Honorable Calvin K.Y. Say

Speaker, House of Representatives

Twenty-First State Legislature

Regular Session of 2001

State of Hawaii

Sir:

Your Committee on Energy and Environmental Protection, to which was referred H.B. No. 174 entitled:

begs leave to report as follows:

The purpose of this bill is to encourage the public utilities to seek fuel price stabilization by limiting the recovery of costs or prices of fuel used in the public utility's production of electricity.

Hawaii Renewable Energy Alliance, Sierra Club, Hawaii Chapter, Ka Makani O Kohala Ohana, Inc., and several individuals testified in support of the bill and the Department of Business, Economic Development, and Tourism testified in support of the intent of the bill.

The Public Utilities Commission submitted testimony and noted that safeguards are currently in place to ensure the appropriate use of fuel adjustment clauses by the utilities. They were also concerned that this bill may have unintended results, such as multiple rate cases, higher rates to the ratepayers, and the Commission's reduced ability to respond to situations that may jeopardize adequate, safe, reliable, and efficient energy services at fair and reasonable prices.

The Consumer Advocate and Hawaiian Electric Company, Inc., and its subsidiaries, Hawaii Electric Light Company, Inc., and Maui Electric Company, Limited testified in opposition to the bill, and Kauai Electric asked that the measure be held.

Your Committee finds that there are three components to the energy cost adjustment charge, and that adjusting the fuel price portion of the charge may result in unintended adjustments to the other components: generation mix and system heat rate.

After careful consideration and collaboration with the Consumer Advocate, your Committee has amended the bill to encourage the public utilities to minimize its fuel and energy costs through the efficient deployment of all available generating resources by limiting the recovery of fuel costs used in the public utility's production of electricity to increases resulting solely from the change in the unit price of fuel and purchased energy.

Your Committee has also added a sunset date to the above provision and requested that the PUC prepare a report for the legislature evaluating the use and application of automatic rate adjustment clauses with a recommendation as to whether this section should remain repealed, be reinstated, or be reinstated and amended to provide for a limitation on the pass through of increases in the unit price of purchased energy and fuel.

As affirmed by the record of votes of the members of your Committee on Energy and Environmental Protection that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 174, as amended herein, and recommends that it pass Second Reading in the form attached hereto as H.B. No. 174, H.D. 1, and be referred to the Committee on Consumer Protection and Commerce.