Kaua‘i, with its golden beaches, emerald mountains and profusions of tropical flowers, is an American paradise. But in 1999, paradise had a big problem: The Hawaiian island was saddled with some of the highest electric rates in the nation.
So when the Connecticut company that owned the local utility decided to sell, a tireless band of activists formed an electric cooperative and went looking for financing.
Greg Gardiner, a local businessman who ended up heading the effort, admitted at the time he knew next to nothing about co-ops (“I didn’t even know how to hyphenate the word.”). But he and his group knew they wanted an electric utility on Kaua‘i that would operate for the benefit of its consumers instead of faraway investors.
NRECA CEO Glenn English saw the creation of Kaua‘i Island Utility Cooperative (KIUC) as “a victory for the co-op business model.” And it focused attention, he said, on the continued need for federal financing from the Rural Utilities Service (RUS), successor to the Rural Electrification Administration.
Martin Lowery, second in command at NRECA at the time, said his work with the Hawaii group “was the most extraordinary experience of my career.”
Here were ordinary citizens—including a research scientist, an administrative assistant, a hotel manager, an electrician and three retirees who together seemed to know everyone on the island—building a co-op business from scratch so they could control their energy destiny.
Before statehood in 1959, sugar plantations dominated Kaua‘i’s economy, and they were the first to generate electric power, selling what they didn’t need for refining and processing to nearby residents. In the 1960s, Citizens Utilities bought up a hodgepodge of plantation lines and stitched them together. Most of the power was generated with diesel and naptha shipped in by tanker, and it was expensive, up to 25 cents per kilowatt-hour.
When Citizens decided to sell, Peter McClaren, editor of the Kaua‘i Business Report, wrote an editorial suggesting a co-op might be a good way to go for the island. He had lived on co-op lines in rural Virginia.
Jim Mayfield, a local banker, read the article and called the U.S. Department of Agriculture in Washington, which steered him to RUS. Officials there told him about the Cooperative Finance Corporation (CFC) and NRECA, which over the next couple of years provided extensive technical assistance.
The more he heard about co-ops, the more enthusiastic he became.
“There’s a Hawaiian word ohana. It means family,” Mayfield said in 2004. “As I got to know the co-op idea, I saw what a co-op is—it’s an ohana. When I realized that, I knew it was right for the island.”
Citizens sought a quick sale, and within weeks, KIUC made a winning offer of $270 million and applied for financing through RUS. But the Hawaii Public Utilities Commission wouldn’t approve the deal, claiming the price would force residential rate increases.
The KIUC board of directors hired a Kansas City investment banker who had handled similar utility acquisitions and re-entered negotiations with Citizens when the company could not reach a deal with either of its other suitors.
The board, which recently expanded from nine to 17 members, also redoubled its grassroots efforts. Turk Tokita, a Japanese-American World War II hero who been involved in Kaua‘i politics since the 1950s, was asked to help. He in turn recruited his activist friends Sab Yoshioka, Stanley Oana and Mary Thronas.
“Turk told us. ‘We’re going to have some fun,’” Oana said. “And we’re going to make this thing happen.”
They took the co-op message to the streets and collected 7,000 signatures on petitions. When the co-op’s new deal with Citizens came before the PUC, they packed the room with 500 loyalists all wearing green “People Power” T-shirts.
“It all came down to a public hearing on the co-op,” Gardner said. “We needed some people to testify, but we needed a lot of people to show up and support us. You looked out and you saw a sea of green. They didn’t all have to testify. The shirts testified for them.”
The PUC, seeing a new acquisition plan and the lower price ($215 million), not to mention huge public support, approved the deal. On November 1, 2002, almost three years to the day after KIUC was incorporated, the sale was confirmed.
Today, the co-op has stable rates and a national reputation for energy innovation.