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PUC considering 6% HELCO general rate increase

HELCO President Jay Ignacio, left, waits to testify at a PUC hearing for a proposed rate increase by the company.

Photography and story by Baron Sekiya | Hawaii 24/7

A Public Utilities Commission hearing on a proposed Hawaii Electric Light Company rate increase was poorly attended by the public with mostly HELCO employees in the audience Thursday night (Feb 25) at Hilo Middle School. It was the second hearing – the first was Feb. 22 in Kona.

Jay Ignacio, president of HELCO, explained why the rate increase is needed and how the average household would be affected. For example, Ignacio said, a customer’s rate could increase 1.4% to 8% under a proposed system called ‘decoupling.’

Decoupling would allow HELCO to change the rate it bills customers by increasing the rate if energy use rises. A customer using less electricity would be rewarded with a lower rate per kilowatt hour (kWh) than a customer consuming larger amounts.

Ignacio said under the proposed system a residential customer using 500 kWh a month would see their electric bill increase by $9.57.

Ignacio said the rate increase would be used to pay for projects to upgrade, replace and install new systems for electric production and distribution. A 16-megawatt steam generator was put into service in June 2009 at Keahole Generating Station and uses exhaust heat from existing turbines to generate electricity.

Ignacio said no new fossil fuel generating systems are planned for the Big Island with all future systems using renewable energy sources such as geothermal, solar, wind, hydroelectric, biomass and possibly waste-to-energy systems. Ignacio said HELCO charges more for electricity than the other islands due to the rural nature of the Big Island with fewer customers along each mile of transmission line.

Pat Kahawaiolaa, of Keaukaha, was the only member of the public to testify at the PUC hearing and questioned if future rate increases would be used to rectify current issues with power plants near Hawaiian Home Lands, specifically any ‘pollution’ output by the generating plants.

John Itamura from the Department of Consumer Advocacy was present to listen to public testimony on the rate increase and urged the public to contact them should there be any concerns with the proposals. The public can contact the DCA at hawaii.gov/dcca/dca/contact

Text of Jay Ignacio’s presentation

Hawaii Electric Light Company
Public Hearing Statement
Docket No. 2009-0164
HELCO Application for a Rate Increase

February 22, 2010
Kealakehe Intermediate School Cafeteria, Kailua-Kona

February 25, 2010
Hilo Intermediate School Cafeteria, Hilo

Introduction

Good evening Chairman Caliboso, Commissioner Cole, Commissioner Kondo and members ofthe audience; My name is Jay Ignacio and I am President of Hawaii Electric Light Company.

Let me begin by thanking all of our customers who came tonight to share their thoughts. Your feedback is important to us. My staff and I will be available after the hearing and will be available to talk with you if you have further questions or comments.

Like everyone else, we have been doing our best to control costs in this tough economy. Even in the best of times, we know that any rate increase is hard on our customers. Therefore, we never take the decision to ask for one lightly. However, we also need to maintain and upgrade our electric system by making the investments that will allow the integration of even larger amounts of renewable energy, make better use of fuel and improve reliability.

We have invested millions of dollars HELCO’s current facilities. Our requested increase would cover more than $289 million in new capital projects since 2006 to improve service reliability.

We are also asking that this case serve as the starting point for a potential new regulatory model called “decoup|ing.” This model could move the utility away from earning revenues based on the amount of electricity sold and instead encourage us to help our customers use less electricity. In a separate proceeding, the specifics of the decoupling mechanism are being established to delink the earning of revenues from electricity usage.

So with that as a background, let me discuss the specifics of this particular rate increase.

Tonight, I will briefly cover how much of an increase we are asking for, what the increase will be used for, and how it will affect customer bills.

How much of an increase is HELCO reguesting and how will it be structured?

HELCO is requesting an overall net increase of 6.0% or $20.9 million in base revenues. However, we have proposed opportunities for customers to save money and to fairly shift more of the responsibility to those who contribute the most to high electricity costs.

First, we are asking the Commission to approve an adjusted residential tiered rate structure so those who use less electricity will pay lower rates. Under this plan, the majority of HELCO customers will see smaller monthly increases in their electric bill, in the range of 1.4% to 5.8%. Those who use a lot of electricity will see larger increases in their monthly bill, for example, approximately 8.0% for a residence using 1,000 kWh. This encourages energy conservation and efficiency and rewards customers who use energy wisely.

At the same time, recognizing that some low-income families have large households with higher electricity use, we have also developed a provision to cap the electric rate applied for certain low-income households so that the tiered rate system does not unduly burden these families. In a separate application, we have also proposed a Lifeline Rate Program that, if approved, will replace the tiered rate cap for low income customers.

Second, to encourage use during off-peak times when power generation reserves are greater, the proposal also includes a voluntary time-of-use rate option for residential and commercial customers, which would provide lower electric rates for off-peak usage times and higher electric rates for peak usage times.

Why is a rate increase needed?

The major reasons for this requested increase are to help pay for capital improvements and increased operating and maintenance costs.

Among the major projects is the 16 megawatt ST-7 steam generating unit at the Keahole Generating Station, which started commercial service in June 2009. Instead of using oil, the exhaust heat from two existing combustion turbines is used to run the new steam turbine to generate electricity. In addition to significantly increasing efficiency and saving fuel, the new unit also adds generating capacity in West Hawaii, which now accounts for about half of the is|and’s demand for electricity.

Another key project involved upgrades to two major West Hawaii transmission lines, which were completed in November 2008 and December 2007, respective|y. These upgrades improve reliability, reduce transmission line losses and helps prepare the HELCO system to accept more renewable energy.

Other significant capital projects included power plant controls upgrades and other upgrades or replacements to increase the efficiency and reliability of our older generating units, and also investments in overhead and underground cables, as well as transformers, poles, meters and other facilities to maintain reliable service and fulfill new service requests from customers.

As we have said before, HELCO does not plan to add any more fossil fuel generation on our island. Going forward, we anticipate that any new generation would come from renewable resources, such as geothermal, solar, wind, hydro, biomass or even waste-to-energy.

When it comes to integrating renewable energy, HELCO continues to set standards for the rest of the country. In 2009, more than 30% of electricity sold on this island came from renewable sources, making HELCO a national leader in renewable energy use.

What is the effect of the rate increase on customer bills?

What most of our customers will want to know is “how will this increase affect my electric bilI?” If the full request is approved, a “typicaI” HELCO residential customer using 500 kWh a month would see their bill go up by $9.57.

Again, the tiered system we are proposing is intended to encourage conservation and lessen the impact on residential customers who use smaller amounts of electricity. If approved, we anticipate that the earliest a rate increase might take effect would be near the end of this year.

Conclusion

Thank you for this opportunity to briefly describe our rate increase application. As I mentioned earlier, we will also be available after the public hearing to answer your questions and concerns.

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