Over the previous two and a half years, Hawaii has been embarking on probably the most aggressive effort in america to alter the best way utilities are financed by the general public they serve, by abandoning the capital expenditure-focused, “spend cash to earn money” paradigm of conventional cost-of-service laws.
To exchange it, Hawaii is wanting towards performance-based ratemaking (PBR), a catch-all time period that encompasses every kind of regulatory buildings. The frequent objective is to financially reward utilities for doing issues regulators and policymakers have determined they should do higher, and cease rewarding them for issues that find yourself costing prospects greater than they return in buyer advantages.
For Hawaii, that PBR impetus is aimed toward Hawaiian Electrical, which operates investor-owned utility on the islands of Oahu, Maui and Hawaii. On one hand, regulators need to restrict buyer fee will increase, particularly for giant capital tasks that won’t align with the island state’s clear vitality imperatives. In addition they need to take away the inherent bias for utility-owned tasks that may function a disincentive for extra inventive approaches that faucet customer-owned rooftop photo voltaic, behind-the-meter batteries, and grid-responsive masses and electrical automobiles.
Then again, they need to keep away from placing the utility beneath a construction that might result in extreme losses that might alienate Wall Avenue buyers and lenders from supplying the capital it wants. In addition they need to reward the utility for doing its core jobs extra effectively — and to spice up these rewards when it exceeds state mandates to shift from centralized fossil-fueled energy crops to a clear and decentralized vitality future.
In December, the Hawaii Public Utilities Fee authorised a resolution and order that takes the subsequent step on this journey. It’s the results of years of grinding negotiations and compromises between Hawaiian Electrical (HECO) and enterprise, environmental and shopper stakeholders, and it doesn’t take up all of the PBR ideas specified by the primary part of the trouble.
But it surely does go a lot additional than any of the PBR efforts underway in the remainder of the U.S., in accordance with members within the course of. That’s as a result of it takes an important, if nonetheless conceptual step, past tinkering on the edges of the cost-of-service mannequin, by setting a transparent sign that, for HECO, there’s no going again to the outdated manner of doing enterprise.