QUESTIONS AND ANSWERS
What’s the difference between the cooperative model of utility ownership versus the government-owned and investor-owned utility (IOU) model?
The cooperative model- The utility ratepayers own the utility.
- A democratically elected board performs oversight of the utility—one meter, one vote.
- People who work for the utility are employees of the coop.
- Direct accountability to the ratepayers. Ratepayers determine strategy and policies through electing board members that advocate their preferences.
- Capital required for infrastructure maintenance, repairs and improvement comes from access to federal lending programs and national coop owned banks like Cooperatives Finance Corporation and CoBank.
- The coop is not-for-profit with the margins, if any, returned to the ratepayers over time through patronage capital retirements.
- The city or public utility district owns and operates the utility.
- The city council or an appointed utility board performs the actual oversight of the utility.
- People who work for the utility are employees of the city or utility district.
- No direct accountability to the utility ratepayers, indirect function of the city government.
- Capital required for infrastructure maintenance, repairs and improvement comes through bonds issued (i.e., debt accrued by the city or utility district with point guaranty).
- The muni is not-for-profit with the margins (i.e., profit), if any, retained by the city or utility district.
- Shareholders own the utility company.
- The governing board of directors is elected by the shareholders.
- People who work for the utility are employees of the utility.
- No direct accountability to the ratepayers.
- Capital required for infrastructure maintenance, repairs and improvement comes through rate increases.
- The IOU is for-profit with the profits passed on to the shareholders.
Is HIEC against the proposed HEI-NextEra merger?
HIEC takes no position either for or against the proposed merger. HIEC desires to explore through the proceedings the unique perspective, goals and objectives of the residents and communities of Hawaii Island, and depending on the outcome of the proceedings, consider whether a different ownership model for energy services on Hawaii Island may provide a positive alternative. A sound discussion should include evaluation of the pending transaction in relation to potential future options that may be in the public interest for the unique interest of the island of Hawaii. HIEC’s participation can assist the development of a sound record by providing a Hawaii Island focused perspective.
Is HIEC making an attempt to buy HELCO?
It’s important to note that HELCO is not for sale at this time. So no, HIEC is not submitting an offer to purchase HELCO. HIEC is positioning itself as a possible option worthy of consideration to take Hawaii Island in a different energy direction, depending on the course of the proceedings.
Would a coop lead to lower energy bills on the Big Island?
HIEC believes that a case can be made that there would be lower energy costs to the consumer over time through tax exempt status, lower cost of capital and no shareholder profits, greater efforts to develop less expensive island-based power sources, promotion of education, markedly improved energy efficiency, and the accelerated adoption of appropriate advanced technologies.
What’s the position of HIEC regarding geothermal energy?
The residents and communities of the Big Island, through an elected board of directors, would decide what choices and directions to take as far as energy sources and policies under the coop.
What’s the position of HIEC regarding a interisland power cable from the Big Island to the other islands?
The residents and communities of the Big Island, through an elected board of directors, would decide what choices and directions to take as far as energy sources and policies under the coop.
What’s the position of the HIEC regarding this or that particular or specific issue on the Big Island?
The residents and communities of the Big Island, through an elected board of directors, would decide what choices and directions to take as far as energy sources and policies under the coop.
What would make HIEC different from a standard electric utility coop?
The cooperative would have a more diversified focus compared to a standard electric utility by focusing on greater overall energy independence, higher renewable energy generation, and enhanced sustainability through a comprehensive and integrated approach to all energy-consuming sectors on the island.
Has HIEC been working with Kauai Island Utility Cooperative?
HIEC has been in contact with KIUC and they have been supportive. In the event that HIEC is successful in establishing an energy coop, it is likely that synergies would exist between the two islands that would enable both to benefit by working together in certain areas.
Would the HIEC have the financial means to purchase HELCO from HEI-NextEra?
There are dedicated lending sources to finance acquisitions unique to the electric cooperative industry. There are over 900 electric cooperatives on the Mainland dating back to the Rural Electrification Act of 1936. Through a combination of private and governmental lending sources, these cooperatives have access to the debt they need to continue investment in their electric systems. These same lenders have financed a number of acquisitions over the last decade.
How about the County of Hawaii owning and operating the electric utility?
In a cooperative the ratepayers, utility customers, own, control and elect the members of the board of the utility. In a municipal utility, or muni, the ratepayers are indirect owners as they have no direct ownership; the municipal government actually is the owner. In Hawaii, the muni would likely be a subdivision of the County of Hawaii. In a cooperative, the members directly own the equity in the utility. They directly elect the board. The cooperative is a private corporation, not a governmental body. In Hawaii, any muni utility, of which there are none now, would be completely exempt from regulation by the HPUC under HRS 269, which is the statute that regulates all utilities.
What would the tax status be for the HIEC?
Energy cooperatives apply to the IRS for tax exempt status under Section 501 (c) 12 of the Internal Revenue Code of 1986. This provision is specific to cooperatives that do business with their members on a patronage basis. As long as 85% of revenue is from members, any earnings are tax exempt, along with unrelated business income like interest income from a bank.
How would what you’re proposing affect HELCO personnel?
HIEC recognizes that its most important asset is its people working every day to deliver affordable, reliable and safe electric service on behalf of their member-owners in the community. A smooth transition for the former employees of HELCO would be a strategic priority in any cooperative alternative. The electric cooperative industry has national pension programs, and HIEC would make it a priority to maintain continuity of retirement, benefit, and union contract provisions in any transaction.
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