor Ige signed into law House Bill 623 that should make all of Hawaii’s power come from 100% renewable sources by the year 2045. Hawaii is the first state in the nation to create such a law and it seems pretty forward thinking. Many critics suggest that the merger will kill this law.

Well, anything is possible but it seems unlikely. Of course, reaching that goal seems just as unlikely but it’s better to fail while trying than not to try it all. NextEra is quick to point out that they fully support going 100% renewable by 2045. Unfortunately, they don’t list any details on that which only makes the skeptics more skeptical.

This Isn't Locally Renewable Energy

This may be a non-issue, but then again what you and I think of a renewable isn’t always the case. In Hawaii we have an abundance of renewable options to look at. Solar is the obvious one and with battery backup options available it’s an option that solves many issues. We also have ocean tidal currents that can be harnessed as well as wind power. Maybe geothermal is an option as well since we do have that Kilauea Volcano on the Big Island!

We could even use photovoltaic solar power that could pump water into holding takes up our various mountains during the day. At night the water runs back downhill and powers generators much like a hydropower dam without the ecological mess that those create. It’s essentially another type of battery as it lets you store energy which can be more difficult than producing electricity.

The Nuclear Option - It's Never Good

So, plenty of renewable options that we don’t have to go outside of the islands for. But what if NextEra views nuclear as a renewable? Okay, not likely on a small island. What about hydrogen, biodiesel, or similar fuels? They are renewable but would have to be shipped in to Hawaii and thus would still have a high cost that gets passed onto customers. But if that’s cheaper to do today maybe they’d opt for that instead of going for the long term logical idea of “locally renewable” energy.

If we all like the idea of the 2045 law, why aren’t we detailing out the solution as part of the merger and ending the speculation?

Job Loss?

I can see this being a point of concern for some. If the merger happens will they cut jobs? NextEra has stated that for at least two years after closing, there will be no involuntary layoffs as a result of the transaction. Benefits offered will be comparable as well and all union labor agreements will be honored.

Seems to be on the up and up but with mergers like this two years would go by pretty darn quick and it will likely take at least that long for things to truly merge and operate under one company. So what happens after two years? Tough to say, but I can also see how this would be tough for NextEra to predict. I can also see how this would be worrisome to anyone at HECO today.

What Does It All Mean?

Is this merger really a big deal in any way that will actually impact the typical Hawaii resident to the point where we should even care? It seems like the only obvious pro is that we might save a few dollars, or maybe not. Maybe getting a more robust and upgraded grid would be the second pro. Otherwise, it’s hard to see what’s actually in it for Hawaii.

On the con side, the big concern seems to be that NextEra may not truly want what is best for Hawaii and the people who live here. That maybe they’ll put profits first and Hawaii second. That could lead to accidents or not-so-clean energy options. Maybe those savings will turn into rising rates earlier than expected and we’ll end up paying more for less.

After a lot of research and misinformation it’s a tough call and I sort of see both sides. I was almost at a 50/50 split for a while but I’m leaning towards the anti-merger side because too much of what I see on the NextEra site lacks detail and feels too warm and fuzzy and propaganda like. I’m not a fan of that. Be open and honest and truly detail things out and maybe some trust can be earned.

The Real Evil Is For-Profit Electric Companies

But the real issue goes far beyond this merger. The real issue is that public utilities shouldn’t be for-profit companies or publicly traded companies at all. This is one the anti-merger side doesn’t seem to mention. Electricity today is something we need almost as much as we need water and nobody should be able to profit from that. Go ahead and make money so our grid can be reliable and efficient, but don’t line investor pockets with it.

Nextera & Heco Merger – Good Or Bad?