Hawaii Water’s rates are set by an independent third party, the Hawaii Public Utilities Commission (HPUC). The HPUC’s job is to make sure that rates are fair and reasonable and that utilities provide reliable service. Rates are based upon “cost of service,” which means that the majority of every dollar a customer pays to Hawaii Water goes directly to system operations.
General Rate Cases
Before Hawaii Water can raise its rates, it is required to file an application for approval of the rates with the HPUC. The Division of Consumer Advocacy (Consumer Advocate) is automatically a party to the application. The role of the Consumer Advocate is to analyze the application, determine whether the request is reasonable and in the best interest of consumers, and to make recommendations to the HPUC. In the rate setting process, the HPUC sets rates to cover the costs of providing water and allow the utility to earn a reasonable return on its investment in the water system. Major costs to operate a water or waste water system include purchased electric power, labor, treatment costs, groundwater pumping fees, repairs and maintenance, and chemicals.
The steps in the rate-case process are as follows:
- Hawaii Water reviews its historical costs, projected costs, and water system improvements and prepares a rate case application for the consideration of the Division of Consumer Advocacy and the HPUC.
- The HPUC holds a public hearing to receive input from customers on the application. Customers may also write to the HPUC.
- The Consumer Advocate analyzes Hawaii Water’s application and makes a recommendation to the HPUC. Usually the Consumer Advocate recommends a smaller increase than that requested by the utility.
- If Hawaii Water and the Consumer Advocate can agree on the amount of the increase, they submit their agreement to the HPUC for approval. If they do not agree, the HPUC holds a formal hearing, which is similar to a court proceeding.
- The HPUC issues a decision on the application. The entire process can take nine months or more.