Performance Based Regulation (PBR)

The Hawaii Public Utilities Commission (“PUC”) has opened a proceeding to investigate performance-based regulation for the Hawaiian Electric Companies. Performance-based regulation (“PBR”) includes a set of alternative regulatory mechanisms intended to focus utilities on performance and desired outcomes, such as increased renewable energy, lower cost, and improved customer service.

PBR Framework Takes Effect June 1, 2021

The Hawaii Public Utilities Commission (PUC) issued a decision and order approving a portfolio of new Performance Incentive Mechanisms (“PIMs”), Scorecards, and Reported Metrics. The portfolio of performance mechanisms goes into effect today, June 1, 2021.

Performance mechanisms are key components of the Performance-Based Regulation (PBR) Framework for the Hawaiian Electric Companies. The PBR Framework was approved by the PUC in December 2020, and 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. The rate reduction in 2021 is equivalent to approximately $1.27 per month for a typical residential customer.

Building on the historic transformation of the electricity industry in Hawaii, this portfolio of Performance Mechanisms offers additional financial incentives and penalties targeting exemplary performance in achieving the State’s clean energy goals. The PUC continued the collaborative process utilized to develop the PBR Framework, and worked with a wide variety of stakeholders to finalize the critical details of the performance mechanisms.

Decision and Order No. 37787

On May 17, 2021, the Hawaii Public Utilities Commission issued a decision and order approving the final details of a suite of new performance mechanisms for the performance-based regulatory framework (PBR Framework) for the Hawaiian Electric Companies established last December.

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.

This decisions is a continuation of the Commission’s years-long efforts to transform Hawaii’s energy sector, and builds on the successful collaboration of a diverse group of stakeholders, including the Hawaiian Electric Companies, State and County government agencies, clean energy companies, and non-profit organizations, who have continued to help propose, develop, and implement new ideas to facilitate this transformation.

Phase 2 Decision and Order

On December 23, 2020, the Hawaii Public Utilities Commission (PUC) issued a decision and order approving a new performance-based regulatory framework (PBR Framework) for the Hawaiian Electric Companies. The PBR Framework continues 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. The portfolio of regulatory mechanisms in the PBR Framework will strengthen the utility’s financial condition and benefit customers by lowering utility costs, accelerating the integration of renewable energy resources, and improving customer service and engagement.

Under the PBR Framework, the Companies will be challenged to immediately control costs, improve efficiency, and reduce customer rates. At the same time, 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. Safeguards, including regular reviews by the Commission and an Earnings Sharing Mechanism, will help protect the utility’s financial condition during this transition, and ensure that unintended consequences are timely addressed.

This decision 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.

Phase 1 Decision and Order

On May 23, 2019, the Hawaii Public Utilities Commission (PUC) issued a decision and order to prioritize new regulations designed to lower electricity costs, improve customer service, expand customer choices, and cost-effectively meet the state’s clean energy goals. This decision and order concludes Phase 1 of the PUC’s Performance-Based Regulation (PBR) proceeding and establishes the specific PBR mechanisms that will be developed in Phase 2 of the proceeding.

Staff Proposal

Hawaii Public Utilities Commission (PUC) staff issued a proposal to adopt updated performance-based utility regulations to encourage the Hawaiian Electric Companies to cost-effectively achieve Hawaii’s energy goals and deliver savings to customers.

Docket parties may file Statements of Position commenting on the Staff Proposal by March 8, 2019.

Related Information

Workshops

Phase 1 Workshop #1 – July 23 & July 24, 2018

Phase 1 Workshop #2 – September 27, 2018

Phase 1 Workshop #3 – November 28, 2018

Phase 2 Workshop A – August 7, 2019

10:00 AM at Hawaii Public Utilities Commission Hearing Room

Watch Live

  • Live TV on  ‘Ōlelo Community Media Channel 49
  • Live Stream online on https://olelo.org/tune-in.  [Click “WATCH NOW!” button under Channel 49]

Presentation Slides

Hearing

Hearing on the PUC’s investigation into Performance-Based Regulation, Docket No. 2018-0088

The Public Utilities Commission (“Commission”) has scheduled a virtual hearing to present questions to the Parties in the Commission’s investigation into Performance-Based Regulation (“PBR”). This hearing represents the culmination of over two years of collaborative working group meetings, workshops, briefing, and discovery, during which the Parties have developed and refined a suite of proposed regulatory mechanisms to implement the transition away from cost of service regulation towards PBR for the Commission’s review and consideration. The hearing will take place from Monday, September 21, 2020, through Wednesday, September 23, 2020, with each hearing day beginning at 9:00 a.m. and ending at approximately 5:00 p.m. The Commission will host the hearing through Webex for the parties, but will live-stream the hearing to the public through a separate YouTube channel. Links to the PBR docket record and the YouTube link to view the hearing are provided below.

Hearing Live-Stream on YouTube: