Hawai’i regulators conditionally approve Phase 1 of companies’ Grid Modernization Strategy

The Hawai’i Public Utilities Commission, in a March 25 order, approved, subject to certain conditions, the application filed by Hawaiian Electric CompanyHawaii Electric Light Company, and Maui Electric Company, in which the companies requested approval for the first phase (Phase 1) of their Grid Modernization Strategy.

As noted in the order, the commission in February 2018 directed the companies to implement the strategy, and in June 2018, the companies filed the application requesting commission approval for expenditures of about $86.3m related to implementing Phase 1, including the acquisition and deployment of advanced meters, a meter data management system (MDMS), a telecommunications network, and related matters.

The companies propose to implement Phase 1 between 2019 and 2023. The commission also said in its order that the companies propose specific accounting and ratemaking treatment for Phase 1, including:

  • Deferral of software costs 
  • Accrual of allowance for funds used during construction (AFUDC), as appropriate, during the applicable construction phases of Phase 1
  • Recovery of capital costs and deferred costs through the Major Project Interim Recovery (MPIR) adjustment mechanism

According to the companies, the current electric grid is neither sufficient to meet customers’ needs nor adequate to achieve the state’s renewable portfolio standards (RPS) goals. The commission added that the companies state that the strategy “will provide the modernized platform for evolving needs and expectations of Hawaii’s communities and stakeholders,” and “will advance state energy policies and provide customers and communities with improved service, tools, offering and capabilities.”

According to the companies, the commission said, deploying the strategy sequentially is “necessary to build a grid that is capable of evolving into a conduit for coordinated import and export of energy and related services…” The companies argue that that “phased approach will align customer value and affordability with identified incremental grid investments,” the commission said.

As part of Phase 1 of the strategy, the companies propose investment in three main technologies:

  • Advanced meters, which will be equipped with communications technologies and “record electricity demand, usage, and power characteristics in configurable intervals as well as send notifications for anomalous conditions to provide the companies with more insight into the distribution grid and support the companies’ growing portfolio of customer energy options”
  • An MDMS, which “collects and stores data received from the advanced meters … enabling customer energy options, data analytics to better refine load profiles for forecasting and grid planning, alerts for system operators regarding anomalous conditions, and a customer portal…”
  • An interoperable and scalable telecommunications network that will enable “the communication path for both advanced meters and field devices for distribution sensing, control, and automation”

The commission added that according to the companies, Phase 1 will provide the basis for future strategy deployments, including an advanced distribution management system and other field devices that are necessary to increase grid efficiency and resiliency while continuing to grow customer options and utility based program opportunities.

According to the companies, typical residential customers would see these monthly bill impacts from Phase 1 implementation:

  • HECO – 24 cents for 2019-2052 for 500 kWh
  • MECO – 34 cents for 2019-2052 for 500 kWh
  • HELCO – 55 cents for 2019-2052 for 500 kWh

The commission added that the companies propose to recover the costs of Phase 1 via the MPIR adjustment mechanism that the commission established in another docket, “until base rates that reflect the revenue requirements associated with the capital costs and deferred costs of Phase 1 take effect in a future rate case for each respective company …”

The commission noted that while the companies’ stated intent responds to the commission’s guidance, some components of Phase 1 are dependent on the companies’ assumptions about customer uptake of specific technologies or energy programs offered. At this time, it is unknowable whether the companies’ assumptions are a true representation of future customer participation as it relates to Phase 1, the commission said, adding that as those implementation details become known, the companies must work continuously to minimize the risk of stranded costs.

The companies propose a customer energy portal to allow customers and customer-authorized third parties to access advanced meter data, the commission said, noting that the companies also allude to their need to develop policies “regarding third-party access to customer-specific advanced metering data.”

The companies state that they included “requirements for the security of the customer energy usage information that will be collected through the advanced meters and MDMS” and “requirements necessary to comply with the companies’ comprehensive cybersecurity measures” in their solicitations for the MDMS and telecommunications network systems, the commission said.

The commission noted that it supports those efforts and will require the companies to file a comprehensive data access and privacy policy for all customers.

Discussing the proposed costs of Phase 1, the commission noted that the companies employed a competitive procurement process for the components of Phase 1 that “required the companies to evaluate and consider alternative technology options” to meet policy objectives. The commission said that the companies’ procurement for those components yielded prices that appear to be lower than past grid modernization proposals in the state.

As an additional measure of cost control, the commission said that it will cap cost recovery for the major components of Phase 1. The commission also said that it will require thorough tracking of project costs and benefits, as well as review the companies’ methodology and quantification of such benefits.

The commission noted that it will implement fixed cost recovery caps for the MDMS project, the meter headend project, and the telecommunications headend project. For the MDMS project and the meter headend project, the companies are to recover no more than the lower of actual incurred costs or their proposed aggregated costs for all three companies, including capital expense and proposed deferred expense. The commission added that for the telecommunications headend project, the companies are to recover no more than the lower of actual incurred costs or their proposed aggregated capital costs for all three companies.

Among other things, the commission said that the companies are to submit semi-annual reports containing such information as plans and scope for implementation in upcoming months for each of the companies’ service territories; status of the MDMS installation in comparison to the companies’ plans and scope; and the actual capital and deferred costs incurred by the companies for each service territory. The commission added that the companies are to file their first such report by June 30.

About Corina Rivera-Linares 3235 Articles
Corina Rivera-Linares, chief editor for TransmissionHub, has covered the U.S. power industry for the past 15 years. Before joining TransmissionHub, Corina covered renewable energy and environmental issues, as well as transmission, generation, regulation, legislation and ISO/RTO matters at SNL Financial. She has also covered such topics as health, politics, and education for weekly newspapers and national magazines. She can be reached at clinares@endeavorb2b.com.