NextEra’s Acquisition Of Hawaii’s Biggest Electric Utility



NextEra Energy, an electric power company based in Juno Beach, FL, said it would acquire Hawaiian Electric Industries for $4.3 billion, including the assumption of $1.7 billion in Hawaiian Electric’s debt.

“We believe our strengths are additive to Hawaiian Electric’s, creating an opportunity to enhance value for Hawaii’s strategically important energy industry,” said Jim Robo, chairman and chief executive officer of NextEra Energy NEE -0.86%.

Hawaii has become a flash point in the battle over the future architecture of the electric grid. The relentless rise of power prices in the state has accelerated customers’ adoption of distributed generation.

The press release announcing the “merger” states that “NextEra Energy shares Hawaiian Electric’s vision of increasing renewable energy, modernizing its grid, reducing Hawaii’s dependence on imported oil, integrating more rooftop solar energy and, importantly, lowering customer bills.”

Okay, but how does NextEra feel about competition?

If Florida’s approach to wholesale market competition is any indication of how the distributed generation market will evolve in Hawaii with NextEra running the show at the state’s largest regulated utility, NextEra’s expansion into Hawaii is likely a mixed blessing for the distributed generation business.

In 2005, Richard Pierce, Jr, a law professor at George Washington University and widely-recognized expert on utility restructuring, explained how utilities in the southeast had smothered wholesale competition by controlling access to the transmission system.
“Florida uses a different approach,” said Pierce in a law review article published in 2005. “It refuses to authorize construction of merchant generating plants, i.e., generating plants that would compete with the plants owned by the state’s utilities. With no non-utility generating plants allowed in the state and limited transmission capacity into the state, competition in the wholesale market is ineffective.”

Distributed generation companies like SolarCity may have reason to be concerned about their future ability to compete in the most promising market in the United States.

NextEra operates very differently in Florida than it operates outside of Florida.

“NextEra is an ‘ordinary’ competitor outside of Florida, but is a dominant monopoly that does everything it can to squash even the threat of competition on the home turf of its largest and most profitable subsidiary, Florida Power & Light,” said David Cruthirds, a regulatory lawyer and publisher of The Cruthirds Report newsletter.

This may not bode well for distributed power businesses keen on competing for market share in Hawaii.

“FPL uses its ‘political market power’ at the Florida PSC and Florida legislature to keep all but the most committed competitors out of the state,” saidCruthirds. ”NextEra can be expected to bring its anti-competitive attitudes and practices to Hawaii if its acquisition of HEI goes through because HEI is the incumbent monopoly.”

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