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GM 1193

Informing the Legislature that on June 5, 2026, the Governor signed the following bill into law: SB2487 SD1 HD1 CD1 (ACT 093).

2026 Regular Session

Hawaii requires the PUC to implement performance-based incentives that tie electric utility revenues to actual performance, not just investment levels.

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Bill Summary · GM 1193

Overview

  • Bill: SB 2487, SD 1, HD 1, CD 1
  • Session/Jurisdiction: Hawaii, 2026
  • Status: Enacted as Act 093 (signed June 5, 2026)
  • Title: Relating to the Public Utilities Commission; Hawaii Ratepayer Protection Act of 2026
  • Governor’s action: Signed into law on June 5, 2026

Main purpose and intent

  • The act reaffirms and strengthens Hawaii’s framework for regulating electric utilities through a performance-based model (PBR) rather than traditional cost-of-service ratemaking.
  • It aims to ensure ratepayer protections by requiring the Public Utilities Commission (PUC) to establish and maintain performance-based incentives that tie utility revenues to actual performance, fostering lower costs and improved service for customers.
  • It clarifies that the PUC may adopt alternative ratemaking procedures that still derive rates from a performance-based model.

Key provisions and changes

  • Section 2: Legislative findings and policy

    • Recaps the 2018 Hawaii Ratepayer Protection Act (Act 5) and its shift toward performance-based regulation.
    • Highlights past concerns with returning to cost-of-service or “rate base” revenue models and forecasted (forward test year) rate cases.
    • Establishes that, as the end of the initial five-year rate control period nears, clarifications are needed to prevent backsliding into cost-based regulation.

  • Section 3: Performance-based incentives and approval deadline

    • Requires the PUC to establish, on or before January 1, 2027:
    • Performance-based incentives (PBIs), including:
      • Revenue adjustment mechanisms
      • Cost control mechanisms
      • Reward and penalty provisions
    • PBIs must directly tie an electric utility’s revenues to its actual performance.
    • Grants authority for the PUC to adopt alternative ratemaking procedures to implement these PBIs, as long as rates are derived from a performance-based model.

  • Section 3 (amended language in §269-16.1): Detailed framework

    • Codifies the requirement for PBIs that decouple allowed revenues from mere investment levels and instead reward performance.
    • Allows the PUC to modify or amend PBIs over time.
    • Specifies that the PBIs apply to electric utility rate regulation under the statute.
    • Excludes member-owned cooperative electric utilities from this section.

  • Section 4: Repeal/inline with new text

    • Updates statutory material to reflect the new framework (underlines new text; brackets indicate repealed material).

  • Section 5: Effective date

    • Effective upon approval (Act 093).

Who/what is affected

  • Electric utilities regulated by the Hawaii Public Utilities Commission.
  • The PUC itself, which must design and implement PBIs and potentially adopt alternative ratemaking procedures.
  • Ratepayers and residential/commercial customers who would benefit from a regime emphasizing customer-centric, performance-based outcomes.
  • Excludes member-owned cooperative electric utilities from certain provisions.

Procedural and timeline aspects

  • Deadline for establishing PBIs and related mechanisms: On or before January 1, 2027.
  • The act reinforces a transition away from traditional cost-of-service and forward-looking (forecast) rate methods toward ongoing performance-based regulation.
  • The five-year rate control period under the prior framework is acknowledged, with policy emphasis on continuing performance-based reforms beyond that period.

Potential impacts

  • Expected improved alignment between utility profits and customer outcomes (reliability, affordability, efficiency, and rapid integration of renewables).
  • Potentially tighter rate controls with incentives to reduce costs and avoid excessive capital expenditures not tied to performance.
  • Increased transparency and accountability in utility planning and procurement processes.
  • Possible resistance from stakeholders advocating traditional cost-of-service models, but the act solidifies Hawaii’s policy direction toward performance-based regulation.

Compiled from official sources — confirm details with the bill’s official record.

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