MECO’s smaller rate hike approved

The state Public Utilities Commission gave final approval for Maui Electric Co. to raise rates by 1.5 percent, less than the 2.7 percent increase the PUC had previously authorized MECO to collect on an interim basis.

The 1.5 percent increase approved Wednesday works out to $4.7 million in additional revenue for MECO. The rate hike will help pay for more than $122 million in capital improvements, including an upgrade of power plant control systems at the Maalaea Generating Station, construction of new substations and the expansion of existing ones, MECO said in a news release issued Friday.

MECO had been collecting the additional 2.7 percent since receiving interim approval from the PUC in August 2010. MECO’s original request filed in September 2009 was for a 9.7 percent rate increase, or $28.2 million in revenue.

The PUC said the difference between the interim and final rulings will "result in a slight reduction in MECO’s rates and charges on a prospective basis." The size of the rate hike was reduced to account for changes in accounting and rate-setting procedures. As a result, customers will not receive a refund or a credit as they have in the past when the PUC determined the utility collected too much during the interim period, according to MECO.

However, the PUC cautioned that MECO customers probably will soon see rates go up again as part of a 2012 rate case. MECO in July filed a request with the PUC for a 6.7 percent rate hike, or $27.5 million in revenue. The PUC is scheduled to issue an interim ruling on the request by May 22.

The increase would help cover the cost of improvements needed to integrate more renewable energy into the MECO electrical grid and improve the reliability of service, according to MECO.

If the PUC approves the full amount requested, the typical bill for residential customers on Maui, Lanai and Molokai would increase by $13 a month, MECO said.