HECO's Response to Consumer Advocate's Comments, 4/29/11

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EXHIBIT 1PAGE 18 OF 19In addition, the Consumer Advocate’s strained interpretation of the RAM could alsonullify recovery of RAM revenues relating the calendar year prior to a rate case test year. Aninterim order can be issued sooner than 10 or 11 months after the filing of a rate caseapplication. 7a test year. 8An interim order can and has in prior rate cases take effect as early as January 1 st ofIn the latter case, the Consumer Advocates’ proposed implementation of the RAMwould require that it be discontinued as of January 1 st , when the Company would have collected,at most, 7/12ths of the RAM revenues for the prior calendar year (and less than that if theimplementation date of the RAM was suspended until after June 1 st of the prior year).Retroactive RatemakingThe Consumer Advocate attempts to mischaracterize the Company’s position assomehow resulting in “retroactive” recovery of RAM Revenues. See Consumer AdvocateComments at 16, 17, 22. Clearly, that is not the case. The RAM Revenue accrual period followsthe effective date of decoupling. If an interim rate case order is allowed to nullify the right tocollect accrued revenues (i.e., if it is given retroactive effect), then that would be retroactiveratemaking.Purpose of Including a Revenue Adjustment MechanismThe Company’s position also is consistent with the purpose of including a revenueadjustment mechanism in a decoupling mechanism. In the Joint Proposal on Decoupling andStatement of Position of the HECO Companies and Consumer Advocate (March 30, 2009), theJoint Parties stated that “[t]he purpose of the Revenue Adjustment Mechanism is to adjust7 For example, in Hawaiian Electric’s 1992 test year rate case, Docket No. 6998, the Commission authorized theinterim increase after eight months. (Interim Decision and Order No. 11559 was issued March 31, 1992, andHawaiian Electric’s application was filed July 29, 1991.)8 In Hawaiian Electric’s 1995 test year rate case, Docket No. 7766, the Commission issued Interim Decision andOrder No. 13716 on December 30, 1994, allowing an interim rate increase to become effective on January 1, 1995.3357864.1
EXHIBIT 1PAGE 19 OF 19revenues decoupled from sales to reflect changes in revenue requirements between rate cases,which should help maintain the utility’s financial integrity and ability to invest in theinfrastructure necessary to meet Hawaii’s 70% clean energy objective, while maintaining reliableservice to customers.” Hawaiian Electric Comments, Exhibit 1, at 9-11.In its final Decision and Order issued December 29, 2010 in Docket No. 2008-0083, theCommission reduced Hawaiian Electric’s authorized rate of return on common equity (“ROE”)to reflect the reduction in business risk resulting from implementation of the “HCEI-related costrecoverymechanisms . . . .” Id. at 25-28. The major cost recovery mechanism is the RAM. TheConsumer Advocate’s position, if adopted, would effectively delay most of the benefit of theRAM to June 2012, over a year after Hawaiian Electric’s authorized ROE will have beenreduced, based in major part, on the assumption that it is currently benefitting from the RAM.The Company’s position would allow it to receive the full benefit of the RAM effective March 1,2011, concurrent with the effectiveness of new rates reflecting the lower authorized ROE.3357864.1
Page 1 and 2: Hawaiian Electric Company, Inc.•
Page 3 and 4: EXHIBIT 1PAGE 1 OF 19TRANSMITTAL NO
Page 5 and 6: EXHIBIT 1PAGE 3 OF 19each party’s
Page 7 and 8: EXHIBIT 1PAGE 5 OF 19on June 1 and
Page 9 and 10: EXHIBIT 1PAGE 7 OF 19The tariff fil
Page 11 and 12: EXHIBIT 1PAGE 9 OF 19June 25, 2009.
Page 13 and 14: EXHIBIT 1PAGE 11 OF 19RAM revenues
Page 15 and 16: EXHIBIT 1PAGE 13 OF 19collected, an
Page 17 and 18: EXHIBIT 1PAGE 15 OF 19In addition,
Page 19: EXHIBIT 1PAGE 17 OF 19Thus, althoug

HECO's Response to Consumer Advocate's Comments, 4/29/11

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