THE SENATE	S.C.R. NO.	38
TWENTY-SEVENTH LEGISLATURE, 2013
STATE OF HAWAII

SENATE CONCURRENT

RESOLUTION

 

 

REQUESTING THE PUBLIC UTILITIES COMMISSION TO ESTABLISH and accelerate the implementation of A COST SAVINGS INCENTIVE MECHANISM as a financial incentive to motivate electric utilities to reduce energy costs.

 

 

     WHEREAS, electricity rates in the State are at record levels, due in large part to the high cost of petroleum used to fuel electric generation plants on all islands; and

 

     WHEREAS, electric utility operating expenses have substantially increased in recent years while electric sales have declined; and

 

     WHEREAS, electric ratepayers are demanding immediate relief from increasing electricity rates; and

 

     WHEREAS, it is therefore imperative that Hawaii's electric utilities accelerate their efforts to acquire lower cost clean energy resources and reduce existing energy and other utility operating expenses; and

 

     WHEREAS, existing regulatory cost recovery mechanisms neither provide sufficient economic incentives to induce electric utilities to reduce energy and operating costs nor financially reward them if these cost reductions are self-initiated and substantial; and

 

     WHEREAS, for example, energy costs are recovered from customers through the energy cost adjustment clause, which is a direct cost recovery pass through mechanism, without the ability for electric utilities to earn a profit or a mark-up on energy cost recovery; and

 

     WHEREAS, electric utilities are not incentivized to aggressively reduce energy costs or seek lower cost alternatives or efficiency gains; and

 

     WHEREAS, the current electric ratemaking process employs a single authorized rate of return that is applied equally to all utility plant investments.  This methodology does not differentiate between plant investments to modernize the electric grid, which should be encouraged, and investments to preserve old, inefficient fossil generation, which should be discouraged; and

 

     WHEREAS, retiring old, inefficient utility fossil generation acts as a financial disincentive for electric utilities because the electric utilities can only earn a return on plant investment that is actually used and useful to provide utility service; and

 

     WHEREAS, it is necessary for the Public Utilities Commission to consider and implement economic incentive mechanisms, where appropriate, to induce electric utility actions to reduce energy cost and operating expenses and to enable the maximum integration of lower cost renewable energy resources; and

 

     WHEREAS, this body finds that the Public Utilities Commission should establish a policy to implement economic incentives and cost recovery regulatory mechanisms, as necessary and appropriate, to induce and accelerate electric utilities' cost reduction efforts, encourage greater utilization of renewable energy, accelerate the retirement of utility fossil generation, and increase investments to modernize the State's electrical grids and that a shared cost savings incentive mechanism would accomplish all of these goals; now, therefore,

 

     BE IT RESOLVED by the Senate of the Twenty-seventh Legislature of the State of Hawaii, Regular Session of 2013, the House of Representatives concurring, that the Public Utilities Commission is requested to establish and accelerate the implementation of a cost savings incentive mechanism as a financial incentive to motivate electric utilities to reduce energy costs; and

 

     BE IT FURTHER RESOLVED that a certified copy of this Concurrent Resolution be transmitted to the Public Utilities Commission.

 

 

 

	OFFERED BY:	_____________________________

Report Title: 

Public Utilities; Shared Cost Savings Incentive Mechanism