PUC Annual ReportâFiscal Year 2004-05 - Public Utilities Commission

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Public Utilities Commission Annual Report 2004-05State of Hawaii Page 61. HECO, MECO, HELCO, AND KIUC PROCEEDINGS:a. COMMISSION REVIEWS HECO’S REQUEST FOR RATEINCREASE.In November 2004, HECO filed an application requesting a rate increase of 9.9 per centwhich includes the transfer of the cost of existing energy conservation programs from a surchargeline item on electric bills into base electricity charges which appear on another line on electricbills. For HECO customers, the net rate increase is 7.3 per cent. HECO’s request for a rateincrease will be needed to ensure the continuation and expansion of its energy efficiency andconservation programs. The Commission issued a decision granting an interim rate increase inFiscal Year 2005-06. 2In the same rate increase application, HECO also requested approvals and/ormodification of demand-side management (“DSM”) programs and load management programsand recovery of costs and DSM utility incentives. (For a discussion of this part of HECO’srequest, see the section, “HECO Requests Approval of DSM Programs and Cost Recovery.”)b. INTEGRATED RESOURCE PLANNING (“IRP”) ACTIVITIES.IRP has become a key vehicle for state regulatory commissions, electric utilities, energystakeholders, and the public to understand and influence the planning process of identifying andevaluating combinations of demand–side and supply-side energy resources that will achievespecified objectives and meet forecasted demand. Specifically, the goal of IRP is theidentification of the resources or the mix of resources for meeting near and long term consumerenergy needs in an efficient and reliable manner at the lowest reasonable cost.In 1992, the Commission required HECO, HELCO, MECO and Citizens CommunicationsCompany, Kauai Electric Division (“KE”) (nka, KIUC) to develop integrated resource plans inaccordance with the IRP Framework. The IRP Framework, which was adopted in May 1992,requires each energy utility to develop a long-range, twenty-year IRP and a medium-range,five-year program implementation schedule (action plan) to be submitted on a three-year planningcycle for the Commission’s review and approval. Generally, the IRP Framework furtherprescribes what the utilities are required to do and the factors to be considered in developing theirrespective integrated resource plans. Among other things, it also encourages public participationin the development of each utility’s integrated resource plan, and subject to Commission reviewand approval, allows the utility to seek the recovery of all appropriate and reasonable integratedplanning and implementation costs. In addition, the IRP Framework provides the Commissionwith the authority to establish various incentive mechanisms to encourage and reward aggressiveutility pursuits of DSM programs (i.e., shareholder incentives and lost margins 3 ).2 On September 27, 2005, the Commission issued a decision granting HECO an interimrate increase of $53,288,000 in additional revenues. Interim Decision and Order No. 22050, filedSeptember 27, 2005, in Docket No. 04-0113.3 In November 2001, the Commission required, consistent with the parties’ stipulation, thatif HECO exceeds its current authorized rate of return of 9.16 per cent on its average rate basedetermined in its last rate case in 1995, as a result of its recovery of lost margins and shareholderincentives, HECO shall refund the amount by which its rate of return on average rate baseexceeds 9.16 per cent, together with interest. D&O Nos. 19019 and 19020, November 15, 2001.The Commission issued similar decisions, consistent with the parties’ stipulation, for HELCO(Amended D&O No. 19094, December 11, 2001) and MECO (D&O No. 19093, November 30,2001). Under D&O No. 19658, KIUC waived “all claims they may have to recover earned, butunbilled demand side management shareholder incentives from KE customers.”
Public Utilities Commission Annual Report 2004-05State of Hawaii Page 72005.Below is a summary of the status of electric utility IRPs and action plans as of June 30,HECO’s first IRP and action plan were approved in March 1995. In January 2001, theCommission approved the parties’ agreement that HECO’s second IRP and action plans aresufficient to meet HECO’s responsibilities under the IRP Framework. On December 31, 2002,HECO filed its evaluation report of its second IRP. In September 2003, the Commission openeda proceeding to examine HECO’s third IRP. HECO’s third IRP and action plans are due no laterthan October 31, 2005. 4MECO’s first IRP and action plan were approved in May 1996. In May 2000, MECO filedits second IRP. In April 2004, the Commission approved the parties’ agreement and requiredMECO to submit two annual evaluation reports. On April 30, 2004, MECO filed its first evaluationreport of its second IRP. The Commission also opened a proceeding to examine MECO’s thirdIRP. MECO’s third IRP and action plan are due no later than October 31, 2006.HELCO’s first IRP and action plan were approved in May 1996. The company’s revisedIRP was filed in September 1998. In February 2004, the Commission approved the parties’agreement. On March 31, 2004, HELCO filed its evaluation report of its second IRP. TheCommission also opened a proceeding to examine HELCO’s third IRP. HELCO’s third IRP andaction plans are due no later than October 31, 2005. 5KIUC’s first IRP was approved in July 1995. KIUC filed its revised IRP in April 1997. InAugust 2000, KIUC filed its annual update report of the IRP. In April 2004, the Commissionapproved KIUC’s request to defer the December 31, 2003 proposed revision to the IRP and DSMprograms for one (1) year to allow KIUC the time to examine and recommend an IRP and DSMplan that would address the needs and interests of its new structure as a member-ownedcooperative. The Commission also approved KIUC’s request to suspend all other IRP and DSMfilings until such time that a revised framework can be approved by the Commission.In December 2004, KIUC submitted its revisions to its IRP and DSM framework. InMarch 2005, the Commission opened a proceeding to investigate KIUC’s proposed revised IRPand DSM framework. The issues to be examined are: (1) the changes, if any, that are requiredto the Commission’s IRP framework and (2) the effect, impact, and appropriateness of KIUC’sproposed revised framework.c. HECO REQUESTS APPROVAL OF DSM PROGRAMS ANDCOST RECOVERY.As described above, in November 2004, HECO filed an application requesting a rateincrease and approval and/or modification of DSM and load management programs and recoveryof program costs and DSM utility incentives. In March 2005, the Commission separated theproposed DSM programs case from the rate case and opened a new docket, the “EnergyEfficiency Docket,” to examine the proposed DSM programs.In its DSM programs application, HECO requests approval to: (1) establish seven (7)new energy efficiency DSM programs and recover the programs’ costs through base rates;(2) extend the residential customer energy awareness (“RCEA”) program duration from two (2) tofive (5) years and modify the cost recovery mechanism so that the program costs are recovered4 HECO filed its third IRP on October 28, 2005. Docket No. 03-0253.5 In November 2005, the Commission granted HELCO an extension to file its third IRP onDecember 29, 2005. Order No. 22105, filed November 4, 2005, in Docket No. 04-0046.
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PUC Annual ReportâFiscal Year 2004-05 - Public Utilities Commission