In re: Maui Electric Company, Limited.

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Electronically Filed
Supreme Court
SCOT-XX-XXXXXXX
02-MAR-2022
02:35 PM
Dkt. 195 OP
IN THE SUPREME COURT OF THE STATE OF HAWAI‘I
---o0o---
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-XX-XXXXXXX
APPEAL FROM THE PUBLIC UTILITIES COMMISSION
(Agency Docket No. 2018-0433)
MARCH 2, 2022
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).
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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
1 As a third point of error, Pono Power contests the PUC’s conclusion
that Paeahu satisfied its community outreach obligations. This argument
lacks merit. The PUC reviewed evidence about Paeahu’s community engagement
activities. And it credited Paeahu’s responses to community concerns; Paeahu
made design changes and explored an alternative location. The PUC then found
that Paeahu fulfilled its community outreach requirements. We do not find
clear error in the PUC’s findings.
2
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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 Hawaiʻi’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
2 All references to HRS provisions reflect their latest published version
as of the PUC’s Decision and Order 37340 approving the PPA.
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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-
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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 Oʻahu, 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.”
3 Four developers submitted these eight projects.
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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
4 MECO asked the PUC to review its requests in two stages: (1) addressing
its PPA-related requests (including the recovery of costs associated with the
PPA) first and (2) considering its request to construct an above-ground line
extension later. The PUC granted the request. This appeal concerns the
first stage.
5 The CA participated as an ex officio party per HRS § 269-51 and Hawaiʻi
Administrative Rules (HAR) § 16-601-62(a). HRS § 269-51(a) requires the CA
to “represent, protect, and advance the interests of all consumers . . . of
utility services.”
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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 (2018)
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(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
(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
6 If the defendant satisfies this second step, the plaintiff must then
show “less anticompetitive means” to achieve the “procompetitive
efficiencies.” Alston, __ U.S. at __, 141 S. Ct. at 2160 (citation omitted).
7 Pono Power also invokes the Sherman Act’s “per se” and “quick look”
standards. Courts use these analytical shortcuts in limited circumstances
where the challenged activities’ anticompetitive effects are immediately
apparent. See Alston, __ U.S. at __, 141 S. Ct. at 2156 (“[S]ome agreements
among competitors so obviously threaten to reduce output and raise prices
that they might be condemned as unlawful per se or rejected after only a
8
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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,
quick look.”). Pono Power fails to meaningfully explain why these tests are
applicable here.
Further, in its reply briefs, Pono Power raises new arguments alleging
violations of HRS § 480-2 (prohibiting unfair or deceptive trade practices)
and HRS § 480-4 (forbidding restraints of trade). Pono Power waived these
arguments. See Hawaiʻi Rules of Appellate Procedure (HRAP) Rule 28(b)(4)
(requiring “[a] concise statement of the points of error” in opening briefs);
HRAP Rule 28(b)(7)(“Points not argued [in opening briefs] may be deemed
waived.”).
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e.g., HRS § 269-16.22 (disallowing a utility’s recovery of power
purchase costs if the PUC finds them to have been incurred “in
bad faith” or “in violation of law”); HRS § 269-27.2(c)
(providing the PUC authority to determine as appropriate “the
just and reasonable rate” for non-fossil fuel-generated
electricity supplied to a utility company); HRS § 269-145.5(b)
(“In advancing the public interest, the commission shall balance
technical, economic, environmental, and cultural considerations
associated with modernization of the electric grid . . . .”).
This “public interest” analysis will be incomplete unless
the PUC examines potentially anticompetitive conduct. Cf. Cent.
Iowa Power Coop. v. FERC, 606 F.2d 1156, 1162 (D.C. Cir. 1979)
(“Although the [Federal Power Commission] lacks authority to
adjudicate violations of the antitrust laws, it must consider
competitive factors when acting under the public interest
mandate of the [Federal Power Act].”). The PUC’s 2006 adoption
of the Framework for Competitive Bidding reflects this view;
this framework generally requires electric utilities to use a
competitive bidding process to acquire “a future generation
resource or block of generation resources.”
Thus, when anticompetitive concerns arise, the PUC must
assess them within the statutory “public interest” analysis.
But the PUC is not required to use antitrust standards to do
that.
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A question remains: did the PUC properly discharge its duty
to assess potential anticompetitive issues in approving the PPA?
It did.
The PUC did not dodge the concerns about the Finalists’
shared counsel. It investigated; it made specific findings.
The Approval Order reflects that the PUC considered the vetting
mechanisms built into the procurement process; they included the
IO’s oversight throughout the bidding and PPA negotiation
phases. The PUC then concluded it had sufficient assurance that
the PPA was negotiated “in good faith and without collusion.”
It determined that Paeahu’s choice of counsel did not have “any
adverse impact on the pricing and terms of the PPA.” The PUC in
the end found the PPA terms “prudent and in the public
interest.”
The record supports the PUC’s findings. The Independent
Observer and the State Consumer Advocate found no evidence of
collusion. As the IO reported to the PUC, the RFP and PPA
negotiation processes were “performed on a fair and consistent
basis.”
Further, the IO and the CA did not find any adverse impact
caused by the Finalists’ post-selection sharing of counsel. The
IO concluded the negotiated PPA terms were “not unfair” to
losing bidders; it also determined that those terms “[did] not
materially alter the risk balance” between MECO and Paeahu as
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originally contemplated. The CA similarly did not believe the
Finalists’ sharing of counsel resulted in direct harm to
customers. 8
Pono Power does not question the IO and the CA’s neutrality
or credibility. It instead raises cryptic concerns about the
common counsel’s involvement in the PPA negotiations. Pono
Power claims that shared representation was “a red flag” and
“inherently suspect.” Beyond that, it points to some
similarities in the negotiated terms across the Finalists’ PPAs.
Yet, Pono Power doesn’t identify the problematic terms. It
provides no concrete explanation as to how any PPA term reflects
collusion, anticompetitive injury, or harm to ratepayers in
general. 9 Pono Power’s own antitrust expert belies its claim of
anticompetitive harm; the expert testified that shared
representation and contract standardization can have pro-
competitive benefits. Pono Power’s vague, conclusory
allegations do not undermine the PUC’s contrary findings.
8 The PUC also relied on the nondisclosure agreements (NDAs) signed by
the Finalists. As Pono Power’s antitrust expert acknowledged, NDAs are
“certainly a step in the right direction.” But we share Pono Power’s concern
about NDAs’ effectiveness in preventing improper information sharing or
collusion through common counsel. This concern, however, is mitigated by the
PUC’s duty to examine potentially anticompetitive actions.
9 Pono Power also relies on the PPA’s unit price (which is slightly
higher than the other selected projects’ prices) as evidence of adverse
impact flowing from the Finalists’ use of the same counsel. This claim
astounds. The Project’s price was a done deal before the alleged collusion
happened; Pono Power should know it cannot be the basis for proving the
challenged conduct’s anticompetitive harm.
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Besides the anticompetitive issue, the PUC considered the
undisputed evidence that the Project would reduce GHG emissions,
mitigate risks associated with fossil fuel, and contribute to
the State’s 100% renewable energy goal. After examining these
factors, the Project’s price, and other statutory
considerations, see infra section III.B., the PUC found the PPA
“in the public interest.”
We do not find clear error in these findings.
III.
Pono Power next invokes Hawai‘i’s public trust doctrine
expressed in article XI, section 1 of our constitution. 10
Pono Power maintains the PUC should have made explicit
findings identifying the affected trust resources and assessing
how they would be protected. Instead, Pono Power asserts, the
PUC abandoned its trust responsibilities by concluding that
other permitting agencies would review Paeahu’s studies relating
to cultural and natural resources before they approve or deny
the requested permits.
10 Article XI, section 1 of the Hawaiʻi Constitution reads:
For the benefit of present and future generations, the
State and its political subdivisions shall conserve and
protect Hawaii’s natural beauty and all natural resources,
including land, water, air, minerals and energy sources,
and shall promote the development and utilization of these
resources in a manner consistent with their conservation
and in furtherance of the self-sufficiency of the State.
All public natural resources are held in trust by the State
for the benefit of the people.
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The PUC and the PPA proponents believe that the PUC
fulfilled its trustee duties by carrying out its statutory
mandates; namely, to consider fossil fuel-related harms under
HRS § 269-6(b) 11 and to balance “technical, economic,
environmental and cultural” factors in advancing the public
interest under HRS § 269-145.5(b). 12
The PUC has public trust obligations. See In re Gas Co.,
147 Hawaiʻi 186, 207, 465 P.3d 633, 654 (2020) (directing the PUC
11 HRS § 269-6(b) requires the PUC to weigh several fossil fuel-related
factors:
(b) The public utilities commission shall consider the need
to reduce the State’s reliance on fossil fuels through
energy efficiency and increased renewable energy generation
in exercising its authority and duties under this chapter.
In making determinations of the reasonableness of the costs
of utility system capital improvements and operations, the
commission shall explicitly consider, quantitatively or
qualitatively, the effect of the State’s reliance on fossil
fuels on price volatility, export of funds for fuel
imports, fuel supply reliability risk, and greenhouse gas
emissions. . . .
(Emphases added.)
12 HRS § 269-145.5(b) commands:
(b) In advancing the public interest, the commission shall
balance technical, economic, environmental, and cultural
considerations associated with modernization of the
electric grid, based on principles that include but are not
limited to:
(1) Enabling a diverse portfolio of renewable energy
resources;
(2) Expanding options for customers to manage their
energy use;
(3) Maximizing interconnection of distributed
generation to the State’s electric grids on a cost-
effective basis at non-discriminatory terms and at
just and reasonable rates, while maintaining the
reliability of the State’s electric grids, and
allowing such access and rates through applicable
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to consider its constitutional trust obligations on remand).
Though we signaled in In re Gas Co. that the PUC must hew to
public trust principles, we have not explored the dimensions of
its trustee duties.
Pono Power’s second argument asks us to determine what
public trust duties are occasioned by the PUC’s PPA approval
process. We first examine the contours of those duties. We
then consider whether the PUC’s approval of the PPA complied
with those constitutional obligations. We hold it did.
A.
The Hawaiʻi Constitution offers vast and versatile public
trust protections. Article XI, section 1 of our constitution
declares: “[a]ll public natural resources are held in trust by
the State for the benefit of the people.” Haw. Const. art. XI,
§ 1. Article XI, section 1 protections apply to present and
future generations. Id. “[T]he State and its political
subdivisions” must “conserve and protect Hawaii’s natural beauty
rules, orders, and tariffs as reviewed and approved
by the commission;
(4) Determining fair compensation for electric grid
services and other benefits provided to customers and
for electric grid services and other benefits
provided by distributed generation customers and
other non-utility service providers; and
(5) Maintaining or enhancing grid reliability and
safety through modernization of the State’s electric
grids.
(Emphasis added.)
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and natural resources.” Id. (emphasis added). In parallel, the
State and its agencies must “promote the development and
utilization of these resources in a manner consistent with their
conservation and in furtherance of the self-sufficiency of the
State.” Id. (emphasis added).
In essence, article XI, section 1 directs the State and its
agencies to assess and balance “protection” and “utilization” of
public trust resources. In re Conservation Dist. Use
Application (CDUA) HA-3568, 143 Hawai‘i 379, 400, 431 P.3d 752,
773 (2018) (Mauna Kea II).
Beyond these core principles, the public trust doctrine’s
dimensions adapt to the circumstances. See Lānaʻians for
Sensible Growth v. Land Use Comm’n, 146 Hawaiʻi 496, 507, 463
P.3d 1153, 1164 (2020) (“The public trust, by its very nature,
does not remain fixed for all time, but must conform to changing
needs and circumstances.” (Citation omitted.)); Mauna Kea II,
143 Hawaiʻi at 401 n.24, 431 P.3d at 774 n.24 (declining to
“wholesale adopt” our water trust precedent in the land trust
context because different constitutional and statutory
provisions may “play a part” in defining the trust principles
governing the land at issue).
Here, the PUC’s PPA review implicates unique policy goals
and practical considerations.
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The PUC’s regulatory mission is broad. The PUC must ensure
the reliability of Hawaiʻi’s electric system. HRS chapter 269,
Part IX. It must also safeguard energy affordability; all rates
charged by electric utilities must be “just and reasonable.”
HRS § 269-16(a). Alongside these technical and economic duties,
the PUC must consider the State’s dependence on fossil fuels and
the fast-approaching 100% renewable energy goal. HRS §§ 269-6,
269-92. These considerations are intended to mitigate the
unhealthy effects of climate change. See infra n.15.
Given the PUC’s distinctive mission to fortify the State’s
power system while focusing on climate change mitigation, we
decline to superimpose the water or land trust jurisprudence
into the PPA approval context.
Rather, the core public trust principles articulated in
article XI, section 1 should guide the PUC: it must assess and
balance “protect[ion]” and “utilization” of public trust
resources when it reviews a PPA. Haw. Const. art. XI, § 1.
This duty heightens when the proposed project poses a
reasonable threat to a trust resource. In that situation, the
PUC as a trustee must further assess that threat; and to approve
the project’s PPA, it must affirmatively find that there is no
harm to the trust resource or that potential harm is justified.
See Kauai Springs, Inc. v. Planning Comm’n of Kauaʻi, 133 Hawai‘i
141, 173, 324 P.3d 951, 983 (2014) (“If there is a reasonable
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allegation of harm to one of the uses protected by the public
trust, then the [permit] applicant must demonstrate that there
is no harm in fact or that any potential harm does not preclude
a finding that the requested use is nevertheless reasonable and
beneficial.” (Emphases added.)); cf. Ching v. Case, 145 Hawai‘i
148, 177, 449 P.3d 1146, 1175 (2019) (recognizing “a duty to
investigate upon being made aware of evidence of possible
damage” to trust property as “a necessary component of [a
trustee’s] general duty”). 13
A “reasonable” threat does not mean that there must be
conclusive evidence of harm. But it means something more than
vague and tenuous concerns about a project’s surrounding
environment; there must be tangible evidence that reasonably
connects the threatened harm to the proposed project.
B.
We now examine whether the PUC satisfied its public trust
obligations.
13 The dissent relies on Ching to assert that the PUC must independently
investigate evidence of “possible” damage to specific public trust resources
when it reviews a PPA. We are unpersuaded by this argument. Ching
recognized an agency’s duty to investigate potential harm in the context of
examining that agency’s continuing duty to monitor the relevant trust
property after it authorized the use of that property. Ching, 145 Hawaiʻi at
152, 176-78, 449 P.3d at 1150, 1174-76. In such “monitoring” situations,
where a party has permission to use trust resources and may even already be
using them, the risk of “impending damage” is concrete. Id. at 152, 449 P.3d
at 1150. Evidence of “possible” harm can quickly turn into real, irreparable
damage. But in the PPA review context, the range of “possible” harm is more
open-ended; to require the PUC to pursue every hint of “possible” harm would
cause goose chases that we cannot endorse. We conclude Kauai Spring’s
“reasonable[ness]” standard is more appropriate here.
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We hold that the PUC’s PPA review aligned with its public
trust duties. The PUC balanced various statutory factors to
support its “public interest” findings. Because the record
lacks credible evidence that the Project posed a reasonable
threat to a trust resource, the PUC’s weighing of environmental
and other public interest factors within its statutory framework
satisfied its trustee obligations.
An agency’s constitutional public trust obligations are
independent of its statutory mandates. Kauai Springs, 133
Hawai‘i at 172, 324 P.3d at 982.
But they operate in tandem. An agency “must perform its
statutory function in a manner that fulfills the State’s
affirmative constitutional obligations.” Lānaʻians for Sensible
Growth, 146 Hawai‘i at 506, 463 P.3d at 1163 (citation omitted).
At the same time, an agency’s governing statutes and regulatory
provisions provide “the context for applying the broad
principles of the public trust doctrine to the specific task
faced by the agency.” Kauai Springs, 133 Hawai‘i at 184, 324
P.3d at 994 (Recktenwald, C.J., concurring and dissenting).
That is because an agency “can only wield powers expressly or
implicitly granted to it by statute.” Morgan v. Planning Dep’t,
Cnty. of Kauai, 104 Hawai‘i 173, 184, 86 P.3d 982, 993 (2004)
(citation omitted).
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An agency’s public trust and statutory mandates can be co-
extensive. See In re Water Use Permit Applications, 94 Hawaiʻi
97, 145, 9 P.3d 409, 457 (2000) (acknowledging that the State
Water Code’s policy provisions “mirror[] the public trust
principles”). They were here.
In approving the PPA, the PUC followed HRS §§ 269-6 and
269-145.5.
Under HRS § 269-6(b), the PUC must consider “the need to
reduce the State’s reliance on fossil fuels through energy
efficiency and increased renewable energy generation.” It must
explicitly assess “the effect of the State’s reliance on fossil
fuels on price volatility, export of funds for fuel imports,
fuel supply reliability risk, and greenhouse gas emissions.”
HRS § 269-6(b) (emphasis added).
A primary purpose of this provision is to combat “air
pollution” and “potentially harmful climate change” stemming
from “the release of harmful greenhouse gases.” In re Maui
Elec. Co., 141 Hawaiʻi 249, 263, 408 P.3d 1, 15 (2017) (In re
MECO) (emphases added) (quoting H. Stand. Comm. Rep. No. 1004,
in 2011 House Journal, at 1332).
So public trust considerations – namely, those related to
protection of air and other trust resources affected by climate
change - are built into HRS § 269-6(b).
Further, under HRS § 269-145.5(a), the PUC must consider
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the value of improving the State’s electrical system by using
“advanced grid modernization technology.” HRS § 269-145.5(b)
provides further guidance: “In advancing the public interest,
the commission shall balance technical, economic, environmental,
and cultural considerations associated with modernization of the
electric grid . . . .” (Emphasis added.) These “environmental”
and “cultural” considerations implicate public trust resources.
The PUC must balance those considerations against other
technical and economic factors to promote “the public
interest.” 14
We hold that the “public interest”-minded balancing
requirement under HRS §§ 269-6(b) and 269-145.5(b) aligns with
the core public trust principles weighing protection and
utilization. 15
14 HRS § 269-145.5(b) provides five principles that the PUC should use
when conducting this public interest balancing. They include “[e]nabling a
diverse portfolio of renewable energy resources.” HRS § 269-145.5(b)(1).
This subsection complements HRS § 269-6(b)’s focus on moving away from fossil
fuel-generated power and curbing climate change, while requiring the PUC to
assess other statutory factors.
15 HRS chapter 269 also intersects with article XI, section 9 of the
Hawai‘i Constitution. In Hawaiʻi, a person enjoys a substantive right to “a
clean and healthful environment.” Haw. Const. art. XI, § 9; In re MECO, 141
Hawai‘i at 260-61, 408 P.3d at 12-13. Though this right is constitutionally
vested, its parameters are defined by “laws relating to environmental
quality.” Haw. Const. art. XI, § 9. “HRS Chapter 269 is a law relating to
environmental quality that defines the right to a clean and healthful
environment.” In re MECO, 141 Hawai‘i at 264, 408 P.3d at 16. Recognizing
Pono Power members’ right to a clean and healthful environment, the PUC
granted Pono Power participant status.
Article XI, section 9’s “clean and healthful environment” right as
defined by HRS chapter 269 subsumes a right to a life-sustaining climate
system. The need to mitigate the catastrophic effects of anthropogenic
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climate change underlies HRS chapter 269; it in turn shapes and defines the
right to a clean and healthful environment.
HRS chapter 269 imposes an obligation on the PUC to consider fossil
fuel-related harms and promote climate change mitigation. HRS § 269-6(b)
reflects this overarching mission. This statute applies to “all of the
[PUC’s] duties”; it requires the commission “to reduce reliance on fossil
fuels and to consider [GHG] emissions.” In re MECO, 141 Hawai‘i at 263, 408
P.3d at 15. The legislative history reveals an intent to require the PUC to
consider “the hidden and long-term costs of reliance on fossil fuels.” Id.
The legislature believed those costs included “potentially harmful climate
change due to the release of harmful [GHG].” Id. (quoting H. Stand. Comm.
Rep. No. 1004, in 2011 House Journal, at 1332). Besides HRS § 269-6(b), HRS
chapter 269 contains additional provisions reflecting the legislature’s
concerns about climate change and the resulting push toward renewable energy.
See, e.g., HRS § 269-27.2 (providing guidance on utilization of non-fossil
fuel-generated power supply); HRS § 269-92(a) (imposing renewable portfolio
standards).
In 2020, the Hawai‘i legislature passed a law preventing the PUC from
approving any new or renewed coal power-based PPAs. 2020 Haw. Sess. Law Act
23, § 2 at 287; HRS § 269-48. The legislature recognized that coal-powered
electricity poses a “clear threat . . . to health and the climate.” 2020
Haw. Sess. Law Act 23, § 1 at 287. It referenced the United Nations
Intergovernmental Panel on Climate Change’s (IPCC) 2018 “Special Report on
1.5 Degrees Celsius.” Id. The legislature explained the special report
found that limiting global warming to 1.5 degrees Celsius to “avoid
devastating climate change” would mean “a complete phase-out” of coal-
generated electricity. Id. (emphasis added).
There is scientific consensus: anthropogenic global warming threatens
the world’s climate system. It raises the seas; it sickens the planet. It
harms present and future generations. See generally Summary for Policymakers
in Climate Change 2021: The Physical Science Basis, IPCC (Valérie Masson-
Delmotte et al. eds., 2021),
https://www.ipcc.ch/report/ar6/wg1/downloads/report/IPCC_AR6_WGI_SPM_final.pd
f [https://perma.cc/U6KB-ZAAD] (summarizing the key findings of the IPCC’s
sixth assessment report on “the physical science basis of climate change”
(which builds upon the IPCC’s previous assessment report and special reports)
and discussing the current state of the climate system and possible climate
change scenarios); Summary for Policymakers in Climate Change 2022: Impacts,
Adaptation and Vulnerability at SPM-7-8, IPCC (Hans-O Pörtner et al., 2022),
https://report.ipcc.ch/ar6wg2/pdf/IPCC_AR6_WGII_SummaryForPolicymakers.pdf
[https://perma.cc/FM6K-H7KH] (“The rise in weather and climate extremes has
led to some irreversible impacts as natural and human systems are pushed
beyond their ability to adapt.”).
Hawaiʻi’s space on Earth makes us vulnerable to the ecological damage
caused by an unhealthy climate system. Recognizing this threat, the Hawaiʻi
legislature recently declared “a climate emergency.” S.C.R. 44, S.D. 1, H.D.
1, 31st Leg., Reg. Sess. (2021). It warned that “Hawaii remains particularly
vulnerable to the dangers of disaster occurrences as a result of the effects
of global warming.” Id. The resolution calls for “statewide collaboration
toward an immediate just transition and emergency mobilization effort to
restore a safe climate.” Id.
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Here, the record shows that the PUC complied with HRS
§§ 269-6(b) and 269-145.5(b). In the Approval Order, the PUC
made detailed findings to satisfy these provisions.
First, the PUC reviewed MECO’s GHG analysis, methodology,
and data. The PUC found that the Project would result in “a
significant reduction in Lifecycle and Operational GHG emissions
relative to the baseline of no Project.” This finding implies
that the Project would help protect air and other trust
resources affected by anthropogenic global warming.
Second, the PUC evaluated Hawai‘i’s energy policy and the
Project’s anticipated bill savings. It found that the PPA
represented “a significant step not only towards Hawaii’s
renewable energy goals . . . but also towards lower energy
prices.”
Third, the PUC considered the benefits of having
dispatchable renewable energy, including the increased
flexibility and reliability of Hawai‘i’s electric grids.
Fourth, the PUC identified (1) the permits that Paeahu
would have to obtain to construct and operate its solar plant;
(2) the impact studies 16 related to those permits; (3) which
These legislative actions reflect the urgent need to curb greenhouse
gas emissions and protect the right to a life-sustaining climate system.
16 In the Approval Order, the PUC explained that Paeahu filed several
studies covering topics including: “traffic, noise, land uses (soils,
topography, geology, vegetation), water quality, archaeological impacts,
cultural impacts, wildlife, electric and magnetic fields (‘EMF’), ‘heat
island’ effects, and glint and glare issues.” For each topic, the PUC
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agency would review them; and (4) under what statutes,
regulations, or ordinances.
The PUC referred to Paeahu’s explanation that the studies’
intended audience was the permit-issuing agencies with the
relevant subject matter expertise. The PUC concluded that those
agencies with jurisdiction over the necessary permits would
review the impact studies and make permitting decisions.
Contrary to Pono Power’s claim, the PUC did not merely
“catalog[ue]” the requisite permits.
Fifth, the PUC considered Paeahu’s efforts to explore an
alternative site. Relocating the Project to this alternative
site, the PUC found, was not feasible due to archaeological,
cultural, and topographical concerns. It “conclude[d] that
Paeahu ha[d] made a good-faith effort to minimize the
environmental, cultural, and archeological impacts of the
Project”; the PUC qualified its conclusion by noting that other
permitting agencies would “further review” the Project.
“[U]pon balance of the technical, economic, environmental,
and cultural considerations,” the PUC found the PPA “in the
public interest.”
identified record-citations where the topic was discussed. Though the PUC
omitted the words, “public trust resources,” its findings evince meaningful
and diligent efforts to appraise the range of trust resources potentially
affected by the Project. By doing so, the PUC implicitly identified the
scope of the affected public trust resources. The PUC’s efforts are
consistent with its trustee duties given that the record lacks a reasonable
threat to a trust resource.
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The PUC did not make explicit findings about its public
trust duties in the Approval Order. But its Recon Order
concluded that it had fulfilled its public trust duties by
satisfying its obligations under HRS §§ 269-6(b) and 269-
145.5(b). 17
Pono Power challenges this conclusion. It claims the
public trust doctrine required more: it says the PUC needed to
make specific findings about each affected public trust
resource. We disagree.
In the Recon Order, the PUC concluded that Pono Power’s
allegations about the Project’s adverse impact on various trust
resources were “speculative or unsupported.” This determination
was not clearly erroneous.
Pono Power participated in the PPA proceedings. It raised
concerns about the Project’s impacts on the surrounding
environment. Those concerns included potential water runoff and
damages to native flora.
Pono Power had the chance to boost its claims of harm to
trust resources. Yet, Pono Power’s support for its position is
scant. Pono Power backs up its water runoff allegation with its
president’s testimony: she saw surface runoff near the Project
17 We read the Approval and Recon Orders together. Cf. Alaska Dep’t of
Env’t Conservation v. EPA, 540 U.S. 461, 497 (2004) (recognizing that an
agency’s “skeletal” orders could be “properly read together with accompanying
explanatory correspondence” from that agency).
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area during moderate storms. She submitted two after-rain
photographs and one dry-day photograph of a nearby gulch.
The testimony and photographs showed that water runoff
happens in the neighborhood, not whether and how the Project
would exacerbate any water runoff issue. Pono Power does not
meaningfully explain the connection between the Project and the
alleged harm to water resources.
Regarding the potential impact to native flora, Pono Power
submitted a four-sentence “Anonymous Note”: the note mentioned
that wiliwili trees and other native plants grow in unidentified
gulches near the Project. 18 It also submitted a general article
about wiliwili forest habitat in the nearby area. 19 The
Anonymous Note and the article do not reasonably establish a
link between the Project and the alleged harm to those trees and
plants. 20
18 Our discussion of Pono Power’s president’s testimony and the Anonymous
Note is not meant to “discredit” or “devalue” testimony based on personal
observation. Rather, it is to point out that the personal observations
relied on by Pono Power (the observations that water runoff happens and
native vegetation exists in or near the Project area) do not adequately
explain how the Project would harm the relevant resources.
19 The dissent refers to this article as the “Altenberg report.” This
report was drafted in 2007 for an unrelated project known as “Wailea 670.”
That project is “adjacent” to the Paeahu site. So it appears that the report
doesn’t cover Paeahu’s location. Further, even within the Wailea 670 area,
the report observed, “the northern 5/6 of [the land was] devoid of endemic
Hawaiian plants.” This suggests that native flora can vary significantly
throughout the Wailea region; and that the existence of wiliwili trees in
some areas within the proposed project boundaries doesn’t necessarily mean
they would be harmed.
20 Beyond its limited support for the purported harm to trust resources,
Pono Power generally questioned Paeahu’s impact assessments and best
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Pono Power responded to the PUC’s conclusion that its
allegations were “speculative or unsupported” with an
unsupported, conclusory statement: “[t]he harm is presumed
because the resources are part of a public trust.” This
sweeping assertion flops.
We conclude that the PUC properly evaluated Pono Power’s
allegations of harm. It did not clearly err. Hand-waving
without meaningful support cannot establish a “reasonable”
threat. The heightened duty to assess and make specific
findings about the affected trust resources was not triggered
here. And the PUC’s statutory balancing sufficiently satisfied
its public trust duties.
Pono Power also questions the PUC’s recognition of other
permitting agencies’ “overlapping jurisdiction” regarding the
Project. It challenges the PUC’s conclusion that those agencies
would review Paeahu’s impact studies and make permitting
decisions based on their expertise and respective statutory and
constitutional mandates. By taking this position, Pono Power
says, the PUC improperly delegated its public trust obligations.
We disagree. 21
management practices. Pono Power’s skepticism does not defeat the PUC’s
factual finding that its allegations of harm were unsupported or speculative.
21 Pono Power further claims that the PUC improperly delegated its public
trust duties by “accept[ing] Paeahu’s representations regarding government
approvals.” Pono Power is correct that an agency cannot delegate its trust
duty to a private party. Lānaʻians for Sensible Growth, 146 Hawaiʻi at 507,
463 P.3d at 1164. But that did not happen here. Though the PUC “accept[ed]”
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An agency can recognize other agencies’ overlapping
jurisdiction and their expertise in specific subject matters.
See Alaloa v. Planning Comm’n of Maui, 68 Haw. 135, 137, 705
P.2d 1042, 1044 (1985) (opining that the planning commission’s
permit conditions requiring the applicant to obtain approvals
from other agencies (including the State Department of Health)
were not an unlawful delegation of duty partly because those
agencies “have the expertise and objective criteria” for
granting or denying approvals needed for the project’s
construction).
Further, the PUC’s acknowledgement of other agencies’
jurisdiction and expertise does not equate to abandoning its own
duties. Here the PUC fulfilled its public trust obligations by
complying with its statutory duties. Its comment about further
oversight mechanisms over the Project’s construction and
operation was “outside and in addition to” its public trust
responsibilities; it does not amount to an improper delegation.
Mauna Kea II, 143 Hawai‘i at 397-98, 431 P.3d at 770-71.
Paeahu’s representations about the requisite governmental approvals, it did
not take Paeahu’s words at face value. The PUC exercised its due diligence
by (1) directing Paeahu to file additional studies and (2) reviewed the
statutes and other governing laws under which the relevant permitting
agencies would examine those studies. The record does not show that the PUC
put the ultimate responsibility to protect trust resources on Paeahu.
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IV.
The PUC lawfully approved the PPA. We affirm the Approval
Order and the Recon Order.
Lance D. Collins, /s/ Mark E. Recktenwald
(Bianca K. Isaki on the briefs)
/s/ Paula A. Nakayama
for Pono Power Coalition
/s/ Sabrina S. McKenna
Joseph A. Stewart,
/s/ Todd W. Eddins
(Bruce Nakamura and Aaron R.
Mun on the briefs)
for Maui Electric Company,
Limited
Douglas A. Codiga,
(Mark F. Ito on the briefs)
for Paeahu Solar LLC
Ashley K.L. Agcaoili,
(Caroline C. Ishida and Mark J.
Kaetsu on the briefs)
for Public Utilities Commission
29