 This is Stink Tech, Hawaii. Community matters here. Bingo! And now we begin Wednesday, okay, with energy, Hawaii, the state of clean energy. Welcome to our show and welcome to our special guest, chair of the PUC, Randy Iwasi. Thanks for coming down, Randy. Well, it's good to be here, Jay. Old friend. Great to see you. Yeah, we're getting old together. Yes, we are. So we're going to call this show today, What's on the horizon for the PUC in 2018 and at sec. And we're going to go, we're going to talk about what can we expect in the new year and what can we expect after that? What new developments at the PUC and around the PUC and what can we expect in terms of the outreach of the PUC, the legislature, the community, the industry and so forth. If you want to ask a question and make a comment, you can tweet us at Stink Tech HI or call us at 374-2014. So we're going to talk about here in the state of the energy, what's going on right now. So my first question is to Randy, what is the state of the PUC, the state of the state, the state of the judiciary, the state of the PUC? Well, we're busy. We have, we were busy the whole year. We issued a whole lot of very significant decisions, PSIP being one, the TechTrack phase two decision in the DER docket. We are also now undertaking to the dockets dealing with rate increases. We have HECO, MECO, HECO. We have Hawaii Gas and I guess at some point in time, KIUC will be coming in and those are extremely, I wouldn't call it difficult, but they're complex, time consuming and it requires a lot of staff work on it. It's technical, isn't it? Because if you want to make a request for a rate increase, they have to justify it within certain parameters. Can you talk about what those parameters are in general? Well, I can give you a real general. We are duty bound to ensure that the rate, first of all, that the companies have a fair and reasonable rate of return. And the other side is to ensure that the rate pair, the charge to the rate pair is fair and reasonable. Easy words, but tough to parse out when we go through, dig down into it. You know, people find, there's always a complaint. I was one of the complainers when I was retired, if there's a cost increase, if there's a rate increase. And it's easy to say no rate increase, but that's not what the statute allows us to do. Nor is it something that is, I think, good for Hawaii. The company, we are not here to watch over the demise of a utility because they do not have a fair rate of return. And so we have to make those tough calls and we're going to make them. Yeah. Okay, important. Because we have to maintain the economy. We have to maintain the industry. Oh, yes. So there will be increases, but we don't know, we don't have an idea about that. I don't want to say if there will be a, although we just, Helco has, was that the first case there before us, we have to make a decision within a certain period of time. Or if we can't do it, or if the parties agree to extend beyond that deadline, we can issue what's called an interim decision. And so what we did in the Helco case, there is a settlement that was agreed to with, except for a couple of parts. And so we have an interim decision. We allowed for a rate of return on equity for Helco of 9.5%. And so there is a, there at least an increase. Yeah. You know, I don't know if I asked you this the last time we met, but do you foresee a time when rates around the whole state could be uniform, island and island? That's something I think we can look at. I know what I want to do. We haven't been able to do it is before we get to that kind of uniform rate is a performance base rate making. I think that is something we have to do to incentivize the utilities to be partners, a bigger partner, a more encouraging partner, an enthusiastic partner in adjusting their business model so that rates renewables will be at the top of their list. So we're going to be doing that. We just haven't- What is performance base? What does that mean? Well, it looks, it'll incentivize the utility, if you achieve certain benchmark. For example, the income you keep, you can keep it. We're not going to be second-guessing you. That's a very simple explanation of performance base rate, but there are incentives in there. One of the key incentives and the motivating force behind it all is how are you serving the public? How are you helping to meet our renewable energy goals? I'm personally, for me, I am not satisfied with the RAM program that was approved. I don't think that has been something that has incentivized utilities, the utilities to encourage customers to use renewables or to buy more PVs. What is that program? It's rate RAM, rate adjustment mechanism. There's another called RBA. What was- That was part of the decoupling cases that were in the past. Well, I think we're in an interesting spot. You mentioned, you used the word partner, and I really like that. Do you see, does the PUC see the utility, or for that matter, the industry as a kind of partner going forward? For example, a couple of years ago, the PUC issued what they called, what you call the inclinations in one of your decisions. I thought that was advice. It was expectation. It was like having a conversation. Do you see that kind of relationship increasing going forward, a partnership, a statement of inclinations and expectations? The last time I was on the program, Jay, I talked about us being in a one canoe. We are. I mean, we both understood that we're out here in the Pacific Ocean. We can't get electricity or power from the mainland or from another state, nor can we export it when we have too much. We have to deal with the issues that we have here by ourselves, and so it would be foolish and counterproductive if each of us in the canoe viewed the other as a competitor and an enemy in the worst case scenario. We are part of this canoe. We have to roll this, or roll this canoe together, and so that's how I view it. The utility is not an enemy. The utility is not a bad thing. You can talk about what kind of utility should be here, but there's always this talk about having a cooperative, for example. That's fine. We'll look at it, but we have to ensure that first, I go back to what I said at the outset, the rates paid by the customer of just and fair, the return to the utility is just and fair. Now, I think for the short haul run, the near future, there are going to be costs increased, and I think the PUC is going to have to take it on the chin a few times because we're going to be having to make those decisions, but if we don't do that, we're not going to have a modernized grid. We're not going to have utility-scale solar. We're not going to have incentives for customers to put PVs on the roof if we don't make these investments now, and we can kick this can down. In fact, we are now holding the can that others have kicked down the road. The pump stops here. It does now. If we want to proceed and achieve, proceed in a competent way and achieve the renewable portfolio standard goals, we can do it, and that is something that is the legacy our generation can pass on to the next. Our generation will have to make some sacrifices so that the next generation can have a better energy future than we have had. Oh, you're touching me, Randy. Thank you for that. So the PUC, State of the PUC, do you have enough staff? Do you have enough resources? Do you have enough money? Do you like your new digs? Is the PUC getting appropriate respect from those who would fund it or not? I don't know about respect. Well, for appropriate funding. The funding, last session, we did not get all that we had asked for. We're making do. We're going to finish this year, and we're not going to be asking for a bump in money. We think we can make it through, but we have a bubble sea. Like I said, we have four rate cases at least, and the staffing, and we've talked about it the last two times I've been on the program. Yes, we've increased the staffing, but they're young. They need the experience. They have to develop the expertise. We want to bring in the consultants. So we need consultants so that not only can they provide us with the expertise that they have, but they can mentor our young staff. The other thing is, and I faced it when I was at the Attorney General's office 40-something years ago, you're in a profession that is highly prized and competitive. And so when you're a young person, you come in to say an AG of the Attorney General's office looking to get the experience to make it so that in two years, three years, you can go off into private sector. The same thing happens with us. We have a professional staff who will become highly skilled in a specialized area, or they already have skills, and so they become very attractive. The money competition out there is we're always going to lose. Government will always lose. And so we try to retain them. We're going to continue to try to retain them with better pay, with better training. But it's sort of like I've come to the conclusion that we're like a college football team. The kids will come. The players will come. And then they're going to leave. They're going to graduate. Yes, they're going to graduate. And so you just got to restock. And it's not a knock on any agency when that happens. It's a fact of life. You mentioned earlier that you have utilities. You're going to regulate the utilities. You mentioned, of course, electoral generation and distribution and gas for that matter. But you also regulate transportation. You regulate, I don't know, all the things in transportation. You have a lot of regulation to do. Would it be better going forward if that kind of got separated out? Because your mainstream obligation, I would say, is energy. Well, that has long been a discussion preceding me in telecommunication, in motor carriers. And I think there's an argument to be made on both sides. In the case of motor carriers, will competition alone without regulation be enough to keep the prices down, to keep the quality of service up? And maybe there is. On the other hand, there is still a need for where would a complainant go to? And that's where you may want a governmental entity there to ensure that their complaints are addressed. In the case of telecommunication, the feds, and I didn't know this when I came in and I still don't know the full extent of it, but they've basically preempted the area on cell phone. Yeah. Okay. We still have some regulations on landlines, but the cell phones, I mean, it's no longer a certificate of need and necessity you come to us for. It's a certificate of registration. You come to us and we're going to do a service, so you sign us up and give us a certificate of registration and we're going to operate. We have little authority over them, and yet the public expects us to do something. And it's rough to tell them, oh, we can't. We don't have this regulation. You take the case of sandwich aisle, you know, we determine whether or not they qualify for certain federal subsidies because they're servicing a needed area. But all of that, all of the rules and regulations come from the feds. We have no statutory authority to go after them. So would it be better to clarify that and call you the public utility, public energy commission, I'm just making that up. And then, you know, relegate these other things, you know, motor carriers and telecommunications to some other agency or agencies and let you focus on what is the most important initiative in our state, in our economy, that is energy? Well, I think that is something that I would really consider. You know, I haven't sat down and had a policy argument or debate or discussion about, intimately about the pro and cons of separating us away from telecommunication and motor carriers. But I will tell you that, you know, I sit there at times and I go, well, why are we doing this for telecommunication? A lot of the motor carrier stuff, the registration with us. We just fire it off. It's almost, yeah, it's almost pro forma. And so, you know, like I said, there is an argument to be made in each of the categories for moving it away or just not regulating. Yeah. Well, we're going to have a break in a minute, Randy, but I want to ask you one more sort of systemic question that is about your new appointment, Jay Griffin, who I like very much, a nice guy, and he's been here a couple of times. How has the mix, if you can say, among the commissioners changed because of the introduction of one brand new commissioner among a group of three? You know, Jay was there before. And we were very fortunate at the PUC. Tom Gorak was a very competent commissioner and with a certain skill set and experience that we're missing at the PUC. Jay Griffin, that's why I say we're very fortunate. We were very fortunate that he was willing to step up. After all of that had happened to Tom to say, okay, I'm willing to put my neck out there. And he brings a different skill set from a personality standpoint. He's not a lawyer, but he has a lot of knowledge in the policy area. He was one of the authors of Inclination. And so he has that kind of vision. And he has been an outstanding addition to the PUC at a personal level and at a professional level. Yeah. You were talking about losing your members of the football team over time. They graduate and all this. So it's good to have expertise right there within the appointed commissioners. Yes. Particularly at this point in time, Jay, because I go back to what I said earlier, the staff that we have hired are young. And it is good. Jay trained many of the people who remain left on the research policy side. The one who's heading it now, Dave Parsons, was also under Jay. So it is important to have someone with that knowledge, that skill set, there to be a mentor. In many cases, he's my mentor. I did not come in with the kind of information he had. So I'm always in his office or he's in mine and asking questions. That's great. That's Randy Iwasa. He's the chair of the PUC. It's great to have him on the show. We'll be right back after this short break. This is Stink Tech, Hawaii, raising public awareness, Stink Tech, Hawaii, raising public awareness. I'm Carol Mon Lee, Stink Tech, Hawaii's volunteer chief operating officer and occasional host. And this is Niki. For the first time, Stink Tech, Hawaii is participating in an online, web-based fundraising campaign to raise $40,000. Here, thanks, Stink Tech will run only during the month of November and you can help. Please donate what you can so Stink Tech, Hawaii can continue to raise public awareness and promote civic engagement through free programming. I've already made my donation and look forward to yours. Please send in your tax deductible contribution by going to this website, www.thanksforthinktech.cozvap.com. On behalf of the community enriched by Stink Tech, Hawaii's 30-plus weekly shows, thank you Mahalo and Shishie for your generosity. Okay, we're back on energy on Hawaii, the state of clean energy with the PUC chair and that is Randy Iwasa. Again, thank you for being here, Randy. We're going to talk about some of the issues now. For example, I think the PSIP, the power supply improvement plan, it's a big deal, isn't it? It was long and coming because it was back and forth for about four or five years and then finally, you know, it's like the smoke comes out of the Vatican, you know? Yes, we have approval of PS, what does it mean to you? Well, it's over, I mean that part is over now. We did not approve everything though, we accepted the plan and now it's up to the, and it was a strategic plan, you tell us so that when we look forward, moving forward, what kind of acquisitions can or should be made? And now it's up to the utilities, now that we've closed the docket, accepted the plan. So, okay, now we're going to get down to business. You start showing us what you're going to be doing and when you're going to do it and then we can make determinations about your expenditures, the directions. It provides us at least that kind of roadmap and for the utilities, you told us what you wanted, you told us what you're going to do and I'll do it. Yeah. Well, what level of granularity you have going forward? I mean how much detail do you need to have and to prove of the implementation of that PSA? Well, if they're going to be buying, making a huge capital expenditure, each of these things are going to be in separate dockets. We will look down on it. Like we do, we will drill down into it because we have to make a decision whether or not that capital expenditure is appropriate, whether we should allow that capital cost to be passed on to the rate base. When we look at those kinds of things in each docket, we will get down deep into it. Yeah. Okay. So what in general is pending now in the way of implementation of the PSIP? What's on your desk? You don't have to tell me they're going to rule. No. But tell me what's there. Well, I don't think there's anything specific now that they've submitted to us. I will tell you what we have done and what's out there now is a month ago we issued the request for proposal. We started the competitive bidding process. That can be very exciting. The utilities have now sent to us their RFP draft. We're getting comments on it. And now it's up to the utilities to go out there when we act on it, to go out there and secure the kinds of developers that we hope that they secure in the various kinds of energy production. Now I will say this. We are wanting to get projects off the ground under this process so that developers can take advantage of the federal tax credit. So we're looking at time. That is in what, 2018? 2019. 2019. So there's a time focus for us in that RFP. This is not the last RFP process that we're going to go through, but for this one it is. Yeah. And that's the first thing. It's a time sensitive issue. The second is we are energy technology neutral. So we are not ordering the utility that you have to do solar, or you have to do wind, or you have to do hydro. We hope that they do, because that's part of the PSIP that they talked about. And that is something that will help us greatly to move towards our achieving the RF, our PS goals. So are you seeking diversity, or will you just entertain any possibility that they may feel is a good diversity? Well, what I'm hoping for, because they're going to go out there with the RFP, that they take into account what we had commented upon in the PSIP, that hydro is important. We're not looking only at solar. We are not looking only at wind, that we want you to look at as well energy storage, which is going to become a very important component, both for utility scales, energy production, as well as individual homes. So we're hoping that, for example, if they come in with a project like Kauai's, Tesla, or AES, it's going to be a good thing, I think, all around. We don't know what they're going to come in with. And we're also hopeful, I'm hopeful, that there is going to be a diversity of developers, that it is not going to be just the utility. That's going to build it, run it, own it, and distribute the power. Because our charge, part of the policy framework, is diversity of energy, diversity of energy sources. Sure. And that's better for resilience, for sustainability in the state, to have an energy system that will be able to keep on going, even if there are natural disasters and all that. Well it's also, Jay, if you have this monolithic 20th century utility structure, which I think we're all trying to move away from, I don't know about the facilities, but we're trying to move away. Because there is value, intrinsic value, in having a 21st century utility model that is diverse. And what can work in Hawaii, we don't know, because we're not like, again, on the mainland. But the questions that have been raised is, should we have a monopolistic utility that runs, produces the power, distributes the energy? Or should there be other independent power producers that you purchase from? Or discussion can go on and on. But that is a discussion that I think will continue as we move forward. And it is not anti-Hawaiian electric, it is not anti-KIUC, anti-Hawaiian gas. It's looking at what would be the best fit for this state as we move forward. Yeah, that's a really sexy question, because we're unique. People see us as a laboratory with advanced thinking, advanced ideas, and advanced open-mindedness, if you will. And it's a sexy question. We're making history, Randy, honestly. Well, sorry, but you are. We'll see what the historians write. So what about, you know, we have some developers who can't make it, they get in trouble. It's a tough business to be a developer, either big or small. And we've seen a couple of them fail, they didn't have to pass off their projects or end their projects. Does the PUC look at the developers, are you vetting developers that are coming before you in these RFPs? You know, I think we're going to have to do a look more closely at that. When you have a power purchase agreement, it is really an agreement between the developer and Hawaii Electric, and they enter into that agreement. When it comes to us, Hawaii Electric is really the applicant asking us to approve it. And what we have done now is we've taken a couple of steps. First of all, and I learned from the Sun Edison project, where Hawaii Electric, Sue Espante, I can use that legal term, terminates on its own motion. Terminated agreement. After the PUC had gone through five or six years of this competitive bidding process, where we was 13 companies, then it was down to eight, and we approved the four, three Sun Edison and Eurus. And after all that period of time, to have the utility say it's gone, it's power. No more contract. That's why we opened up investigative docket, was what is the basis of you doing that? We invested our time, energy and effort in this, and you come along and say it's gone. That's not cool with me. There was something about they were in trouble. There was a bankruptcy issue, but we had also looked at other information that we had that caused us to do the investigation. The fact that there was an impending bankruptcy was of course great concern. The issue was, at least for me, was there appeared to have been a buyer stepping in and would have stood in the shoes of Sun Edison. Why didn't you negotiate with them? Because they were a substantial buyer. So we want to, I think we ought to look at that some more so that there is no one party can say it's gone, that you come to it after we go and we approve the PPA. You've got to come to us and tell us we are going to terminate and we want your approval of that termination so that we can look at it as well. We have a different perspective than the utility company or the parties to that agreement. That was Sun Edison, yeah? That's right, and now we have NRG stepped into its place, 110 megawatts now, which will help us with the R. That's why it was so important, Jay. When they terminated the three Sun Edison, it's 110 megawatts. That's a lot. That was a lot. Substantial percentage of the whole pie. And when you just say go away, okay, now. And when they did that, on the books, there was nothing. There was no, very little if any, I don't recall any, renewable projects that were on the books for a while. This island is the island that is lagging behind on achieving the RPS goals in comparison with Kauai, Maui, and Hawaii. And so we on this island, and we're gonna have, and I said it at the last program, my concern was Oahu. Because we have limited land area, we have four fits of the population. How are we going to achieve that goal on this island? And right now it's iffy, because we don't have geothermal. The land areas are small. And there's always not in my backyard. And there's a lot of that because you have so much urban development. Which I had to deal with when I was on the city council on ag and homes. And when they maneuvered the field, I'd get complaints. And they should eventually shut down agriculture. So what are you gonna do? We gotta keep pushing. Look at on this island, are the prospects for hydro? And if so, what's the cost? If so, how much energy can we produce? What other areas of land, what other land areas on this island that we can utilize? And what about battery storage? What about micro, well microgrid, a school being a microgrid. Right, and community solar too. That's the other side. We've got community solar, we've got time of use, we've got Brian Kealoha doing a bang-up job on energy efficiency. All of those things have to be in play. And we cannot, you know, the one that got the most publicity. It's not like the loudest person in the room always gets the attention. Which you know, it's kind of, yeah I know it's 60s when we have long hair and everything. At protesting. But you know it's, so solar became at the top of the mountain. But that's not enough. We have to be open to other things. And whether it's wind, solar with battery, wind with battery, hydro, hydrogen. And who knows in 10 years some brain, brain-y student in 5th grade today or 10th grade today is going to develop something that is just outstanding. And that's another thing I hope for, and I'm optimistic about. Yeah. We have to develop expertise, we have to be the best. We can find excellence right here. That's right. You know. Well, Jay, you know today my hero was John F. Kennedy. Today was, you know, he was assassinated. And we talked, I think we talked about it the last time. Just think about how you felt, how I felt when this young president stood before Congress and said to them by the end of the decade, we're going to go to the moon. It just uplifted you. It challenged you. It filled you with a sense of energy. STEM programs started to expand. Engineering colleges started to expand. We'll get more in Roman. And all the spin-offs that came, Teflon, Velcro. But John Kennedy challenged us. And this, to me, is that new challenge is the energy field, the second frontier, the second new frontier. And that's what our kids can study. That's right. And they can stay home and do that in the laboratory of Hawaii's energy initiative. That is exactly right. And we always talk about that. John Burns talked about it back in the 60s. If you read his biography, he was talking about the brain drain. I was talking about it. You were talking about it when I was in office. And this is a real possibility here. I mean, for example, I just toss it out. Sounds kind of weird. But can we do a hydrogen production facility on the big island using geothermal and produce hydrogen and sell it? In times all over the place. All over the place. That's just a small thing. But I'm sure there are other things. And you don't have to go someplace else to be an energy expert in the state of Hawaii. Yeah. Randy, you're so excited you have such vitality about this. Your term is going to be up in, what, 2020? 2020. 2020. Yeah. You've got to continue. What do you think? Last time we talked about this, you said it was all powed at the end. What do you think now? Well, what I said was, this is my last trek through government. And when 2020 comes around, I'm going to be 70 this year. You're a young man. Well, as you know, and I think it's wrong for our profession, judges got to retire. I don't think they should have to. They still got this. The DSE commissions don't have to retire yet. They don't have to. So we'll see where everything ends up in 2020. But I came back because this, you know, I just called it the second new frontier in honor of John Kennedy. But that's why I came back. This, the energy is not just powering your house or your television or your internet. It's about climate, it's about clean air. It's about preserving, bringing back the Hawaii I knew when I looked at Diamondhead on a non-foggy day, a foggy day. You know, I want that. Are you glad you came back? Yeah. We have had some, you know, on a personal level, it's been a long haul for me because I was retired for eight years. I had no expertise in utility. I still, I don't claim to be one. But I have a good, I think what I know is hire good people and then talk to them. And so that has been really good for me to have the people I've worked with to teach me. I am, I think proficient at moving policy forward and we have and keeping things moving forward. And you know, there were disputes, it's highly controversial with the next era case. But I feel good that we made the right decision. I don't want to be having to look back had we approved it despite all of the defects and see it fall apart and then you say, okay, I was at fault with that. Wow. It's really so nice to see you. Nice to have you here. This is Randy Iwasi, chair of the PUC who has really enjoyed this job and who in my opinion has become more mellow and more extensible, you know, than ever before in his entire career. And he's really found a niche for himself. Thank you so much. Thank you, Jay. Thank you very much. Hello. And happy Thanksgiving. Thank you. To you too.