NOTICE OF PUBLIC HEARING

APPLICATION OF HAWAIIAN ELECTRIC COMPANY, INC.
FOR APPROVAL OF RATE INCREASES AND
REVISED RATE SCHEDULES AND RULES

Docket No. 2016-0328

The PUBLIC UTILITIES COMMISSION of the STATE OF HAWAII ("Commission"), pursuant to Hawaii Revised Statutes §§ 269-12 and 269-16, HEREBY GIVES NOTICE that it will hold a public hearing relating to the Application of HAWAIIAN ELECTRIC COMPANY, INC. ("HECO"), filed on December 16, 2016, for Approval of Rate Increases and Revised Rate Schedules and Rules ("Application").

The public hearing will be held as follows:

Wednesday, February 22, 2017, at 6:00 p.m.
Ala Wai Elementary School cafeteria
503 Kamoku Street
Honolulu, Hawaii   96826

The Commission will investigate whether the proposed revenue increases, changes in rate schedules and rules, and other matters proposed in HECO’s Application are just and reasonable.
HECO is the provider of electric utility service for the island of Oahu.  In its Application, HECO proposes two different scenarios for rate relief, depending on whether the Commission allows HECO to incorporate a step revenue adjustment to include the revenues associated with the Schofield Generating Station Project ("SGS") into HECO’s revenue requirement for this rate case proceeding.
First, if the Commission approves HECO’s requested SGS step adjustment, HECO requests a general increase in revenues of $299,859,000 (22.0%) over "revenues at present rates" (or $125,010,000 (8.13%) over "revenues at current effective rates"). HECO’s alleges that its requested increase is based on a revenue requirement of $1,662,986,000, based on 2016 fuel prices and an 8.28% rate of return (which incorporates a return on common equity of 10.60%) on HECO’s average rate base. 
Second, if the Commission rejects the proposed SGS step adjustment, HECO seeks Commission approval of a general increase in revenues of $281,234,000 (20.7%) over "revenues at present rates" (or $106,383,000 (6.9%) over "revenues at current effective rates"). HECO’s alleges that its requested increase is based on a revenue requirement of $1,642,362,000 for a normalized 2017 test year, which is based on fuel oil prices in 2016 and an 8.28% rate of return (which incorporates a return on commonequity of 10.60%) on HECO’s average rate base. 
Essentially, HECO estimates that the SGS would add approximately $20,624,000 to HECO’s revenue requirement.  In the event the Commission allows HECO to include the SGS in this rate case proceeding, HECO proposes a step revenue adjustment which would occur when the SGS goes into service, and would incorporate the $20,624,000 in additional revenue requirement into the rate increase, if any, approved by the Commission (HECO’s "revenue requirement" represents the estimated amount of revenue HECO would need to collect during a given test year (here, using estimates for 2017) to cover its operating expenses and earn a fixed rate of return (here, requested at 8.28%) on its capital investments that are "used and useful" to ratepayers ("rate base")). The SGS was the subject of Docket No. 2014-0113, in which HECO sought, and received, Commission approval to commit no more than $167 million to construct a 50 megawatt ("MW") electrical generation station on land leased from the Army at Schofield Barracks.  Although the SGS was approved by the Commission on September 29, 2015, the SGS is not expected to begin operation until the first quarter of 2018, thus raising the issue as to whether its associated costs should be included as part of this rate case.
As part of its Application, HECO also proposes modifications to the decoupling Rate Adjustment Mechanism ("RAM") tariff, which HECO maintains will simplify and eliminate some uncertainties in the process for seeking recovery for capital projects through the RAM.
HECO also seeks approval for several proposed Performance Incentive Mechanisms ("PIMs"), which are intended to provide financial rewards or penalties for utility performance, according to specific metrics, in the areas of service reliability & customer service, and improving communications with customers regarding the Distributed Energy Resources interconnection process.  HECO proposes a calculation of revenue adjustments "based on respective measured performance parameters compared to established targets" and HECO "would be rewarded or penalized according to the amount it exceeds or misses the targets, within a defined limit of revenue exposure."
HECO also proposes certain modifications to the Energy Cost Adjustment Clause ("ECAC"), which include: (a) modifying the ECAC tariff to reflect the revised cost of fuel and purchased energy; (b) revising the target rates for low sulfur fuel oil to reflect the 2017 test year production simulations; (c) eliminating target heat rates for diesel fuel and biodiesel fuel; (d) widening the heat rate deadband for low sulfur fuel oil, and (e) adding a trigger for target heat rate determination.
With respect to the allocation and implementation of the proposed rate increase, HECO "proposes to allocate the final increase in electric revenues to each rate class as an equal percentage increase over the respective electric revenues at current effective rates[.]" HECO also requests that, should the Commission issue an interim decision, any interim rate increase be implemented as a surcharge on base revenues, calculated as a percentage increase on revenues at current effective rates.
At the public hearing, the Commission will receive in-person testimony from the general public regarding HECO’s Application and proposed general rate increase and revised rate schedules and rules, pursuant to HRS § 269-16(b).
The purpose of this public hearing is to listen to the views expressed by the general public. All interested persons are invited to attend the public hearing to state their views on HECO’s Application orally, in writing, or both. So that all in attendance will have the opportunity to speak at the public hearing, the Commission may impose time limits for each person’s testimony. Special accommodations for persons with disabilities can be made if requested reasonably in advance by contacting the Commission’s Honolulu Office.
In addition, written statements may be mailed to the Commission at 465 South King Street, Room 103, Honolulu, Hawaii, 96813, or sent by electronic mail to .(JavaScript must be enabled to view this email address). Written statements should reference Docket No. 2016-0328 and include the author’s name and the entity or organization that the author represents, if any.
Any motions to intervene or participate in this proceeding must comply with the applicable provisions of the Commission’s Rules of Practice and Procedure Before the Public Utilities Commission, Hawaii Administrative Rules, Title 6, Chapter 61, and must be filed with the Commission at its Honolulu Office by March 6, 2017.
After the conclusion of the public hearing, at a later date to be determined, the Commission will hold an evidentiary hearing with the Parties, and thereafter, issue a decision on HECO’s Application in accordance with HRS § 269-16.
The foregoing is a brief summary of the proposals in HECO’s Application.  Copies of HECO’s Application are available for public review through the Commission’s electronic Document Management System, accessible at http://dms.puc.hawaii.gov/dms/. In addition, copies of HECO’s Application are also available for review by contacting HECO [(808) 548-7311], the Commission’s Honolulu Office [(808) 586-2020], or the Division of Consumer Advocacy [(808) 586-2800]. 

____________________________
Randall Y. Iwase
Chair

(SA958068   1/31, 2/7, 2/14, 2/21/17)~