On February 2, 2015, Susan Essoyan writes in the Star Advertiser:
While NextEra Energy’s $4.3 billion bid to buy Hawaiian Electric Industries dominates the local energy debate, a group of Hawaii island residents is quietly investigating another possible future for their utility.
They are turning for inspiration to Kauai, where pioneering folks banded together in a cooperative and bought their electric utility for $215 million in 2002 in a completely debt-financed deal.
“We had zero equity,” recalled Dennis Esaki, who runs an engineering company and was a founding director of the nonprofit Kauai Island Utility Cooperative. “We didn’t have any money. It was an amazing feat.”
At first he ducked when people called about the idea of buying the electric company.
“I didn’t take their phone calls,” he said in an interview. “I figured they must think I got money that I don’t have.”
By the Numbers
Kauai Island Utility Cooperative is a not-for-profit electrical co-op owned and controlled by the members it serves.
>> $215 million: Cost of the utility when purchased in 2002
>> 33,000: Member-owners, who are its customers
>> $80 million: Equity stake owned by members
>> $30 million: Returned to members since 2002
>> 9: Elected board membersSource: Kauai Island Utility Cooperative
But he decided to join the effort. The cooperative got rolling with $200,000 fronted by a Lihue businessman, Gregg Gardiner, and the support of the National Rural Utilities Cooperative Finance Corp. which put up $2 million and financed the acquisition.
Since its launch 12 years ago, the nonprofit Kauai Island Utility Cooperative has returned $30 million to its members, who are its customers, money that is left at the end of the year after expenses are met. And it has built up more than $80 million in equity, the members’ ownership stake.
“Main thing is, we don’t have off-island owners that the profits go out to, like an investor-owned utility,” Esaki told a forum in Hilo last month. “All of the profits, called margins in this business, stay on the island.”
The co-op is guided by a board elected by its 33,000 ratepayers, who each get one vote. It has aggressively pursued solar power and focused on rate stability.
Residential electricity cost 34.1 cents per kilowatt-hour on Kauai in January, compared with 35.9 cents on Hawaii island, 35.1 cents on Maui and 29.5 cents on Oahu, where there are economies of scale.
Kauai’s residential electricity rates fell by 1.6 percent from 2008 to 2013 while Hawaiian Electric Co.’s rose by more than 21 percent, according to KIUC, which crunched data from the Public Utilities Commission.
Shortly after the NextEra announcement, Esaki and David Bissell, CEO of KIUC, were invited to describe the co-op’s experience at a Dec. 19 forum sponsored by the Big Island Community Coalition, Hilo-Hamakua Community Development Corp. and Hawaii Farmers and Ranchers United.
A Big Island Energy Utility Cooperative steering committee has been formed to discuss the idea further, but is keeping things low-key. Committee member Richard Ha, president of Hamakua Springs Country Farms, said it was too early to be interviewed about it.
“It’s a big subject and lots to look into before we decide whether to proceed with enabling a co-op,” Ha told the Honolulu Star-Advertiser in an email. He was chairman of a company, Kuokoa Inc., that considered buying Hawaiian Electric Industries in 2011, but that effort fizzled.
The goal of a Hawaii island cooperative utility would be local, democratic control over a crucial resource, keeping profits at home, greater energy independence and lower electrical costs, Ha wrote on his blog.
“We are doing all the legwork and research and information-gathering now so that if there is an opportunity, we will be in position,” he wrote. “If we don’t do this, we won’t be in the game.”
Another steering committee member, Marco Mangelsdorf, president of ProVision Solar, also declined to be interviewed, saying, “There’s no comment to be made at this time.”
Other members include Gerald DeMello, a retired University of Hawaii administrator; Wally Ishibashi, a former ILWU division director; Donna Johnson, president of the Hilo-Hamakua Community Development Corp.; rancher Michelle Galimba; Vincent Paul Pontieux; and Eric Weinert.
Along with the interest on Hawaii island, the Kauai utility has fielded calls from individuals on Maui and Molokai interested in learning more about the cooperative model, said Jan TenBruggencate, chairman of KIUC’s board. Some legislators aren’t aware of what happened on Kauai and have been inquiring, Esaki said.
One big difference between then and now is that Kauai residents were dealing with a willing seller because Citizens Utilities had decided to shed utilities and focus on communications. This time, Florida-based NextEra has an agreement to buy all three utilities: Hawaiian Electric Co. on Oahu, Maui Electric Light Co. and Hawaii Electric Light Co. in Hawaii County. The parties hope to close the purchase by the end of the year.
But the NextEra deal must first be approved by the Public Utilities Commission. And that might not be a slam dunk, judging from reaction to the surprise announcement, which has already triggered two lawsuits by HEI stockholder groups. There may be a chance for a neighbor island utility to be spun off, if HEI entertains another offer.
Last week two separate filings at the PUC by various community groups called for a delay in considering the merger, until the state defines its energy needs and ensures that power companies serve customers’ interests and state goals. The Big Island Community Coalition was a party to one of the motions.
State Rep. Cynthia Thielen (R, Kailua-Kaneohe) has introduced a bill, HB3, to require a study of the benefits of establishing publicly owned utilities, including co-ops.
When Kauai residents first decided to form a utility cooperative, the idea was new in Hawaii, and there were plenty of naysayers, including county officials who wanted to make it a municipal power company. It took three years after the Kauai co-op was formed to get its bid approved.
“Some of it was due to a lack of familiarity with the co-op system; some of it was due to competing interests,” TenBruggencate said. “Most of that opposition has dropped off as the utility has performed, kept its rates under control, has developed an enviable reliability record and basically has kept its word about how it conducts business.”
The PUC turned down the co-op’s initial $270 million bid as too high. The applicants regrouped, invited critics to join their board, hired experts and revised their bid. The second proposal was also rejected but, after a request for reconsideration, allowed to go forward.
Although utility co-ops were slow to reach Hawaii, they date back to the 1930s, when they helped bring electricity to far-flung farms and rural towns across the United States, where investor-owned power companies couldn’t turn a profit.
Today more than 900 electric cooperatives and public power districts provide electricity for 42 million people in 47 states, according to the National Rural Electric Cooperative Association. The association was instrumental in helping Kauai’s co-op succeed, said Esaki, who recently stepped down from its national board.
Rural utility cooperatives have access to low-cost government financing. Their sole focus is their members, and they can take a longer view, advocates say, because they don’t have to answer to shareholders on a quarterly basis.
Last year the PUC singled out Kauai’s cooperative utility for praise in a white paper, “Commission’s Inclinations on the Future of Hawaii’s Electric Utilities,” that criticized HECO for its lack of progress in aligning its business model with customers’ interests and the state’s public policy goals.
“By contrast, the Commission does note that the state’s other electric utility has clearly articulated a strategic vision and made substantial progress in achieving their goals over the same time period,” it wrote.
“Moreover, KIUC has been able to manage utility operations over the last decade with far fewer, and substantially less, base rate increases than each of the HECO Companies,” it added.
Democracy is a messy business, and the utility cooperative had a turbulent childhood, with members rising up and voting out boards of directors. Eventually the board stabilized.
In the last four years, members have twice petitioned to challenge actions of the board but lost badly when the questions were put to a vote of the membership.
Kauai’s utility opened the largest solar energy project in the state in September, a 12-megawatt array in Koloa, and will bring another big solar array online this year, making it one of the most sun-reliant utilities in the country. Last year it gave away 23,000 LED light bulbs as part of an energy efficiency push, and expects to do the same this year.
Reliability remains a concern, as it is for any island utility that can’t tap into a neighboring grid. On average, each Kauai utility customer had three outages in 2013, according to its annual report, an improvement over the previous several years. A PUC graph of the overall availability of electrical service showed Kauai lowest of the four Hawaii utilities in 2012, but performing better than at least two others for the previous four years.
“People don’t tend to like their utilities,” acknowledged Bissell, the co-op’s CEO. “You’re not necessarily going to be loved by everybody.”
But he added, “People do really appreciate the chance to set the direction for their own island’s energy future.”
https://www.staradvertiser.com/2019/12/19/breaking-news/kauai-utility-hits-mark-of-supplying-island-with-100-renewable-energy/?fbclid=IwAR2KLGKfw_zmkAtj30eBFGbgnRQYwkz1Ba93vFqPiGLIV3shVkNunBacNao
Gary Reber Comments:
As an alternative to non-profit Community Investment Corporations, Land Trusts, Land Banks, Land Foundations, Cooperatives or any other legal vehicle in which ownership of land, natural resources and basic community infrastructure are owned collectively (i.e., where no one has a property stake) or by any state monopoly, other States should use a Citizen Land Bank (CLB).
A Citizens Land Bank is a for-profit, professionally-managed, citizen-owned-and-governed community land planning and development enterprise, designed to enable every citizen of a community of any size to acquire a direct ownership stake in local land, natural resources and basic infrastructure.
A CLB is a social vehicle for every man, woman and child to gain, as a fundamental right of citizenship, a single lifetime, non-transferable ownership interest in all the Bank’s assets, share equally in property incomes from rentals and user fees from leases or use of the Bank’s assets, accumulate appreciated equity values from enhanced land values, and gain an owner’s voice in the governance of future land development.
A CLB is an innovative legal and financing tool empowered to borrow on behalf of all citizen-shareholders and service the debt with pre-tax dollars to meet the land acquisition, capitalization and operational needs of the Bank. The CLB shelters from taxation the equity accumulations of citizen-shareholders and protects the outside assets of the citizens in the event of loan default or if the enterprise fails.
A Citizen Land Bank is a social tool designed to encourage a just, free and non-monopolistic market economy. It applies the democratic principles of equal opportunity and equal access to the means to participate as an owner as well as a worker. It demonstrates that anything that can be owned by government can and should be owned, individually and jointly, by the citizens.
The Citizen Land Bank is a major feature in a proposed national economic agenda known as “Capital Homesteading for Every Citizen” and embodied in the proposed Capital Homestead Act, which is designed to reform existing monetary, credit and tax barriers to provide every American an equal opportunity to share in the governing powers and profits from new entrepreneurial ventures, new technologies, new structures, and new rentable space built upon the land. Capital Homesteading offers a “Just Third Way” of reversing unsustainable federal deficits and debt, and revitalizing and growing the American free enterprise system in a sustainable and environmentally sound way.
