In common with many utilities, the Hawaiian Electric Companies (Companies) are investing significant sums in modernizing their systems, integrating renewable generation and maintaining reliability. The regulatory framework in Hawai‘i provides for a rate case every three years and annual revenue adjustments between rate cases, with this last feature being necessary to support the rate of investment that the Companies are undertaking. However, the Commission has expressed a concern that the traditional regulatory model could lead to over investment by the utility. This concern can be referred to as a risk of “capex bias”.

In this report we show that, across a wide range of jurisdictions, regulators have approved mechanisms that result in revenue adjustments between rate cases. The magnitude of necessary revenue adjustments will depend on the circumstances of the utility concerned, but there are many examples of revenue adjustments that exceed the rate of general inflation.

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