Posted on: Sunday, December 24, 2000 Hawai'i power bills soar By Frank Cho Advertiser Staff Writer Hawai‘i consumers will be reaching deeper into their pockets this month to pay their electricity bills as rising oil prices have pushed rates to their highest levels in nearly a decade.

As the cost of the oil used by utilities has nearly doubled, to about $32 a barrel in the last year, electricity rates have risen to levels not seen since the Gulf War in 1991, electric company officials said.

Big Island ratepayers have seen some of the biggest increases. Big Island residents this month will pay an average of 16.2 percent more than they did a year ago, according to Hawaii Electric Light Co. Inc., a subsidiary of Hawaiian Electric Co. Inc. on O‘ahu. The average monthly residential bill on the Big Island is now $140.36 compared to $120.80 a year ago.

Maui consumers are paying about $121.04 a month on average, up about 18.2 percent from $102.38 last December. On O‘ahu, consumers will shell out $91.20 on average, or about 10.7 percent more compared to a year ago.

While this year’s electricity rates are higher overall in the state, Hawai‘i consumers may take some comfort in knowing they are not alone. More than 10 million consumers in California are facing a 17 percent rate hike next month to keep their two cash-strapped power companies from going bankrupt because of more than $8 billion in unexpected fuel costs and a shortage of capacity.

The two privately held California utilities, Pacific Gas & Electric and Southern California Edison, blame the losses since May on deregulation, which led to soaring wholesale and fuel costs and a freeze on consumer rates.

California agreed four years ago to deregulate its electric utilities with the hope that the move would lower rates for homeowners and businesses through increased competition. But rising oil prices have forced the utilities to absorb more costs than they can recoup by charging consumers.

Al Nakamura, a research analyst with Hawai‘i’s Public Utilities Commission, said the effect of deregulation and higher oil prices in California has raised questions about how Hawai‘i might deregulate its industry.

"Certainly it would make us more cautious. We would really have to look at the situation and how that would impact the Islands," Nakamura said.

Avoiding the trouble in the past

Hawai‘i power providers have managed to avoid similar troubles because of a little-known decision made nearly 30 years ago by regulators that allows utility companies to pass oil costs on to customers without seeking regulatory approval first.

It was the most efficient way to allow companies to recover their costs after the energy crisis of 1973, said Paul Shigenaga, administrative director for utilities commission.

An adjustment for the cost of oil is made each month, giving Hawaiian Electric the ability to quickly respond to changes in prices. It reports its adjustment to the commission after it has already been made. There is no cap on how much Hawaiian Electric can pass on to consumers, but the commission monitors the rate changes through monthly reports.

Hawai‘i utilities said they do not profit from any increases related to rising fuel costs because they are allowed to increase rates only enough to cover the increased fuel costs.

When the cost of the fuel is excluded, electricity rates have remained substantially unchanged from a year ago, said Lynne Unemori, a spokeswoman for Hawaiian Electric.

"Basically we have seen sales coming in higher because of the improving economy, and our cost-cutting efforts are starting to reap benefits," said Unemori, noting these efforts have helped the company keep other costs mostly unchanged.

Those improving sales and cost-cutting efforts also are allowing utilities to have a financially rewarding year.

Robert Clarke, chairman and chief executive officer for the utility’s parent, Hawaiian Electric Industries Inc., told analysts this month that earnings by the utilities are at or near the maximum allowed by regulators. He said that was easing pressure to seek any more rate increases in the near term.

Hawaiian Electric Co. returned 9.1 percent as of last month, slightly below its 9.16 percent rate of return allowed by the state. Maui Electric returned 7.81 percent, compared to an allowed rate of return of 8.83 percent. Hawai‘i Electric Light on the Big Island recently was granted an interim 1.9 percent rate increase by the utilities commission, helping push its return to 9.61 percent, exceeding its allowed rate of 9.21 percent.

Meanwhile for consumers, some relief could be in sight. Experts have speculated that oil prices could fall slightly before stabilizing early next year, easing the upward pressure on electricity rates.

"We are expecting them (prices) to come down over time," Unemori said. "I don’t know how much, but probably not to the level it was at before the run up."

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-- Martin Thompson (mthom1927@aol.com), December 24, 2000