The Hawaii Public Utilities Commission (PUC) on Friday approved a new "decoupling" method for setting electric rates designed to encourage a clean energy economy for the state.
Under the new method, electric revenues would be de-linked, or "decoupled," from the amount of electricity (kilowatt-hours) sold.
The concept of decoupling, has been adopted for utilities in
California, Vermont, New York, Massachusetts and other progressive jurisdictions, and is viewed as a potential tool for encouraging the development of renewable power nationwide.
Under a decoupled system, the PUC approves a revenue level based on
the services it authorizes the company to undertake on behalf of
customers. Rates are then adjusted based on varying sales levels,
allowing the utility to continue recovering the costs of providing
those services, but not earn additional profit from higher sales. This
model provides greater support for energy efficiency and conservation
and is expected to help Hawaii achieve its aggressive renewable energy goals set by Governor Linda Lingle in 2008.
The decoupling proposal was submitted jointly by the Hawaii Division of
Consumer Advocacy and the Hawaiian Electric Company (NYSE:HE) as part of
a PUC docket opened in October 2008.
Under that agreement the utilities committed to much more aggressive clean energy goals including increasing the proportion of renewable energy in Hawaii from 25% by the year 2020 to 40% by the year 2030, adding new energy efficiency goals, implementing a feed-in tariff to speed the addition of renewable energy projects, and pursuing a smart grid that includes advanced metering to give customers more options such as residential time-of-use electric rates.
Under the agreement with the Consumer Advocate, rates also would increase or decrease between formal rate cases largely based on independent cost indices and adjustments would be allowed to recover PUC-approved capital additions.
The PUC’s decision requires the Consumer Advocate and the Hawaiian Electric utilities to propose a final decision and order within 30 days, detailing the components and implementation for decoupling. Other parties in the docket will be able to comment on the proposed order. The PUC must issue a final decision and order before decoupling can be implemented.
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