The state Public Utilities Commission ordered up a management audit of the state’s largest electric company, in the wake of its rate-hike proposal, long before anyone had heard of COVID-19.
But when that tumultuous disruption hit, it suppressed commerce, crushed employment and turned everyone’s attention to cost-cutting and survival. So this audit, which presses Hawaiian Electric for efficiency, was timely, and absolutely necessary.
The company’s own bottom line has taken a hit as well, as customer power use has fallen off, but the PUC was correct to insist that the utility run a tighter ship before asking ratepayers to shoulder a heavier burden.
The commission called for the audit in September after receiving Hawaiian Electric’s request for a 4.1% rate increase for Oahu. That was aimed at raising $77.5 million more for operating and capital costs, such as grid upgrades and integration of renewable energy.
The utility is rightly advancing more plans for renewable projects. But approving that increase, especially when it’s levied in an economy hobbled by the pandemic, plainly would have been unconscionable if the utility is found to be spending money inefficiently.
The rate increase didn’t happen, fortunately.
Instead, the PUC’s management audit did uncover that Hawaiian Electric had become too top-heavy;
the utility did take steps to address that problem, and ultimately withdrew the rate-increase request.
This revelation should have come much sooner — an independent management audit was long overdue. But now that it has, the commission needs to stay on top of Hawaiian Electric’s reforms.
The substantial report of 216 pages, performed by the consulting firm Munro Tulloch, identified both the utility’s strengths and its shortcomings. And Hawaiian Electric did not brush off the pointed criticism, either.
The audit targeted three areas: governance and executive leadership; capital and operations and maintenance planning, budgeting and investment strategy; and program and project management. It focused on Oahu’s Hawaiian Electric Co., the largest of the three island-based utilities that are now largely transitioned into a single Hawaiian Electric entity.
Among the audit’s primary findings:
>> Overall governance processes were satisfactory, but adding one or two more non-executives with utility experience to its board would “provide balance and promote greater diversity of thought.” A new appointee already has been made.
>> Although progress toward clean-energy goals was noted, so was the rise in costs and staffing levels, from 2,310 in 2010, to more than 2,700 last year.
>> The “one company” restructuring did not have the desired effect: “Rather than delivering business efficiency, the restructuring created more bureaucracy,” auditors said.
Scott Seu, named in December to take over as president and chief executive officer, said in his response that Hawaiian Electric would reduce its workforce and launch a “rigorous review process on hiring.” It is incumbent on the PUC to see that changes indeed are being made at an aggressive pace.
Henry Curtis, Life of the Land executive director who often intervenes in energy cases, observed that the audit shows the utility was more efficient in its own electricity generation than in its operations to integrate other, clean-energy producers into the grid.
“When it came time to operate the grid and interconnect to others,” Curtis added, “each silo seemed to expand exponentially.”
That plainly must change. Hawaii needs a lean, effective utility that can deliver cost-efficient energy for its economic recovery and all consumers — now more than ever.
