When the Hawaii Public Utilities Commission issued an order earlier this month accepting Hawaiian Electric Co.’s long-term plan for supplying power to customers, one part of the plan stood out: a 44 percent rate increase on Oahu over 10 years.

But far from accepting the rate increase along with the overall plan, the regulators pushed back with a strong message to the HECO companies.

The message: HECO needs to do more to make sure higher rates don’t drive customers off the grid. In the end, the commission said, keeping customers is HECO’s kuleana.

Civil Beat/Public Utilities Commission

The commission also dismissed HECO’s analysis of the economics of customer defections as “minimal and incomplete.”

“The risks associated with such decisions,” the commission concluded, “lies with the companies.”

Jim Kelly, HECO’s vice president for corporate relations, said: “There’s nobody more mindful of it (customer defections) than we are. Believe me, it is a topic of much discussion here.”

Courtesy: Eurus Energy America

HECO includes Oahu’s Hawaiian Electric Co. and its affiliates Maui Electric Co. on Maui, Molokai and Lanai; and Hawaiian Electric Light Co. on Hawaii Island.

It’s a sign of the times that utilities regulators are telling the 125-year-old power monopoly to do a better job measuring the risk of losing residential customers, who can now power their homes with rooftop solar systems and big batteries that can store electricity to use later.

In fact, the whole PUC order reflects Hawaii’s new energy policy of focusing on renewable resources to power the state.

Although the order begins by saying the commission “accepts” HECO’s plan, much of the 53-page document tells HECO what’s wrong with the plan and what the company should do better before moving forward.

It’s important to recognize that the PUC’s accepting the plan is not the same as approving it, said Kyle Datta, general partner with the Ulupono Intitiative, a Hawaii-based social investment firm focused on renewable energy, local food production and waste management.

“It may seem subtle, but it’s an important difference,” said Isaac Moriwake, an attorney with Earthjustice, which represented the Sierra Club in the proceedings before the PUC. In many cases, the order articulates criticisms, he said.

The order is not a prescription, the PUC said, but rather “a useful snapshot of the Companies’ dynamic and ongoing planning efforts.” The commission also made clear that the order “provides guidance regarding implementation and future planning activities.”

And any rate increases would have to be approved separately by the commission.

Among the handful of things that the PUC made clear was a desire for expanded use of renewables, Moriwake said. While some have pushed for importing liquefied natural gas as a fuel source, that’s off the table, he said.

“That’s unambiguous,” Moriwake said.

Datta agreed, noting the plan calls for HECO to competitively procure 400 megawatts of renewable resources across all of its service areas by 2021. In addition, the order calls for HECO to move fast so that customers can use available tax credits before they expire.

Jeffrey Mikulina

“I think the overall take is the state is accepting a plan from the utility that calls to use 100 percent renewable energy ahead of schedule,” said Jeff Mikulina, executive director with the Blue Planet Foundation, a nonprofit that promotes the use of clean energy in Hawaii. “That’s a dramatically different conversation than the one we were having a few years ago.”

The order praises HECO’s initiatives to use “distributed energy resources,” which is the technical term for renewable resources like rooftop solar systems that can feed surplus electricity back onto HECO’s grid.

Perhaps equally illuminating is a section titled, “Commission Concerns with the Report,” which may presage upcoming battles between HECO and stakeholders. The proposed increase in rates was one cause for concern.

“Given the substantial increase in rates forecasted in the report, the commission is concerned that the companies have not fully considered the affordability of their plans,” the commission said.

HECO’s Kelly said the rate estimates are merely the company’s best guess of what rates will be in five and 10 years, given projections of oil prices. Oil is still used to generate much of the state’s energy.

The commission also expressed concerns about HECO’s proposal to install a conventional power generator at Marine Corps Base Hawaii in Kaneohe and a conventional project on Maui, potentially through a waiver from competitive bidding.

The commission said HECO “should not assume the commission will waive the competitive bidding process for any of these proposed projects.”

By some measures, Hawaii already leads the nation in producing electricity from renewable sources, particularly from the rooftop solar systems.

In 2015, Hawaii produced more solar energy per capita from distributed resources than any other state, the U.S. Energy Information Agency reported. Solar energy from big solar facilities and rooftops generated 35 percent of Hawaii’s renewable electricity.

U.S. Energy Information Administration

That will continue to grow under HECO’s plan, Kelly said.

At the same time, he said the state needs some power produced from conventional generation, which generally means burning fuel to turn turbines. Industrial and commercial users like the military and big hotels need fixed sources of reliable, consistent electricity, Kelly said.

“Everybody forgets about the 40 days of rain in 2006,” Kelly said, referring to a bizarre wet period in which it rained every day on Oahu for more than a month. “And let me tell you, that’s not going to be charging any batteries when it rains for 40 days.”

Read the PUC’s response to the power supply plan here: