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The Associated Press September 1, 2010, 10:51AM ET

Hawaii severs tie between power sales and profits

Hawaii's electric company will get paid a guaranteed amount of money regardless of how much power it sells under a decision Tuesday meant to promote renewable energy.

The 133-page ruling, approved by two of three members of the Hawaii Public Utilities Commission, separates revenues that go to Hawaiian Electric Co., a subsidiary of Hawaiian Electric Industries Inc., from the amount of electricity it sells to consumers.

The idea is designed to discourage the public utility from seeking higher profits by selling more electricity. Instead, the company would be getting paid for providing access to power through its electricity grid.

Known as "decoupling," the plan is a key part of the state's goal of getting 70 percent of its power from clean sources by 2030 - 40 percent from renewables and 30 percent from efficiency improvements.

The state so far gets less than 10 percent of its power from renewable sources.

The utility's 400,000 customers may see their power bills increase over the next few years as a result of decoupling, but the state will benefit from becoming more energy independent, said Doug Codiga, an attorney for Blue Planet Foundation, which aims to make Hawaii more energy sustainable.

"Over the long haul, everybody's rates will go down. Why? Because we're promoting renewables, which are cheaper than oil," Codiga said.

The revenue decoupling plan gives the utility consistent annual revenues to cover fixed costs.

The Public Utilities Commission hasn't yet decided on specific dollar amounts that will go to Hawaiian Electric or when decoupling will take effect.

The commission's decision "is a major milestone on Hawaii's path to meeting our ambitious and essential clean energy goals," said Robbie Alm, executive vice president for Hawaiian Electric Co. "Delinking utility revenues from electric sales will help support more energy efficiency and conservation, as well as more renewable generation by our customers."

In Commissioner Les Kondo's dissenting opinion, he wrote that the utility is getting a "blank check" to increase rates with minimal oversight of whether it's improving use of renewable energy sources.

"The HECO companies will get additional money from customers, with no obligation to perform differently than the status quo," Kondo wrote.

But Hawaii Energy Administrator Ted Peck countered that Hawaiian Electric has already committed to meeting renewable energy goals, and the company will face penalties if those targets aren't reached.

In addition, the Public Utilities Commission noted in its order that it can revoke the decoupling strategy at any time if it doesn't work.

"The proof is going to be in the behavior of the utility from this point forward," said Hawaii Energy Administrator Ted Peck. "We're watching and cheering for them, but we're going to hold them accountable to make sure they deliver."

Besides decoupling, state regulators also are considering a way to make the utility pay renewable energy producers for their power.

Combined, these initiatives are meant to set the framework for moving Hawaii away from consuming fossil fuels and toward renewable energy.

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