The typical monthly electric bill on Oahu went up $3.13 on Saturday as Hawaiian Electric Co. increased a supplemental fee it gets to pay for a shift to more renewable energy and greater energy efficiency.
While approving the fee increase, the state Public Utilities Commission blasted Hawaiian Electric for high rates and poor service.
HECO ratepayers "are growing increasingly frustrated by high electric rates and poor customer service," the PUC said in a news release Monday. The PUC said it was "putting the HECO companies on notice that utility performance must be improved."
"HECO companies lack a strategic and sustainable business model to address technological changes and increasing customer expectations," the commissioners wrote in their decision.
In addition, the PUC said it was holding Maui Electric Co. accountable for its "inefficient performance" and reducing an interim rate increase that will result in a one-time refund of $39 to $49 for a typical Maui customer.
"Taken together, the decisions are intended to hold the HECO Companies responsible and accountable for their performance," PUC Commission Chairwoman Hermina Morita said in the news release.
Hawaiian Electric Companies is the parent of Hawaiian Electric Co., which serves Oahu; MECO on Maui, Molokai and Lanai; and Hawaii Electric Light Co. on Hawaii island.
"We take our responsibilities to our customers very seriously and have worked hard to live up to those responsibilities," said Robbie Alm, HECO executive vice president. "We are continuing to make improvements, and we will take a hard look at the PUC’s concerns and look forward to working with them on these issues."
The supplemental fee HECO companies collect as an incentive to shift to more renewable energy and boost energy efficiency is known as a decoupling tariff. Decoupling is intended to eliminate the economic incentive on the part of the utility to sell more electricity. Decoupling essentially guarantees utilities enough revenue to cover their fixed costs even if their electricity sales decline.
The PUC first approved a decoupling tariff on Oahu in 2010, and HECO implemented it in June 2011 with a 0.9 percent fee, or $1, for a typical household using 600 kilowatt-hours a month. In June 2012 the fee was increased to 1.7 percent, or $2.40. On Saturday it climbed to 2.8 percent, or $5.53, for the typical household.
On Hawaii island, HELCO’s decoupling tariff as of Saturday was set at 1.6 percent, or $3.17, based on an average 500 kilowatt-hours of usage a month. The rate for Maui has not been determined, but a decoupling tariff will be added to Maui bills later this year.
The PUC reaffirmed its support for decoupling "as an essential component to achieve Hawaii’s clean energy policies."
At the end of last year, almost 14 percent of Hawaiian Electric companies’ electricity came from renewable energy, nearing the state’s next goal of 15 percent by 2015. Hawaii is ranked third in the nation in installed photovoltaic capacity per capita.
"With more than 50 percent of electric bills going to pay for fuel costs, we must reduce our dependence on oil to lower long-term energy costs for our customers," Alm said. "That means making the upfront investments in clean energy and strengthening our grids to reliably accept as much clean energy as possible."
Since late 2010, higher oil prices have increased typical monthly electric bills on Oahu by $49, HECO said.
For Maui County the PUC ruled that MECO must refund ratepayers $8.1 million. The rate case decision, which is separate from the decoupling tariff, resulted in the PUC cutting MECO’s rate request by $7.8 million. MECO customers’ rates will now be increased by 1.29 percent, or $5.3 million, rather than the interim increase of 3.16 percent, or $13.1 million, that has been reflected in customers’ bills since June 2012. The $8.1 million to be refunded includes interest.
"The HECO companies need to employ sound business practices focused on customer value," PUC Commissioner Michael Champley said. "Hawaii should have financially healthy electric utilities; however, attractive financial returns are not a utility entitlement. Instead, excellent utility performance with affordable rates and superior customer service should drive utility financial performance."
The PUC also said it will investigate the decoupling tariff "to ensure that these mechanisms do not insulate the HECO companies from making timely and necessary improvements to their business models, strategies and operational practices to serve customers and the public interest."
The PUC said the investigation also will address legislative guidance to examine whether shared cost savings and other incentives could encourage and reward utility performance for accelerated cost reductions and retirement of old, inefficient fossil fuel generators.
"The commission will work collaboratively with the HECO companies, State Consumer Advocate, and other stakeholders to improve and streamline the rate-making process to achieve outcomes that are in the public interest," Morita said. "However, achieving a high performance, customer-focused and financially viable electric utility with affordable rates is the responsibility and public interest duty of utility management."
