Hawaii is overhauling the way electricity rates are set as its drive to 100% renewable electricity forces it to align the rate-setting process with the integration of green and distributed energy sources.
The Ratepayer Protection Act sets a 2020 deadline for establishing different incentives and penalties that link electric utility revenues to the local utility’s success at hitting various customer-focused performance metrics. They include electric service reliability, reduced volatility of electric rates, timely execution of competitive procurements, the rapid integration of renewable energy sources and the quality interconnection of customer-sited resources such as solar and battery storage.
In passing the bill, lawmakers expressed concern that the traditional way electric utilities get paid would result in higher costs to modernize the electric grid, due to a focus on utility-owned projects to the detriment of more efficient or cost-effective options, such as distributed energy resources owned by customers or projects implemented by independent third parties.
The legislation “is a responsible step forward helping utilities transition to a sustainable business model that can survive disruption in the energy sector,” said Hawaii State Representative Chris Lee, Chair of the Committee on Energy and Environmental Protection, in a statement.
According to the Hawaii Solar Energy Association (HSEA), the signing of the bill makes Hawaii the first state to have performance-based ratemaking mechanisms in statute. Hawaii is currently also the only state in the nation with a target to achieve 100% renewable electricity, with a deadline set for 2045.
“The time to make these changes is now, before billions of dollars are spent in rebuilding our outdated electrical networks,” said Anne Hoskins, chief policy officer at solar solutions company Sunrun. “Rooftop solar and home batteries are allowing users to choose a system that maximizes public benefits, not utility shareholder profits.”