Residents on Oʻahu will see their monthly electric bills increase by about $8 in 2027 and another $3 in 2028 under a proposal that Hawaiian Electric and the Ulupono Initiative have submitted to the state Public Utilities Commission. Residents on neighbor islands could expect bigger jumps.

Oʻahu’s Hawaiian Electric Co. and its Maui and Big Island affiliates are asking the utilities commission to approve the rate increase as part of a new rate-setting scheme mandated by lawmakers in 2018. In an unusual twist, an outspoken critic of HECO’s initial announcement that it intended to increase rates has joined the utility in making the request to the commission.

The joint filing by HECO and Ulupono asks regulators to approve a 5% increase in rates on Oʻahu over two years, 5.8% on Hawaiʻi island and 6.4% for Maui County. For the typical household, that translates to an $11 increase to monthly bills by 2028 on Oʻahu, $15 on the Big Island, $14 on Maui and $11 on Lānaʻi and Molokaʻi, according to HECO estimates.

The rate increase is designed to cover increased business costs. In the future, customers can anticipate an additional line item on their bills — technically a fee and not a rate increase — to pay for wildfire prevention measures. Lawmakers approved HECO’s ability to borrow money against the fee, known as securitization, in 2025. However, it’s not clear what fee customers will pay for that.

Ulupono’s participation in the proposed rate increase filing marks a significant change in the organization’s posture since the utilities commission first gave HECO the green light to pursue a rate increase. At the time, the organization, which promotes using renewable energy in Hawaiʻi, led a stampede of critics who said the commission’s green light sidestepped a mandate that regulators set rates based on the utility’s performance, known as performance-based ratemaking, or PBR.

Now Ulupono is firmly on board. “The Joint Proposal,” HECO and Ulupono say in their request, “is consistent with PBR.”

Michael Colón, Ulupono’s director of energy, said HECO’s initial proposal wasn’t consistent with the performance-based rate-making law. After a series of meetings with Ulupono and other stakeholders, Colón said, HECO was willing to step back from a wider-ranging request.

The result, Colón said, was a request in line with the performance-based rate-making approach for which Ulupono has long fought.

“We’re not celebrating a rate increase,” Colón said, adding that the organization understands the stress high electric rates place on residents and businesses.

But, he said, if HECO hadn’t been willing to work out a compromise, the utilities’ requested increase “would absolutely be a higher dollar amount.”

Jim Kelly, HECO’s vice president for government and community relations and corporate communications, said it was highly unusual for a community organization frequently at odds with HECO to participate in filing a rate request.

“It’s easy to overlook the significance that we have a joint filing,” Kelly said. “It’s absolutely a first for us, and it might be a first for the entire utility industry.”

It remains to be seen whether that removes the sting for customers who already pay the nation’s highest rates for electricity. Hawaiʻi residents paid 41 cents per kilowatt hour for electricity in December compared to a national average of 17 cents, according to the U.S. Energy Information Administration.

The performance-based ratemaking scheme was designed to dampen escalating costs for consumers while encouraging HECO to promote the state’s energy policy, which calls for all of the electricity sold in the state to be produced with renewable resources by 2045.

Under traditional rate-making, utilities build power plants and increase rates to pay for the facilities. 

The state’s energy policy calls for a practice where third-party independent power producers build wind and solar farms, and HECO buys the power from them wholesale, then resells and delivers the power to retail customers. By design, the policy nudges HECO out of the business of producing energy while relegating it to managing the electric grid, requiring the utility to keep the lights on while dealing with an increasingly complicated portfolio of energy producers.

Performance-based ratemaking is meant to incentivize HECO to promote this practice. Rate increases are based on meeting milestones rather than spending money on new equipment.

By design, performance-based ratemaking calls for periodically resetting a base rate not tied to performance. The company and Ulupono have requested the rate increase to cover costs associated with inflation, rising insurance premiums and closing fossil fuel plants by 2035 pursuant to an executive order by Gov. Josh Green.

Although HECO has not requested a rate increase on Oʻahu since 2011, Kelly said customers have seen their electric bills rise because 70% of what customers pay is based not on rates but on costs of fuel and taxes.

The Ulupono Initiative is a venture of The Omidyar Group. Pierre Omidyar is a co-founder of The Omidyar Group and of Civil Beat.

“Hawaiʻi’s Changing Economy” is supported by a grant from the Hawaiʻi Community Foundation as part of its work to build equity for all through the CHANGE Framework.