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

To the extent thecontested case proceedings referred to in chapter 91 are required in any rateproceeding to ensure fairness and to provide due process to parties that may beaffected by rates approved by the commission, the evidentiary hearings shall beconducted expeditiously and shall be conducted as a part of the ratemakingproceeding.

(b)  No rate, fare,charge, classification, schedule, rule, or practice, other than one establishedpursuant to an automatic rate adjustment clause previously approved by thecommission, shall be established, abandoned, modified, or departed from by anypublic utility, except after thirty days' notice to the commission asprescribed in section 269-12(b), and prior approval by the commission for anyincreases in rates, fares, or charges.  The commission, in its discretion andfor good cause shown, may allow any rate, fare, charge, classification,schedule, rule, or practice to be established, abandoned, modified, or departedfrom upon notice less than that provided for in section 269-12(b).  A contestedcase hearing shall be held in connection with any increase in rates, and thehearing shall be preceded by a public hearing as prescribed in section269-12(c), at which the consumers or patrons of the public utility may presenttestimony to the commission concerning the increase.  The commission, uponnotice to the public utility, may:

(1)  Suspend the operation of all or any part of theproposed rate, fare, charge, classification, schedule, rule, or practice or anyproposed 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)  Prohibitrebates and unreasonable discrimination between localities or between users orconsumers under substantially similar conditions;

(C)  Regulate themanner in which the property of every public utility is operated with referenceto the safety and accommodation of the public;

(D)  Prescribe itsform and method of keeping accounts, books, and records, and its accountingsystem;

(E)  Regulate thereturn upon its public utility property;

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

(G)  Regulate itsfinancial transactions; and

(3)  Do all things that are necessary and in theexercise of the commission's power and jurisdiction, all of which as soordered, regulated, fixed, and changed are just and reasonable, and provide afair return on the property of the utility actually used or useful for publicutility purposes.

(c)  The commissionmay in its discretion, after public hearing and upon showing by a publicutility of probable entitlement and financial need, authorize temporaryincreases in rates, fares, and charges; provided that the commission shallrequire by order the public utility to return, in the form of an adjustment torates, 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 foundto be reasonable by the commission, received by reason of continued operationthat are in excess of the rates, fares, or charges finally determined to bejust and reasonable by the commission.  Interest on any excess shall commenceas of the date that any rate, fare, or charge goes into effect that results inthe excess and shall continue to accrue on the balance of the excess untilreturned.

(d)  The commissionshall make every effort to complete its deliberations and issue its decision asexpeditiously as possible and before nine months from the date the publicutility filed its completed application; provided that in carrying out thismandate, the commission shall require all parties to a proceeding to complystrictly with procedural time schedules that it establishes.  If a decision isrendered after the nine-month period, the commission shall report in writingthe reasons therefor to the legislature within thirty days after rendering thedecision.

Notwithstandingsubsection (c), if the commission has not issued its final decision on a publicutility'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 andcharges, if any, to which the commission, based on the evidentiary recordbefore it, believes the public utility is probably entitled.  The commissionmay postpone its interim rate decision for thirty days if the commissionconsiders the evidentiary hearings incomplete.  In the event interim rates aremade effective, the commission shall require by order the public utility toreturn, in the form of an adjustment to rates, fares, or charges to be billedin the future, any amounts with interest, at a rate equal to the rate of returnon the public utility's rate base found to be reasonable by the commission, receivedunder the interim rates that are in excess of the rates, fares, or chargesfinally determined to be just and reasonable by the commission.  Interest onany excess shall commence as of the date that any rate, fare, or charge goesinto effect that results in the excess and shall continue to accrue on thebalance of the excess until returned.

The nine-monthperiod in this subsection shall begin only after a completed application hasbeen filed with the commission and a copy served on the consumer advocate.  Thecommission shall establish standards concerning the data required to be setforth 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 thesufficiency of any application, and the commission shall hear and determine anyobjection within twenty-one days after it is filed.  If the commission findsthat the objections are without merit, the application shall be deemed to havebeen completed upon original filing.  If the commission finds the applicationto be incomplete, it shall require the applicant to submit an amendedapplication consistent with its findings, and the nine-month period shall notcommence until the amended application is filed.

(e)  In any case oftwo 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, thecommission may distribute, apportion, or allocate gross income, deductions,credits, or allowances between or among the organizations, trades, orbusinesses, if it determines that the distribution, apportionment, orallocation is necessary to adequately reflect the income of any suchorganizations, trades, or businesses to carry out the regulatory duties imposedby this section.

(f)  Notwithstandingany law to the contrary, for public utilities having annual gross revenues ofless than $2,000,000, the commission may make and amend its rules andprocedures to provide the commission with sufficient facts necessary todetermine the reasonableness of the proposed rates without unduly burdening theutility company and its customers.  In the determination of the reasonablenessof the proposed rates, the commission shall:

(1)  Require the filing ofa standard form application to be developed by the commission.  The standardform application for general rate increases shall describe the specific factsthat shall be submitted to support a determination of the reasonableness of theproposed rates, and require the submission of financial information inconformance with a standard chart of accounts to be approved by the commission,and other commission guidelines to allow expeditious review of a requestedgeneral rate increase application;

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

(3)  Make every effort tocomplete its deliberations and issue a proposed decision and order within sixmonths from the date the public utility files a completed application with thecommission; provided that all parties to the proceeding strictly comply withthe procedural schedule established by the commission and no person ispermitted to intervene.  If a proposed decision and order is rendered after thesix-month period, the commission shall report in writing the reasons thereforto the legislature within thirty days after rendering the proposed decision andorder.  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 tothe proceeding accept the proposed decision and order, the parties shall not beentitled to a contested case hearing, and section 269‑15.5 shall notapply.  If the commission permits a person to intervene, the six‑month periodshall not apply and the commission shall make every effort to complete itsdeliberations and issue its decision within the nine‑month period fromthe date the public utility's completed application was filed, pursuant tosubsections (b), (c), and (d).

If a party doesnot accept the proposed decision and order, either in whole or in part, thatparty shall give notice of its objection or nonacceptance within the timeframeprescribed by the commission in the proposed decision and order, setting forththe basis for its objection or nonacceptance; provided that the proposeddecision and order shall have no force or effect pending the commission's finaldecision.  If notice is filed, the above six‑month period shall not applyand the commission shall make every effort to complete its deliberations andissue its decision within the nine‑month period from the date the publicutility's completed application was filed as set forth in subsection (d).  Anyparty that does not accept the proposed decision and order under this paragraphshall be entitled to a contested case hearing; provided that the parties to theproceeding may waive the contested case hearing.

Public utilitiessubject to this subsection shall follow the standard chart of accounts to beapproved by the commission for financial reporting purposes.  The publicutilities shall file a certified copy of the annual financial statements inaddition to an updated chart of accounts used to maintain their financialrecords with the commission and consumer advocate within ninety days from theend of each calendar or fiscal year, as applicable, unless this timeframe isextended by the commission.  The owner, officer, general partner, or authorizedagent of the utility shall certify that the reports were prepared in accordancewith the standard chart of accounts.

(g)  Any automaticfuel rate adjustment clause requested by a public utility in an applicationfiled with the commission shall be designed, as determined in the commission'sdiscretion, to:

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

(2)  Provide the publicutility with sufficient incentive to reasonably manage or lower its fuel costsand encourage greater use of renewable energy;

(3)  Allow the public utilityto mitigate the risk of sudden or frequent fuel cost changes that cannototherwise reasonably be mitigated through other commercially available means,such as through fuel hedging contracts;

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

(5)  Minimize, to theextent reasonably possible, the public utility's need to apply for frequentapplications for general rate increases to account for the changes to its fuelcosts. [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; amL 1979, c 111, §11; am L 1982, c 222, §2; am L 1983, c 98, §2(1), (2); am L1984, 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]

 

Attorney General Opinions

 

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

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

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

 

Case Notes

 

  May not regulate rates and chargesin interstate commerce.  24 H. 136.

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

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

  Regulation of interislandservice.  32 H. 127.

  Rates for gas.  33 H. 487.

  Interlocutory order notappealable.  33 H. 697.

  Constitutional.  33 H. 890, aff'd96 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 withrespect 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 asprotector of consumer's interest is party to proceeding before PUC.  54 H. 663,513 P.2d 1376.

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

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

  Utility's promotional expendituresshould not have been allowed for ratemaking purposes.  56 H. 260, 535 P.2d1102.

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

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

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

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

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

  Under "just andreasonable" standard, it is the result reached and not the method employedwhich 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 inutilizing original cost method of valuating rate base, or in concluding thattelephone company's plant-in-service was used or useful for public utilitypurposes.  65 H. 293, 651 P.2d 475.

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

  Rebuttable presumption that acontribution was made by lot owners, or lessees, for construction of a utilitysystem arises only if certain factors reveal intent by developer to obtaindouble recovery for its capital construction costs; commission erred inapplying 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 pertainsto regulation of utility rates or ratemaking procedures; supreme court thuslacked jurisdiction to hear direct appeal for PUC order pertaining to placementof 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 notdemonstrate that telephone company's allegedly inadequate disclosuresconstituted an unfair or deceptive trade practice because (1) company's tariffson file with the public utilities commission disclosed that fees should be assessedagainst customers receiving touch calling services; (2) knowledge of thesedisclosures contained in the tariff was imputed to the customers, and, thus,(3) customers could prove neither the injury nor the likelihood of damage thatis required under §480-2 or chapter 481A.  109 H. 69, 123 P.3d 194.