Oahu electrical rate decrease gets final OK from panel

A state panel has put a final stamp on an 18-month-old case of how much customers of Oahu’s dominant electrical utility should be paying as a base rate for power.

The state Public Utilities Commission on Friday ruled that Hawaiian Electric Co. customers deserve a slight decrease in their base rate largely because of federal tax savings the company is reaping under a new corporate income tax break signed into law by President Donald Trump in December.

The decision won’t materially change bills for HECO’s roughly 304,000 customers because the company was granted an interim rate reduction in March that took effect in April and resulted in a 95-cent net monthly savings for a typical residential customer using 500 kilowatt-hours compared with rates before a prior increase went into effect.

Prior to the April cutback, the PUC had granted HECO an interim 2.3 percent increase in February which represented the first time in six years that HECO’s base rate went up. That increase added $2.60 a month to the bill for a typical residential customer.

HECO initially asked for a 6.9 percent hike that would have generated an additional $106 million in annual revenue. But that request made in December 2016 was reduced to a 3.5 percent increase generating $53.6 million under an agreement between the company and the state Consumer Advocate in November. Then a month after that, the PUC made an interim decision to grant a 2.5 percent increase before reducing that to 2.3 percent in February. The 2.3 percent increase represented an additional $36 million in annual revenue for HECO.

HECO in December said it was “extremely disappointed” by the 2.5 percent interim rate increase approved by the PUC, but that was before the federal tax change.

In a statement Friday, the company said, “We’re glad the timing of the changes in federal tax law worked out well for our customers. We’re making a lot of progress on our clean energy transformation and this was the first rate request we had made in six years.”

Friday’s final PUC order puts the base rate slightly below what it was before HECO sought its increase in late 2016 — a reduction of 0.039 percent. That amounts to about $603,000 less in annual revenue for HECO.

The commission, which voted 3-0 on the rate case, said several factors, including the federal tax benefit, prompted the swing from a rate increase to a rate decrease. HECO’s federal corporate income tax rate dropped to 21 percent from 35 percent, the PUC noted.

PUC Chairman Randy Iwase said in January that tax savings should be passed on to customers of the regulated utility instead of increasing profits for shareholders. Under PUC regulation, Hawaiian Electric is permitted to earn a fair rate of return on its operations, and the PUC scrutinizes revenue and expenses of the company to make rate-setting decisions.

Another part of the PUC’s order issued Friday adjusted how HECO passes on fuel costs to customers through surcharges. The commission said it mandated a change that more fairly shares the risk of fuel price increases and decreases with customers.

Friday’s order requires HECO to refund customers amounts they were charged based on the interim increase and with interest. But HECO said customers already have been receiving the savings since April when the rate decrease more than offset the prior 2.3 percent increase.