Let's say you live in an apartment or small house on Oʻahu. In October, your electric bill was about $246. This month, it's $260. Nothing about your energy usage changed — so what happened?
These are real numbers taken from Hawaiian Electric's filings to the Public Utilities Commission showing what the average customer's monthly bill looks like. And the difference mainly comes down to something called the Energy Cost Recovery Factor — or the cost of fuel used to generate electricity that gets passed on to customers.
The Energy Cost Recovery Factor gets recalculated every month in response to changes in the global oil market.
"So when we see oil prices increasing, that means electricity prices will also increase. And when oil prices go down, they will also go down," HECO spokesperson Darren Pai told HPR.
When the Iran war first shut down oil shipments through the Strait of Hormuz, HECO warned customers that it would affect their bills.
"After the war started, prices of oil started to increase dramatically. That was back in March and April, and ever since then, our electric bills have gone up as well," Pai said.
Since May, Oʻahu customers have been paying about 20% to 30% more on their bills every month, largely due to fuel costs. Those costs go up and down a little bit each month — costs dropped a tad this summer, but this November, they're the highest they've been all year.
To understand why, Pai said customers have to look back at what was happening on the world stage in September and October.
"There is a delay between changes in global oil prices, and when it shows up in a customer bill. Typically it takes anywhere from 45 to 60 days before it will show up in customers' bills," Pai said.
HECO keeps about six to eight weeks of fuel on hand — the utility is only now burning oil for power that it bought in September and October. At that time, oil prices were spiking again due to increased hostilities in the Middle East.
Pai said the cost that gets passed on to customers' bills is the cost that HECO paid for the fuel at the time of purchase. So high September and October oil costs means high November bills. That also means that if the war eased or ended, it would take a minute for bills to come back down.
"We understand it can be frustrating to see the headlines of what the oil prices are today, and maybe they don't intuitively match up with what's happening with the bill, but there is a delay," Pai said.
When will fuel costs come down?
Voters expressed their dissatisfaction with high prices at polls last week. But even with a significant shakeup in Washington after the midterm elections, experts told HPR that some high prices related to the Iran war might be here to stay.
"History has taught us that price increases due to oil-price volatility caused by geopolitical events are reflected in the market immediately, but corrections post-event take months and sometimes never return to pre-event pricing," Hawaiʻi Chief Energy Officer Mark Glick told HPR in a statement.
The Energy Cost Recovery Factor is a set formula, and HECO doesn't receive any additional profit if fuel costs are high. That means if fuel costs come down, electric bills should come down accordingly in a couple of months.
But prices at the pump aren't regulated the same way, and gasoline prices tend to stay high even if the cost of oil comes down, said UHERO Executive Director Carl Bonham.
"Businesses are protecting that profit gain," Bonham told HPR.
Gas prices were already on the rise late in the pandemic when Russia invaded Ukraine, shocking the global oil market. Between July 2021 and July 2022, Bonham said Honolulu gas prices rose almost 40%.
But even as the oil market stabilized over the second half of 2022, Honolulu gas prices did not return to their previous levels.
"They started at a little bit below $4 (a gallon) in July of 2021, and they never got back to that," Bonham said.
I heard that HECO is raising rates. Is that why my bill is high?
Hawaiian Electric has asked the Hawaiʻi Public Utilities Commission to approve a base rate increase that would increase the company's revenue by $170 million a year.
HECO estimates customers' bills would go up over the next two years by about $11 to $15 a month, depending on where they live.
The rate case is occurring on a preset schedule under the Performance-Based Regulation framework set by the Public Utilities Commission. HECO claims the additional revenue would help account for inflation. It would also help to cover the rising cost of insurance premiums related to the state's wildfire risk, but it would not help to pay for HECO's share of the Maui wildfire settlements.
Those rate increases have not gone into effect yet — HECO has requested that the Commission issue a ruling in mid-December — so if your bill has gone up this year, fuel costs are probably the culprit.
The public can share their thoughts about HECO's requested rate reset with the Public Utilities Commission.
