Key facts on Performance Based Regulation, rate reset

Key facts on Performance Based Regulation, rate reset

Release Date: 3/6/2026

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HONOLULU, March 6, 2026 - Performance Based Regulation (PBR) is a unique and innovative regulatory framework that incentivizes utility performance aligned with customer interest and public policy objectives.

Passed by the Legislature and signed into law in 2018, the Hawaii Ratepayer Protection Act directed the Public Utilities Commission (PUC) to develop a framework that limits the connection between a utility's profits and the money it spends on capital-intensive projects. Instead, it provides the opportunity for the utility to earn revenue by meeting performance goals for priorities like reliability, customer service and affordability, as well as milestones toward the achievement of the 100% renewable portfolio standard by 2045.

How this is different from traditional ratemaking

Until 2020, Hawaiian Electric would submit a "rate case" to the Public Utilities Commission every three years that reflected its cost of providing service. This is the traditional model of ratemaking followed by all other regulated utilities in Hawaii and in most of the U.S. The PUC would review the documentation for the proposed rate and issue a decision after considering inputs from the Consumer Advocate and other parties.

The last base rate increase approved for Oahu was in 2011, Hawaii Island was in 2016 and Maui County was in 2018. Hawaiian Electric's base rates have been fixed since 2021, except for a small inflation adjustment that didn't come close to matching a 25% surge in prices from 2020-2025, the highest rate in 40 years. The surge has been especially pronounced in the utility industry; an electrical transformer that cost $3,730 in 2020 now costs $7,879, a 111% increase.

After the first 5-year period under PBR, the regulatory process provided for an assessment of rates to determine whether changing conditions warrant a base rate reset to ensure continued safe and reliable service. Consistent with this construct, regulators, Hawaiian Electric and a working group of stakeholders are trying something novel - a collaborative process to explore a rate adjustment before a rate request is filed. The working group includes the Consumer Advocate, two counties, Ulupono Initiative, Blue Planet Foundation, Life of the Land and solar industry organizations. This alternative process, which took place over several months, mostly involved discussing and debating issues in real time rather than through formal written filings. The working group process has been a key feature of PBR.

"As far as we know, this is the first time a rate adjustment request was vetted through a collaborative process like this with the result that the request is being filed jointly by Hawaiian Electric and one of the PBR working group parties," said Joe Viola, the Hawaiian Electric senior vice president who oversees regulatory affairs.

"There was significant engagement by all stakeholders, transparent discussion and exchange of perspectives. Although only one other party has expressed its support so far, the proposal was informed and ultimately modified based on feedback gained from the process."

What's happening now

Through these working group meetings, Hawaiian Electric has proposed a reset that would be spread over two years, increasing revenue by 3.5% on Oahu in 2027 and 1.5% in 2028; 4.5% on Hawaii Island in 2027 and 1.3% in 2028 and 5.2% in Maui County in 2027 and 1.2% in 2028. The rate would be fixed until 2032, except for an inflation adjustment. The increase is limited to elements largely outside the utility's control, not infrastructure or major capital spending.

In the past two years, some of the state's largest regulated utilities, including electricity, gas, water and transportation, have received PUC-approved rate increases ranging from 5% to 56%. County water and sewer utilities, which are not regulated by the PUC, have announced rate increases averaging 8% to 9%, including some that will occur annually over several years.

Proposed estimated typical residential bill impact of rate reset

Typical residential bill using 500 kWh at current effective rates; 400 kWh for Lanai, Molokai

The reset proposal is based on three elements reflecting energy policy changes and certain changed business conditions outside the utility's control; a downward adjustment was then applied to reduce the total amount:

As part of the rebasing process, including input from the PBR working group, Hawaiian Electric heavily discounted its rate reset request to reduce bill impact and do not reflect the actual full costs incurred by the utility.

Fortifying the reliability and resilience of the electric grid and power generation assets requires investments that keep pace with the costs of maintaining and improving the systems serving five islands. An example is the ongoing work in downtown Honolulu and Chinatown to repair and upgrade the network that serves thousands of homes and businesses. By the end of the decade, Hawaiian Electric will have spent about $183 million on grid improvements in the area.

What happens next

The PUC will review the proposal to make sure it includes sufficient information to proceed to public hearings. If so, the PUC will take input and decide whether it should be approved. In parallel, Hawaiian Electric and other parties will continue developing potential refinements of PBR framework mechanisms for performance incentives and penalties. Any proposed changes from that process also require the approval of the PUC.