New PEG Study Includes Custom Productivity Growth Projections

PEG filed a new research report, accessible here, on May 13 in Hawaii’s closely-watched proceeding to develop new performance-based regulation (“PBR”) plans for the Hawaiian Electric companies. A key issue in the proceeding is how to design revenue cap indexes for the companies that reflect the special operating conditions that they face and the fact that the plans will include capital cost trackers for major and renewables-related capital expenditures. New econometric research identified several drivers of the ongoing decline in the productivity growth of vertically integrated electric utilities. These drivers include the increasing age of transmission and distribution systems. Aging T&D systems are a particular challenge for the HECO companies at a time when these systems must handle high levels of distributed solar generation and withstand increasingly severe storms. PEG developed projections of the productivity growth that typical utility managers would achieve in the next five years if faced with HECO’s special operating challenges. This research used tools that PEG had presented in a Review of Network Economics paper.