APEC Workshop on Recent Advances in Utility Based Financial Mechanisms that Support

Renewable Energy and Energy EfficiencyHonolulu, HawaiiMarch 30, 2009

REGULATOR’S PERSPECTIVE ON

RENEWABLE ENERGY PORTFOLIO STANDARDS

AND

ENERGY EFFICIENCYCarlito P. Caliboso

ChairmanPublic Utilities Commission

State of Hawaii

BackgroundRegulatory Authority

• General supervisory power over public utilities under Chapter 269, HRS. HRS §269-6(a).

• “The public utilities commission may consider the need for increased renewable energy use in exercising its authority under this chapter.” HRS §269-6(b). Act 177 (SLH 2007).

Traditional Regulatory Objectives, Ch. 269 HRS

• Reliable Electricity Service

• Just and Reasonable Rates

• Fair Opportunity to Earn Reasonable Rate of Return

Reasonable Return ($) on Investment for Utility

Reasonable Rates ($) for Customers

Balancing TraditionalRegulatory Objectives

Hawaii’s Dependence on OilHawaii Fuel Mix

Percent of Fuel Used for Electricity Generation by HECO in 2007

OilCoalBiomassGeothermalHydroWind

Data Source: www.heco.com

Percent of Fossil Fuel and Renewable Energy Used in Electricity Generation

2007

Fossil FuelRenewable Energy

Data Source: www.heco.com

Hawaii’s Fossil Fuel Dependence

Comparison of US andHawaii Oil Demand

Oil Demand by End-Use

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

US Total Hawaii

ElectricityHomeAirInd/CommRoad

Source: HNEI

OIL PRICES (WTI)

40

50

60

70

80

90

100

110

120

130

140

Jan-07

Feb-07

Mar-07

Apr-07

May-07

Jun-07

Jul-07

Aug-07

Sep-07

Oct-07

Nov-07

Dec-07

Jan-08

Feb-08

Mar-08

Apr-08

May-08

Jun-08

Jul-08

Aug-08

Sep-08

Oct-08

Nov-08

Dec-08

Jan-09

Data Source: U.S. DOE Energy Information Administration http://tonto.eia.doe.gov/dnav/pet/pet_pri_spt_s1_m.htm

$/B

arre

l

OIL WTI

Oil Price Volatility

EFFECTIVE RATES

0.10

0.15

0.20

0.25

0.30

0.35

0.40

0.45

0.50

Jan-07

Feb-07

Mar-07

Apr-07

May-07

Jun-07

Jul-07

Aug-07

Sep-07

Oct-07

Nov-07

Dec-07

Jan-08

Feb-08

Mar-08

Apr-08

May-08

Jun-08

Jul-08

Aug-08

Sep-08

Oct-08

Nov-08

Dec-08

Jan-09

Data Source: HECO Companies' "Effective Rate Summaries" ReportsKIUC Fuel and Purchased Power Rate Adjustment Reports

Mon

thly

Eff

Rat

es -

Ener

gy C

harg

es $

/kw

h

OAHU HAWAII MAUI LANAI MOLOKAI KAUAI

Vulnerability to Oil Price Volatility

EFFECTIVE RATES AND OIL PRICE CHANGESSINCE JANUARY 1, 2007

-40%

-20%

0%

20%

40%

60%

80%

100%

120%

140%

160%

Jan-07

Feb-07

Mar-07

Apr-07

May-07

Jun-07

Jul-07

Aug-07

Sep-07

Oct-07

Nov-07

Dec-07

Jan-08

Feb-08

Mar-08

Apr-08

May-08

Jun-08

Jul-08

Aug-08

Sep-08

Oct-08

Nov-08

Dec-08

Jan-09

Data Source: HECO Companies' "Effective Rate Summaries" ReportsKIUC Fuel and Purchased Power Rate Adjustment Reports

U.S. DOE Energy Information Administrationhttp://tonto.eia.doe.gov/dnav/pet/pet_pri_spt_s1_m.htm

Perc

ent (

%) C

hang

e Ef

fect

ive

Rat

es -

Ener

gyC

harg

es

OAHU HAWAII MAUI LANAI MOLOKAI KAUAI OIL

Vulnerability to Oil Price Volatility

Vulnerability to Oil Price Volatility

Price of OilSince 1980s

Climate Change(Global Warming)

Priority Policy andRegulatory Objectives

• Energy Security– Reduce Imported Oil Dependence– Price Stability– Supply Security

• Climate Change (Global Warming)– Reduce Green House Gas

Emissions– Reduce Fossil Fuel Use

• Energy Efficiency: – Maximize Cost-Effective Energy

Efficiency Programs• Increase Renewable Energy

Generation– Wind – Solar– Geothermal– Wave, OTEC, Biofuels, & Others

Primary Energy Strategies

• 2004 HECO Rate Case 04-0113 DSM Application Bifurcated

• Energy Efficiency Docket 05-0069

• Public Benefits Fee, Act 162 (2006) , HRS §269-121.

• Energy Efficiency Program Administrator Docket 2007-323

Maximize Energy Efficiency Aggressively

Public Utilities Commission

Contract Administrator

ProgramEvaluator

FiscalAgent

Program Administrator

RegulatedElectric Utility

Performance Contract &Regulation

Contract Contract Regulation

Evaluation &

Verification

Contract Oversight

Public Benefits Fee $

Hawaii Energy EfficiencyProgram Administrator

July 1, 2009

• Renewable Portfolio Standards– Standards– Goals

• Broad Policy Tool (Weapon)– Requires % of RE Generation– Communicates Policy to Change

Establishing Energy Policy to Increase RE Generation

• RPS (includes EE), HRS §269-92– 10% Renewable Energy by 2010– 15% Renewable Energy by 2015– 20% Renewable Energy by 2020

• Penalties Established for RPS at $20 per MWh of deficiency. (Order 12/19/2008 Docket 2007-0008)

Establishing Policy to Increase RE Generation: RPS

BALANCING TRADITIONAL OBJECTIVESWITH

NEW ENERGY POLICY

Traditional Objectives

New Energy Policy

Kaheawa WindMaui

Kaheawa WindMaui

Hawi WindBig Island

Hawi Wind Big Island

La Ola Solar FarmLanai

La Ola Solar FarmLanai

La Ola Solar FarmLanai

Renewable Energy ProgressOthers on the Horizon

• Sea Water Air Conditioning• Ocean Thermal Energy

Conversion (OTEC)• Biomass• Biofuels• Wave• Others TBA

ALOHA