Editor’s Note: Choosing Our Electric Future

October, 2015

I ENVY PEOPLE who make their intellectual life easy by sticking to an ideology.

For some, there’s no need to investigate and think through a particular issue, because we always need to bomb our enemies back to the Stone Age; for others, war is never the solution, no matter what the threat. People’s opinions on economics are often governed by an ideology: Some believe the free market is always the answer; for others, it never is.

Of course, the opposite intellectual evasion is to avoid judgment because there’s no obvious answer, the complications are immense or the future unpredictable. In the case of Hawaiian Electric, indecision is not an option: We must choose our electric future.

First, let’s thank NextEra for offering to buy Hawaiian Electric. Most of us thought the only way to reach Hawaii’s goal of 100 percent renewable energy by 2045 was to impose change on a reluctant HECO and its fellow utilities. NextEra inadvertently persuaded us there are other options: reform and regulation of a privately owned utility remains a viable way forward, but we can also figuratively blow up the existing system by turning HECO and its brethren into cooperatives or county-operated utilities.

I wish there was an obvious choice among those three. Dennis Hollier’s report on page 92 outlines the pluses and minuses of each. But, after following this issue for many months, I believe co-ops are the best solution for each of the islands now powered by the Hawaiian Electric companies.

Here’s why: Free-market advocates should be delighted by a future in which there is lots of competition to generate renewable electricity, and that should drive down prices. The electric utility’s job would be to find the best prices from a mix of sources like solar, wind, geothermal, battery storage and whatever the future offers. That mix should add up to a dependable supply connected to a modern, islandwide grid and the utility’s customers.

We could have a private company do all of that – essentially revising the current regulatory model – but it may be hard to move a traditional utility in that direction, whether its HEI or NextEra. After all, those utilities must first serve shareholders, not the community. Their traditional financial incentives do not lead them toward Hawaii’s 2045 goal and it will be hard to overhaul those incentives. A private company may promise to follow our goals, but actually follow its own. Then, 20 or 30 years down the road, it will insist that it tried, but 100 percent renewable energy was really unachievable. Furthermore, most of the usual efficiencies you get with a private company operating in a free market disappear with a regulated monopoly.

If you think a municipally run utility is the answer, my simple rebuttal is: Do you want another Honolulu Board of Water Supply, a very inefficient agency? I don’t expect a Honolulu Board of Electricity Supply to be any better. People on Maui and Hawaii Island should look at their own water agencies as crystal balls into the future.

That leaves co-ops. Kauai’s electricity co-op started in 2002 and the early years were rough, but it seems to have its act together now and Dennis details lots of positives to co-ops. The biggest drawback, and it’s a huge one, is an electricity co-op on Oahu would be the biggest in America by a country mile. It’s not clear a co-op would work on that scale, but the alternatives appear worse. I think we should bet on co-ops, but make no mistake: Each path is a gamble.

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Author:

Steve Petranik