In re Maui Elec. Co.

150 Hawai‘i 528

506 P.3d 192

In the MATTER OF the Application of MAUI ELECTRIC COMPANY, LIMITED

For Approval of Power Purchase Agreement for Renewable Dispatchable Generation with Paeahu Solar LLC.

SCOT-21-0000041

Supreme Court of Hawai‘i.

MARCH 2, 2022

AS CORRECTED MARCH 3, 2022

Lance D. Collins, (Bianca K. Isaki on the briefs) for Pono Power Coalition

Joseph A. Stewart, (Bruce Nakamura and Aaron R. Mun, Honolulu, on the briefs) for Maui Electric Company, Limited

Douglas A. Codiga, (Mark F. Ito, Honolulu, on the briefs) for Paeahu Solar LLC

Ashley K.L. Agcaoili, (Caroline C. Ishida and Mark J. Kaetsu, Honolulu, on the briefs) for Public Utilities Commission

RECKTENWALD, C.J., NAKAYAMA, McKENNA, AND EDDINS, JJ.; AND WILSON, J., DISSENTING

OPINION OF THE COURT BY EDDINS, J.

After a contested case proceeding, the Public Utilities Commission (PUC) approved a power purchase agreement (PPA) between Maui Electric Company, Limited (MECO) and Paeahu Solar LLC (Paeahu).

The PPA followed competitive bidding that MECO and other electric utility companies collectively conducted in 2018. Paeahu was one of eight projects selected through this competitive procurement process. Under the PPA, MECO would purchase renewable energy from Paeahu's solar-plus-battery plant located within Ulupalakua Ranch on Maui (the Project).

Appellant Pono Power Coalition (Pono Power), a Maui community group, asks this court to vacate the PUC's approval of the PPA for two reasons.¹

First, Pono Power points to the winning bidders’ post-selection use of the same counsel to negotiate non-price PPA terms. It argues the PUC failed to evaluate the common counsel's involvement under the "rule of reason," a burden-shifting standard created for Sherman Antitrust Act cases.

Second, Pono Power asserts that the PUC failed to fulfill its public trust duties. It claims the PUC merely catalogued the Project's anticipated permits and left decision-making about trust resources to the agencies with jurisdiction over those permits. Instead, Pono Power contends, the PUC should have made explicit findings that identified the affected trust resources and how they would be protected.

We reject both arguments.

We decline to inject antitrust standards into PPA approval proceedings. Hawai‘i Revised Statutes (HRS)² chapter 269 already requires the PUC to examine potential anticompetitive practices. And those statutes equip the PUC with a framework for that analysis: they prescribe "the public interest" as the controlling principle.

We hold that the PUC appropriately evaluated the allegations of anticompetitive conduct. The PUC considered the circumstances relating to the winning bidders’ shared counsel, balanced other statutory factors, and found the PPA terms reasonable and in the public interest. The PUC was not required to apply antitrust standards in this analysis.

Next, we hold that the statutes governing the PUC's PPA review – HRS §§ 269-6(b) and 269-145.5(b) - reflect the core public trust principles: the State and its agencies must protect and promote the justified use of Hawai‘i's natural beauty and natural resources. Thus, when there is no reasonable threat to a trust resource, satisfying those statutory provisions fulfills the PUC's obligations as trustee. But when a project poses a reasonable threat, the public trust principles require more from the PUC: the commission must assess that threat and make specific findings about the affected trust resource.

Here, the record shows that the PUC conducted the statutory balancing. Under HRS § 269-6(b), the PUC considered the need to mitigate the risks associated with fossil fuel-based energy; it also weighed other "technical, economic, environmental, and cultural considerations" under HRS § 269-145.5(b). The PUC then found the PPA "in the public interest." Because the record lacks a reasonable threat to a trust resource, this public interest-minded balancing satisfied the PUC's public trust duties.

We affirm the PUC's approval of the PPA.

I.

The Hawai‘i legislature has committed to protect the climate and mitigate climate change by reducing reliance on fossil fuels and converting to renewable energy sources.

In 2015, the legislature took a decisive step: it set a goal to reach 100% renewable energy by 2045. 2015 Haw. Sess. Laws Act 97, § 2 at 245-46; HRS § 269-92(a)(6).

To meet this target, the Hawaiian Electric Companies - MECO, Hawaiian Electric Company, Inc., and Hawaii Electric Light Company, Inc. – developed a plan to competitively procure grid-scale renewable power supplies. The PUC accepted this plan in 2017.

The first phase of competitive bidding began in early 2018. The Hawaiian Electric Companies issued requests for proposals (RFPs) for O‘ahu, Maui, and Hawai‘i Island. The RFPs reflected comments from interested stakeholders. They also incorporated guidance from the PUC and PUC-appointed Independent Observers.

The Hawaiian Electric Companies conducted multi-step bid evaluations. The bidders’ pricing terms were set during this process. The utility companies ultimately selected eight projects: four on O‘ahu, two on Maui, and two on Hawai‘i Island.³ Paeahu was one of the Maui projects.

The Hawaiian Electric Companies negotiated PPAs for the winning projects. Only non-price terms were discussed since the projects’ prices had already been fixed. During this PPA negotiation phase, one law firm represented the developers for the selected projects (the Finalists).

MECO and Paeahu agreed on the PPA terms. The Independent Observer overseeing MECO's RFP process (the IO) concluded that MECO conducted bid evaluations and PPA negotiations on a "fair and consistent basis."

MECO submitted the PPA for the PUC's approval.⁴ Besides MECO, the Division of Consumer Advocacy (Consumer Advocate or CA) became a party to the PPA approval proceeding.⁵

Pono Power then moved to intervene or participate in the PPA approval proceeding. Recognizing Pono Power members’ right to a clean and healthful environment, the PUC granted Pono Power participant status. After considering Paeahu's motion, the PUC also made it a participant.

The PUC held a two-day evidentiary hearing in December 2019. Witnesses testified and were cross-examined; they discussed the RFP process, PPA negotiations, pricing, greenhouse gas (GHG) analysis, community outreach, and Paeahu's studies relating to the Project's impact on cultural and natural resources. Both before and after the hearing, the parties and participants submitted and responded to information requests related to these issues.

In October 2020, the PUC approved the PPA. It issued Decision and Order No. 37340 (the Approval Order). After investigating concerns about the Finalists’ common counsel and weighing environmental and other statutory considerations, the PUC found the PPA "in the public interest."

Pono Power moved for reconsideration of the approval. The PUC denied that motion in Order No. 37553 (the Recon Order).

Pono Power appeals both the Approval and Recon Orders. It asks this court to vacate the PPA approval, alleging two primary deficiencies in the PUC's findings: (1) the PUC did not apply the rule of reason to evaluate the Finalists’ post-selection choice of counsel; and (2) the PUC did not make affirmative findings about trust resources affected by the Project.

Both arguments fail.

II.

Pono Power's first argument targets the Finalists’ use of the same counsel to negotiate non-price PPA terms. Pono Power invokes the Sherman Act. It contends the PUC failed to apply the "rule of reason" - a burden-shifting standard for assessing antitrust claims - to evaluate anticompetitive concerns surrounding the Finalists’ common counsel.

The rule of reason involves "a fact-specific assessment of market power and market structure ... to assess the [challenged conduct's] actual effect on competition."

Ohio v. Am. Express Co., ––– U.S. ––––, 138 S. Ct. 2274, 2284, 201 L.Ed.2d 678 (2018) (emphasis added) (citation and internal quotation marks omitted).

Under this rule, the plaintiff has the initial burden to show the challenged activity's "substantial anticompetitive effect." NCAA v. Alston, ––– U.S. ––––, 141 S. Ct. 2141, 2160, 210 L.Ed.2d 314 (2021) (citation omitted). If the plaintiff does this, the burden shifts to the defendant to show a "procompetitive rationale" for the activity.⁶ Id. (citation omitted).

Pono Power says it produced evidence showing "how bidders’ collusion ... harmed competition." It highlights two facts to support this accusation: (1) after the bid selection, all Finalists hired the same legal counsel to negotiate non-price PPA terms; and (2) some of those terms were similar or identical across the projects. So, Pono Power claims, the PUC should have shifted the burden to the PPA proponents and required them to prove that the sharing of counsel was "not a restraint of trade." The PUC did not engage in this burden shifting. This failure to apply the rule of reason, Pono Power argues, was reversible error.⁷

We reject Pono Power's attempt to inject antitrust standards into PPA approval proceedings.

First, Pono Power cites no authority for that position. It fails to provide, and we have not found, any cases that applied antitrust standards in public utility PPA approval proceedings.

Second, the PUC has no power to adjudicate alleged violations of federal or state antitrust laws. The PUC is not the right forum to litigate antitrust claims; courts are. See 15 U.S.C. § 4 (granting jurisdiction to "prevent and restrain" violations of the Sherman Act (§§ 1-7) to federal district courts); HRS § 480-21 (designating appropriate courts where actions or proceedings authorized by HRS chapter 480's antitrust statutes are to be initiated).

Third, the PUC's governing laws already require the commission to assess allegations of collusion or anticompetitive practices; they also provide the framework for that assessment.

The PUC must always act in the public interest. This principle is incorporated throughout HRS chapter 269. See, e.g., HRS...