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A crucial stage of deliberations over the proposed $4.3 billion merger of NextEra Energy and Hawaiian Electric Industries began with a surprise announcement Monday.

The U.S. Department of Defense, a huge consumer of electricity in the state, is seeking to withdraw from its intervenor status in the case, saying it is satisfied that the merger would be in the best interest of ratepayers.

Public Utilities Commissioner Randy Iwase made the announcement and said it was unclear how the action would affect the deliberations. A handful of intervenors have withdrawn since this summer, leaving about two dozen remaining.

Iwase spoke in a large, high-ceilinged room at the Neal S. Blaisdell Center — before more than 100 energy industry experts, lawyers, executives, observers and the media — as the PUC opened the trial-like hearing nearly a year to the day after the proposed merger was announced.

“At this 11^th hour, the Department of Defense has sought to withdraw,” said Iwase, who expressed concern that this raises “serious due process issues” for other intervenors and the Consumer Advocate.

The DOD has filed numerous documents that have been incorporated into the case. Its motion to withdraw says that it now believes in NextEra’s commitment “to pursue safe, reliable, clean, and cost effective renewable energy for all rate payers in Hawaii.”

In response to the DOD’s request, which came Friday afternoon in the final weekday hours before the hearing opened, the PUC considered delaying the hearing. Instead, the commission decided to give intervenors and the Consumer Advocate until Dec. 7 to comment in writing on the DOD’s motion.

Until the motion is granted, Iwase said, the DOD should consider itself a continuing party to the case and “act accordingly.” The lawyer for the DOD later waived its right to cross-examine the first witness, Hawaiian Electric Co. President and CEO Alan Oshima.

With the DOD issue out of the way, it was on to the testimony.

The PUC chair swore in the 11 witnesses who were present — somewhat theatrically — and instructed them to “tell the whole truth and nothing but the truth.”

But it was a single individual, Oshima, who spent most of the next six and a half hours testifying.

The evidentiary hearing started out stark, with cold exchanges, but there were some surprising signs of warmth, as when Oshima highlighted what he sees as the potential for a profound partnership between NextEra and Hawaiian Electric.

“Legally it is an acquisition obviously,” the soft-spoken CEO said, but he added that, “It is almost like a marriage. I mean, yes, you know, one party or the other will have a stronger voice, but you would hope that there is communication and collaboration. … It will be a partnership.”

Hawaiian Electric’s voice, he insisted, “will be heard.”

This is natural in Hawaii, Oshima said, because “the culture demands a different way of doing certain types of transactions.”

Such romantic visions didn’t win over Thomas Gorak, the PUC’s chief counsel. Gorak spent two hours probing for details to elucidate the central question posed by the hearings: Is this merger in the best interests of Hawaii?

The PUC’s questioner quickly bore in to find out how much of a role Oshima and Hawaiian Electric had in shaping NextEra Energy’s promise to save customers $60 million within four years of the merger getting the regulatory OK, and whether Hawaiian Electric had verified they were the right numbers.

“We’re not sure about the right numbers,” Oshima said.

“I’m a very optimistic person so I tend not to go into dark places.” HECO President and CEO Alan Oshima

“We thought it was a meaningful commitment by the future owners of Hawaiian Electric,” HECO’s CEO said. “We did no independent analysis of any of that.”

Gorak probed the issue of the $90 million termination fee that NextEra or Hawaiian Electric might have to pay out to the other party if the deal falls through, depending on how failure occurs.

Oshima, unflappable, repeatedly said that he wasn’t in a position to answer an array of hypothetical questions about what might or might not lead to a termination fee payout, so he couldn’t assess who might be at fault.

He repeatedly insisted there was no reason for him to answer “speculative” questions.

The CEO said that if the PUC approves the deal and the 85 conditions that NextEra has committed to satisfying, there has to be a “good-faith element.”

Henry Curtis, an intervenor in the docket who has come out against the merger, told Civil Beat he was surprised by “Oshima’s use of ‘speculative’ and ‘speculation’ to avoid answering so many questions. That surprised me. I would think that they would be more forthcoming, especially in this evidentiary hearing.”

In the afternoon, Consumer Advocate Jeff Ono took up a different aspect of the same issue, asking Oshima whether Hawaiian Electric customers would receive any part of the $90 million if NextEra was required to pay a termination fee to Hawaii’s power company.

Oshima replied that it would be up to Hawaiian Electric’s board to decide what to do with the money.

The Consumer Advocate then asked if Hawaiian Electric Industries, HECO’s parent company, were to blame for the failed deal and was required to pay the termination fee to NextEra, would customers be on the hook for that.

Oshima said he didn’t know.

Oshima acknowledged not being sure of a lot of things. He repeatedly said he would gladly answer questions if documents or emails were placed in front of him to remind him of events. He often offered partial answers, and then, in an abundance of caution, added that he wasn’t certain.

Gorak pressed Oshima about HECO’s responsibility to identify risks to customers in NextEra’s proposals.

“I’m a very optimistic person so I tend not to go into dark places,” Oshima responded, adding that he sees a lot of benefits in the deal for Hawaii.

From The Sidelines

Experts and executives said this is just the beginning.

“From what I’ve observed being in the industry for many years, this is the process and it’s playing out as do other merger proceedings,” said NextEra Vice President of Communications Rob Gould. “All of this is part of the commission coming to an informed decision on the question before it: Is this in the public interest?

Gould said he doubted there would be “any ‘aha’ moment.”

Richard Wallsgrove, of the Blue Planet Foundation, said, “This is an important part of the process. You have to have the opportunity for folks to probe and ask questions and see how things work.”

“I can say that from Blue Planet’s perspective, in the 360-something days since this merger was announced, our perspective has not changed a whole lot, which is we really see an opportunity here, but you have to make solid commitments to how it is all going to work.”

Wallsgrove said his foundation, which is a strong advocate of the shift toward renewable energy, wants to see concrete commitments on the part of NextEra to accelerate Hawaii’s transition to clean energy.

He suggested NextEra facilitate the use of electric cars to reduce transportation and commuting costs, while taking other renewable energy measures. Or the company could do countless other things, he said, as long as they make solid and constructive commitments.

“If we could get some specificity like that with the commitments, I think that will really help inform the public interest question,” Wallsgrove said.

Curtis, who heads Life of the Land, said his organization “does not believe (the merger) is in the public interest and we haven’t seen anything today that would change our views.”

But he didn’t attempt to predict what the PUC will do.

“I find this commission very difficult to read,” he said.

He is not alone, which is part of why dozens of people were still around when Iwase hit the gavel to end the seven-hour session.

Monday’s hearing was slated to be the first of 12 days, but the length of Oshima’s testimony, which continues on Tuesday, raised concerns that it could go longer. He is the first of a fairly long list of people scheduled to testify. Intervenors will continue to question him and then there will be brief cross-examinations.

“Typically in these hearings, they start out slow,” said Delmond Won, the PUC’s executive officer.

It isn’t clear whether Blaisdell Center has enough available days for a continuation of the hearings beyond the 12th day, Dec. 16. If it is necessary to extend the hearings, that likely wouldn’t happen until January, at the earliest.

The PUC is expected to come to a decision by the middle of 2016.