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Maui & Big Island Businesses Face Potential Energy Cost Hikes and Reliability Concerns Amidst AG Lawsuit

·7 min read·👀 Watch

Executive Summary

A lawsuit filed by the Attorney General seeks to force the premature shutdown of HECO's oldest oil burners on Maui and the Big Island, threatening potential increases in energy costs and disruptions for local businesses. Owners should monitor legal proceedings and explore energy resilience options.

  • Small Business Operators: Expect potential increases in operating costs, and possible energy supply instability.
  • Real Estate Owners: Property operating costs may rise; consider energy-efficient upgrades.
  • Investors: Assess energy sector risks and potential disruptions to operations in affected areas.
  • Tourism Operators: Higher energy costs could impact profitability; plan for potential service disruptions.
  • Entrepreneurs: Factor increased utility costs into business models; explore energy independence solutions.
  • Agriculture: Increased energy costs may affect irrigation and processing; investigate on-site power generation.
  • Action: Monitor the lawsuit's progress and HECO's response over the next 30-60 days.

Watch & Prepare

High Prioritynext 30-60 days

Legal action implies a potential for expedited closure, which could lead to immediate changes in energy supply or increased costs if alternative energy sources are not secured or planned for.

Monitor the progress of the AG's lawsuit against HECO's old oil burners on Maui and the Big Island over the next 30-60 days. If the court rules for accelerated shutdown, begin assessing alternative energy options and budget for potential rate increases.

Who's Affected
Small Business OperatorsReal Estate OwnersInvestorsTourism OperatorsEntrepreneurs & StartupsAgriculture & Food Producers
Ripple Effects
  • →Forced shutdown of older generators → intensified demand for newer, potentially more expensive, energy sources → increased operating costs for businesses.
  • →Potential energy supply instability → need for business investment in backup power solutions → diversion of capital from growth and operational improvements.
  • →Increased energy costs → higher consumer prices → reduced discretionary consumer spending → negative impact on retail and tourism sectors.
Serene sunset view over Kihei, Hawaii with wind turbines along the coast, capturing nature and renewable energy.
Photo by Max Fomin

The Change

The Hawaii Attorney General has initiated a lawsuit aimed at compelling Hawaiian Electric (HECO) to cease operations of its oldest oil-burning generators on Maui and the Big Island. The suit targets the Kanoelehua Hill (Maui), Kahului (Maui), Māʻalaea (Maui), and Puna (Big Island) generating stations, identifying them as significant contributors to haze-causing pollution. While the current operational lifespans of these facilities are not explicitly stated for closure, litigation implies a push for accelerated decommissioning, potentially sooner than planned emissions reduction schedules. This legal action introduces uncertainty regarding future energy supply, operational costs, and infrastructure reliability for businesses on the affected islands.

Who's Affected

This lawsuit has direct implications for businesses operating on Maui and the Big Island.

  • Small Business Operators (small-operator): Businesses reliant on consistent and affordable electricity will be most exposed. Potential energy price increases passed on by HECO could directly inflate operating expenses, impacting margins for restaurants, retail stores, and service providers. Reliability concerns may also necessitate investments in backup power solutions.
  • Real Estate Owners (real-estate): Property owners and landlords may face increased utility costs passed on through common area charges or leased space. Developers should consider the long-term energy infrastructure landscape when assessing new projects, factoring in potential regulatory shifts and cost volatility.
  • Investors (investor): Energy sector investors and those with portfolios exposed to Hawaii's economy should monitor regulatory risks associated with legacy infrastructure. Companies in affected regions might see their cost structures impacted, altering investment theses.
  • Tourism Operators (tourism-operator): Hotels, tour operators, and vacation rental businesses rely heavily on consistent power. Increased operational costs due to higher energy prices could squeeze profitability. Any perceived or actual decrease in energy reliability could also affect guest experience and operational continuity.
  • Entrepreneurs & Startups (entrepreneur): Startups, particularly those with energy-intensive operations or those planning significant growth, will need to build contingency into their financial models for rising utility costs. Exploring renewable energy or energy efficiency solutions from the outset could be a strategic advantage.
  • Agriculture & Food Producers (agriculture): Farming and food processing operations depend on reliable and affordable electricity for irrigation, climate control, and production machinery. Increased energy costs could raise per-unit production expenses, affecting competitiveness, especially for export-oriented producers facing their own logistical challenges.

Second-Order Effects

The forced shutdown of older, potentially more cost-effective (though polluting) generators could lead to a reliance on newer, potentially more expensive energy sources or an accelerated transition to renewables without full grid readiness. This ripple effect could manifest as:

Higher energy costs → Increased operating expenses for all businesses → Reduced profitability margins → Potential for price increases passed to consumers → Potentially reduced consumer spending → Dampened economic activity across sectors.

Furthermore, any perceived or actual reduction in energy grid stability could necessitate significant capital investment in backup power for critical infrastructure and businesses, diverting resources from other growth opportunities.

What to Do

Given the dynamic nature of ongoing litigation, businesses on Maui and the Big Island should adopt a WATCH strategy. The primary focus should be on monitoring the legal proceedings and HECO's response over the next 30-60 days. This monitoring period is crucial for understanding the timeline and potential magnitude of changes.*

Small Business Operators: Begin monitoring HECO’s rate filings and any public statements regarding energy cost projections. Assess current energy consumption and identify immediate areas for efficiency improvements. Consult with advisors about potential hedging strategies for energy costs if feasible.

Real Estate Owners: Review property operating budgets for potential increases in utility expenses. If managing commercial properties, begin conversations with tenants about potential pass-through costs and long-term energy resilience planning.

Investors: Track legal developments and analyze HECO’s financial disclosures for impacts related to capital expenditure for new energy infrastructure or potential write-downs of older assets. Evaluate companies in Hawaii that could benefit from the transition to new energy sources or offer energy resilience solutions.

Tourism Operators: Proactively review energy contracts and explore opportunities for energy efficiency within your operations. Consider the communication strategy if energy-related service interruptions become a possibility.

Entrepreneurs & Startups: Integrate conservative energy cost projections into financial models. Research and catalog potential providers of renewable energy solutions and energy storage for future implementation.

Agriculture & Food Producers: Evaluate the energy intensity of your operations. Investigate the feasibility and ROI of on-site solar or other renewable energy generation and storage solutions, factoring in potential long-term cost savings and reliability improvements.

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