State lawmakers are leaning hard on the state Public Utilities Commission to come up with a nuanced approach to regulating the rates electric utilities can charge, one based on their performance as well as their costs.
The enactment of Senate Bill 2939, which was signed this week by Gov. David Ige, sets a Jan. 1, 2020 deadline for the PUC to establish incentive and penalty mechanisms that tie the utility’s revenue to its performance.
The goal is a good one — to align the incentives for the electric company with benefits for the consumer. But the proverbial devil is in the details, and the commission’s job of finding just the right formula won’t be an easy one.
What metrics will count most, for instance? And how might the utility and the public be affected if the utility meets some targets, reaping rewards, while missing others and incurring penalties?
The new law cites a PUC white paper urging the reform of the utility business model to better align with customer interests and public policy goals. One of the central themes in that paper was the need for the regulated industry — primarily Hawaiian Electric Industries — to become more nimble and able to adapt its operation to new technological innovations.
It also references the Hawaiian Electric modernization proposals and echoes the commission’s call for urgency in this transition to an energy utility that primarily distributes electricity from renewable sources.
No argument there. But even those who laud the overall intent of this bill are a bit worried how it will play out. A new Legislature should take its opportunity to revisit the goals when it convenes in January, review what the commission has developed in the interim and consider ways of supporting the agency in that work.
Extending the deadline could be a viable option, if the PUC is putting a good-faith effort behind the process, which it already has started.
The commission opened a docket on April 18 to begin what was intended by SB 2939: devise a system of metrics on which the utility can base its rates, along with the incentives and penalties for meeting or missing those benchmarks.
It was designed to take
21 months, including nine for crucial outreach to stakeholders to define the metrics, said Randy Iwase, PUC chairman. The PUC’s timetable is longer than the Legislature’s, although Iwase added that the new, tighter deadline will be the goal.
Under the law, the PUC is mandated to consider a list of elements in developing the new system. Some deserve greater emphasis than others, such as “volatility and affordability of electric rates and customer electric bills.” As the state continues to drive toward its Clean Energy Initiative targets, the ratepayers’ ability to shoulder the costs must remain a top priority.
Others may be overly prescriptive on points that should be left to the PUC. For example, the law requires the consideration of “access to utility system information, including but not limited to public access to electric system planning data and aggregated customer energy use data and individual access to granular information about an individual customer’s own energy use data.”
Public access to data is generally a principle worth endorsing, but in this case, more flexibility may be needed.
There is some justification for the state to apply the pressure of a deadline. The legislation notes that “the responsibility for aligning investor-owned utility regulatory policies with customers’ interests and the state’s public policy goals is not limited to the Public Utilities Commission, but more broadly rests with the state and county governments that represent the public interest.”
Of paramount concern, however, is the final product. The PUC must be able to get it right, so lawmakers need to give the agency some room to adjust.
