Is HECO’s monopoly over? New law could change power market

Hawaiian Electric Co.’s century-long hold on Hawaiʻi’s electricity market soon will change in a major way, creating a potential path to lower rates for businesses and residents.

Starting in 2027, HECO will be required to let independent electricity producers use its grid to deliver electricity directly to customers for a fee, potentially ending the utility’s standing as the sole choice for most electric consumers in the state. Under the current system, producers must sell electricity at a wholesale price to HECO, which pools it to sell to customers at a higher rate.

Gov. Josh Green signed the groundbreaking bill on Thursday, despite having previously signaled his intent to veto the measure.

It remains to be seen to what extent the new system will lead to significant savings for residential customers. A previously passed law allowing renters to buy power from community solar farms, for instance , has gone nowhere, hampered by what critics say are untenable rules. But even critics of the new law have said it could generate savings for some customers.

State Sen. Glenn Wakai, who chairs the Energy and Intergovernmental Affairs Committee and sponsored the bill, said the measure was meant to introduce competition in Hawaiʻi’s electricity market and reduce costs in a state where customers pay the nation’s highest costs for electricity — more than three times the national average.

“We have for more than 100 years been at the mercy of HECO for our electricity needs, and we’ve seen in recent times that the delivery of that electricity has been very unreliable and very, very expensive,” Wakai said. “In the next two years, come 2027, all HECO’s customers will have an option of buying from someone other than HECO.”

“I think this is a game changer to benefit the consumers,” Wakai said.

Green’s office also expressed optimism.

“We believe that the provisions contained within the bill will allow for greater energy choice and hopefully a reduction in costs for Hawai‘i’s consumers,” Green’s spokeswoman, Makana McClellan, said in a written statement.

HECO spokesman Jim Kelly declined an interview request.

Law Could ‘Really Open Up Our Grid’

The law includes several provisions to break HECO’s hold on Hawaiʻi’s electricity market, but the most important involves what energy experts call wheeling.

Under the current system, developers build big wind and solar farms and sell the power to HECO under long-term contracts. HECO pays as little as 8 cents per kilowatt hour for electricity from these independent power producers, said Jeff Mikulina, a renewable energy consultant who was an architect of the law requiring Hawaiʻi to produce all of the electricity sold in the state from renewable resources by 2045.

Meanwhile, HECO charges residential customers on Oʻahu almost 43 cents per kilowatt hour. Big Island residents pay 48 cents.

Wakai said a goal of the law is to enable customers to pay closer to what the renewable electricity costs HECO to buy and to encourage smaller players to get in the game.

The wheeling provision does this by letting independent electricity producers pay a set fee to use HECO’s grid to deliver power to customers. Although wheeling has long been allowed on the mainland, it’s been prohibited by law in Hawaiʻi.

The PUC had been investigating a proposal to allow wheeling between government entities only, and Green’s intent-to-veto statement pointed to that as a reason to veto the broader bill. Green decided to sign the broad bill after the PUC said it would cancel the intra-governmental wheeling inquiry, McClellan said.

Hawaiʻi’s previous prohibition against wheeling has played out on the ground at places like Green Homes Hanalei, a cluster of seven homes in west Oʻahu built in 2017 around the idea of using solar and storage to make the subdivision as energy self-sufficient as possible.

Developer R.J. Martin powered each home with photovoltaic solar cells combined with two Tesla Powerwall batteries. Each home had garages with chargers for electric vehicles.

Martin wanted to go further and link the homes with a small power grid that would let homeowners share surplus power with each other. But he quickly learned that would be illegal. Homeowners would have to become regulated utilities to share surplus electricity with their neighbors.

“No one in their right mind is going to go through that exercise,” Wakai said. “So now, it just simplifies what has been all these walls and impediments put up by the government as well as by HECO.”

Martin hopes the new law will enable him to do something more innovative in the near future: use renewables and perhaps a microgrid to power a larger, workforce housing subdivision he’s planning for West Oʻahu.

But much will depend on how the Hawaiʻi Public Utilities Commission implements the law, Mikulina said.

“If the PUC does it right, it can really open up our grid to some innovative renewable solutions,” Mikulina said. “This could catalyze renewable growth and really help folks who need access to this.”

Critics Say Some Could Be Left Out

Critics point to potential unintended consequences.

A major issue involves equity. The concern is that HECO customers with the money and wherewithal to partner with an independent power producer will defect from HECO, leaving those less well-off to still deal with higher rates.

Testifying against the bill, the International Brotherhood of Electrical Workers Local 1260, which works on utility infrastructure, argued the long-term technical effects of wheeling on HECO’s grid are unknown.

“Further,” the union wrote, “the fixed-cost of operating and maintaining the system will remain unchanged and passed on to those left in the system, essentially increasing the cost of electricity to those who can least afford it.”

Given this risk, it will be key to make sure lower-income residential customers can benefit as the commission creates rules governing the program, said Michael Colón, director of energy for the Ulupono Initiative, which supports the use of renewable energy.

To address such concerns, Wakai said, the law limits the size of a wind or solar farm allowed to use the wheeling provision to two megawatts, the size needed to power about 3,000 homes.

“We’re not talking about, you know, large 50- to 60-megawatt plants going and selling to all the Waikīkī hotels,” Wakai said. “That’s not going to be possible under this scenario.”

“What is possible under this scenario,” he said, “is, if you have let’s say 10 acres of land that can create two megawatts of power, you are free to go and sell to the nearby residents or wheel it across the island to someone who’s willing to take it.”

That’s promising news to people like Steve Mazur, director of commercial business development for RevoluSun, one of Hawaiʻi’s largest solar companies.

Mazur said he’s encountered business owners with energy hogging cold storage systems but small rooftops located near businesses with huge rooftops but little electricity needs. If implemented well by the PUC, Mazur said, the new law could make way for solar panels on the large roof to power the neighboring business.

“These rooftops are sitting there empty,” he said. “There has to be something to entice them.”

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This story was originally published by Honolulu Civil Beat and distributed through a partnership with The Associated Press.