Hawaii's new fuel price performance incentive gives HECO 'skin in the game'

Hawaii regulators took a step toward performance incentives for its dominant electric utility, but transitioning to true performance-based regulation (PBR) will be contentious, judging from the stakeholder response. The cost of importing expensive fuel oil for power generation in the state has led to many debates over the best way to align utility incentives with customer interests — such as using a sharing mechanism to split fuel price volatility risks between the utility's shareholders and its ratepayers. On June 22, the Hawaii Public Utilities Commission (HPUC) approved a risk sharing mechanism proposed by the environmental group Blue Planet in a new foray into performance-based incentives. Many in the state see the move as an indication that more reforms are coming in the state's regulatory docket on PBR, initiated this year.The new risk sharing mechanism is mean to give the Hawaiian Electric Companies (HECO) "skin in the game," said former Colorado regulator Ron Binz, who testified at the HPUC on behalf of Blue Planet. But both HECO and Hawaii's consumer advocate question whether the new PBR provision will ultimately serve customer interests.