On April 18, 2018, the Public Utilities Commission of Hawaii (PUC) opened a Performance-Based Regulation proceeding to investigate the economic and policy issues associated with performance-based regulation (PBR), as required by SB 2939. This proceeding seeks alternative regulatory mechanisms intended to focus utilities on performance and desired outcomes, such as increased renewable energy, lower cost, and improved customer service.
On December 23, 2020, the Commission issued Decision and Order No. 37507 establishing a PBR Framework to reform Hawaiian Electric’s business model to the transition away from traditional cost-of-service regulation, under which rates are driven by system costs, towards a system that rewards the utility for exemplary performance. Financial rewards for exemplary performance in key areas will drive improvements in the integration of renewable energy into the utility’s system, increase customer choice, and accelerate the achievement of the State’s clean energy goals. An expedited pilot process will support the development of innovative new projects and service offerings, while encouraging collaboration between Hawaiian Electric and local businesses. This Order makes Hawaii one of the first states in the country to transition away from traditional ratemaking models to incentivize utilities to lead the energy transition.
On May 17, 2021, the Commission issued Decision and Order (D&O) No. 37787, establishing a suite of performance mechanisms as required by the December 23, 2020 D&O No. 37507. The suite of new performance mechanisms includes an Interconnection Approval performance incentive mechanism (“PIM”), which incentivizes faster interconnection timelines for small-scale solar and storage systems, and an LMI Energy Efficiency PIM, which incentivizes increased collaboration between the utility and the energy efficiency program administrator to provide low-to-moderate income customers with opportunities to better manage their energy consumption. The Commission also approved an AMI Utilization PIM, which incentivizes the utility to harness the opportunities offered by advanced meters to begin providing immediate customer benefits. The Decision and Order also approves a portfolio of Scorecards and Reported Metrics, which will track and measure utility performance across a wide spectrum of categories to provide valuable data that can inform future planning and development efforts.
Also in 2018, the Commission opened an Integrated Grid Planning proceeding. IGP differs from PBR in that it considers the technical process by which utilities will plan grid investments. This proceeding remains ongoing.