Hawaii Regulators Identify Priorities for Designing Performance-Based Rates

The Hawaii Public Utilities Commission released an order identifying specific goals and best suited regulatory performance-based rate mechanisms for each outcome to be addressed in the upcoming Phase 2 of its investigation of performance-based rules, set to begin next month, according to a May 23 order.

Building on a staff proposal issued in February 2019, the commission has established 3 guiding principles that will shape the development of performance mechanisms: 1) A customer-centric approach; 2) Administrative efficiency; 3) Utility financial integrity.

The regulator also adopted 3 regulatory goals and 12 outcomes identified by commission staff during Phase 1. Out of the 12 outcomes, more than half will directly impact customer experience. In addition to already adopted performance incentives such as service reliability and interconnection experience, affordability and engagement are customer-centric outcomes that will be further examined in Phase 2.

Under the proposed mechanism, targets for Hawaiian electric utilities will be applied over a five-year multi-year rate plan instead of the traditional general rate cases, under which Hawaiian utilities will have the opportunity to boost revenues if they achieve performance targets related to these priorities.

In April 2018, Hawaii Governor signed the Ratepayer Protection Act that sets a 2020 deadline for the PUC to establish a financial link between utility revenues and utilities’ performance in achieving customer-focused performance metrics. The Commission opened a docket shortly after the signing of the bill and began Phase 1 of stakeholder engagement to identify goals, discuss outcomes, and express opinions on potential regulatory mechanisms to achieve outcomes.

The PBR proceeding affects investor-owned utilities, including Hawaii Electric Light Company (HELCO), Hawaiian Electric Company (HECO) and Maui Electric Company (MECO), collectively known as HECO Companies.