HECO says it's ready to become the utility of the future

Dive Brief:

Hawaiian Electric Industries (HEI), parent company to utilities Hawaiian Electric Company (HECO), Maui Electric Company (MECO) and Hawaii Electric Light Company (HELCO), reported consolidated net income for common stock of $45.9 million for Q1 2014, up from $33.7 million over the same period last year.
On the earnings call, HECO said it is ready to become the "utility of the future" in response to questions about the Hawaii Public Utilities Commission's (PUC) recent decision and order outlining how the utility business model needs to be aligned with a customer-focused, clean energy strategy.
The utility is looking at several projects that will help further its agenda. One is a call for bids for a liquid natural gas provider contract, and the other is a call for utility-scale energy storage proposals, announced late last week. HECO has been given between 30 and 120 days to respond to different aspects of the PUC's order, and the utility plans to honor these timelines. One of the main priorities that emerged from the order is to review decoupling and the extent of residential rooftop solar adoption.
The company announced that it has retired 5 units of oil-fired generation, totaling 131 MW of capacity. This should save $7.9 million a year, HEI said. More retirements could be on the horizon as the company tries to wean itself off oil.

Dive Insight:

Late last month, the Hawaii PUC rejected HECO's Integrated Resource Plan (IRP). In its decision and order, the Commission said HECO's IRP appeared to be a series of "unrelated" projects and expenditures with no clear focus. HECO is still reviewing the PUC's filings, but the utility said it welcomed "more clarity" on the PUC's expectations for the utility, and that the PUC order is a "roadmap and opportunity" for the future.

HECO CEO Dick Rosenblum explained that presenting projects piecemeal was standard in the old regulatory model, but the PUC made it clear it wanted an all-encompassing vision. Rosenblum said HECO needs to show the PUC how its individual projects fit together as part of a more comprehensive strategy. Already, the utility is engaged in boosting demand response technology, the integration of clean, variable energy and lower cost fuels, energy storage and more efficient operating practices. The utility holds Oahu as a success case study—the island has 11% solar penetration and has integrated 326 MW of rooftop solar generated electricity onto the grid by the end of the first quarter this year, up from just 12 MW in 2008.

To progress further, HECO is looking to liquid natural gas as a "bridge" fuel. Currently, 75% of its customer bills are fuel-related costs, reflecting the extortionate price of imported oil. Importing liquid natural gas would lower these costs while HECO works to modernize its grid to incorporate more distributed energy resources, utility-scale energy storage, and smart technologies to stabilize what will be a variable energy supply.

But to meet the PUC's expectations, and its own goals, the utility was vocal on the role regulators must play. "Being on the leading edge is always challenging," said HEI CEO Connie Lau. "But together with our regulators, policy makers and other stakeholders, we are intent on solving these challenges." The current rate structure in Hawaii is possibly not suited to the grid of the future, said Lau, and that an unbundled rate structure might be more suitable. This would adjust the burden of fixed costs between customers that have distributed generation and those that do not.

"It's got to be a community wide effort where we all talk and we all agree on the trade-offs that are to be made," she said.