$78M HECO project approved

Hawaii Electric Co. customers could see a $1.18 bump on their monthly electrical bills, as state regulators approved a nearly $80 million project for the utility to upgrade its business management software.

In an order made public Friday, the state Public Utilities Commission approved HECO’s request to use up to $77.62 million on a project to upgrade business management tools over a 12-year period.

Peter Rosegg, HECO spokesman, said customers would not see an impact on their bills until 2019.

“While there may be a small net increase to bills in the earlier years of the project, any impact would not go into effect until the project is operational and serving customers in 2019,” Rosegg said.

Rosegg said the existing software needs to be replaced and that the new software will save customers money over time.

“The new system and the additional automation will provide guaranteed benefits of more than $240 million to customers over 12 years, in the form of savings from the operational efficiencies and avoided capital expenditures,” Rosegg said. “Over the life of the project, these benefits will more than cover the estimated $78 million cost.”

Rosegg said all areas of the utility’s operation would become more efficient with new software, from the utility’s deployment of its smart grid to the integration of renewable energy resources to response to outages.

The PUC said the upgrade is necessary because HECO’s existing Ellipse system — the system the utility uses to calculate, record and pay taxes; manage payroll; produce financial statements; and process work orders — is over 16 years old, “technically obsolete” and could possibly fail.

“The (HECO) companies need to replace their Ellipse system in order to ensure business continuity and to avoid any disruption of service to ratepayers,” the PUC said in the order.

When approving the costs, the PUC put safeguards in place to assure that customers would receive a net benefit totaling $244 million. If the safeguards are successful, customers are set to see roughly $3.70 savings on their bills every month from the program.

In the order, the commission mandated an interim cap of $34.6 million for total costs on the project until HECO files a detailed updated project timeline, as well as a clear explanation and supporting documentation of how the project will provide savings to ratepayers.

HECO said in its filing that customers would see direct reduction in rates due to savings in operation and maintenance, reduced future project costs and tax savings due to a reduction in the rate base associated with the tax repair.

State Consumer Advocate Jeff Ono recommended the PUC approve the plan.

“It is apparent that the existing Ellipse system as well as the underlying server hardware should be replaced,” Ono said.

Matthias Fripp, assistant professor in the Department of Electrical Engineering at the University of Hawaii at Manoa, said he was surprised by the price tag of the project.

“HECO is a big company, and they have a lot of people and project details to keep track of,” Fripp said. “They need software like this, although I’m surprised it’s as much as $80 million.”