Hawaiian Electric Co. customers installed a record amount of solar power generating capacity on their rooftops last year, causing a reduction in utility revenue that HECO says it will have to make up with an increase in rates.

Customers on Oahu, Hawaii island, Maui, Molokai and Lanai installed enough photovoltaic (solar) panels connected to HECO’s grid to generate a maximum 30 megawatts of electricity, the same generating capacity as the new wind farm in Kahuku. That was nearly triple the 11.5 megawatts of capacity installed in 2010.

While the homeowners and businesses that installed photovoltaic panels shaved millions of dollars off their electric bills, their savings translated into a loss of $7.4 million of revenue that HECO would have normally used to pay for fixed costs, such as meter reading and billing. HECO estimates that it will have to raise rates by 0.05 cent per kilowatt-hour on Oahu, 0.17 cent a kilowatt-hour on Hawaii island and 0.16 cent a kilowatt-hour in Maui County to recover the shortfall, which the utility calls the "lost contribution to fixed costs." HECO will apply to recover the lost contribution in a future rate case.

Although owners of photovoltaic systems are able to generate their own power when there is enough sunlight hitting their panels, they still have to rely on HECO’s grid when clouds roll in and at night. HECO is obligated to provide them with electrical service even when they aren’t helping pay for the fixed costs HECO needs to collect to keep its system functioning.

So HECO customers who don’t have solar panels will see their rates go up because of the increase in customers who do.

For a typical customer who uses 600 kilowatt-hours a month, the possible rate increase would be 30 cents a month on Oahu, about $1 a month on Hawaii island and Maui.

The head of the state Public Utilities Commission said regulators are aware that the situation raises a fairness question, adding that the panel eventually will address it.

"It’s not equitable. It’s something the commission will have to look at closely," said Hermina Morita, PUC chairwoman. "We’re sorting through all the commission’s priorities with mandatory deadlines on rate cases and power purchase agreements. It’s a constant juggling act, but this is one of the issues that we have to deal with," Morita said.

HECO officials said the situation is an example of the trade-offs that come with switching to renewable energy sources.

"Customers who net meter (send power into the electric grid) are still connected to the grid and take advantage of grid services but do not pay per kilowatt-hour for what they generate themselves," said Peter Rosegg, HECO spokes­man. "Thus they do not contribute to the cost to maintain the system of wires and generators that other customers help pay for. Currently, the value of adding more customer-sited renewable energy and using less oil is considered to outweigh this lost contribution to fixed costs."

Rep. Cynthia Thielen (R, Kailua-Kaneohe) said part of the problem is that HECO is being pulled in two different directions. It has a renewable energy mandate that sometimes conflicts with its duty to shareholders, she said. "This is why the utility needs to be restricted to distribution of electricity only. It’s another example of why HECO shouldn’t be in charge of both generation and distribution."

Thielen, a member of the House Energy and Environmental Protection Committee, supports a bill that would restructure HECO and have it sell all of its generation facilities to independent power producers.

Oahu had the largest amount of photovoltaic power installed under HECO’s net energy metering program last year at 18.5 megawatts. That was up from 7.2 megawatts in 2010. There were 950 streets in 25 ZIP codes on Oahu where the amount of installed photovoltaic power was 15 percent or more than the peak load of the particular circuit as of December. That was up from 242 streets in 13 ZIP codes just six months earlier.

Once the photovoltaic penetration on a circuit reaches 15 percent of peak load, HECO can require a homeowner or business seeking to install photovoltaic panels to pay for a study to determine what impact the additional panels would have on the circuit. The studies typically cost from $5,000 to $15,000 for a homeowner to $50,000 and up for a business, according to photovoltaic installers.