Fuel cost risk sharing order for Hawaiian Electric seen as 'landmark' clean energy driver
- The Hawaii Public Utilities Commission (PUC) last week rejected a $106 million rate increase proposed by Hawaiian Electric Co., signing off instead on a $600,000 rate decrease.
- In a 3-0 vote, the commission modified the utility's automatic fuel cost surcharge to include a risk sharing element, so that not all of its fuel costs are passed on to customers.
- Environmental advocacy group Earthjustice called the risk sharing provision a "landmark" move that will help push the utility to add more renewable energy.
Hawaii is moving rapidly towards renewable energy, which makes the new risk sharing provision an interesting experiment.
The idea, regulators explained in a statement, is to "more fairly share the risk of fuel price increases and decreases between Hawaiian Electric and its customers." The risk sharing is capped at $2.5 million per year to protect the utility from "significant unanticipated increases in fuel prices," while prodding it to reduce prices and fuel use.
The decision ends a 100% pass-through of fossil fuel costs, but the PUC's order notes the move is a "deliberately conservative and 'gradual' approach" to determining appropriate amounts of revenue tied to fuel risk. Fluctuations in fuel costs will be shared 98% by customers and 2% by the utility.
Blue Planet Foundation advocated for the risk sharing mechanism. The decision is "a victory for consumers, clean energy, and common sense ... It requires our electric utility to share in the costs of its fossil fuel reliance and gives it some 'skin in the game' to move away from fossil fuels to clean energy," Melissa Miyashiro, Blue Planet's chief of staff, said in a statement.
Hawaii is in the process of modernizing its grid infrastructure and changing the way utilities do business. The PUC has launched a proceeding on performance-based rates for the state’s regulated utilities. An initial phase will evaluate the state's existing regulatory framework and identify areas for improvement.
A second phase will investigate new performance-based frameworks.
- Hawaii Public Utilities Commission Order
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