April 12th, 2018
This week, a bill to better align the Hawaiian Electric Companies’ profits with the affordability of electric rates and the utilities’ integration of renewable resources has successfully passed through the House and Senate. The measure is now on Governor David Ige’s desk awaiting his signature.
“We are hopeful that the governor will sign this long-awaited and customer-friendly bill,” said Melissa Miyashiro, Blue Planet Foundation‘s Chief of Staff. “The utility sector is changing. This measure can help ensure that Hawaii stays in its role as a leader on clean energy as our electricity system becomes increasingly distributed and powered by renewables. By signing this bill, the governor would align the financial interests of utility shareholders with the interests of ratepayers and the state’s clean energy goals.”
Ige’s enactment of Senate Bill (SB) 2939—known as the Hawaii Ratepayer Protection Act and introduced by Senator Stanley Chang—would set 2020 as the deadline for the state Public Utilities Commission (PUC) to establish different incentives and penalties that directly tie electric utility revenues to the utility’s achievement hitting various customer-focused performance metrics.
The performance metrics that the bill directs the PUC to consider include: affordability of electric rates and customer electric bills; electric service reliability; customer engagement and satisfaction; customer options for managing electricity costs; availability of utility system information and data; rapid integration of renewable energy sources; quality interconnection of customer-sited resources; as well as timely execution of competitive procurement third-party interconnection, and other business processes.
The bill marks an important step forward in an ongoing conversation about the utility of the future, which has surfaced in several dockets before the PUC. As one example, in a recent decision (issued January 25, 2018) in the demand response docket (No. 2015-0412), the PUC established a one-time performance incentive for the Hawaiian Electric utilities related to the timely acquisition of cost-effective demand response. In the decision, the PUC expressed a willingness to consider different performance incentives to inform and reward demand response portfolio outcomes in the longer term. In addition, recent Hawaiian Electric utility rate cases have proposed a limited set of performance benchmarks. Coupled with this ongoing work, Senate Bill 2939 lays the framework to ensure that any performance incentive mechanisms and penalties are transformative on a larger scale.
“Currently, utilities aren’t directly rewarded for reducing customer bills, adding renewable energy, or increasing the resiliency of the system,” Miyashiro said. “Without such a policy to do so, Hawaii will continue to have a misaligned incentive system where the utility makes more by spending more.”
Blue Planet Foundation, a nonprofit with a mission to clear the path for 100% clean energy, has been advocating for performance-based ratemaking for a number of years and worked with legislators to draft the bill. The organization commended state legislative leaders for their decision to move forward with a performance-based ratemaking bill.
Governor Ige has until April 25 to act on SB 2939 or the bill becomes law without his signature.
“We applaud the visionary leadership of the House and the Senate on this measure,” Miyashiro said. “This will become a crucial guideline as Hawaii gets closer to 100 percent clean energy.”