Tuesday, September 29, 2015

Update: LOL Petition

Update:  On Monday, October 27,  the Hawaii Public Utilities Commission filed its decision and order to deny the petition and close the docket on Life of the Land's request to investigate other utility ownership and business models.  The Order, issued after receiving the preliminary statement of position filed by the Consumer Advocate on October 14, states, "LOL did not offer a specific 'draft or substance of the proposed rule or amendment' to be considered, but merely opined . . ."  The Order found:
On these facts, the commission concludes that LOL's
request to engage in rulemaking is "purely speculative"
and therefore agrees with the Consumer Advocate that, if the
Petition was granted, the "resulting proceeding will be unduly
broad and may involve a misallocation of available resources
towards [a] prolonged proceeding with an inconclusive ending."
The commission observes that LOL is a frequent
participant in commission dockets and should thus be familiar with
the commission's rules of practice and procedure, including the
requirements of HAR § 6-61-147. 
For these reasons, the commission finds and
concludes that the Petition should be denied insofar as it fails
"to comply with [HAR § 6-61-147] or to disclose sufficient reasons
to justify the rulemaking proceeding[.]" HAR § 6-61-148(b).  

Last week "Life of the Land's petition for the Commission to open an investigation on different business models and utility structures including B-corporations, electric cooperatives, private utilities, municipal utilities, share-holder owned utilities, grid-only utilities (independent system operators) and micro-grid utilities" was filed with the Hawaii Public Utilities Commission (PUC).  I guess if you make the title long enough there might be plenty of buzz words to get others to jump onboard.  In this case, I think Life of the Land (LOL) should withdraw its petition and spare the PUC and Consumer Advocate the time and expense trying parse the purpose of this petition.

First of all, the petitioner lacks an understanding of what a business model is meant to accomplish and who is responsible for its development.  In a Harvard Business Review article entitled “Why A Business Model Matters,” writer Joan Magretta describes its purpose, 

“[business models] are, at heart, stories—stories that explain how enterprises work. A good business model answers Peter Drucker’s age-old questions: Who is the customer? And what does the customer value? It also answers the fundamental questions every manager must ask: How do we make money in this business? What is the underlying economic logic that explains how we can deliver value to customers at an appropriate cost?
. . . At some level, all new stories are variations on old ones, reworkings of the universal themes . . . A new business model’s plot may turn on designing a new product for an unmet need . . . [O]r it may turn on a process innovation, a better way of making or selling or distributing an already proven product or service.  
. . . [A business model is key] as a basis for employee communication and motivation. Because a business model tells a good story, it can be used to get everyone in the organization aligned around the kind of value the company wants to create. Stories are easy to grasp and easy to remember. They help individuals to see their own jobs within the larger context of what the company is trying to do and to tailor their behavior accordingly. Used in this way, a good business model can become a powerful tool for improving execution.” 
As the electric sector is evolving, an electric utility's business model must be flexible and adaptable to address advancing technology and changing customer preferences.  It is the electric utility's responsibility to develop its business model to meet the performance standards and expectations of the regulator.  While the regulator can demand operational and financial performance and scrutinize the business model to achieve regulatory objectives, it is the responsibility of the electric utility to have an updated business plan to execute its productivity and ensure its profitability.

Simply establishing a venue for pontificating and plucking stuff out of the air for non-existent entities (with no business models mind you) for an electric utility already in a sale process is just not worthy of a PUC investigation.

If people want to argue the merits/demerits of a publicly-owned or municipal utility do it before the State Legislature or County Councils.  If the merits outweigh the negatives, then those elected officials should layout the game plan for eminent domain and address the charter and statutory changes necessary before bringing the ownership transfer issue to the PUC.  Proponents of an electric cooperative should establish their non-profit corporation and be able to put their money on the table to begin negotiations with the Hawaiian Electric Companies for its purchase.  You don’t need a PUC investigation to initiate any one of these change of ownership actions and it sure separates what's real from all the bs when you put the responsibility where it belongs.

A PUC investigation should begin only when there is something concrete to be evaluated where, if the Consumer Advocate prevails, the standard of review will be an evaluation of the substantial net benefits for the consumer. However, can't talk substantial net benefits when you are just plucking stuff from the air.

1 comment:

  1. Absolutely. Take KIUC as an example. Many said at the time of negotiations and the sale "I'm all in favor of a co-op, just not THIS co-op."
    Although it has evolved into an elected board whose actions now, if not reflect, are at least responsive to members' (ratepayers') priorities that took almost 15 years.
    It took that long because of what proved to be a huge over payment (estimated to be $70 million even after the first reduction) as compared with actual value of the asset. That included an "unexpected" bill for the all of the repairs after the hurricane (which could have and should have been anticipated but that was, for political considerations, never even considered much less anticipated) assets (such as the old `Ele`ele plant itself as well as the toxic waste dump under it as revealed in a consultant's report at the time) that proved to be liabilities, a politically appointed governing board of questionable (to be charitable) competence and trustworthiness as well as other problematic matters concerning transparency that effect decision making to this day... making for a legacy of no confidence among members.