Electric bills could go up if PUC approves rate proposal
Maui Electric Co. is asking the Public Utilities Commission to approve a proposed change in what consumers are charged for the utility’s “Revenue Balancing Account.”
The money generated by the “RBA Adjustment” helps MECO pay for fixed costs and offset the loss of revenue from people installing rooftop solar power systems.
Those who invest in solar systems find refuge from Hawaii’s highest-in-the-nation power rates. Photovoltaic system owners pay only an $18 monthly connection fee to MECO’s power grid.
Now, nonphotovoltaic system MECO customers pay an RBA adjustment that’s a fraction of a cent (0.008071) for each kilowatt hour consumed in a month. A typical Maui residential consumer uses 600 kilowatt hours monthly and is charged $4.84 for “revenue balancing.”
Under the proposed new RBA charge, consumers would pay a little more than a cent (0.0163) for each kilowatt consumed, increasing MECO’s annual revenue by nearly $8.9 million.
For the typical consumer, that means the monthly RBA charge would increase to $9.78, an increase of $4.94. An average power bill is around $200 per month. On Lanai and Molokai, an average consumer uses 400 kilowatt hours per month, and typical residents there would pay $3.29 more, according to a MECO announcement.
Maui County Energy Commissioner Doug McLeod said that Mayor Alan Arakawa is urging Maui Electric not to seek any further rate increases “until it is operating under a sustainable energy plan.”
“We are in active discussions with them on what that process would look like,” McLeod said.
MECO spokeswoman Kau’i Awai-Dickson said that the revenue balancing account was part of a “decoupling” provision approved for the utility in 2012.
“Decoupling is a regulatory model adopted by many states that supports increased integration of renewable energy and encourages higher levels of energy efficiency,” she said in an email. “Traditionally, electric utilities’ revenues were based on the amount of electricity their customers used. However, that formula doesn’t support our state’s vision of a clean energy future. Hawaii’s electricity is largely generated by burning imported oil. To reach our state’s clean energy goals, we must find ways to use less oil.
“Decoupling breaks the link between electricity usage and Maui Electric’s revenues, but it doesn’t provide a guaranteed amount of profit to Maui Electric,” Awai-Dickson said.
In recent discussions with MECO, the Arakawa administration has “specifically identified decoupling as an aspect of the present system that is unsustainable,” McLeod said. “The residential minimum charge is meaningfully less than what the company calculates as its average monthly cost divided among all customers. Using round numbers, MECO charges less than $20 per month for service (to customers with rooftop solar systems) that costs $50 per month. Decoupling answers who pays that other $30.”
West and South Maui Sen. Roz Baker, who chairs the Senate Commerce and Consumer Protection Committee, also questions the minimal connection charge for those with photovoltaic systems to connect with the power grid.
The minimum charge doesn’t cover the utilities’ transmission and backup power costs, although consumers with solar systems still remain connected to the grid to draw power at night or on cloudy days, Baker said.
People who rent or those who live in high-rise apartments don’t have the option of getting photovoltaic systems, and the minimal charge for those with solar power shifts the burden of paying utility costs to those who have lower incomes and those without the ability to get solar systems.
“To me, that’s not the way to do it,” Baker said. “The rates for the interconnection are not sufficient.”
State lawmakers are urging the PUC to examine the situation, which it has already initiated, she said.
The proposed higher RBA charge stems from several factors, Awai-Dickson said.
“A major part of the increase is to adjust Maui Electric’s total revenues back to the level approved by the PUC in Maui Electric’s 2012 rate case,” she said. “This is to ensure the previously approved costs that are incurred by Maui Electric to meet its obligation to serve all customers (including customers with solar who still remain connected to and use the grid when their solar systems are not producing power) are still covered.
“In years where actual revenues are higher than what was approved in the last rate case, this adjustment would be a decrease,” she said. “In 2013, actual revenues were lower than those approved in the 2012 rate case. One significant reason for the decrease is due to customers who have converted to rooftop solar systems.”
For Maui Electric, 8 percent of its customers have rooftop solar power systems, according to a Jan. 22 announcement from Hawaiian Electric, Maui Electric and Hawai’i Electric Light. As of Dec. 31, Maui Electric had 5,246 customers generating a capacity of 41 megawatts. That’s more than 10 percent of Hawaiian Electric utilities’ solar capacity of 300 megawatts statewide.
Awai-Dickson said that the other main reason for the proposed increase in the RBA is to help pay for more than $100 million in investments in capital projects placed in service in 2012, 2013 and part of this year for customer service.
“These include projects to improve reliability, serve new customers, address safety and environmental requirements, and help integrate more renewable energy,” she said.
An example of one project is the installation of a battery energy storage system to demonstrate the ability to integrate more variable renewable energy, she said. And, a small portion of the adjustment is tied to cost increases largely due to inflation based on the independent gross domestic product price index.
This year’s adjustment also includes a credit due to an “earnings sharing” mechanism that refunds money back to customers when the utility rate of return exceeds the target level approved by the PUC, she said.
MECO’s proposed change in what electricity consumers would pay for power comes as Hawaii continues to have the highest power rates in the United States. According to the U.S. Energy Information Administration, the average U.S. power consumer pays 11.65 cents per kilowatt hour. In Hawaii, residential consumers paid 37.4 cents per kilowatt hour in January, the administration reported.
According to figures provided by Maui Electric, residential power consumers on Maui island pay 37 cents per kilowatt hour. Those on Lanai pay 46 cents, and those on Molokai pay 45 cents, officials said.
Awai-Dickson said that the utility has multiple rate schedules for commercial customers, which differ depending on the energy needs of the customer.
The Hawaii Energy Office reports that Hawaii’s high cost of electricity is tied to it being the only state that depends so heavily on petroleum for its energy needs. Nationally, less than 1 percent of electricity is generated using oil. In 2011, Hawaii relied on oil for 74 percent of its electricity generation, the office said.
According to the state Department of Business, Economic Development and Tourism, Maui Electric had 54,500 residential customers on Maui in 2012, 2,600 on Molokai and 1,400 on Lanai. The utility had 9,000 commercial customers on Maui, 500 on Molokai and 200 on Lanai.
* Brian Perry can be reached at email@example.com.