STAND. COM. REP. NO. 2861

Honolulu, Hawaii

RE: S.B. No. 2487

S.D. 1

Honorable Ronald D. Kouchi

President of the Senate

Thirty-Third State Legislature

Regular Session of 2026

State of Hawaii

Sir:

Your Committee on Ways and Means, 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 and intent of this measure is to ensure that electric utility rates remain performance-based, rather than returning to cost-based ratemaking that could raise customer costs.

More specifically, this measure:

(1) Clarifies that, for electric utilities, "performance-based incentives" include revenue adjustment mechanisms, cost control mechanisms, rewards for superior performance, and penalties for subpar performance;

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

(3) Requires the 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 written comments in support of this measure from Earthjustice and Ulupono Initiative.

Your Committee received written comments on this measure from the Department of Commerce and Consumer Affairs Division of Consumer Advocacy, Public Utilities Commission, and Hawaiian Electric.

Your Committee finds that Act 5, Session Laws of Hawaii 2018, known as the Hawaii Ratepayer Protection Act, established a performance‑based framework to align electric utility incentives with the interests of customers by linking revenues to performance outcomes rather than capital expenditures. Your Committee also finds that recent actions by the Public Utilities Commission have raised concerns about a return to traditional cost-plus ratemaking, contrary to the intent of the Hawaii Ratepayer Protection Act. Your Committee further finds that this measure is intended to clarify the Legislature's intent regarding utility ratemaking methods and to provide additional guidance to support the consistent implementation of performance‑based regulation.

As affirmed by the record of votes of the members of your Committee on Ways and Means that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 2487, S.D. 1, and recommends that it pass Third Reading.

Respectfully submitted on behalf of the members of the Committee on Ways and Means,

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DONOVAN M. DELA CRUZ, Chair