Hawaii's high electricity rates blamed on oil prices

Hawaiian Electric officials say the cost for power in Hawaii – almost three times the national average – places emphasis on the state’s reliance on importing resources from the mainland, namely oil, to the islands to support the state’s energy supply structure and the need to continue statewide initiatives for Hawaii to more energy independent by 2045.

Hawaiians are paying the highest price in the U.S. for their electricity, a recently released report from the U.S. Energy Information Administration concludes.

According to the EIA’s 2021 U.S. Electricity Profile, Hawaiians pay on average of $30.31 per kilowatt. This amount is $20.21 higher than the national average of $11.10 per kilowatt. In stark comparison, the lowest per kilowatt price is in Idaho, where residents pay $22.14 less than Hawaii residents, or $8.17 per kilowatt.

Hawaiian Electric Spokesperson Shannon Tangonan told The Center Square that the reason Hawaii has one of the highest costs for electricity is that the state currently uses imported oil for much of its power generation. Coal, natural gas, nuclear and other resources used on the mainland are also not as readily available in Hawaii and would also have to be supplied through import, according to Tangonan.

“Customers we serve on Oahu, Hawaii Island, Maui, Lanai and Molokai have seen energy costs increase as oil prices have risen,” said Tangonan. “Within the formula for regulated rates, the cost of fuel is passed through to customers, meaning Hawaiian Electric makes no profit on the fuel it uses to generate power.”

Tangonan added that while the price of oil is “the main driver” for energy cost increases across the state, other factors, such as retirement of the state’s last coal plant on Sept. 1, have contributed to higher energy costs.

“In 2020, during the height of the pandemic, oil prices were at historic lows. No one was buying oil so prices dropped dramatically – as did rates,” said Tangonan. “But as the economy began to open up, oil prices rose steadily in 2021, then spiked earlier this year due to world events, including the Russia-Ukraine conflict. Because of that, Hawaiian Electric is paying more for the imported fuels used to generate electricity.”

To combat the rise in oil prices, Hawaiian Electric has made concerted efforts to encourage residents to reduce energy use and has been offering longer-term, interest-free payment plans made available since the onset of the COVID-19 pandemic, said Tangonan. The state has also mandated 100% renewable energy for power generation as well as net-zero emissions by 2045, a goal that Hawaiian Electric has been striving to meet, she added.

“Last year, about 38% of our electricity sales came from renewable resources, and developers are ramping up more than a dozen utility-scale projects with solar-plus-energy storage and standalone energy storage technology on three islands,” said Tangonan. “There are multiple renewable energy projects in various stages of the regulatory process or development to help meet those mandates. In addition, a new performance-based regulation framework that went into effect last year for Hawaiian Electric encourages improved efficiency, increased adoption of renewable energy resources and lower customer rates.”

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