COVID–19 has been sending shock waves through health systems, economies, and societies around the world. The energy sector is also severely affected by this crisis. There have been steps to support the energy sector and to mitigate the negative effects of the crisis. This page provides synthesized COVID-19 related energy information to help inform the public.
Suspending Termination/Disconnection (Non-docketed)
Order Nos. 37125, 37153, 37189, 37251, 37284
The Division of Consumer Advocacy initially filed a letter on April 23, 2020 requesting the Public Utilities Commission (PUC) file an order to temporarily suspend the authority of regulated companies to terminate or disconnect services due to non-payment, and to assess any charges or fees that might be unreasonably assessed, including the accrual of interest on outstanding balances throughout the COVID-19 pandemic. In Order No. 37125 filed on May 4, 2020, the PUC ordered the following:
- All PUC-regulated electric, gas, telecommunications, water, and wastewater public utilities in the State of Hawaii to suspend disconnections of electricity, gas, telecommunications, water, and wastewater services during the pendency of the Governor’s Emergency Proclamation, and until otherwise ordered by the PUC. The PUC also suspended any and all rules and provisions of individual utility tariffs that prevent or condition reconnection of disconnected customers.
- Utilities were encouraged to offer payment plans or other reasonable arrangements to customers once the suspension of disconnections or terminations of service are lifted.
- Utilities were prohibited from charging customers interest on past due payments, or imposing any late payment fees, until otherwise ordered by the PUC.
- Customers should continue paying their bills to the extent possible during this time, as they will still ultimately be responsible for paying utility service billings accrued during this suspension.
- Utilities were required to provide notice of this Order’s content on their website or in any other prominent place.
- The utility’s ability to disconnect a customer’s service for public safety concerns unrelated to non-payment of services was not affected by this order.
- Each of these utilities were authorized to establish regulatory assets to record costs resulting from the suspension of disconnections.
- Any utility that books regulatory assets consistent with the authorization of this order must file a short report regarding the utility’s financial condition by May 20, 2020. In addition, these utilities must file quarterly reports beginning July 30, 2020, detailing the amount of the costs incurred and any savings realized, updated information regarding the utiltiity’s financial condition, and a list of measures the utility has in place to assist its customers during the COVID-19 pandemic.
In Order No. 37153 filed on May 28, 2020, the PUC extended through June 30, 2020, its suspension of disconnections of electricity, gas, telecommunications, water, and wastewater services, and the suspension of any and all rules and provisions of individual utility tariffs that prevent or condition reconnection of disconnected customers. It also reiterated previous statements made from Order No. 37125.
In Order No. 37189 filed on June 26, 2020, the PUC extended the suspension of disconnection of regulated utility services due to non-payment and/or assessment of other charges through July 31, 2020. In addition to previous statements in Order Nos. 37125 and 37153, the PUC also authorized utilities that elect to suspend disconnections beyond July 31, 2020, to book regulatory assets related to the costs associated with that suspension, through September 1, 2020.
In Order No. 37251 filed on July 31, 2020 the PUC extended the suspension of termination or disconnection of regulated utility services due to non-payment and/or assessment of other charges through August 31, 2020. In addition to previous statements in Order Nos. 37125, 37153, and 37189, the PUC also authorized utilities that elect to suspend disconnections beyond August 31, 2020, to book regulatory assets related to the costs associated with that suspension, through October 1, 2020.
Hawaiian Electric – Docket No. 2020-0069
On April 22, 2020, Hawaiian Electric filed an application to defer costs associated with the COVID-19 pandemic beginning from March 17, 2020, when Hawaiian Electric temporarily suspended service disconnections in response to the potential impacts of the pandemic on customers. Hawaiian Electric made the request because they expected to incur significant costs resulting from: bad debt expense, increased financing costs, sequestration costs for critical employees, increased sanitation costs among others that cannot be predicted. While the revenue balancing account (RBA) mechanism allows Hawaiian Electric to accrue and subsequently bill for revenue amounts that fall below target revenues due to the reduced sales because of the COVID-19 pandemic, the RBA does not adjust for the increase in bad debt expense due to the amount of uncollected (non-paid) customer accounts. In Decision and Order No. 37192 issued on June 30, 2020,
the Public Utilities Commission (PUC) approved Hawaiian Electric’s request to defer costs incurred from March 17, 2020 through December 31, 2020. Quarterly reports filed by the Hawiian Electric pursuant to suspension of termination or disconnection orders are now required to include eight additional pieces of information related to deferred costs, calculation methodology, and COVID-19. The PUC also directed Hawaiian Electric to submit any request to recover costs deferred as a result of COVID-19 as a separate docketed application.
Hawaii Gas – Docket No. 2020-0083
On May 22, 2020 Hawaii Gas filed an application to defer costs and to accrue and record lost contribution margins (LCMs) associated with the COVID-19 pandemic, beginning from March 4, 2020, when Governor of the State of Hawaii issued an emergency proclamation relating to the COVID-19 pandemic. Hawaii Gas made the request because they expected to incur significant costs resulting from: bad debt expense, increased costs associated with sanitation and prevention of COVID-19 transmission, severe decrease in utility gas demand, and other costs not easily predictable due to the nature of the event. In Decision and Order No. 37253 issued on July 31, 2020, the Public Utilities Commission (PUC) approved Hawaii Gas’ request to defer costs associated with the COVID-19 pandemic incurred from March 4, 2020 through December 31, 2020, conditional on detailed reporting requirements. The PUC denied Hawaii Gas’ request for approval to accrue and record LCMs associated with the COVID-19 pandemic on the basis that there was not sufficient evidence in the record–demonstrating the extent to which the anticipated reduction in LCMs as a result of decreased utility volumes from the COVID-19 pandemic will financially impact the company–to approve the extraordinary relief requested. The PUC provided Hawaii Gas with thirty days from the date of Decision and Order No. 37253 to submit additional information for consideration in its request to accrue and record LCMs associated with the COVID-19 pandemic. Quarterly reports filed by Hawaii Gas pursuant to suspension of termination or disconnection orders are now required to include eight additional pieces of information related to deferred costs, calculation methodology, and COVID-19. The PUC also directed Hawaii Gas to submit any request to recover costs deferred as a result of COVID-19 as a separate docketed application.
Kauai Island Utility Cooperative – Docket No. 2020-0088
On June 5, 2020 Kauai Island Utility Cooperative filed an application requesting deferred accounting treatment to establish a regulatory asset to record and accrue lost gross margins (LGMs) for COVID-19 related sales volume declines (and, as applicable, increased bad debt expense) incurred from April 1, 2020. KIUC stated that the financial impact of the COVID-19 pandemic sustained is substantial, cautioning that if sales and revenues continue at the significantly decreased levels for an extended period of time, KIUC may not being able to meet its minimum debt service coverage ratio requirement, which is critical for KIUC to access capital when and as needed on favorable terms so they can continue to safely and reliably provide its essential electric service. In Decision and Order No. 37252 issued on July 31, 2020, the Public Utilities Commission (PUC) approved KIUC’s request to utilize deferred accounting treatment to establish a regulatory asset to record and accrue LGMs and increased bad debt expense associated with the COVID-19 pandemic, incurred from April 1, 2020, and continuing until ordered otherwise by the PUC. The PUC conditioned approval of KIUC’s request on detailed reporting requirements and ordered KIUC to include five additional pieces of information related to LGMs, calculation methodology, and COVID-19 in their quarterly reports pursuant to suspension of termination or disconnection orders. The PUC also ordered that any request to recover costs deferred as result of COVID-19 are to be filed in a separate docketed application.
Fuel Supply Contract between Hawaiian Electric and Par Hawaii – Docket No. 2020-0090
On June 9, 2020, Hawaiian Electric filed an application requesting a decision and order to: 1) approve the First Amendment to the Original Fuel Supply Contract between Par Hawaii Refining and Hawaiian Electric (approved in Docket No. 2018-0413 Decision and Order No. 36280); 2) approve a process to create the ability of the Hawaiian Electric Companies to purchase Imported fuel; 3) approve the inclusion of the costs of the First Amendment, imported fuel, and cost savings opportunities, including without limitation, the costs of fuel, terminalling and handling fees, throughput fees, storage and transportation, other costs, and related taxes and fees in the Energy Cost Recovery Clause (ECRC); and 4) grant Hawaiian Electric Companies such other and further relief as may be just and equitable.
The Original Fuel Supply Contract is a two year and eight month contract between Par Hawaii and Hawaiian Electric that began in January 2019. On April 29, 2020, due to “dire financial impacts from the COVID-19 pandemic” and the need to stop its financial losses as soon as possible due to its obligations to shareholders, Par Hawaii requested the contract renegotiation, exercising its contractual right to demand negotiation or terminate the contract. Par Hawaii’s letter to Hawaiian Electric presented that the decrease in fuel demand, particularly from reduced ground and air transportation, has led to historically low or negative margins on Par products. Par Hawaii shutdown its second crude unit due to the impact on its sales margin to Hawaiian Electric for the low sulfur fuel oil (LSFO) under the contract. Without the second crude unit, Par Hawaii is unable to produce the full volume of LSFO required by Hawaiian Electric and will have to import barrels of LSFO to meet demand.
The First Amendment terms are as follows:
- Effective Date: no later than August 15, 2020 with an option for Hawaiian Electric to terminate by August 6, 2020 (this termination clause allowed Hawaiian Electric to evaluate potential LSFO alternatives to the First Amendment).
- Fuel Quantity: Tier 1 volumes were amended from the original fuel supply contract, and Hawaiian Electric now has the ability to source Tier 2 volumes from other suppliers, subject to certain conditions.
- Fuel Quality: Maximum carbon residue of supplied LSFO will be reduced from 15% to 12%.
- Pricing: LSFO prices are expected to increase under the First Amendment (though determined to be the lowest cost solution compared to alternative importing options evaluated in response to Hawaiian Electric’s Request for Proposal). Other fuel price agreements (i.e. high sulfur fuel oil, diesel, and ultra low sulfur diesel for the neighbor islands) under the original fuel supply contract will remain the same.
- Other Provisions: Additional savings for Tier 2 volumes if the second crude unit resumes operations. Return to the pricing terms of the original contract if the second crude unit resumes operations and if crude run rates and the number of daily visitors to the State return to 2019 levels.
- Given the requested decision date, the PUC approved the First Amendment to be reasonable and in the public interest on an interim basis on August 4, 2020 in Interim Decision and Order No. 37256. The PUC found that approval on an interim basis provides the most stable option for procuring LSFO with regards to price volatility and fuel supply risk, noting that per Hawaiian Electric, not approving the First Amendment would likely lead to higher costs for its customers if Par Hawaii were to terminate the Original Fuel Supply Contract. The approval also included on an interim basis, Hawaiian Electric’s request to include the costs of the First Amendment in its ECRC, to the extent such costs are not recovered in its base rates. The interim greenhouse gas (GHG) emission study was deemed sufficient for the PUC to make an interim decision pursuant to HRS 269-6(b). Phase 2 of the proceeding will conduct a thorough vetting of all identified issues, including 1) the reasonableness of the First Amendment and including the costs of it in Hawaiian Electric’s ECRC, 2) whether Hawaiian Electric is pursuing all reasonable measures to mitigate the higher fuel costs expected under the First Amendment (including renewable energy alternatives), and 3) whether the interim GHG study is sufficient for the PUC to fulfill its obligations under HRS 269-6(b).
What’s changed since COVID-19? A snapshot of the electricity sector
This handout includes figures using publicly available data to observe what has happened in the electricity sector since COVID-19
Last Updated: 9/10/2020