By CHELSEA JENSEN
State lawmakers want to expand the Public Utility Commission’s scope to allow for incentives for electric utilities to reduce costs and integrate renewable energy resources.
If made law, Senate Bill 120, introduced by urban Honolulu Sen. Brickwood Galuteria, would authorize the PUC, the state’s lone utility regulator, to implement economic incentives and cost recovery regulatory mechanisms to induce electric utilities to reduce costs; increase renewable energy and grid modernization; and speed up retirement of fossil fuel generators.
The bill passed the Senate Commerce and Consumer Protection Committee with a 7-0 vote, but was recommitted to the committee for consideration after several amendments were made during a Feb. 6 public hearing.
The committee again passed the bill on a 6-0 vote on Wednesday. One senator was excused from the vote. A referral had yet to be submitted as of press time.
Bill 120 contends that electricity rates in Hawaii are at record levels due in large part to the high cost of fossil fuels that are used to fuel generation plants on all Hawaiian Islands. Electric rates have also increased as the rate-of-use has dropped.
“Electric ratepayers are demanding immediate relief from increasing electricity rates,” the bill reads. “It is therefore imperative that Hawaii’s electric utilities accelerate their efforts to acquire lower cost clean energy resources and reduce existing energy and other operating expenses.”
The bill would require the PUC when considering an application look at whether it would be in the public interest to implement economic incentives or cost recovery mechanisms.
Among the proposed mechanisms are creating incentives for utilities to reduce energy and operating costs via shared-cost savings; to implement curtailment mitigation practices when renewable energy exceeds grid demand; to retire fossil fuel generators via a stranded cost recovery mechanism; and stop fossil fuel generation and investment in the process in favor of grid modernization and transmission and infrastructure investment.
Currently, the PUC regulates registered public utilities and is tasked with prescribing rates, tariffs, charges and fees; determining and establishing allowable rates; and deciding requests for the acquisition, sale or other exchange of utilities. It shall also consider the need for reducing the state’s reliance on fossil fuels in rendering a decision.
Galuteria was unable to be reached for comment on the bill as of press time on Wednesday.
Jeffrey T. Ono, executive director of the Department of Commerce and Consumer Affairs Division of Consumer Advocacy, testified in support of the legislation’s intent but also noted a caveat concerning financial incentives for electric utilities.
“It is already part of the rate making process to provide sufficient financial incentives for the electric utilities to be able to attract capital for projects such as the improvement of transmission and distribution infrastructure,” Ono testified. “This bill seems to suggest providing a higher authorized rate of return on equity if the electric utilities invest in transmission and distribution infrastructure.”
He further noted that such proposals could lead to hikes for ratepayers, “which the customers can ill afford at this time.” Rather than law, Ono suggested the state Legislature consider adopting the provisions in the form of a resolution, rather than making the incentives required by statute.
Also providing testimony in support of the bill was Richard Lim, director of the Department of Business, Economic Development, and Tourism, who stated that the bill could provide for “greater adoption of renewable energy, more robust electric grids, and reduced electricity rates.”
Lim also noted that the bill is consistent with Gov. Neil Abercrombie’s “New Day in Hawaii Plan” calling for the adoption of more renewable energy to meet Hawaii’s clean energy goals.
Hawaiian Electric Co. Vice President of Energy Resources and Operations Scott Seu also testified on behalf of the company and its subsidiaries, including Hawaii Electric Light Co. While noting the company supports the general intent of the bill, Seu said that the language it contains needs to be refined to allow the PUC and utility to more broadly consider what is in the customer’s best interest.
“The proposed statutory language makes certain presumptions that it will always be in the public interest to discourage any investment in fossil fuel infrastructure, when in fact some types of such investment may be actually critical to lowering customer costs and allowing for greater use of renewable energy,” Seu testified.
He suggested amendments that would remove language regarding the accelerated retirement of fossil fuel plants and discouragement of fossil fuel use.
Hawaii PUC Chairwoman Hermina Morita testified in support of the legislation noting that the incentives proposed have been implemented in many areas of the country for moving electric utilities toward a more desired course of action. She also noted that the proposals are flexible enough to allow the commission to tailor the best set of incentive mechanisms.
“Stranded cost recovery, for example, has been an accepted practice throughout the contiguous United States during the last few decades, as many mainland electric utilities underwent the transition to retail choice in electricity supply for consumers,” she testified.
Email Chelsea Jensen at email@example.com.