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Hawaiian Electric Adopts New Performance Based Regulation Framework Tied To Sustainability

(Credit: Hawaiian Electric)

Hawaiian Electric, the state’s largest utility, has adopted a new Performance Based Regulation (PBR) Framework based on a recent order from the Hawaii Public Utilities Commission (PUC) approving a portfolio of new Performance Incentive Mechanisms (PIMs), Scorecards, and Reported Metrics. The Framework became effective in June this year.

The new Framework is a comprehensive set of utility regulations to align the Hawaiian Electric financial interests with Hawaii’s clean energy goals and customer needs. The order represents the culmination of over two and a half years of dedicated work by a broad spectrum of key stakeholders, including Hawaiian Electric, the State Consumer Advocate, local governments, clean energy companies, and environmental groups.  

The PBR Framework includes a Customer Dividend, which will automatically provide approximately $12.6 million in rate reduction in 2021, and is estimated to provide approximately $69.9 million in total rate reductions through 2025 — Hawaii has the highest electricity rates in the nation. The rate reduction in 2021 is equivalent to approximately $1.27 per month for a typical residential customer.

The portfolio’s suite of PIMs incentivize accelerated achievement of the state’s renewable energy goals; faster interconnection of small scale Distributed Energy Resource (DER) systems; increased procurement of grid services from customer-based programs; improved collaboration with Hawaii Energy to reach low-to-moderate income customers and promote energy saving measures; and improved utilization of next generation grid modernization infrastructure, which is currently being rolled out by Hawaiian Electric. 

The Framework’s Scorecards and Reported Metrics will track utility performance across a wide range of performance areas, collecting valuable data that can support future planning efforts and improve system operations and outreach to customers.  

Additionally, to foster innovation, a new Pilot Process will provide regulatory flexibility and expedite the implementation of pilots that test new technologies, programs, business models, and other arrangements.

The Framework is based on 12 priority outcomes:

Goal: Enhance Customer Experience

  1. Affordability
  2. Reliability
  3. Interconnection Experience
  4. Customer Engagement

Goal: Improve Utility Performance

  1. Cost Control
  2. DER Asset Effectiveness
  3. Grid Investment Efficiency

Goal: Advance Societal Outcomes

  1. Capital Formation
  2. Customer Equity
  3. GHG Reduction
  4. Electrification of Transportation
  5. Resilience

“This decision underscores our commitment to transforming Hawaii’s energy future,” said PUC Chair James Griffin. “Though we faced challenges developing these first-of-their-kind performance mechanisms, we all understand the importance in completing this part of the PBR Framework and ensuring the regulatory structure is well-rounded and balanced.”

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