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Energy policy needs oversight

LAST UPDATED: 2:15 a.m. HST, Jan 24, 2011

The bright beacon of Hawaii's green energy future seems close at hand, but appearances can be deceiving. There is a huge gap between the state as it is and one in which the current dependence on imported fossil fuels is curtailed. It's going to take much vision, planning and leadership to bridge that gap.

The goal, as set out in the Hawaii Clean Energy Initiative that was adopted in 2008, is that 40 percent of Hawaii's energy come from "clean," renewable sources. That's ambitious, considering that Hawaii now generates roughly 90 percent from fossil fuels.

But the job is doable so long as the effort remains focused and carefully planned. Much of the responsibility for that falls to two state agencies that must work more closely than ever in the coming 20 years to keep the myriad players on track: the Energy Office and the Public Utilities Commission.

There are various tracks needing oversight, too. Among them:

» The contract with Hawaiian Electric Co. signed with Aina Koa Pono, a Hawaii-based company, to purchase 300 million gallons of liquid biofuels produced on Big Island agricultural land over the next 20 years.

» The state mandate for solar water-heating systems in newly built homes, and the question of whether an exemption allowing a more conventional alternative defeats the purpose of the law.

» Proposed wind farms on Lanai and Molokai that would yield a total of 400 megawatts of electricity, power to be piped to Oahu via undersea cables.

But perhaps the most consequential step was the one taken at the end of last year, when the PUC issued its final decision allowing what's called "decoupling." This is a radical departure from the conventional business model in which HECO's earnings are tied directly to energy sales -- and that must change to encourage the move away from fossil fuels.

Decoupling allows a different mechanism for setting rates. The PUC approves HECO's plans for fixed costs and the revenue needed to cover them. If revenues decline below a certain point, HECO will be able to adjust what it charges ratepayers more easily than the former lengthy rate-changing process enabled. Conversely, if revenues rise, customers are due a rebate.

Critics of the decision say that an important component was lacking in the new scheme. Raising rates should have required HECO to meet performance standards -- efficiency improvement, perhaps, or progress toward green energy goals -- to ensure that the ratepayer isn't simply underwriting business as usual. The commission, however, was unable to settle on a metric for measuring performance.

HECO maintains that it's been given benchmarks in the energy initiative that have the force of law and said the additional standards aren't essential. Unfortunately, in the absence of these standards, the commission will have a tougher job riding herd on the electric company, ensuring that the inevitable rate increases are kept within reasonable bounds.

It will also take more staffing resources than have been available in recent years for the energy office and, especially, the chronically understaffed PUC, which oversees a dizzying array of public utilities.

The Legislature should review the budget allotments to these offices carefully this year, to ensure that expertise and staff support are equal to the tasks. That includes a robust consumer advocate within the PUC.

Without question, the transformation of Hawaii to an economy with far more energy independence is good public policy. It means investments in production methods that have higher costs in the short term, costs that will be passed through to the consumer.

Taking the long view, the cost will be worthwhile if at the end Hawaii is less vulnerable to the caprices of diminishing oil supplies. But it's also the duty of the state to see that the public pays a fair price, every step of the way.

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