Electric rates rise for poor, middle class as affluent switch to solar

The middle class and poor are increasingly footing the bill for Hawaii Island’s electric grid when wealthier homeowners, businesses and government agencies opt out by installing photovoltaic systems, the county energy coordinator said Tuesday.

Will Rolston, addressing the county Energy Advisory Commission, said Hawaii County has intervened in a state Public Utilities Commission case (Docket 2013-0141) that is trying to determine the best model for encouraging alternative energy sources while helping utilities such as Hawaiian Electric Co., protect their substantial investments in electricity infrastructure.

“The low-income population is really taking the hardest hit on this,” Rolston said. “It affects rates because the fixed costs have to be recouped.”

At issue is a process known as “decoupling,” which the PUC has defined as a regulatory tool that separates a utility’s revenue from changes in energy sales. This encourages energy efficiency and renewable energy. The decoupling mechanism, instituted by the PUC in 2008, in theory adjusts rates up or down to meet the utility’s revenue targets.

But with rates set at specific amounts, and fewer ratepayers to share the burden, the cost ultimately falls on those who can’t afford the upfront costs of solar or are renters or live in high rises where they have no place to put the panels.

“All the people who are going off the grid because they have the opportunity to do that affects the rates of everyone else,” noted Energy Advisory Commissioner Steve Burns. “The lower-income person has a disproportionate rate increase. … This sounds like a fairness issue.”

Peter Rosegg, a HECO spokesman, agrees that cost burdens are being shifted because of the increased popularity of solar panels. He said it’s a nationwide phenomenon, but it’s seen most in Hawaii, which has the highest percentage of solar on its grid. The Hawaii Island grid is about 9 percent solar, compared with the national average of about 1 percent, he said.

Rosegg said the country is just starting to deal with the equity issue, although he believes it’s a societal one, not one the utility has any control over.

“This is an issue more about social equity than it is about the utility’s bottom line,” he said.

That’s especially true because of decoupling, which changes how utilities gain revenue, he said.

Rolston said the county recently won a first-step victory. The remainder of the decoupling issue has yet to be resolved, however.

The PUC on Feb. 7 reduced the interest rate of a key account from 6 percent to the short-term interest rate of the companies’ last rate cases, a move that lowers the amount ratepayers would pay to HECO companies by about $2 million to $3 million. The account, known as the revenue balancing account, is the difference between the utility’ s target revenue and recorded adjusted revenue, plus interest applied monthly.

HECO’s Big Island subsidiary, Hawaii Electric Light Co., is governed by that order.

In the PUC filing, HECO argued that using the interest rate for short-term debt interest rates would add “another layer of complexity to the process.”

Rolston is no fan of decoupling. When asked about alternatives, he discussed a smart grid system, where automating the collection of electricity customers’ usage habits allows for much greater efficiency which can reduce costs. That’s the path the Kauai Island Utility Cooperative took, a lengthy process that included almost 3,000 of the roughly 25,000 electricity customers refusing to use the wireless smart meters out of health and privacy concerns.

Both Rolston and Burns agree that electric utilities need some form of revenue assurances, as the energy business undoubtedly has the highest upfront and infrastructure costs of any other commodity.

Still, Rolston said, “We don’t favor decoupling as the proper model.”