LIHUE — The island’s consumer-owned electrical utility is beginning to consider exemption from the state’s regulatory agencies.
As part of its updated strategic plan, Kauai Island Utility Cooperative is in the process of considering moving out from under the authority of the state’s Public Utility Commission to a deregulated or minimally regulated status. The move would allow the coop greater flexibility in responding to member concerns and changes in fuel prices and market conditions.
Beth Tokioka, KIUC spokesperson, said some of the areas in which KIUC is regulated include rate-setting, financial matters such as borrowing or entering new purchase power agreements, safety and reliability standards, and policies for bill collection.
“Since KIUC is governed by an elected Board of Directors, any functions that are deregulated from the PUC would be governed at the local level,” she said. “The main advantages would be reduced cost to members and the ability to move more quickly on certain matters to either address challenges or take advantage of opportunities.”
Factors such as investments in new technology required for out-dated equipment and systems may put stress on existing regulatory practices, according to a study from the Massachusetts institute of Technology.
“Meeting the future expectations for transmission and distribution systems in a cost-effective manner will require utilities to evaluate and potentially adopt technologies that significantly depart from traditional grid investments,” according to the study.
The Public Utilities Commission declined to comment.
As of April 2014, 16 states and the District of Columbia are deregulated in some capacity.
“Most utility cooperatives in the United States are not regulated to the degree that KIUC is regulated by the Hawaii PUC,” said Kauai Mayor Bernard Carvalho Jr. “It is my understanding that KIUC is in the process of determining how deregulation might benefit its members, but they haven’t made any decisions on this matter yet.”
As of December 2016, KIUC customers pay $0.33233 per kilowatt-hour. The utility serves about 32,000 accounts and has 23,300 active member-owners.
In the MIT study, 242 investor-owned companies account for 66 percent of the nation’s electricity sales.
“Over the years, KIUC has done excellent work for Kauai, most notably in reducing our island’s dependence on fossil fuels,” Carvalho said. “The county has partnered with KIUC on a number of initiatives, and we believe that their efforts in the last 10 years have demonstrated their ability to act in the best interests of our island and our residents for the long term. Deregulation is a critical conversation for KIUC, its board and management, along with our community to engage in. We look forward to more discussions on this matter.”
David Bissell, KIUC president and CEO, said KIUC owes it to its membership to evaluate all the effects of regulation to see if there may be benefits to lighter or removed regulation in certain areas.
“The effort to understand these things is ongoing, as it has been since 2002 when KIUC first became a cooperative,” he said.
In 2013, the state Legislature passed a law which would have “public utilities commission and the consumer advocate shall at all times consider the ownership structure and interests of an electric cooperative in determining the scope and need for any regulatory oversight or requirements over such electric cooperative.”
“There is no timeline developed at this point for completion of the task,” Bissell said.
“A very important step in our due diligence will be seeking the input of various stakeholders — including our member-owners — about the question of deregulation.”