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Oral Argument of the Hawaii Supreme Court–No. SCOT-19-0000044

No. SCOT-19-0000044, Thursday, January 23, 2020, 8:45 a.m.

In the Matter of the Application of THE GAS COMPANY, LLC, dba HAWAII GAS

For Approval of Rate Increases and Revised Rate Schedules and Rules.

The above-captioned case has been set for argument on the merits at:

Supreme Court Courtroom
Ali iolani Hale
417 South King Street
Honolulu, HI 96813

Attorney for Appellant, Life of the Land and Hui Aloha ina o ka Lei Maile Ali i:

Lance D. Collins

Attorneys for Appellee, The Gas Company, LLC dba Hawaii Gas:

Jeffrey T. Ono, David Y. Nakashima, and John E. Dubiel of
 Watanabe Ing

Attorneys for Appellee, Public Utilities Commission:

Bryan C. Yee and Andrew D. Goff, Deputy Attorneys General

COURT: Recktenwald, C.J., Nakayama, McKenna, Pollack, and Wilson, JJ.

Listen to the entire audio recording in mp3 format  ]

Brief Description:

In this Act 48 agency appeal, Life of the Land (“LOL”) and Hui Aloha ina o ka Lei Maile Ali i (“HAA KLMA”) appeal from the Public Utilities Commission’s (“PUC”) final “Decision and Order No. 35969.”   

The Decision and Order adjudicated a rate case initiated by Hawaii Gas Company (“HG”), which sought rate increases due to its importation of liquid natural gas (“LNG”). LOL and HAA KLMA sought to intervene, but the PUC granted them only participant status, limited to the following issue:

1. Whether [HG’s] proposed rate increase is reasonable, including, but not limited to:

. . . .

h. With respect to [HG’s] purchase and use of imported [liquefied natural gas (“LNG”)] as part of its gas utility operations, HRS § 269-6(b)’s requirement that:

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 . . . and greenhouse gas emissions. The commission may determine that short-term costs or direct costs that are higher than alternatives relying more heavily on fossil fuels are reasonable, considering the impacts resulting from the use of fossil fuels.

In effect, whether the commission should disallow as unreasonable [HG’s] LNG costs due to the effects of [HG’s] use of imported LNG on the State’s reliance on fossil fuels and greenhouse gas emissions.

The PUC also expressly considered the following issue to be “outside the scope of this rate proceeding”: “The participants’ asserted interested in a clean and healthful environment beyond the State’s borders, given the Hawaii Constitution’s limited application and scope to a clean and healthful environment within the State’s borders.”

The PUC ultimately approved the rate increase. On appeal, LOL and HAA KLMA raise the following points of error:

(1) the PUC failed to 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 GHG emissions, including hidden and long term costs, in determining the reasonableness of the costs of utility system capital improvements and operations under HG’s application in violation of HRS §269-6(b) and Appellants’ due process rights therein.

(i) the PUC determined it need not address GHG emissions released beyond the borders of the State under article XV, §1 of the Hawaii Constitution and Admission Act §2 as a result of its approval of the

HG application, despite HG’s application inclusion of projects requiring importation of LNG from the U.S. mainland.  Consequently, PUC did not consider the long term and hidden costs of reliance on fossil fuels and consequent GHG emissions in approving HG’s application.  

(ii) the PUC’s Order did not explicitly consider the hidden and long term costs of fossil fuel use or GHG emissions, and rather recited HG’s assertions concerning the comparative GHG emissions of those portions of operations taking place in
 Hawaii.  

(iii) the PUC’s Order relied on HG’s assertion that Appellants failed to adduce evidence that HG’s LNG projects will increase GHG emissions. This error was compounded because PUC had permitted HG to redact, render confidential, or refuse to provide responses on items pertinent to GHG emissions released within Hawaii. HG heavily redacted many of its submissions and responses to IRs. HG refused to answer Appellants’ information requests (IRs). 

(iv) the PUC’s Order summarized Appellants’ testimony, which was contrary to HG’s assertions on GHG emissions, and concluded the former was not credible in support of its ultimate conclusions. 

(2) the PUC denied Appellants a meaningful opportunity to be heard and violated their rights to due process (U.S. Const., amend. V; Haw. Const. art. I, §5 & art. XI, §9)

by:  

(i) restricting Appellants to “participant” status

and limiting their involvement to subissue 1.h and specifying as “outside the scope of their participation” many matters Appellants’ raised to protect their rights and interests. 

(ii) permitting HG to omit submission of information relating to GHG emissions in their application, finding Appellants failed to raise contrary information, and then concluding Appellants’ due process rights to raise their rights to a clean and healthy environment were satisfied.  

(iii) adopting and incorporating findings from separate PUC proceedings to which Appellants were not full parties or intervenors and incorrectly interpreting the doctrine of issue preclusion to support the Order, and thereby violating Appellants’ due process rights.

  
(3) the PUC’s Order employed rules that were not promulgated as required by HRS §91-3. The methodology by which PUC analyzes and assesses GHG emissions constitutes a statement of general applicability that affects the private rights of and procedures available to the public and therefore constitutes a “rule.” HRS § 91-1. PUC’s use of such a rule is reasonably foreseeable under HRS §269-6(b), yet this rule was not promulgated under HRS §91-3.   
  
(4) PUC failed to identify traditional and customary practices that may be affected by its Order, to assess potential impacts of its Order on those practices, or to identify feasible protections for affected practices as required under article XII, §7 of the Hawaii Constitution.

(5) PUC failed to fulfill its obligations as a trustee of public trust resources, which include air and other environmental resources under article XI, § 1 of the Hawaii Constitution.