H.B. NO.



















     SECTION 1.  The legislature finds that a comprehensive management audit is necessary to evaluate the effectiveness of the department of commerce and consumer affair's division of consumer advocacy in representing, protecting, and advancing consumer and public interests in light of evolving clean energy and climate imperatives, consumer preferences, and utility regulatory priorities.

     In 1975, a management audit of the Hawaii public utilities program found there to be "considerable confusion" with respect to the role of the division of consumer advocacy, at that time called the public utilities division.  At the time, the division of consumer advocacy acted both as staff for the public utilities commission and as a representative of consumers, resulting in the division of consumer advocacy "serv[ing] two masters uncomfortably".  The audit proposed placing the audit and litigation staff under the public utilities commission while creating a separate consumer advocate office.  Legislative amendments in 1976 administratively separated the public utilities commission and the office now called the division of consumer advocacy, but maintained the dual roles within the division of consumer advocacy.

     In 1989, another management audit found that "ambiguities and deficiencies" in the functions and duties of the public utilities commission and the division of consumer advocacy "still exist" and the agencies "have been passive and reactive" rather than "pro-active in defining and carrying out their separate roles".

     A 2003 comprehensive evaluation of Hawaii energy utility regulation expanded on these concerns.  The report observed that unlike most states, the division of consumer advocacy combines two functions.  The first is an "audit and litigation" function that involves traditional accounting review and litigation of utility ratemaking.  In other states, this function is usually performed by internal public utilities commission staff.  The second function is "true consumer advocacy", which is a role that in other states has historically involved advocating as a change agent for progressive initiatives in consumers' interests.

     Over the years, the public utilities commission has built up its own internal, independent staff capacity and no longer needs to rely on the division of consumer advocacy for staff support.  However, the division of consumer advocacy continues to combine its two historical functions by acting as the lead or sole public agency party in public utilities commission proceedings, while also retaining its specific title and function focused on consumers.

     In 2004, another management audit conducted on the public utilities commission and the division of consumer advocacy found that the agencies lacked strategic plans and "a vision of Hawaii's regulatory future and [their] role in that process".  Thus, the agencies "trudge through daily operational work mired in process and individual case details".  The 2004 audit also cited the "planning and organization deficiencies" found in the 1975 and 1989 audits, concluding that since the time of those audits, "neither agency has planned strategies to correct the deficiencies and many of the same serious problems persist".

     Further, in the fifteen years since the 2004 audit, public utilities regulation and, more broadly, the electric services sector in Hawaii has evolved significantly.  New technologies, consumer preferences, and environmental and climate imperatives have emerged.  For example, adoption of distributed energy resources has grown significantly, leading to a change in the fundamental role of Hawaii's ratepayers from primarily passive consumers of electricity to "prosumers" with the ability to respond to price signals in a way that lowers costs for all ratepayers.  Segments of the electric sector have increasingly opened up to market competition, creating lower costs to consumers and an increased range of energy services and choices.

     Also, recent statutory changes such as the State's:

     (1)  One hundred per cent renewable energy portfolio standard, enacted by Act 97, Session Laws of Hawaii 2015;

     (2)  Carbon neutrality by 2045 goal, enacted by Act 15, Session Laws of Hawaii 2018; and

     (3)  Hawaii ratepayer protection act, enacted by Act 5, Session Laws of Hawaii 2018,

have passed during a time of an unprecedented climate change as well as movement toward full-scale transition to renewable energy in the State and across the nation.  The legislature finds that these statutory changes necessitate an expanded, long-term, and visionary perspective in utility regulation and consumer advocacy to advance customer and public interests in clean energy transformation and the reduced economic, environmental, and climate costs that it will provide.

     The legislature also finds that utility regulatory practice must change from its traditional focus on auditing utility costs and rates to a new vision for aligning utility incentives with a broader, modern view of the consumer and public interests.  The public utilities commission articulated this strategic vision in its landmark inclinations document in 2014, and in Act 5, Session Laws of Hawaii 2018, the legislature similarly enacted the nation's first mandate to "break the direct link" between utility investments and revenues.

     The legislature also enacted various amendments broadening and supplementing the public utilities commission's mandate, including but not limited to the requirement that the public utilities commission "consider the need to reduce the State's reliance on fossil fuels through energy efficiency and increased renewable energy generation" and "explicitly consider . . . the effect of the State's reliance on fossil fuels on price volatility, export of funds for fuel imports, fuel supply reliability risk, and greenhouse gas emissions".  The only similar amendment that has been made to the division of consumer advocacy's mandate is the addition of general language in Act 132, Session Laws of Hawaii 2003, that the division of consumer advocate "consider the long-term benefits of renewable resources in the consumer advocate's role as consumer advocate".

     The legislature finds that ensuring Hawaii's regulatory bodies and agencies are best positioned and equipped to navigate the transformation of Hawaii's energy sector is a paramount priority.  It has been fifteen years since an audit has been conducted on the division of consumer advocacy, despite the concerns raised in previous audits, the changes in utility regulation and the energy sector, and the division of consumer advocacy's ongoing prominent role in the public utilities commission's clean energy proceedings.

     Accordingly, the purpose of this Act is to require the auditor to conduct a comprehensive management audit of the division of consumer advocacy.

     SECTION 2.  (a)  The state auditor shall conduct a comprehensive management audit of the department of commerce and consumer affairs' division of consumer advocacy.  The audit shall include but not be limited to:

     (1)  Any updates of the findings in previous audits, including the inherent ambiguity and conflict in the division of consumer advocacy's roles and lack of strategic vision;

     (2)  The actions, initiatives, and performance of the division of consumer advocacy in promoting Hawaii's clean energy goals, including the State's commitment to its one hundred per cent renewable mandate and other greenhouse gas and climate goals;

     (3)  The actions, initiatives, and performance of the division of consumer advocacy's statutory duty to represent, protect, and advance the interests of all consumers, including the interests of consumers who adopt clean energy resources such as distributed renewables and energy efficiency; and

     (4)  Any recommended improvements, including proposed legislation, to update, redefine, or realign the division of consumer advocacy's mission and organization based on the evolving needs of utility regulation as well as consumer and public interests.

     (b)  In conducting the audit, the auditor shall solicit comprehensive and, as necessary, confidential feedback from the State's clean energy stakeholder community.

     (c)  The auditor shall submit a report to the legislature of its findings and recommendations, including any proposed legislation, no later than twenty days prior to the convening of the regular session of 2020.

     SECTION 3.  This Act shall take effect upon its approval.








Report Title:

DCCA; Division of Consumer Advocacy; Auditor; Audit



Requires the Auditor to conduct a comprehensive management audit of the Department of Commerce and Consumer Affairs' Division of Consumer Advocacy.




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