Following the tragic—and perhaps criminal—fires in Lahaina, the state of Hawaii should purchase Hawaiian Electric, the sole provider of electric power to the state, and run it as a publicly owned utility. Here’s why.
When it comes to electric utilities, there are basically only two types of companies: private and public. The main difference between the two is one of incentives.
Private companies, owned by shareholders, have a singular primary goal: to make money. Every action they take must be scrutinized in the light of their impact on profits, because if profits aren’t maintained at a level acceptable to the shareholders, the senior level of management is looking at being replaced by people who will prioritize profits.
People served by publicly owned power companies pay less for electricity, get better service, and have fewer outages.
Public companies, owned by the governments representing the people they serve or run as co-ops and owned by the consumers themselves, also have a singular primary goal: serve the people as well as possible. Every action they take is scrutinized by the people and the government to make sure that people are getting the services they need, in the way they need, at a price they can afford.
Private for-profit electricity utilities not only cost their customers more and generally provide poorer service, but they also have such a long history of ripping people off to increase profits that every state in the union has had to create a regulatory agency to control their worst impulses.
This “public management” to oversee the private company’s management adds another layer of cost, on top of the profits extracted as dividends paid to shareholders, paid by the customers being burdened by privately owned power companies.
Hawaiian Electric is a private, shareholder-owned for-profit corporation, much like California’s PG&E. And, if investigations turn up further evidence of what’s already being reported in the media—that the Lahaina fires were possibly caused by the power company’s failure to turn off the power when the winds hit gale force—they’ll be as responsible for the deaths there as PG&E was for deaths from multiple wildfires in California. Those deaths cost PG&E billions.
This is part of why the company’s shares right now are in the tank, trading around $13 after years of bouncing between $30 and $40.
The market is anticipating lawsuits like the ones that bankrupted PG&E (a half-dozen have already been filed against Hawaiian Power, including a class action), driving down the share price, making now a perfect time for the state to buy out the company. Wells Fargo says they believe the stock will settle around $8 a share making it an amazing bargain.
In fact, the company filed a brief this week with the U.S. Securities and Exchange Commission (SEC), which regulates private companies, revealing that they are looking into bankruptcy.
People served by publicly owned power companies pay less for electricity, get better service, and have fewer outages. Serving over 49 million (1 in 7) Americans, including large cities like Austin, Nashville, Los Angeles, and Seattle as well as over 2,000 communities across the country, public power companies return an average of 20% more to their communities than do private power companies.
Customers of privately owned power companies suffer an average of 150 minutes of lost power per year; for customers of publicly owned power companies it’s only 62 minutes per year. Being responsive to their communities’ concerns, in 2019 fully 40% of all power generated by publicly owned companies came from renewable resources.
This only makes sense. While the management of a private company is always looking for ways to cut costs to satisfy shareholder demands for higher dividends, the management of publicly owned companies spend their time every day looking for ways to better serve their customers.
Not only that, private corporations can get away with behaviors that are imprisonable crimes when committed by government employees. These “now legal” breaches of the public trust include self-dealing, handing off cash to family members, paying off politicians, and harassing or firing whistleblowers.
As In the Public Interest notes:
[P]rivate providers are generally not subject to conflict‐of‐interest laws, nepotism statutes or ordinances, ethics codes or whistleblower protection for their employees, or restrictions on political involvement.
Back in 2015, when Hawaiian Electric announced it was in negotiations to be purchased by a big Florida power corporation, citizens of Hawaii got together and launched a series of plans and petitions to flip the company to public ownership. These plans ranged from the state taking over the entire company to breaking it up into smaller parts that were owned by the governments of each island or major city.
Forty legislators and county council members met at the state Capitol to request the legislature consider taking over Hawaiian Electric and turning it public. They were led by former Energy Committee Chair Chris Lee.
The group formed on Oahu was called KULOLO (Keep Our Utility Locally Owned and Locally Operated), named after a well-known fudge-like Hawaiian desert made from taro and coconut. City Council Chair Ernie Martin put forth the resolution to the city for a feasibility study.
On the Big Island, citizens and legislators formed the Hawaii Island Energy Cooperative. Its members included some well-known names from the area: Richard Ha of Hamakua Farms, state Sen. Russell Ruderman, and Department of Hawaiian Home Lands Commissioner Wallace Ishibashi. They went so far as to hire a big PR firm (Hastings and Pleadwell) to sell the idea to citizens.
Maui Mayor Alan Arakawa was serious, too: he awarded $70,000 to the consulting firm Guernsey for a study of the viability of transitioning that city’s power to a municipally owned utility.
But then the deal fell through and the conversation about taking over the company went silent.
Now it’s back.
A sense of crisis around Hawaiian Electric is already in the air. Just a few days ago, State Senator Angus McKelvey (D-Maui) told the Honolulu State Advertiser:
The consequences [of the fire] are beyond measure. I hope that this will be the mother of all wake-up calls. People need to have comfort that this won’t happen ever again.
The senator, who’s been in the legislature for 18 years, added that the privately owned power company has repeatedly resisted calls from him and other legislators to spend money to harden their power systems by burying cables where they can’t cause fires:
“They fight it tooth and nail,” he told the Advertiser. “There’s zero excuse in my mind why power lines in Lahaina shouldn’t be underground now. No amount of money should be a reason not to do it.”
Disaster workers are still searching for bodies in Lahaina, but, with over 100 dead and counting, the fire already represents the worst American wildfire death toll in over a century.
Hawaiian Electric not only provides an essential service (which shouldn’t be exploited for profits), but also employs about 3,800 people across the islands.
Picking it up before or out of bankruptcy and converting it to a public good will insure the state with reliable, citizen-centered electricity for years to come while guaranteeing minimal disruption for those employees (other than the senior executives with their fat paychecks, like the CEO, who makes $3.8 million a year, who will probably need to be replaced).
Back when Enron was collapsing, our local utility here in Portland, Oregon, was one of their affiliates and on the block for sale. The city scraped together the asking price and a small premium to sweeten the pot, but the company refused to sell to a municipality or state, wanting to keep the utility in for-profit hands. It’s now called Portland General Electric (PGE).
Portlanders got screwed (I’ve personally experienced multiple days of power outages almost every year since) and we didn’t even get a T-shirt out of the deal.
During our last power outage, a month or two ago, PGE came out and strung a temporary high-voltage power line, attaching it to trees (!), to keep our neighborhood lit; we’re now bracing for the winter winds.
PGE, after all, has to come up with the $6.2 million in annual compensation its CEO gets, not to mention the other high-paid senior executives and the $158 million in dividends it paid to its stockholders last year. Fixing my neighborhood naturally competes with that priority.
Which is why Hawaii needs to move on this quick, before other for-profit utilities get into the act as happened here in Oregon. The corporate raiders will soon be circling, even as Lahaina buries its dead.
