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Tuesday, September 20, 2005



HECO cuts its
proposed rise in rates

The request after state negotiations
is lower but far from finalized

Ten months after it initially asked regulators for permission to raise electricity rates by more than 7 percent, Hawaiian Electric Co. Inc. has significantly reduced the percentage of the increase it is seeking to tack on to bills.

Although HECO's current request is only part of what it will ultimately seek, and subject to approval by the state Public Utilities Commission, the now 3.4 percent request would create less shock for residential and business customers than HECO's original one.

For the average residential customer using 600 kilowatt-hours per month, the proposed rate increase would add $4.29 to a typical electric bill, raising the monthly bill to about $117 from about $113, said Lynne Unemori, director of corporate communications for HECO.

That compares with an increase that would have added about $6.50 to the typical bill, she said.

The change is the result of a series of adjustments to the request that HECO has implemented amidst negotiations with the state Department of Commerce and Consumer Affairs' Division of Consumer Advocacy, which represents the public in rate cases before the PUC.

The most recent development came yesterday when HECO announced a settlement with the Consumer Advocacy Division over some components of the proposed rate increase.

John Cole, executive director of the division, stressed that the amount of HECO's request is far from final.

"Nothing will be final until the PUC says so," said Cole, who represents the public's interest in regulated utility hearings. "If they don't like it or approve the whole thing, it could be back to the drawing board."

The other unknown is how much of a rate increase HECO will seek to cover energy conservation programs it is encouraging customers to implement.

The rationale for such "demand-side management" programs is that with environmental concerns limiting opportunities for the development of new power plants, HECO must work to ease the increasing demand for electricity.

For instance, HECO gives rebates to residential customers who buy the solar water heater systems. The company initially sought to pay for those rebates by lumping the cost of the program, and others like it, into HECO's original request for a 7.3 percent rate increase.

But after the original filing, the PUC asked HECO to split its rate request into two: one of about 5.4 percent to cover costs of traditional infrastructure, the other of about 1.9 percent to cover the conservation programs. The PUC would then consider the two separately.

Since then the 5.4 percent increase had been tweaked down to about 4.1 percent before yesterday's settlement with the consumer advocate, which led to HECO's current 3.4 percent request.

Meanwhile, the 1.9 percent rate increase for conservation has come under a complete re-evaluation, Unemori said.

"The package of programs might be different," she said.

The result, Unemori said, is that the 1.9 percent request is no longer part of HECO's official request to the PUC.

"That's an old number, and unfortunately, I don't have a new number," she said.

Cole said he could not predict what HECO might ask for to cover costs of conservation programs. But he said the company almost certainly will ask for something, and that would increase the 3.4 percent rate increase HECO now seeks.

HECO's adjustment comes as consumers already are paying more for electricity because of higher fuel prices, which HECO passes on to customers.

HECO's rate increase is based on operating revenue, so even with a rate increase lower than the one proposed in November, HECO still can secure considerable additional revenue.

For example, HECO's 3.4 rate increase would raise an additional $42 million per year for the company, Unemori said. That compares with $74 million HECO would have raised with the 7.3 percent increase in November.

Unemori stressed that HECO knows the rate increase is likely to upset ratepayers. But she said the company, which has invested $250 million in infrastructure since its last increase in 1995, has little choice but to raise rates.

"We know as we did when we originally filed the request that any rate increase would be hard on customers," she said. "But it has been 10 years since our last rate increase, and we have made substantial investments to improve reliability that we have to cover the costs of."



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