Hawaii PUC Rethinks The Economics Of The Utility Industry
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Hawaii has the most aggressive renewable energy mandate of all US states — 100% by 2045. Reaching that goal means an end to business as usual in the utility industry. For more than a century, it has been all about selling more and more kilowatt-hours. But as the world careens toward an uncertain future caused in large part by carbon emissions from generating electricity, new constructs are needed to meet the needs of customers while slashing the emissions attributable to the industry.
Hawaii’s public utilities commission is considering how to amend the traditional rules of the game to support the state’s 100% renewable energy goals while insuring utility companies are not asked to shoulder more than their fair share of the burden associated with those changes. Its latest proposal, known as performance-based rates, “encourages electric utilities to increase [capital] investments, thereby increasing the utility’s associated return on investment,” reports Utility Dive. This creates what the PUC calls “infrastructure bias” to deploy capital intensive solutions.
The purpose of the new PBR rules is to “motivate utility companies to employ cost-savings measures, reduce electricity sales, improve energy efficiency, increase customer choice, integrate customer-sited generation and establish new and innovative services.” It’s all part of an initiative to modify the present regulatory framework so that it better aligns utility company interests with the public interest. Hawaiian Electric Company (HECO) is the largest utility company in the Hawaiian islands. One new aspect of the PUC proposals would require utility companies to bear a portion of any future fuel increases until the goal of 100% renewable energy is reached. At present, such costs are simply passed on in full to rate payers.
HECO has been actively participating in programs to reduce consumption of electricity, including a demand response program that most people would call a “smart grid” arrangement. It will use the power of the internet of things to connect appliances, electric vehicles, solar panels, and battery storage systems so they can all work together. The utility company believes such initiatives, which will begin on the islands of Oahu and Maui first before being expanded to other islands, will reduce overall demand by hundreds of megawatts. In a related development, UK firm Ovo last week announced it is now offering the first EV charger optimized for vehicle to grid operation.
EV owners will be incentivized to charge their cars during periods of low demand or during hours when there is excess renewable energy available. Similarly, new tariffs for rooftop solar customers will reward them for feeding power back to the grid during the peak demand hours of 4 pm to 9 pm but will receive no compensation for the electricity they provide to the grid at other times.
Utility companies obey all the normal rules of commerce. They seek to maximize their income and return on investment. By refocusing the rules that govern the industry, the Hawaii public utilities commission is taking important new steps to align the interests of companies, customers, and the environment. Hopefully, other state utilities commissions will take notice of what is happening in Hawaii and adjust their policies accordingly.
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