HECO needs to step up for future

Transitions to a new business reality can be rocky, and this week the relations between the state’s largest power utility and its regulator got a bit rocky as well.

The state Public Utilities Commission delivered a stinging rebuke to Hawaiian Electric Co. along with three separate orders affecting the utility company’s ratemaking. These are fairly complex issues, but behind the decisions seems to be a concern about how much of the costs of shifting to renewable energy will be borne by ratepayers.

It’s a rational concern, and most consumers, worried about their rising bills, undoubtedly are glad to see some kind of line drawn in the sand on their behalf.

That said, completing the transition is going to be difficult under the best of circumstances, and that means heated rhetoric probably won’t lead to a useful end.

Going forward, the hope is for a collaborative, open discussion on how to make the "decoupling tariff" program less onerous for consumers, and on how the utility should transition to become primarily an energy distributor rather than a producer.

In some of the major points in this week’s action:

» The commission reduced base rates on Maui by $7.7 million and ordered an $8.1 million refund to customers of HECO subsidiary Maui Electric Co. to account for what the commission termed "inefficient performance," mandating a plan to lower fuel costs and make better use of wind energy on the grid.

This decision "sends a strong signal that business-as-usual is not good enough," said Blue Planet Foundation CEO Jeffrey Mikulina. "By placing shareholder profits at stake, the order makes clear that using less fossil fuels, and more clean energy, is in the interest of both the public and shareholders."

» The PUC approved decoupling tariffs, producing a rate revenue increase of $77.2 million for the companies. About $43.5 million is to cover lower sales — the tariff was created to compensate for customers moving to green energy, which was necessary to incentivize renewable energy projects. The remainder is on account of rising costs and capital reinvestments. The typical electric bill on Oahu is going up $3.13 a month as a result.

» In a remarkable turn, the regulatory agency also took the opportunity to list some of its concerns about utility operations. Most startling was the assertion that "HECO companies lack a strategic and sustainable business model to address technological changes and increasing customer expectations."

It’s hard to dispute that there should be some kind of road map to show how the utility plans to stay financially healthy through the transition to green energy.

"They would like a firmer sense of what we want to be in the long run," acknowledged Robbie Alm, executive vice president of Hawaiian Electric Co.

One hitch, he said, is that there isn’t full agreement of exactly how much the utility should withdraw from power generation. Alm said what should be under discussion is HECO’s potential role as backup energy producer in the event the independent vendors — the photovoltaic solar producers, the wind companies and all others — can’t fulfill the needs. That is a reasonable point for debate as the utility seeks to fulfill the PUC demand for better strategic planning.

It’s good to see that the PUC plans to open the doors open wide, inviting various parties to join in another pursuit: an investigation into the decoupling tariff and rate adjustment mechanism for Hawaiian Electric. Alm said utility executives have expected such a re-evaluation to take place once decoupling was rolled out throughout utility operations, adding that they agree with the intent.

According to the order, the investigation is being undertaken "to ensure that these mechanisms do not insulate the HECO companies from making timely and necessary improvements to their business models, strategies and operational practices to serve customers and the public interest."

The utility is considering whether to challenge any of the orders through normal administrative channels, Alm said. Once that’s settled, it’s time for the parties — the consumer advocacy groups, environmentalists, the utility and commissioners — to sit down and chart a clearer route toward a new energy reality that doesn’t overburden ratepayers. Just as cellphone technology upheaved the telecommunications industry, the energy landscape is changing rapidly beneath our feet. Everyone needs to find their footing.