Supreme Court hears arguments in Honua Ola’s appeal of PUC ruling

The state Supreme Court on Thursday heard arguments in Honua Ola Bioenergy’s appeal requesting the high court order the Public Utilities Commission to vacate its July 9, 2020, decision that nullified an amended power-purchase agreement the Pepeekeo power plant had with Hawaiian Electric Co.

The PUC order, which nixed a 2017 waiver from the competitive bidding process granted to Hawaiian Electric Co. for Honua Ola — formerly known as Hu Honua Bioenergy — has kept the almost-completed biomass facility from going online.

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The decision forced HECO to consider two 30-megawatt solar-plus-storage projects that offered a price of 8-9 cents per kilowatt hour for electricity, as opposed to Honua Ola’s stated price of 22.1 cents per kilowatt hour for electricity generated by burning eucalyptus wood chips.

The PUC’s 2020 order followed a ruling by the Supreme Court on an appeal by the environmental group Life of the Land that vacated the 2017 power-purchase agreement between Honua Ola and HECO containing the waiver. The high court’s order remanded the case back to the PUC on the instructions that a contested case hearing be conducted on the issue of greenhouse gas emissions. That hearing was never held because of the PUC’s denial of the waiver.

Bruce Voss, Honua Ola’s attorney, argued before the high court that “an evidentiary hearing was required by law, because … this court ordered it.”

“At no time and in no place did the PUC ever state that it was considering terminating the project’s waiver from competitive bidding,” Voss said. “… Or, and most importantly, that it would make its decision without even conducting a hearing and considering all the evidence.”

Voss added “that’s exactly what the PUC did when it issued its order to kill the (Honua Ola) project without a hearing.”

Associate Justice Paula Nakayama noted that in PUC’s order reopening the case “it indicated the waiver would be at issue.”

She went on to say “at no time did (Honua Ola) enter an objection,” and asked why Honua Ola didn’t raise the issue of the waiver.

Voss replied that PUC’s position “is based on a fundamental misconception of the facts,” adding the waiver was “never contested in the prior proceeding, never appealed.”

He added that the high court’s instructions were “limited and clear” and that “the waiver was in effect because it had never been terminated.”

According to Voss, his clients want the PUC to “conduct an evidentiary due process hearing” on the amended power-purchase agreement with “explicit consideration of greenhouse gas emissions and if the project is in the public interest, as this court ordered.”

Lance Collins, representing Life of the Land, said the PUC “did not revoke any decision regarding whether to waive the competitive bidding framework,” but that the high court vacated the commission’s 2017 decision and order approving the amended power-purchase agreement.

“The commission’s decision not to grant the waiver did not violate any provision” of the applicable law, Collins argued. He said there’s no issue of law because the Supreme Court’s decision did not address a competitive bidding waiver, explicitly or implicitly.

Associate Justice Sabrina McKenna asked Collins about the issues of due process and deprivation of potential property raised by Honua Ola in its filings, which said almost $500 million has been invested in the project.

“Life of the Land’s position is that (Honua Ola) does not have a property interest in (HECO’s) request for a waiver and does not have standing to raise it … ,” Collins replied.

McKenna asked if the organization’s position is that if a company receives a waiver prior to the PUC’s change in policy on granting waivers, spends hundreds of millions of dollars based on reliance on that waiver which is later set aside, that company has “no property interest in the hundreds of millions of dollars that were expended.”

“In this case, there was nothing for (Honua Ola to rely on, other than its own wishful thinking,” Collins said. He added that Honua Ola expended hundreds of millions of dollars “without any approval that was final and non-appealable.”

State Solicitor General Kimberly Guidry, representing the PUC, also argued that the commission “did not revoke the waiver.”

“There is no valid waiver on the record,” Guidry told the justices. “This court’s … judgment vacated the commission’s 2017 decision and order in its entirety and without qualification.” She added that the vacated decision caused the PUC “to consider the waiver issue anew, on remand.”

Guidry also opined that the denial of a waiver “by no means killed the (Honua Ola) project.” She said the denial required Honua Ola “to participate in the same competitive bidding process” to which all Hawaii energy projects are subject.

According to Guidry, if Honua Ola “emerges successful from that process,” then any amended power-purchase agreement between HECO and Honua Ola “must, at that time be brought to the commission for its review.”

She said that would lead to a contested case hearing on greenhouse gas emissions and that participants in the case “can be meaningfully heard with respect to their interests in a clean and healthful environment.”

Guidry said the waiver denial by the commission was because the waiver “would not be in the public interest based on the changed circumstances” of the post-2017 Hawaii alternative energy market.

Associate Justice Todd Eddins asked if the PUC can revisit the issue of a waiver “under the competitive bidding framework.”

“The commission could … revisit a waiver, but that is not what happened here … ,” Guidry replied.

Eddins inquired if Guidry thinks Life of the Land had legal standing “to appeal PUC’s 2017 granting of the competitive bidding waiver.”

Guidry replied she hadn’t “thought about whether Life of the Land would have standing” but that “the waiver issue was before this court” as part of the 2017 decision appealed by Life of the Land.

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The court took the matter under advisement and will make its decision later.

Email John Burnett at jburnett@hawaiitribune-herald.com.

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