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Frequently Asked Questions about Decoupling

General Questions

Q How does decoupling work?
A.

Decoupling breaks the link between utility revenues and how much electricity customers use.  This removes the incentive for utilities to increase the use of electricity.

The PUC decides in a rate case which services the utility should provide its customers, and determines how much revenue the utility may collect to cover the cost of those services.

Rates are adjusted as total electricity sales vary to allow those costs to still be recovered and to allow the utility to recover the cost of investments it makes in clean energy and reliability. The utility will not make additional profits from higher sales.  Decoupling does not guarantee the utility a profit. Many factors can cause the utility to earn less than the amount allowed by the PUC.

Individual electric bills will still be based on the amount of electricity a customer uses, so customers will still have an incentive to conserve and use electricity efficiently.

Separating electricity consumption and utility revenues encourages utilities to better support Hawaii’s clean energy objectives – to increase use of renewable resources, reduce use of imported fossil fuels, promote energy efficiency and protect our energy, economic and environmental security.

Q. How exactly does this support the state’s clean energy goals?
A.

Decoupling is one of many major steps to support efforts to reduce Hawaii's dependence on imported oil.

In the past, the more electricity used by utility customers, the more money the utility collects. That formula isn't consistent with our state's current energy policies. To reach our state’s clean energy goals, we must find ways to use less oil, not more.

Decoupling breaks the link between utility revenues and how much electricity customers use.  This allows utilities to better support increased energy efficiency, conservation and increased use of renewable energy resources.

More than 50% of your electric bill pays for the rising cost of fossil fuels. As we transition to clean energy, bills will become be more stable and lower than if our state continues to rely so heavily on imported oil.

Q. Why did the Public Utilities Commission adopt the decoupling plan?
A.

Since Hawaii is moving away from traditional, fossil-fuel based methods of generating electricity, our state is also adopting a new way of setting electricity rates to support those efforts. The idea is to help our state transition to greater energy independence through locally-produced renewable energy and energy efficiency.

How will this impact customers?

Q. Will customers see decoupling on their bill, and in what form?
A.

Yes. A separate line item called the “RBA rate adjustment” will appear on customers’ bills reflecting the decoupling adjustment. RBA stands for Revenue Balancing Account.  We’ve made it a separate line item in order to make it easier for customers to find the adjustment.

Q. How will decoupling impact customers’ electric bills in coming months?
A.

Your individual customer bill is still based on the amount of electricity you use, so you will still save money by conserving electricity.

Any increase or decrease due to decoupling is expected to be relatively modest and will depend on a number of factors, including changes in electricity sales and inflation.

Also, customers can receive a refund if the company collects more revenues than allowed by the Commission.

According to the Progressive States Network, which has studied decoupling in other states, “decoupling has not resulted in any significant rate increases in states that have adopted it and consumers end up with more control over their utility bills to offset increase with conservation measures.”

Q. What if decoupling doesn’t achieve the benefits it’s supposed to?
A.

The Commission will review decoupling on an ongoing basis and address any issues that arise.  In addition, the Commission has made it clear that it authorized decoupling to facilitate Hawaii’s transition to a clean energy economy.  If it does not appear that decoupling is achieving the intended objective, the Commission has retained the right to end the use of decoupling.

Other questions

Q When is this plan going to be implemented?
A.

The Commission has implemented decoupling for Hawaiian Electric, Maui Electric and Hawaii Electric Light Company.

Q. Doesn’t this plan essentially just provide a guaranteed profit for the utility?
A.

No. Many factors can cause the utility to earn less than the amount allowed by the PUC. 

Decoupling enables the utility to recover on a more timely basis the fixed costs of providing service to anyone connected to the grid than it would have recovered under the traditional method.  This provides the utility with an incentive to support energy efficiency, conservation and more renewable energy. The utility’s financial performance will still be monitored by the Public Utilities Commission to ensure that the utility is not recovering more than what is reasonable.

Q. How often will the Public Utilities Commission review each utility’s revenues?
A.

The Commission and Consumer Advocate receive and review information on the utilities’ finances and plans on an ongoing basis.

In addition, every three years, in each of the utility’s rate request filings, the Commission will thoroughly review each utility’s activities and determine what services they must provide going forward.  The Consumer Advocate will also participate in these reviews. 

In between those rate cases, the Consumer Advocate will assist the Commission in reviewing and validating the utility’s annual decoupling adjustment filing.  The utility’s rates will be adjusted down or up based on factors such as an independent cost index or how the overall economy is doing.f

Q. Are there other states that have adopted this approach?
A.

Yes. The utility commissions in nearly half of the states have approved decoupling in some form for one or more of their utilities.

The decoupling plan that the Commission adopted here is similar to what several California electric utilities have in place. Independent reviewers have found that decoupling in California has helped save customers there more than $55 billion over the last four decades.

What’s more, they found that residential electricity bills in California today are lower than the national average. The Michigan Land Use Institute’s managing editor says, “When California utilities decoupled their rates, the state surged ahead of the nation in the productivity of its electricity use.”  He adds that California residents, per capita, now use about half the electricity that the average American uses.

Decoupling and the State Energy Policy

Q I understand this is part of the State’s energy policy. What exactly is that policy?
A.

The state energy policy has established a roadmap to a clean energy future and reduced dependence on imported oil for Hawaii. The goal is to get 70 percent of Hawaii’s energy from clean sources (30 percent from energy efficiency and 40 percent from renewable generation) by 2030. The Hawaiian Electric companies, the Governor of the State of Hawaii, the State of Hawaii Department of Business, Economic Development & Tourism and the State of Hawaii Consumer Advocate signed an Energy Agreement in October 2008.  Decoupling was included as a basic policy initiative in the Energy Agreement to help reach the goal of reducing Hawaii’s dependence on imported fossil fuels and move quickly toward locally-produced renewable energy for both electricity and transportation.

Q. How does the Hawaii Clean Energy Initiative improve our economy?
A.

Every bit of progress we make in reducing imported oil translates into dollars, potentially billions of dollars, being kept in Hawaii.  In 2008, our economy spent roughly $8.4 billion on foreign oil to meet all our energy needs, both electricity and transportation.  If we reduced that by even 10%, then $840 million more would be kept in our state’s economy.