STAND. COM. REP. NO. 2478
Honolulu, Hawaii
RE: S.B. No. 2939
S.D. 1
Honorable Ronald D. Kouchi
President of the Senate
Twenty-Ninth State Legislature
Regular Session of 2018
State of Hawaii
Sir:
Your Committee on Commerce, Consumer Protection, and Health, to which was referred S.B. No. 2939 entitled:
"A BILL FOR AN ACT RELATING TO ENERGY,"
begs leave to report as follows:
The purpose and intent of this measure is to require the Public Utilities Commission, on or before January 1, 2020, to establish performance incentive and penalty mechanisms that directly tie electric utility revenues to the utility's achievement on performance metrics.
Your Committee
received testimony in support of this measure from the Blue Planet Foundation, Hawaii Solar
Energy Association, and Sierra Club of Hawai‘i. Your Committee received testimony in
opposition to this measure from the Hawaiian Electric Company, Inc., and Land
Use Research Foundation of Hawaii.
Your Committee received comments on this measure from the Division
of Consumer Advocacy of the Department of Commerce and Consumer Affairs, Public
Utilities Commission, and Kaua‘i Island Utility Cooperative.
Your Committee finds
that utility rates across the country have traditionally been set using a
cost-plus system, wherein utility profits are generally set as a percentage of
utility expenditures. Under this type of
ratemaking system, electric utilities are not directly rewarded for reducing
consumer bills, adding renewable energy, or increasing the resiliency of the
system. In contrast, a performance-based
ratemaking system ties utility revenues to the achievement of certain
performance benchmarks, which in turn aligns the financial interests of utility
shareholders with the interests of a state and ratepayers. Your Committee further finds that this
measure therefore establishes a deadline for the Public Utilities Commission to
establish performance-based incentive and penalty mechanisms and provides
further guidance to the Commission on certain benchmarks that are consistent
with state goals and longstanding regulatory guidance.
However, your Committee has heard the concerns that this measure encompasses all electric utilities in the State, including member-owned cooperative electric utilities. According to testimony received by your Committee, because any incentives or penalties allowed in a member-owned cooperative's rates are essentially collected from the cooperative's ratepayers and paid to the cooperative's shareholders -- which are one and the same – the concept of performance-based financial incentives and penalties is moot, as a member-owned cooperative's interests are already inherently and fundamentally aligned with the interests of its members. Your Committee understands these concerns and concludes an amendment to this measure is therefore necessary.
Your Committee has amended this measure by:
(1) Clarifying the performance metrics to be considered by the Public Utilities Commission, by:
(A) Removing language regarding exceeding the State's renewable portfolio, as this metric is sufficiently covered in the metric on rapid integration of renewable energy sources;
(B) Clarifying required consideration of the volatility and affordability of electric rates and bills that customers are asked to pay; and
(C) Removing language regarding fair compensation for utility employees, as adoption of this metric could have led to unintended consequences for consumers;
(2) Exempting member-owned cooperative electric utilities from the requirements of this measure; and
(3) Making technical, nonsubstantive amendments for the purposes of clarity and consistency.
As affirmed by the record of votes of the members of your Committee on Commerce, Consumer Protection, and Health that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 2939, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 2939, S.D. 1, and be referred to your Committee on Ways and Means.
Respectfully submitted on behalf of the members of the Committee on Commerce, Consumer Protection, and Health,
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________________________________ ROSALYN H. BAKER, Chair |
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