Make HEI pay us for going off grid

SOURCE: Ed Wagner (
SUBHEAD: The Hawaii electric monopoly is a creation of our state government and could be changed legislatively.

By Tom Brandt on 23 September 2015 in Island Breath -

Image above: Robin Hood and his men stop the wealthy Bishop of Hereford. Illustration by Howard Davie. From (

[IB Publisher's note: This article wsa derived from a email interchange between Tom Brandt and Ed Wagner (among others). We have shortened and edited the piece hoping to make it more understandable to an outside reader.]

I am aware and agree that geothermal already is a viable, cost-effective, and POSSIBLY long-term environmentally-friendly source of at least utility-scale electricity. This might be by either directly  creating steam to power generators, or indirectly (via hydrogen production)  in many locations... possibly including Hawaii.

But, in my mind, the question remains unanswered whether or not the investment required to scale up geothermal to a level comparable to that required in the past to provide ALL of Hawaii with utility-scale fossil fuel power versus the investment required  to provide ALL of Hawaii with conventional utility-scale solar, wind, bio-mass renewable power is  more cost-effective.

It is not clear that geothermal is more environmentally "friendly", or customer friendly when considering emerging generation and storage techs for home solar voltaic.

These new and less costly stand alone solutions  will only ensure that the "utility death spiral" expected by many (including former US Energy Secy Steven Chu) is just a matter of "when" rather than "if".

These technologies may also promise increasing customer independence from ANY centralized utility-scale source or sources of not only electricity, but also ground and air transportation fuel.

Here in Hawaii we have a power generating monopoly. Hawaiian Electric Industries (HEI) now includes the Hawaiian Electric Company (HECO) on Oahu, the Maui Electric Company and the Hawaiian Electric Company on the Big Island. Only the Kauai Island Utility Cooperative (KIUC) is not part of HEI. Presently HEI is the target of a takeover by utility giant by NextEra. This does not bode well for renewable energy independence or lower utility costs in Hawaii.

Having said that, I realize that no one has a crystal ball capable of factoring in ALL of the many variables that have to be considered as we try to develop consensus on an optimal path forward. It is uncertain which combination of technologies, policies, and investments should receive highest priority going forward.

But it is precisely this uncertainty and complexity that compels me to favor a "contingency planning" approach that would prioritize a strategy that proves more resilient and flexible in the widest possible range of future scenarios.

That range would be from continued growth (continued "jobless" growth, and continued mostly low-wage job growth)  to various possible versions of social, economic, and/or environmental stagnation, decline, or collapse. We might even see some form of more fundamentally restructured or transformational futures.

From this perspective, I think smaller and more incremental investments in the best current and emerging distributed and decentralized power generation with stand alone storage may be the least financially risky and costly path, as well as the most flexible path.

Going forward that might not only minimize the cost of trying to reach our current goal of so-called 100% "renewable" energy, but also reduce customer costs and increase customer independence and self-reliance sooner and at less expense.

So, after trying to stimulate more thought and discussion, for the past 13 years, about converting our for-profit monopoly utilities to some form of non-profit customer or taxpayer ownership, I have more recently suggested we should also consider a "third" alternative to both continuation of our for-profit monopolies, as well as to converting them to non-profit entities.

The third alternative I now have in mind might immediately strike many as even more "out of the box" compared to even a buyout and conversion of HEI to non-profit ownership.

I think we should try to estimate the costs and benefits of actually subsidizing/paying the likely shrinking number of HEI customers who still not cannot afford the upfront costs of the generation and storage techs necessary to go "off the grid" themselves.

I expect as the "utility death spiral" runs its course, and the value of HEI stock to decline while borrowing costs are still near record-lows will be the time to act.

If this pencils out, I also think it is possible that pairing such subsidization of increasing defection from the legacy centralized grids with gradual replacement of legacy grids with newer, more decentralized, and possibly cheaper and more resilient/reliable micro-grids and nano-grids may be more cost-effective than EITHER:
1) hoping HEI or NextEra can deliver on suggestions, which are NOT guarantees, that asking customers to stay connected to their legacy grids, and then asking customers to pay for the cost of upgrading and "smartening" their grids, will eventually pay for itself at some unspecified point in the future, by at least reducing the need for future rate increases, if not actually lowering rates (and far more than the insignificant and even insulting amount of $5 to $7 per customer per month as recently estimated by NextEra);


2)  using eminent domain and/or the Public Trust doctrine as the legal basis for compelling HEI to sell their electric utilities to their Hawaii customers and/or taxpayers instead of NextEra, and then using some combo of debt, equity, or on-bill financing to transfer ownership from HEI to public ownership on each Hawaiian island currently controlled by HEI.
I think the following current HEI revenue streams expenses could be used to help pay for the buyout WITHOUT necessarily having to increase electricity rates until they can potentially be lowered after the buyout is completed:
  1. The guaranteed dividends HEI currently has to pay to its shareholders from HEI's guaranteed profits (which will no longer be the case after the utilities become a non-profit);
  2. The exorbitant salaries and compensation packages HEI currently feels it must pay its executives in order to remain "competitive";
  3. Any taxes HEI must pay as a for-profit entity (that it would not have to pay as a non-profit);
  4. Any revenue received from its current customers that HEI  uses to make investments NOT related to lowering customer electric bills, improving service, and/or reducing our dependency on imported fossil fuels--which are intended to increase return on investment for its shareholders rather than benefit its customers;
  5. Any revenues received from HEI customers used to pay for public relations campaigns intended to convince HEI customers how "green" HEI intends to become, instead of spending that money on actually becoming more "green".
Finally, I think these current HEI revenue streams business expenses could also be used to subsidize the possibly shrinking future number of HEI customers who cannot afford to go "off the grid" themselves to go "off grid".

As the costs of decentralized generation, storage, and transmission technologies continue to decline we should reach 100% "renewable" energy well before our current target of 2045.

If possible, then the biggest unanswered questions of all may be these:
  • Could subsidizing a  shrinking number of future HEI customers to go off the grids at some "optimal" future point in time be cheaper and more efficient than first buying out the HEI utilities and converting them to some formof non-profit ownership?
  • And, if so, would it be legally and financially feasible to compel HEI to do this in some way without first having to buy out the HEI utilities and convert them to some form of non-profit ownership?  While I realize this may strike most as implausible initially, the HEI monopoly is, after all, a creation of Hawaii's state government.
As such, why CAN'T we simply change this legislatively, and perhaps without HEI customers and taxpayers having to spend a dime to buy out HEI shareholders and executives?

All comments, questions, and criticisms are welcome. Contact: (

Tom Brandt (former planning and economic development specialist for the State of Hawaii, and former Ph.D. candidate at UH-Manoa, currently working for the USDA Natural Resources Conservation Service)


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