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The Hawaiian Electric Industries utilities will be more insulated from the financial risks of their parent company and its affiliates if regulators allow NextEra Energy to buy Hawaii’s privately owned utility — at least according to testimony and filings discussed in hearings before the Public Utilities Commission on Tuesday and Wednesday.

Over the course of the trial-like proceedings, intervening parties have raised repeated concerns that Hawaiian Electric could be liable for the actions of its owner, if regulators OK the sale.

Representatives of some intervening parties in the hearing have called on NextEra to protect Hawaii from liability in case things go wrong for the Florida-based company’s investments outside the islands.

NextEra’s investments in nuclear power and liquefied natural gas have been brought up at the hearings as sources of risk that could have financial repercussions for Hawaii.

NextEra Energy Hawaii President Eric Gleason said Tuesday such concerns “are overstated,” but has promised — as part of 10 new commitments — to strengthen the walls separating the Hawaii power company from the rest of NextEra’s business.

NextEra has committed to have HEI keep separate books, bank accounts and financial statements with an eye toward keeping assets and liabilities distinct. Beyond that, the Hawaii company will not be allowed to make any loans to NextEra Energy or any of its subsidiaries unless the PUC gives them explicit permission.

Gleason expressed surprise on the stand at how much attention this “ring fencing” issue has received at the hearing. Ring fencing can act as a sort of prenuptial agreement for companies, cordoning off one company from its partner’s financial risks.

If the finances are separated too completely, Gleason warned, credit agencies might not perceive the benefits for Hawaiian Electric.

The surprise in this case, Gleason said, is that the more powerful company usually seeks protection from the smaller, more fragile partner.

This new commitment is limited, Gleason noted, because otherwise it could cause short-term problems for Hawaiian Electric. NextEra’s logic is that by tying the two companies’ finances together, the utility in Hawaii stands to receive a substantially improved credit rating that could save it millions of dollars in borrowing costs, assuming the deal goes through.

If the finances are separated too completely, Gleason warned, credit agencies might not perceive the benefits for Hawaiian Electric.

“It is really important that Hawaiian Electric gets a credit upgrade,” he told the commission.

If NextEra is mistaken and there is no improvement in the Hawaiian Electric Company’s credit rating after the sale goes through, the company promises it will then strengthen the ring fencing.

These efforts “for the protection of ratepayers,” as Gleason called them, grew out of negotiations on a multi-faceted agreement with the Department of Defense, which is one of the intervening parties in the case.

In negotiations with the DOD that came to fruition in late November, NextEra drew up the additional commitments that it filed with the commission, bringing the total number to 95. The DOD and NextEra also co-signed a letter of intent that includes 14 other points of agreement that are non-binding.

The agreements helped to facilitate a shift in the DOD’s stance on the acquisition. On the last working day before the regulatory hearings began at the end of November, the Defense Department came out in favor of the merger. The DOD asked the PUC to leave the docket.

The commission decided to accept the new commitments during the recess in January, but the DOD must stay on as an intervenor.

This week at the hearing has involved plenty of scrutiny of the November deal.

On Wednesday, Rear Adm. John W. Korka took the stand, but he was largely unable to explain how the deal came about because, he said, he did not play any role in assembling it.

Korka said that the Navy counts on the electric utility for a substantial portion of its energy, and that it has many reasons to support efforts that could result in more affordable, renewable and secure energy in the islands. The Military is working to , while the high price of electricity in the state is a quality-of-life issue for service members and their families, he said.

He suggested that lower rates and the possibility of a quicker transition toward renewable energy sources with NextEra is something “we view as a good thing for everyone,” including the DOD and the people of Hawaii.

He refuted a question during his testimony about whether the DOD was angling in its deal with NextEra for special price reductions.

“We do not look at getting a better deal than residents or businesses,” he said. “We don’t do business that way.”

Overall, Korka said, “We think we are better off because of the utility merger.”

Still, he clarified, that if major flaws are discovered, the DOD could change its mind, and that it will be fine with whatever decision the PUC comes to in the case.

He noted that the Navy has numerous energy concerns about “a lot of wasted energy and a lot of concerns about our infrastructure.” If money can be saved on electricity, Korka said, it could go toward improving the infrastructure.

Other new commitments that grew out of the November talks involve guarantees of management and governance commitments to bolster local influence within a NextEra-owned Hawaiian Electric.

It emerged Tuesday that the Ulupono Initiative, which is another intervening party in the case, also took part in negotiations with NextEra. The content of those negotiations, a lawyer for Ulupono said on the sidelines of the hearing, are subject to a non-disclosure agreement.

Gleason, of NextEra, said he had also been interested in opening discussions with state parties in the case, but was told those parties were not interested.

�پ��������Dz��ܰ���:��The Ulupono Initiative was founded by Pierre and Pam Omidyar. Pierre Omidyar is the CEO and publisher of Civil Beat.