Heco plans
7.3% rate hike
The raise is needed
to avert a power crisis,
company officials say
Hawaiian Electric Co. plans to raise its base electricity prices for Oahu by 7.3 percent in the company's first increase in a decade, saying it needs the extra revenue to help keep pace with surging electricity demand.
HECO wants
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The increase would raise the average residential electricity bill about $7.03 per month to $111.67. If approved, a rate hike is not likely to go into effect until late next year at the earliest.
The increased revenue will be used to pay for current and future energy-efficiency programs, the planned purchase of additional power from independent producer Kalaeloa Partners, past investments in Heco's power grid, and various operating and maintenance costs.
Heco officials said they expect a negative public reaction to the request, but characterized those costs as essential to helping avert a potential future power crisis, a possibility highlighted by the near-blackouts last month on Oahu.
"We know any rate increase is tough on our customers," said Robert Alm, Heco's senior vice president for public affairs. "And as Hawaii's economy has struggled, we have worked hard over the past decade to avoid asking for an increase. But we can't hold off any longer."
The size of the proposed rate increase caught some by surprise, however.
"That's high compared to what they've gotten in the past, and we're going to have to take hard look at this," said John Cole, the state's consumer advocate.
Most of the increase -- about $44 million annually -- will help fund Heco's involvement in energy-efficiency projects.
These include existing Heco rebates and other programs that promote energy-saving opportunities such as solar-water heating for residential and business users. Some of the existing programs are due to expire under Heco's last rate-hike agreement in 1995.
Heco said it also plans to expand into the field of "distributed generation," in which large electricity users such as resorts or other businesses establish their own on-site power-generation and conservation projects, with Heco's help.
Heco officials pointed to last month's spike in power demand as evidence of the need to more aggressively manage consumption. On Oct. 13, record-high demand of 1,327 megawatts pushed power usage to within 5 percent of the island's generating capacity, forcing Heco to issue an emergency appeal for energy conservation.
"That kind of emergency call is no way to run a system," Alm said.
Alm said residential power usage has increased about 5 percent over the past year, which he attributed partly to the pace of residential development in the hotter Central and Leeward sections of the island and the resulting increase in demand for hot water and air conditioning there.
Heco expects it will need an additional 200 to 250 megawatts of capacity -- or the equivalent in energy saved -- by the end of the decade, and Alm said the company may still need a small additional power plant to help meet that. One megawatt is enough to power between 800 and 1,000 homes.
But the proposed rate increase gives consumers the opportunity to pay now and avoid the higher future costs of having to build another large, fossil-fuel-burning plant, Alm said.
"There is no free lunch. This is an expense that is not insignificant," he said. "But the public needs to take a deep breath and think about how to solve this problem as a community."
The PUC could approve a reduced rate increase. Heco's 1995 rate increase was approved at 1.3 percent, down from Heco's original request for a 4.1 percent hike. The company also has won much higher percentage increases in the past, including a 23.7 increase in 1992, which primarily paid for power bought from an independent producer.
Heco spokeswoman Lynne Unemori said the company's rate-hike proposal is based on expected expenses for next year. It would generate an expected 9.11 percent rate of return for the company on the prices consumers will be asked to pay. That compares to a 9.16 percent expected rate of return on the company's current rate plan. Unemori said Heco has actually earned less than that during most of the past 10 years.
"There is a misunderstanding that this (rate hike) gives us a guaranteed profit," she said. "Our whole premise is to look at what would be a fair return -- no more, no less."
Heco wants to expand its energy-efficiency programs and add others, such as a system that would allow Heco to turn off energy-gobbling devices remotely.
The company also wants to offer energy-saving devices such as fluorescent bulbs and low-flow shower heads at low cost to low-income families, and expand its rebate systems to cover a wider range of equipment.
