Tiered rates keep an essential amount of electricity affordable for low-income families, and reward conservation.
It’s important to motivate consumers to conserve and then to reward them. TURN supports tiered rates as a conservation and bill reduction measure, but we are not fans of rate shock. It is up to the utility company to make sure customers know how to use the new rates to their advantage.
Hawaiian Electric Co. customers using a typical amount of electricity will see little change in the "non-fuel energy" part of their bill as a result of the utility’s shift to a tiered rate structure.
HECO announced the change on Tuesday but did not give enough information at that time to evaluate whether the new tiered rates would cause electric bills to go up or down. Star-Advertiser calculations yesterday showed the new rates will result in little change for the average rate payer.
A HECO customer using 600 kilowatt hours (kwh) a month paid a non-fuel energy charge of $49.80 in February. Under the tiered system the charge would have been $47.88, a savings of $2.08.
While the "non-fuel" charge may be the same or a little less, it’s likely that most customers will see an increase in their total electric bill this month due to higher oil prices.
Under the new three-tier system for "non-fuel" charges, customers who use more electricity pay a higher rate than those who use less. The new system applies only to the portion of a HECO bill that helps cover the cost of operating HECO’s power plants and maintaining its electric system. That is typically about 30 percent of a bill.
HECO said the goal of the new structure is to create an incentive for customers to conserve electricity.
The new structure consists of three usage levels. Customers will be charged the lowest rate for the first 350 kwh used in a month; the middle rate for 351 to 1,200 kwh used in a month, and the highest rate for anything over 1,200 kwh.
The bulk of HECO’s customers, 60 percent, use between 351 and 1,200 kwh per month; 28 percent use 350 or less; and 12 percent use more than 1,200, according to the utility.
Some ratepayers complained that the new system penalizes large families that will find themselves above the 1,200 kwh threshold simply because of the number of family members.
HECO said it tried to address that situation by creating an exemption for large families that meet low-income criteria under the federally funded Low Income Home Energy Assistance Program. They will be billed at the lowest rate.
"We do recognize that there may be some larger households that may find it difficult to cut back. That’s why there is a waiver that allows them to be billed at the low rate," said Darren Pai, HECO spokesman.
A consumer watchdog group in California said it supports tiered rates, which it says have worked well in California after being put in place by utilities there more than a decade ago.
"From our perspective it accomplishes two really important goals," said Mindy Spatt, communications director for The Utility Reform Network.
"It keeps an essential amount of electricity affordable for low-income families. It’s really important to have electricity remain affordable. And two, it rewards conservation. It’s important to motivate consumers to conserve and then to reward them," Spatt said.
She said HECO’s announcement did not say how it plans to educate customers about the change.
"TURN supports tiered rates as a conservation and bill reduction measure, but we are not fans of rate shock. It is up to the utility company to make sure customers know how to use the new rates to their advantage," she said.