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Bill would dramatically change electric utility models in Hawaii

Posted on Jan 26, 2017 in Headlines, Pacific Business News, Policy, Utilities

(Pacific Business News)  A bill looks to change the way Hawaii’s main utility company — Hawaiian Electric Co. — recoups costs.

State Rep. Chris Lee, D-Kailua-Waimanalo, who is the chairman of the House Committee on Energy and Environmental Protection, has proposed House Bill 1283, which would require state regulators to establish framework that would tie utility revenues to how well they perform.

Jim Kelly, a spokesman for Hawaiian Electric, told PBN that the company supports performance-based regulation, but noted that most of this is already underway, without legislation.

“In the two rate reviews we recently filed for Hawaiian Electric and Hawaii Electric Light, we proposed performance incentives using a number of customer-focused metrics,” he said in an email. “The power-supply plans we just filed with our regulators forecast that we’ll meet the state’s renewable energy milestones ahead of schedule and I believe the [Hawaii] Public Utilities Commission already has the authority to ‘promote decisions and strategies that will maximize public benefit, reduce ratepayer risk, and meet Hawaii’s energy goals.’”

Some performance incentives could include exceeding the state’s renewable energy goal, keeping rates affordable, providing reliable service and rapidly integrating renewable energy sources, including rooftop solar.

Currently, utilities in the state are rewarded for increasing capital expenditures irrespective of utility performance, a business and revenue model that has been in place for more than a century, the bill notes.

“The Legislature finds that improving the alignment of utility customer and company interests is critical to ensuring that Hawaii’s residents and businesses do not suffer economic and environmental harm from the state’s energy systems,” the bill said. “At the same time, this realignment is critical to ensure the ongoing viability of the state’s regulated electric utilities, as they face an increasing need to rapidly adapt business models and strategies to enable new innovations and customer choices.”

The bill goes on to say that this realignment has reached a point of “extraordinary urgency, and that directives by state regulators noted that the state’s utilities must rapidly create a 21st century generation system and implement new rate structures.”

The goal of the bill is “to protect consumers by urgently and proactively ensuring that the existing utility business and regulatory model is updated for the 21st century by requiring that electric utility rates be considered just and reasonable only if the rates are derived from a performance-based model for determining utility revenues.”

The bill would direct the Hawaii Public Utilities Commission to establish this new utility model by Jan. 1, 2020.

http://www.bizjournals.com/pacific/news/2017/01/26/bill-would-dramatically-change-electric-utility.html Bill would dramatically change electric utility models in Hawaii 1/26/17 Duane Shimogawa