The past month has seen rapid increases in the cost of oil around the world. As the state most reliant on oil for electricity production, many residents of Hawaii have been highly concerned about what this would mean for the cost of electricity. This week, Hawaiin Electric confirmed the fear announced that they are projecting an increase of at least 10% to rates on Oahu and 20% on Hawaii Island and Maui County.
With the cost of living in Hawaii already amongst the highest in the nation, the rise in gas prices at the pump and electricity costs at home have real-world implications for homeowners across the state to pay the bills. Yet, while homeowners struggle with these rising costs, Hawaiian Electric announced a jump in net income of $177.6 million in 2021, increasing $8.3 million from 2020.
Historically when HECO increased utility rates, customers had no choice but to pay more for electricity. Fortunately, homeowners across Hawaii can now control the rising electricity costs by installing solar and solar batteries. We have helped people across the state save thousands of dollars on their HECO bills, and these savings will only increase as rates continue to rise.
Let's look at why electricity rates are going up, how HECO was able to turn such a significant profit during the pandemic and how solar can help you!
Hawaiian Electric Expects Rates To Increase 10-20%: What is the cause of the massive utility cost increase?
One of the most frequent questions we get asked is why electricity is so expensive? Of course, many factors go into why utility rates on the average increase year after year, but the recent increase has been driven by the cost of a barrel of oil.
The recent crisis in Ukraine has exasperated an already strained global oil market. As cities and countries worldwide began to reopen in 2021, experts projected that the oil demand would surpass pre-pandemic numbers. Over the past six months, this projected increase in demand led to some experts being concerned about the resulting price for oil.
The COVID-19 pandemic had a variety of impacts on the world economy, but two of the most dramatic impacts were labor shortages and shipping delays. Both of these two had dramatic implications for the oil market. As production dropped and getting the oil shipped became more challenging, oil prices rose at the start of 2022. By February, prices had risen to over $100 a barrel.
The conflict in Ukraine at the start of March accelerated the rising oil prices. Historically, Russia has been one of the world's largest oil and gas exporters. In addition to putting a strain on oil production in the region, counties worldwide have responded to Russia's aggression by refusing to purchase oil produced by the country.
This additional reduction in available oil and gas has driven costs up to historical highs. While this is happening, some politicians have also argued that large oil companies are involved in price gouging.
So you might be thinking, how does all of this impact the price of electricity in Hawaii? The vast majority of electricity in Hawaii comes from fuel-based resources that must be shipped, refined, and burned to produce electricity.
As a result, Hawaiin Electric, a publicly-traded company, passes these increased costs to HECO customers across Hawaii.
Even though Hawaiin Electric had time to anticipate the rise in the price of oil, its Senior Vice President of Customer, Legal and Regulatory Affairs said, "The increases we're anticipating are more abrupt than we've seen before and, on top of the inflation we've all experienced in recent months, I know they will impact the budgets of many households" when announcing the electricity rates on Oahu would increase at least 10%, and rates on Big Island and Maui would increase at least 20%!
This upcoming price jump comes on the heels of Hawaiin Electric raising rates in 2021 during the peak of the COVID-19 pandemic by 20%! That means that customers on Oahu are already paying over $.32 a kilowatt and customers on Maui and Big Island over $.39 a kilowatt.
Hawaii has some of the highest electricity rates in the nation, and with these projected increases, Hawaii will compete for the most expensive electricity rates in the nation!
Hawaiian Electric Profits Sore: How much did HECO's profits increase in 2021?
The COVID-19 pandemic hit Hawaii incredibly hard. With the tourism sector on hold, many businesses being forced to close, and others being forced to work from home, the financial burden of paying for household expenses increased for homeowners across the state.
During this time, Hawaiin Electric became the most profitable business in Hawaii! As mentioned above, rates for HECO customers on Oahu, Big Island, and Maui increased by 20% in 2021.
Those increases to the electricity rates across Hawaii allowed Hawaiian Electric to increase profits by $8.3 million to $177.6 million in 2021. Its profits proved to be so large that even American Savings Bank, owned by Hawaiian Electric Industries, moved up the list of most profitable businesses in Hawaii.
HECO's increased profitability was not just the result of increasing rates. It also reduced staffing by 100 employees. A majority of this reduction resulted from employees retiring and not replacing the positions.
It might seem like not replacing employees who retire is a smart business, but it's essential to factor in the recent issues that HECO has had with power outages. Even as HECO rates have increased, Hawaii is experiencing more power outages.
For Hawaiin Electric homeowners on Oahu, Maui, and Big Island, that means customers are being forced to pay more for electricity and experiencing more power outages. This is the worst possible combination for the homeowners of Hawaii. In the past, HECO customers did not have any options for reducing their cost of electricity and protecting themselves from power outages, but now they do!
Residential Solar and Home Batteries: How do they protect HECO customers from rising electricity costs?
In parallel with HECO's announcement that the conflict in Ukraine will drive up the electricity prices in Hawaii, HECO made another stunning announcement. In a press release on what customers can do to reduce electricity costs, HECO recommended that homeowners install solar!
The announcement from HECO that solar is an excellent way for homeowners to save money on electricity shows just how powerful of a tool is solar and home batteries for providing security, stability, and safety to customers.
Many people still think that adding solar is incredibly expensive. In 2022 that is no longer the case! The Hawaii State Tax Credit and Federal Solar Tax Credit help provide customers who switch to additional solar savings. In addition, most of our customers go with Sunrun's $0 down solar as a service option! The $0 down Sunrun option allows our customers to lock in an electricity price that, in some cases, is 50% less than what HECO is currently charging before the next HECO rate increase.
Unlike the yearly rate increases that historically happen under HECO, most of our customers lock in their new electricity rate with Sunrun so that it will not increase for the next 25 years!
By making the switch to solar, customers usually see day one savings and can generate tens of thousands of dollars of savings over the life of the solar panel system. Considering the cost of living across Hawaii, savings on electricity costs can make a big difference for homeowners and families!
One of the unique aspects of residential solar in Hawaii is that most customers also receive a solar battery like the Tesla Powerwall 2 or LG Chem RESU.
In addition, Sunrun's Brightbox provides customers with emergency battery backup that protects homeowners from power outages. As power outages increase across Oahu, Kaui, Big Island, and Maui battery backup will be central to keeping homes and communities safe.
In Hawaii, solar batteries provide customers with financial savings in addition to protection against power outages. On Oahu, customers who had solar but no battery under the Net Energy Metering (NEM) program can add additional solar and a battery under the Battery Bonus Program.
Battery Bonus or Demand Response, as it is also known, lets customers add additional solar under the NEM program and receive a rebate of thousands of dollars to cover some of the cost of the battery! The Battery Bonus rebate helps reduce customers' electricity cost, cover most of the battery's cost, and help protect the utility grid at the same time.
Oahu customers who add a battery also get the Kukui Hele Pō Grid Service Program's added advantage. With Kukui Hele Pō HECO, customers get the added advantage of additional HECO savings, a $300 gift card from Sunrun, and a $50 donation to a Hawaiin language school. In addition, the Grid Service program helps to protect Oahu's electrical grid and limit power outages across the island.
When all these factors are combined, solar with Alchemy Solar presents customers with the ability to take back control of electricity costs from HECO while also protecting themselves against power outages.
Conclusion: Why are solar and home batteries valuable for protecting yourself from HECO rate increases?
In the past, customers had no choice but to pay HECO more every time they increased utility rates. Over the past few years, the rate increases have been historically, but unfortunately, they might be the new normal.
With the conflict in Ukraine, uncertainty and fear about electricity costs is a genuine concern for homeowners across Hawaii. Alchemy Solar and Sunrun present homeowners in Hawaii with the ability to finally save money on electricity costs and increase the value of their homes.
If you are interested in learning more about how solar and home batteries can protect you from utility rate increases, schedule a free consultation with Alchemy Solar today!