§269-16 Regulation of utility rates; ratemaking procedures. (a) All rates, fares, charges, classifications, schedules, rules, and practices made, charged, or observed by any public utility or by two or more public utilities jointly shall be just and reasonable and shall be filed with the public utilities commission. The rates, fares, classifications, charges, and rules of every public utility shall be published by the public utility in such manner as the public utilities commission may require, and copies shall be furnished to any person on request.

To the extent the contested case proceedings referred to in chapter 91 are required in any rate proceeding to ensure fairness and to provide due process to parties that may be affected by rates approved by the commission, the evidentiary hearings shall be conducted expeditiously and shall be conducted as a part of the ratemaking proceeding.

(b) No rate, fare, charge, classification, schedule, rule, or practice, other than one established pursuant to an automatic rate adjustment clause previously approved by the commission, shall be established, abandoned, modified, or departed from by any public utility, except after thirty days' notice to the commission as prescribed in section 269-12(b), and prior approval by the commission for any increases in rates, fares, or charges. The commission, in its discretion and for good cause shown, may allow any rate, fare, charge, classification, schedule, rule, or practice to be established, abandoned, modified, or departed from upon notice less than that provided for in section 269-12(b). A contested case hearing shall be held in connection with any increase in rates, and the hearing shall be preceded by a public hearing as prescribed in section 269-12(c), at which the consumers or patrons of the public utility may present testimony to the commission concerning the increase. The commission, upon notice to the public utility, may:

(1) Suspend the operation of all or any part of the proposed rate, fare, charge, classification, schedule, rule, or practice or any proposed abandonment or modification thereof or departure therefrom;

(2) After a hearing, by order:

(A) Regulate, fix, and change all such rates, fares, charges, classifications, schedules, rules, and practices so that the same shall be just and reasonable;

(B) Prohibit rebates and unreasonable discrimination between localities or between users or consumers under substantially similar conditions;

(C) Regulate the manner in which the property of every public utility is operated with reference to the safety and accommodation of the public;

(D) Prescribe its form and method of keeping accounts, books, and records, and its accounting system;

(E) Regulate the return upon its public utility property;

(F) Regulate the incurring of indebtedness relating to its public utility business; and

(G) Regulate its financial transactions; and

(3) Do all things that are necessary and in the exercise of the commission's power and jurisdiction, all of which as so ordered, regulated, fixed, and changed are just and reasonable, and provide a fair return on the property of the utility used and useful for public utility purposes.

(c) The commission may in its discretion, after public hearing and upon showing by a public utility of probable entitlement and financial need, authorize temporary increases in rates, fares, and charges; provided that the commission shall require by order the public utility to return, in the form of an adjustment to rates, fares, or charges to be billed in the future, any amounts with interest, at a rate equal to the rate of return on the public utility's rate base found to be reasonable by the commission, received by reason of continued operation that are in excess of the rates, fares, or charges finally determined to be just and reasonable by the commission. Interest on any excess shall commence as of the date that any rate, fare, or charge goes into effect that results in the excess and shall continue to accrue on the balance of the excess until returned.

(d) The commission shall make every effort to complete its deliberations and issue its decision as expeditiously as possible and before nine months from the date the public utility filed its completed application; provided that in carrying out this mandate, the commission shall require all parties to a proceeding to comply strictly with procedural time schedules that it establishes. If a decision is rendered after the nine-month period, the commission shall report in writing the reasons therefor to the legislature within thirty days after rendering the decision.

Notwithstanding subsection (c), if the commission has not issued its final decision on a public utility's rate application within the nine-month period stated in this section, the commission, within one month after the expiration of the nine-month period, shall render an interim decision allowing the increase in rates, fares and charges, if any, to which the commission, based on the evidentiary record before it, believes the public utility is probably entitled. The commission may postpone its interim rate decision for thirty days if the commission considers the evidentiary hearings incomplete. In the event interim rates are made effective, the commission shall require by order the public utility to return, in the form of an adjustment to rates, fares, or charges to be billed in the future, any amounts with interest, at a rate equal to the rate of return on the public utility's rate base found to be reasonable by the commission, received under the interim rates that are in excess of the rates, fares, or charges finally determined to be just and reasonable by the commission. Interest on any excess shall commence as of the date that any rate, fare, or charge goes into effect that results in the excess and shall continue to accrue on the balance of the excess until returned.

The nine-month period in this subsection shall begin only after a completed application has been filed with the commission and a copy served on the consumer advocate. The commission shall establish standards concerning the data required to be set forth in the application in order for it to be deemed a completed application. The consumer advocate may, within twenty-one days after receipt, object to the sufficiency of any application, and the commission shall hear and determine any objection within twenty-one days after it is filed. If the commission finds that the objections are without merit, the application shall be deemed to have been completed upon original filing. If the commission finds the application to be incomplete, it shall require the applicant to submit an amended application consistent with its findings, and the nine-month period shall not commence until the amended application is filed.

(e) In any case of two or more organizations, trades, or businesses (whether or not incorporated, whether or not organized in the State of Hawaii, and whether or not affiliated) owned or controlled directly or indirectly by the same interests, the commission may distribute, apportion, or allocate gross income, deductions, credits, or allowances between or among the organizations, trades, or businesses, if it determines that the distribution, apportionment, or allocation is necessary to adequately reflect the income of any such organizations, trades, or businesses to carry out the regulatory duties imposed by this section.

(f) Notwithstanding any law to the contrary, for public utilities having annual gross revenues of less than $2,000,000, the commission may make and amend its rules and procedures to provide the commission with sufficient facts necessary to determine the reasonableness of the proposed rates without unduly burdening the utility company and its customers. In the determination of the reasonableness of the proposed rates, the commission shall:

(1) Require the filing of a standard form application to be developed by the commission. The standard form application for general rate increases shall describe the specific facts that shall be submitted to support a determination of the reasonableness of the proposed rates, and require the submission of financial information in conformance with a standard chart of accounts to be approved by the commission, and other commission guidelines to allow expeditious review of a requested general rate increase application;

(2) Hold a public hearing as prescribed in section 269-12(c) at which the consumers or patrons of the public utility may present testimony to the commission concerning the increase. The public hearing shall be preceded by proper notice, as prescribed in section 269-12; and

(3) Make every effort to complete its deliberations and issue a proposed decision and order within six months from the date the public utility files a completed application with the commission; provided that all parties to the proceeding strictly comply with the procedural schedule established by the commission and no person is permitted to intervene. If a proposed decision and order is rendered after the six-month period, the commission shall report in writing the reasons therefor to the legislature within thirty days after rendering the proposed decision and order. Prior to the issuance of the commission's proposed decision and order, the parties shall not be entitled to a contested case hearing.

If all parties to the proceeding accept the proposed decision and order, the parties shall not be entitled to a contested case hearing, and section 269-15.5 shall not apply. If the commission permits a person to intervene, the six-month period shall not apply and the commission shall make every effort to complete its deliberations and issue its decision within the nine-month period from the date the public utility's completed application was filed, pursuant to subsections (b), (c), and (d).

If a party does not accept the proposed decision and order, either in whole or in part, that party shall give notice of its objection or nonacceptance within the timeframe prescribed by the commission in the proposed decision and order, setting forth the basis for its objection or nonacceptance; provided that the proposed decision and order shall have no force or effect pending the commission's final decision. If notice is filed, the above six-month period shall not apply and the commission shall make every effort to complete its deliberations and issue its decision within the nine-month period from the date the public utility's completed application was filed as set forth in subsection (d). Any party that does not accept the proposed decision and order under this paragraph shall be entitled to a contested case hearing; provided that the parties to the proceeding may waive the contested case hearing.

Public utilities subject to this subsection shall follow the standard chart of accounts to be approved by the commission for financial reporting purposes. The public utilities shall file a certified copy of the annual financial statements in addition to an updated chart of accounts used to maintain their financial records with the commission and consumer advocate within ninety days from the end of each calendar or fiscal year, as applicable, unless this timeframe is extended by the commission. The owner, officer, general partner, or authorized agent of the utility shall certify that the reports were prepared in accordance with the standard chart of accounts.

(g) Any automatic fuel rate adjustment clause requested by a public utility in an application filed with the commission shall be designed, as determined in the commission's discretion, to:

(1) Fairly share the risk of fuel cost changes between the public utility and its customers;

(2) Provide the public utility with sufficient incentive to reasonably manage or lower its fuel costs and encourage greater use of renewable energy;

(3) Allow the public utility to mitigate the risk of sudden or frequent fuel cost changes that cannot otherwise reasonably be mitigated through other commercially available means, such as through fuel hedging contracts;

(4) Preserve, to the extent reasonably possible, the public utility's financial integrity; and

(5) Minimize, to the extent reasonably possible, the public utility's need to apply for frequent applications for general rate increases to account for the changes to its fuel costs. [L 1959, c 239, §1; am L 1962, c 25, §2; Supp, §104-15; am L 1967, c 28, §1 and c 276, §1; HRS §269-16; am L 1973, c 149, §1(c); am L 1976, c 10, §1; am L 1979, c 111, §11; am L 1982, c 222, §2; am L 1983, c 98, §2(1), (2); am L 1984, c 289, §1; am L 1988, c 250, §2; am L 1989, c 189, §1; am L 1998, c 195, §2; am L 2004, c 168, §2; am L 2006, c 162, §2; am L 2014, c 95, §2]

Attorney General Opinions

Allowances paid by gas and electric utilities under their promotional programs constituted rebates. Att. Gen. Op. 65-18.

PUC may permit Honolulu Rapid Transit to charge reduced rates for senior citizens during non-peak hours. Att. Gen. Op. 69-30.

Operation of a fuel oil adjustment clause is not a "rate increase". "Rate" is synonymous with "rate schedule". Att. Gen. Op. 76-1.

Case Notes

May not regulate rates and charges in interstate commerce. 24 H. 136.

Appeal to supreme court directly does not lie from order requiring carrier to relocate tracks. 25 H. 332.

Hawaiian Telephone, only Interstate Commerce Commission may fix rates. 26 H. 508.

Regulation of interisland service. 32 H. 127.

Rates for gas. 33 H. 487.

Interlocutory order not appealable. 33 H. 697.

Constitutional. 33 H. 890, aff'd 96 F.2d 412, aff'd 305 U.S. 306.

Applicant before PUC aggrieved, when. 44 H. 634, 637, 361 P.2d 390.

Section was inoperative with respect to air carrier rates during the 2-year transition period when C.A.B. jurisdiction over air carriers was continued by §15 of Admission Act. 44 H. 634, 361 P.2d 390.

Director of regulatory agencies as protector of consumer's interest is party to proceeding before PUC. 54 H. 663, 513 P.2d 1376.

To comply with §91-12, commission must rule on all proposed findings and its findings must be reasonably clear. 54 H. 663, 513 P.2d 1376.

Persons aggrieved who were involved as participants in hearings may appeal to supreme court when PUC staff fails to do so. 56 H. 260, 535 P.2d 1102.

Utility's promotional expenditures should not have been allowed for ratemaking purposes. 56 H. 260, 535 P.2d 1102.

Tariff rate based partially upon value of equipment not owned by taxpayer does not properly reflect taxpayer's gross income. 57 H. 477, 559 P.2d 283.

Commission must make findings of fact as required by §91-12 when issuing interim rate increases. 60 H. 166, 590 P.2d 524.

Granting of interim rate increases conditioned on a refund provision is a valid exercise of commission's powers. 60 H. 166, 590 P.2d 524.

Rehearings by administrative bodies are at their discretion. 60 H. 166, 590 P.2d 524.

Charges made by a public utility are governed by tariff filed with PUC. 60 H. 582, 593 P.2d 375.

Under "just and reasonable" standard, it is the result reached and not the method employed which is controlling. 60 H. 625, 594 P.2d 612; 67 H. 370, 689 P.2d 741; 67 H. 425, 690 P.2d 274.

No abuse of discretion in utilizing original cost method of valuating rate base, or in concluding that telephone company's plant-in-service was used or useful for public utility purposes. 65 H. 293, 651 P.2d 475.

Commission did not arbitrarily limit rate award. 67 H. 370, 689 P.2d 741.

Rebuttable presumption that a contribution was made by lot owners, or lessees, for construction of a utility system arises only if certain factors reveal intent by developer to obtain double recovery for its capital construction costs; commission erred in applying rebuttable presumption. 83 H. 132, 925 P.2d 302.

Under subsection (f) (1997), direct appeal to supreme court from PUC order lies only when PUC order pertains to regulation of utility rates or ratemaking procedures; supreme court thus lacked jurisdiction to hear direct appeal for PUC order pertaining to placement of transmission line. 85 H. 322, 944 P.2d 1265.

Under the filed-rate doctrine, telephone customers' claims failed as a matter of law where customers could not demonstrate that telephone company's allegedly inadequate disclosures constituted an unfair or deceptive trade practice because (1) company's tariffs on file with the public utilities commission disclosed that fees should be assessed against customers receiving touch calling services; (2) knowledge of these disclosures contained in the tariff was imputed to the customers, and, thus, (3) customers could prove neither the injury nor the likelihood of damage that is required under §480-2 or chapter 481A. 109 H. 69, 123 P.3d 194.

The statutes and rules cited by defendants did not require dismissal of the billing disputes on the basis of primary jurisdiction. Sections 269-6 and 269-37 and this section did not place the action in the instant case within the "special competence" of the public utilities commission (PUC); the statutes provided the PUC with authority to take certain actions as an administrative agency, but the authority granted to the PUC over certain types of billing disputes is shared with the courts. 131 H. 257, 318 P.3d 97 (2013).

Where (1) sewage system operator was a regulated public utility whose 2004 tariff was duly filed and approved by the commission and set the rates for all of the operator's customers; (2) the State was a sewerage customer; and (3) the application of the 2004 tariff rates to the State conflicted with the free services provision in the 1961 agreement with the State, the filed-rate doctrine prohibited the enforcement of a promised contract rate that contradicted the published tariff rate. 125 H. 210 (App.), 257 P.3d 223 (2011).

Section does not require a cost of service study; because it is not the method used in determining the rate, but rather the outcome that is dispositive, a cost of service study is not a necessary component of a rate increase proceeding; without a further showing of an unjust and unreasonable result, the lack of a cost of service study alone was not enough to show that the public utilities commission erred in approving the utility's requested rate increase. 127 H. 234 (App.), 277 P.3d 328 (2012).

Where county could not illustrate how utility's purported illegal use of the well without a proper permit or use of the irrigation system without conducting an environmental assessment generated unnecessary costs that would not have been incurred if utility had complied with the law, county failed to demonstrate how the public utilities commission's approval of a rate increase was not "just and reasonable". 127 H. 234 (App.), 277 P.3d 328 (2012).

In order for a charge to be considered unjust and unreasonable, the charge must be based on expenses unnecessarily incurred as the result of illegal activity; where county failed to demonstrate how the lack of a certificate of public convenience and necessity for the Kualapuu area resulted in unnecessary expenses that would not have occurred had water utility services company complied with the law by having the certificate, county failed to demonstrate how the rate approved by the public utilities commission was unjust and unreasonable. 127 H. 404 (App.), 279 P.3d 69 (2012).

The language of this section grants to the public utilities commission broad discretionary power in the area of rate regulation, provided that the rates set are just and reasonable; as the standard for allowing attorney's fees to be passed on to the consumer in a rate case proceeding differs from the standard used in civil cases where there is a need to distinguish between types of fees, the commission correctly held that all reasonable rate case activities were reimbursable under regulatory expense; the commission thus did not err in approving $225,000 in total regulatory expenses, including non-itemized attorneys' bills. 127 H. 404 (App.), 279 P.3d 69 (2012).