H.B. NO.



H.D. 1
















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 purpose of this Act is to adopt "substantial net benefit" as the standard for a transfer or assignment of a franchise for public utilities.

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 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 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 a franchise 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 shall 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, provides 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 will impact the ability of the public utility company's employees to provide safe, adequate, and reliable service at reasonable cost;

(D) The proposed 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 utility 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, will 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 such 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, will:

(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 diminish, in any way, the public utilities commission's current regulatory authority over a public utility, particularly, if the ultimate control of the public utility will 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. New statutory material is underscored.

SECTION 4. This Act shall take effect on January 1, 2017.

Report Title:

Public Utilities Commission; Merger



Establishes "substantial net benefit" as the Public Utilities Commission's standard for a transfer or assignment of a franchise. (HB2567 HD1 PROPOSED)




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