HOUSE OF REPRESENTATIVES

H.B. NO.

2431

TWENTY-NINTH LEGISLATURE, 2018

 

STATE OF HAWAII

 

 

 

 

 

 

A BILL FOR AN ACT

 

 

relating to energy.

 

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 


     SECTION 1.  This Act shall be known as the "Hawaii Ratepayer Protection Act."

     SECTION 2.  The legislature finds that in 2014, the public utilities commission issued a landmark set of "Inclinations on the Future of Hawaii's Electric Utilities:  Aligning the Utility Business Model with Customer Interests and Public Policy Goals," known as the inclinations.  The document provided "perspectives on the vision, business strategies and regulatory policy changes required to align the Hawaiian electric company and its subsidiaries' business model with customers' interests and the State's public policy goals."

     The commission's inclinations document noted that the State's utilities must rapidly create a modern electric system.  The legislature agrees with the public utilities commission that "electric utilities need to move with urgency to modernize the generation system on each island grid as delays are lost savings opportunities."

     To that end, some of the State's utilities have recently proposed modernization plans.  Those plans may ultimately result in a reduction in fossil fuel consumption, in line with the State's renewable energy goals.  However, this shift could be accompanied by a change in how utility revenues are expended.  

     As utilities shift away from fossil fuel use, they will look for new opportunities for investment.  The projects they choose could benefit residents and businesses where, for example, the projects provide reliable services in a cost-effective manner.  However, the existing regulatory business model rewards utilities for increasing capital expenditures irrespective of utility performance.  Utilities may choose to invest in projects that displace more efficient or cost-effective options such as a distributed energy resources project owned by customers or projects implemented by independent third parties.  If the less cost‑effective utility project is allowed to go forward, it would make it difficult for third parties to fairly compete with the utility and would also raise costs for customers. 

     Without performance mechanisms to incentivize utility spending decisions towards the State's energy goals, the status quo will prevail.  The same business and revenue model has been in place for over a century.  The Wall Street Journal explained that "the more [utilities] spend, the more profits they earn," and called this "a regulatory system that turns corporate accounting on its head."

     The legislature finds that it is important that customer and utility interests be aligned to maximize the State's energy goals.  Utilities must be incentivized to innovate, create customer choice, integrate clean energy, and increase reliability.  This would promote the ability of the State's utilities to make decisions and develop strategies to maximize public benefit, reduce ratepayer risk, and meet Hawaii's energy goals.

     The legislature finds that, although some utility performance incentives are being considered in existing dockets at the public utilities commission, the process has not been transformative in urgently moving electric utilities toward the State's ambitious energy policy goals.  The legislature further finds that the responsibility for aligning utility regulatory policy and the State's public policy goals is not limited to the public utilities commission, as the regulatory framework under which utilities operate and the scope of regulation by the public utilities commission are established by the legislature.

     The purpose of this Act is to protect consumers by urgently and proactively ensuring that the existing utility business and regulatory model is updated for the twenty-first century by requiring the public utilities commission to establish performance incentive and penalty mechanisms to incentivize electric utilities to achieve the State's energy goals as they may apply to the regulation of electric utility rates.

     SECTION 3.  Chapter 269, Hawaii Revised Statutes, is amended by adding a new section to part I to be appropriately designated and to read as follows:

     "§269-     Performance incentive mechanisms.  (a)  On or before January 1, 2020, the public utilities commission shall establish performance incentive and penalty mechanisms to incentivize electric utilities to achieve the State's energy goals as they may apply to the regulation of all rates under section 269-16.

     (b)  In developing performance incentive and penalty mechanisms, the public utilities commission shall consider, but shall not be limited to, the following:

     (1)  The economic incentives and cost recovery mechanisms described in section 269-6(d);

     (2)  Meeting and exceeding the State's renewable portfolio standards;

     (3)  Electric rate affordability and ratepayer volatility risk;

     (4)  Electric service reliability;

     (5)  Customer engagement and satisfaction, including customer options for managing electricity costs;

     (6)  Access to utility system information, including but not limited to public access to electric system planning data and aggregated customer energy usage data, and individual customer access to granular information regarding the customer's own energy usage data;

     (7)  Rapid integration of renewable energy sources, including quality interconnection of customer-sited resources;

     (8)  Timely execution of competitive procurement, third-party interconnection, and other business processes; and

     (9)  Fair compensation for utility employees."

     SECTION 4.  New statutory material is underscored.

     SECTION 5.  This Act shall take effect upon its approval; provided that the public utilities commission may delay the implementation of the requirements of this Act until no later than January 1, 2020.

 

INTRODUCED BY:

_____________________________

 

 


 


 

Report Title:

PUC; Electric Utilities; Rates; Performance Incentive Mechanisms

 

Description:

Requires the Public Utilities Commission to establish performance incentive mechanisms for electric utilities.

 

 

 

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.