Hawaiian Electric Co. has introduced a tiered rate structure for its residential customers on Oahu that increases the cost of electricity per kilowatt-hour as usage goes up.

The new system brings Oahu into line with what HECO launched in January at its subsidiaries on Maui, the Big Island, Molokai and Lanai.

HECO said the changes on Oahu that went into effect yesterday coincide with a decision by the state Public Utilities Commission last Friday to implement the final pieces of a 2009 rate hike sought by the utility.

The new structure consists of three tiers, with the rates at each level varying depending on electricity use. Customers in the highest tier using more than 1,200 kilowatt-hours a month will pay 21.5 percent more than those in the lowest tier using less than 350 kilowatt-hours a month. HECO said the majority of customers’ bills fall into the first and second tiers.

The rate structure released by HECO is a base rate that covers the company’s cost of operating power plants and maintenance of the grid. It does not include the cost of fuel and other charges that increase the final cost on a customer’s bill. HECO will report next week what the new structure means in terms of the kilowatt-hour charge on a customer’s final bill.

"To reach our clean energy goals, as a community we need to find ways to reduce our energy use," said Robbie Alm, Hawaiian Electric executive vice president. "Tiered rates offer customers a clear pricing incentive to conserve electricity."

The PUC also approved Hawaiian Electric’s request to allow the total amount of electricity used by qualifying low-income customers to be billed only at the lowest rate tier. This exception will be available to customers who provide a copy of their qualification letter for the federally funded Low Income Home Energy Assistance Program.