The Federal Energy Regulatory Commission (FERC) authorized a proposed merger between Hawaiian Electric Industries, Inc. and NextEra Energy, Inc. whereby NextEra would indirectly acquire 100% of Hawaiian Electric Industries. The merger would result in Hawaiian Electric Industries becoming a wholly-owned subsidiary of NextEra. FERC determined the proposed merger was consistent with the public interest and would not adversely affect competition, rates, regulation, or result in cross-subsidization. The authorization was subject to conditions including retaining regulatory authority and requiring any necessary rate or status change filings.

1. 150 FERC ¶ 62,209
UNITED STATES OF AMERICA
FEDERAL ENERGY REGULATORY COMMISSION
Hawaiian Electric Industries, Inc. Docket No. EC15-67-000
ORDER AUTHORIZING PROPOSED MERGER
(Issued March 27, 2015)
On January 29, 2015, Hawaiian Electric Industries, Inc. (Applicant) filed an
application pursuant to section 203(a)(2) of the Federal Power Act (FPA)1
requesting
Commission authorization for the series of merger transactions through which NextEra
Energy, Inc.2
(NextEra) will indirectly acquire 100 percent of the securities of Applicant
and its electric utility company affiliates (Proposed Transaction), and the surviving
company will become a direct, wholly-owned subsidiary of NextEra. The facilities
associated with the Proposed Transaction include generation and transmission facilities.
Although Applicant states that the Proposed Transaction may not require
Commission approval under FPA section 203(a)(2), out of an abundance of caution it
nevertheless asks the Commission to approve its Application without ruling on the
jurisdictional question. This order authorizes the Proposed Transaction without making
any determination of jurisdiction.3
Applicant is a publicly-traded holding company incorporated in the State of
Hawaii whose principal subsidiaries are engaged in electric utility and banking
businesses' operating primarily in Hawaii. Applicant directly owns Hawaiian Electric
Company, Inc. (Hawaiian Electric Company) and, through Hawaiian Electric Company,
indirectly owns Maui Electric Company, Limited (Maui Electric) and Hawaii Electric
Light Company, Inc. (Hawaii Electric Light Company). Hawaiian Electric Company,
Hawaii Electric Light Company, and Maui Electric are engaged in the production,
transmission, and distribution of electricity and collectively serve the electric
power needs of over 95 percent of Hawaii's 1.4 million residents.
1
16 U.S.C. § 824b (2012).
2
NextEra is not an applicant with respect to this filing because, according to
Applicant, NextEra has prior approval for the Proposed Transaction pursuant to section
33.1(c)(1)(i) of the Commission’s regulations.
3
See Ocean State Power, 47 FERC ¶ 61,321 (1989).
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2. Docket No. EC15-67-000 - 2 -
Applicant’s three affiliated utilities are regulated by the State of Hawaii Public
Utilities Commission (Hawaii Commission). According to Applicant, because they are
engaged in utility service exclusively within the islands of Hawaii and have no sales for
resale in interstate commerce or transmission interconnections with the continental
United States, neither Hawaiian Electric Company, Maui Electric, or Hawaii Electric
Light Company is a public utility under FPA section 201.
Applicant states that its affiliated electric generating capacity is distributed across
all of the Hawaiian islands since there is no interconnectivity among the individual island
utility systems and each island must have sufficient resources to supply its load.
Specifically, Applicant owns or controls the following generation through its utility
subsidiaries:
 Hawaiian Electric Company: 1,731 megawatts (MW) of firm generating capacity,
including three owned generation facilities totaling 1,270 MW and 461 MW of
generation purchased from three independent power producers. Hawaiian Electric
Company also purchases 348 MW of non-firm generation.
 Hawaii Electric Light Company: 290 MW of firm generating capacity, including
four owned generation facilities, distributed generation owned by Hawaii Electric
Light Company totaling 174 MW, and 16 MW purchased from an independent
power producer. Hawaii Electric Light Company also purchases 115 MW of non-
firm generation.
 Maui Electric: 286 MW of firm generating capacity, including five owned
generation facilities and distributed generation totaling 188 MW and 98 MW of
generation purchased from three independent power producers. Maui Electric also
purchases 87 MW of non-firm generation.
Applicant and its affiliates do not own or control any generation or transmission
facilities or other energy-related facilities in the continental United States.
In addition to its three operating utility subsidiaries, Applicant also owns the
following non-utility subsidiaries:
 ASB Hawaii, Inc. (ASB Hawaii) and its wholly-owned subsidiary, American
Savings Bank, F.S.B. (American Savings). As described below, Applicant states
that it will divest its interests in ASB Hawaii and American Savings prior to
closing the Proposed Transaction.
 HEI Properties, Inc., a company holding passive, venture capital investments.
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3. Docket No. EC15-67-000 - 3 -
 Hawaiian Electric Industries Capital Trusts II and III and HECO Capital Trust III
(vehicles formed to facilitate preferred security financings for Applicant’s three
operating utility subsidiaries).
According to Applicant, NextEra, a Florida corporation, is an energy holding
company. Its operations are conducted primarily through two business units: Florida
Power & Light Company, a traditional public utility operating in Florida, and NextEra
Energy Resources, LLC (NextEra Resources), the parent company of NextEra's merchant
generation and trading businesses. A third business unit, NextEra Energy Transmission,
LLC, owns New Hampshire Transmission, LLC, a transmission public utility operating in
New Hampshire, and Lone Star Transmission, LLC, a transmitting utility operating in the
Electric Reliability Council of Texas.
Through its subsidiaries, NextEra Resources owns and operates a portfolio of
resources that totals over 19,000 MW of net generating capacity located in 25 states and
Canada. These resources include approximately 11,700 MW of wind-powered and solar-
powered electric generating facilities. NextEra Resources currently does not own any
generation in Hawaii, although one of its subsidiaries, Ka La Nui Solar, LLC, is
developing a 15 MW solar facility on the island of Oahu that is scheduled to begin
operation in 2017. The output of the facility is to be sold to Hawaiian Electric Company
under a long-term contract that is pending approval before the Hawaii Commission.
NextEra Resources’ subsidiaries own and operate various interconnection facilities
used solely for connecting generating facilities to the transmission grid. While NextEra
does not own any transmission facilities in Hawaii, its NextGrid Hawaii subsidiary has
been developing an undersea cable project in the State. If determined to be in the public
interest and approved by the Hawaii Commission, this transmission project would consist
of two high-voltage undersea cables and associated on-island facilities with a system
transfer capability of 200 MW. The system would interconnect the Maui Electric electric
system on the island of Maui with the Hawaiian Electric Company electric system on the
island of Oahu, allowing for the bi-directional flow of power. The project is still in the
planning stages.
Pursuant to the Merger Agreement dated December 3, 2014, the Proposed
Transaction will be implemented through a series of merger transactions that result in
NextEra indirectly acquiring 100 percent of the shares of Applicant and its Hawaiian
Electric Company, Hawaii Electric Light Company, and Maui Electric subsidiaries, as
well as certain of Applicant’s non-utility subsidiaries. The Proposed Transaction will be
completed in two steps using newly-created NextEra special-purpose vehicles: Merger
Sub I, a corporation, and Merger Sub II, a limited liability company. NextEra is the sole
shareholder of Merger Sub I and is the sole member and manager of Merger Sub II. In
consideration for the Proposed Transaction, each share of Applicant’s common stock will
be converted into the right to receive 0.2413 shares of NextEra common stock.
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4. Docket No. EC15-67-000 - 4 -
In the first step, Merger Sub I will be merged with and into Applicant, and the
separate corporate existence of Merger Sub I shall cease. Following this step, Applicant
will continue as the surviving corporation (Surviving Corporation) and as a wholly-
owned subsidiary of NextEra. In the second step, the Surviving Corporation will merge
with and into Merger Sub II, at which point the separate corporate existence of the
Surviving Corporation will cease.
Upon completion of the Proposed Transaction, Merger Sub II will be renamed
Hawaiian Electric Holdings, LLC (Hawaiian Electric Holdings), and survive as a direct,
wholly-owned subsidiary of NextEra; Hawaiian Electric Company will remain a wholly-
owned subsidiary of Hawaiian Electric Holdings; and each of Hawaii Electric Light
Company and Maui Electric will remain wholly-owned subsidiaries of Hawaiian Electric
Company. With the exception of ASB Hawaii and American Savings, Applicant’s other
subsidiaries also will become indirect subsidiaries of NextEra. Prior to closing the
Proposed Transaction, ASB Hawaii and American Savings will be spun off to
Applicant’s shareholders as a separate, publicly-traded company. Upon completion of
the Proposed Transaction, ASB Hawaii and American Savings will have no affiliation
with NextEra.
Applicant states that the Proposed Transaction is consistent with the public interest
and will not have an adverse effect on competition, rates, or regulation and will not result
in cross-subsidization or the pledge or encumbrance of utility assets for the benefit of an
associate company.
Applicant states that the acquisition of Applicant by NextEra does not raise
competitive concerns in any relevant market. According to Applicant, there are no
possible horizontal competitive concerns because Applicant does not own or control any
generation in markets in the continental United States subject to the Commission's
jurisdiction nor does it engage in any sales for resale in interstate commerce in markets
subject to the Commission's jurisdiction. Given the absence here of any overlap in any
relevant geographic market, Applicant states that the Proposed Transaction does not raise
any horizontal market power concerns.
Applicant states that the Proposed Transaction raises no concerns with regard to
vertical market power because the Proposed Transaction does not involve the
combination of control over generation with control over shared transmission or other
shared vertical inputs to generation in any relevant market. According to Applicant,
neither Applicant nor its affiliates own or control within any relevant market subject to
the Commission's jurisdiction: (i) any electric transmission facilities; (ii) any intrastate
natural gas transportation, storage, or distribution facilities; (iii) any physical coal supply
sources or access to transportation of coal supplies; or (iv) any sites for new generation
development that would constitute barriers to entry to the generation market.
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5. Docket No. EC15-67-000 - 5 -
Accordingly, Applicant submits that the Proposed Transaction does not raise any vertical
market power concerns.
Applicant states that the Proposed Transaction will not have an adverse effect on
jurisdictional transmission or wholesale rates. Applicant and its affiliates do not serve
any FPA-jurisdictional wholesale power or transmission customers. The rates charged by
Applicant's utility affiliates are for services entirely within intrastate commerce and
following completion of the Proposed Transaction will remain subject to the exclusive
jurisdiction of the Hawaii Commission. Accordingly, Applicant states that the Proposed
Transaction does not raise any concerns with respect to rates.
Applicant states that the Proposed Transaction will not have an adverse effect on
regulation. Neither Applicant nor its subsidiaries are currently subject to regulation by
the Commission. According to Applicant, after the Proposed Transaction is
consummated, the Hawaii Commission will continue to have the same jurisdiction over
Hawaiian Electric Company, Maui Electric, and Hawaii Electric Light Company as it has
today. Thus, Applicant submits that the Proposed Transaction will have no effect on
regulation.
Applicant states that, based on facts and circumstances known to it or that are
reasonably foreseeable, the Proposed Transaction will not result in, at the time of the
closing or in the future, cross-subsidization of a non-utility associate company or the
pledge or encumbrance of assets of a traditional public utility that has captive customers
or that owns or provides transmission service over jurisdictional facilities for the benefit
of an associate company. Specifically, Applicant states that the Proposed Transaction
does not involve a franchised public utility with captive customers and will not result in:
(1) any transfer of facilities between a traditional public utility associate company that
has captive customers or that owns or provides transmission service over jurisdictional
transmission facilities, and an associate company; (2) any new issuance of securities by a
traditional public utility associate company that has captive customers or that owns or
provides transmission service over jurisdictional transmission facilities, for the benefit of
an associate company; (3) any new pledge or encumbrance of assets of a traditional
public utility associate company that has captive customers or that owns or provides
transmission service over jurisdictional transmission facilities, for the benefit of an
associate company; or (4) any new affiliate contract between a non-utility associate
company and a traditional public utility associate company that has captive customers or
that owns or provides transmission service over jurisdictional transmission facilities,
other than non-power goods and service agreements subject to review under sections 205
and 206 of the FPA.
The filing was noticed on January 30, 2015, with comments, protests, or
interventions due on or before February 19, 2015. The Hawaii Commission submitted a
timely notice of intervention, and the State of Hawaii’s Department of Business,
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6. Docket No. EC15-67-000 - 6 -
Economic Development & Tourism submitted a timely motion to intervene. Notices of
intervention and unopposed timely filed motions to intervene are granted pursuant to the
operation of Rule 214 of the Commission's Rules of Practice and Procedure.4
Information and/or systems connected to the bulk system involved in this
transaction may be subject to reliability and cybersecurity standards approved by the
Commission pursuant to FPA section 215. Compliance with these standards is
mandatory and enforceable regardless of the physical location of the affiliates or
investors, information database, and operating systems. If affiliates, personnel or
investors are not authorized for access to such information and/or systems connected to
the bulk power system, a public utility is obligated to take the appropriate measures to
deny access to this information and/or the equipment/software connected to the bulk
power system. The mechanisms that deny access to information, procedures, software,
equipment, etc., must comply with all applicable reliability and cybersecurity standards.
The Commission, North America Electric Reliability Corporation or the relevant regional
entity may audit compliance with reliability and cybersecurity standards.
Order No. 652 requires that sellers with market-based rate authority timely report
to the Commission any change in status that would reflect a departure from the
characteristics the Commission relied upon in granting market-based rate authority.5
The
foregoing authorization may result in a change in status. In addition, Applicant shall
make any necessary filings under section 205 of the FPA to implement the Proposed
Transaction.
After consideration, it is concluded that the Proposed Transaction is consistent
with the public interest and is authorized, subject to the following conditions:
(1) The Proposed Transaction is authorized upon the terms and conditions and
for the purposes set forth in the application;
(2) The foregoing authorization is without prejudice to the authority of the
Commission or any other regulatory body with respect to rates, service,
accounts, valuation, estimates or determinations of costs, or any other
matter whatsoever now pending or which may come before the
Commission;
(3) Nothing in this order shall be construed to imply acquiescence in any
4
18 C.F.R. § 385.214 (2014).
5
Reporting Requirement for Changes in Status for Public Utilities with Market-
Based Rate Authority, Order No. 652, 70 Fed. Reg. 8,253 (Feb. 18, 2005), FERC Stats. &
Regs. ¶ 31,175, order on reh’g, 111 FERC ¶ 61,413 (2005).
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7. Docket No. EC15-67-000 - 7 -
estimate or determination of cost or any valuation of property claimed or
asserted;
(4) The Commission retains authority under sections 203(b) and 309 of the
FPA to issue supplemental orders as appropriate;
(5) If the Proposed Transaction results in changes in the status or upstream
ownership of Applicant’s affiliated qualifying facilities, an appropriate
filing for recertification pursuant to 18 C.F.R. § 292.207 (2014) shall be
made;
(6) Applicant must inform the Commission of any change in circumstances that
would reflect a departure from the facts the Commission relied upon in
authorizing the Proposed Transaction;
(7) Applicant shall make appropriate filings under section 205 of the FPA, as
necessary, to implement the Proposed Transaction; and
(8) Applicant shall notify the Commission within 10 days of the date that the
disposition of jurisdictional facilities has been consummated.
This action is taken pursuant to the authority delegated to the Director, Division of
Electric Power Regulation - West, under 18 C.F.R. § 375.307 (2014). This order
constitutes final agency action. Requests for rehearing by the Commission may be filed
within 30 days of the date of issuance of this order, pursuant to 18 C.F.R. § 385.713
(2014).
Steve P. Rodgers
Director
Division of Electric Power Regulation - West
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8. Document Content(s)
EC15-67-000.DOC.......................................................1-7
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