STAND. COM. REP. NO. 1379-26

Honolulu, Hawaii

, 2026

RE: S.B. No. 2487

S.D. 1

H.D. 1

Honorable Nadine K. Nakamura

Speaker, House of Representatives

Thirty-Third State Legislature

Regular Session of 2026

State of Hawaii

Madame:

Your Committee on Energy & Environmental Protection, to which was referred S.B. No. 2487, S.D. 1, entitled:

"A BILL FOR AN ACT RELATING TO THE PUBLIC UTILITIES COMMISSION,"

begs leave to report as follows:

The purpose of this measure is to:

(1) Require the Public Utilities Commission to establish performance-based incentives, including revenue adjustment mechanisms, cost control mechanisms, and reward and penalty mechanisms on or before January 1, 2027;

(2) Clarify that the Public Utilities Commission is authorized to adopt alternative ratemaking procedures to establish electric utility rates and performance-based incentives; and

(3) Require the Public Utilities Commission to apply a presumption in favor of considering historical cost trends and external indices that reflect incentives to control costs if the Commission resets an electric utility's allowed revenues based on consideration of the utility's costs.

Your Committee received testimony in support of this measure from Earthjustice and Ulupono Initiative. Your Committee received comments on this measure from the Department of Commerce and Consumer Affairs; Public Utilities Commission; Life of the Land; and Hawaiian Electric.

Your Committee finds that Act 5, Session Laws of Hawaii 2018, provided that electric utility rates would be considered just and reasonable only if they are derived from a performance-based model for determining utility revenues. Your Committee further finds that this marked a needed shift away from the traditional focus on utility costs to a more modern focus on performance. Your Committee recognizes that recent developments, including the Public Utilities Commission's recent adoption of a cost-of-service rate to "re-base" a utility's allowed revenues, threaten a shift away from the performance-based model. This measure provides certain clarifications and guidance to ensure that the Public Utilities Commission continues to utilize performance-based regulatory frameworks.

Your Committee has amended this measure by:

(1) Changing the effective date to July 1, 3000, to encourage further discussion; and

(2) Making technical, nonsubstantive amendments for the purposes of clarity, consistency, and style.

As affirmed by the record of votes of the members of your Committee on Energy & Environmental Protection that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 2487, S.D. 1, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 2487, S.D. 1, H.D. 1, and be referred to your Committee on Consumer Protection & Commerce.

Respectfully submitted on behalf of the members of the Committee on Energy & Environmental Protection,

____________________________

NICOLE E. LOWEN, Chair