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August 26, 2020

Energy Regulatory Innovation in Hawaii

Categories: Energy

"Every few millennia evolution leaps forward."

– Dr. Jean Grey, X-Men (2000)

 

The Smart Electric Power Alliance (SEPA) recently named the Hawaii Public Utilities Commission (the “Commission”) as the Regulatory Innovation Power Player of the Year. This award recognizes the Commission’s current efforts to update Hawaiian Electric’s regulatory framework.


The electric utility business model has remained largely unchanged over the past 100 years. As a result, energy regulation has only marginally shifted to accommodate technological innovations in the electricity sector. In Hawaii, a number of trends in the energy sector (i.e. distributed energy resources, energy efficiency, public policy) have confronted both Hawaiian Electric (the utility) and the Commission, creating a need to adjust the regulatory landscape. Since the early 2000s, the Commission has implemented a number of regulatory mechanisms (i.e. decoupling, revenue adjustment mechanisms, and performance incentives) to more closely align the utility with the state’s public policy goals and the evolution of renewable energy technologies.

However, in the last ten years, there has been more innovation in Hawaii’s regulatory landscape than over the last century. While efforts prior to the Performance Based Regulation proceeding have served as solutions to specific challenges faced by the electric utility and its ratepayers, the potential for a more holistic evolution of energy regulation in the state is currently underway, which will chart the course for Hawaii’s energy systems for the next century. As the past can always serve as a helpful guide, the Energy Regulatory Innovation timeline is intended to reflect the incremental yet diverse set of approaches Hawaii has taken to prime the state for a 21st century regulatory framework.