Poor planning, stubborn idealism push Hawaii electricity costs ever higher

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By Keli‘i Akina

We all know that Hawaii has the highest cost of living in the country.

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We also know about the many factors that contribute to those high costs, such as high taxation, too many regulations, not enough homes and the protectionist federal maritime law known as the Jones Act.

What is less well known is how we got to this point.

Keli‘i Akina

To be fair to Hawaii lawmakers, none of them ever intended to price people out of paradise. Yet that’s exactly what is happening.

Why?

Because the road to a high cost of living — much like the road to hell — is paved with good intentions.

Consider, for example, the well-meaning efforts to make Hawaii energy self-sufficient and improve the environment. Hawaii’s electricity prices had already gone up significantly this year before Hawaiian Electric Co. announced in August it would be increasing its rates by 7% in October, due to the state-mandated closure of Hawaii’s last coal-fired power plant.

At the beginning of this month, HECO said the increase might be only 4%, but coming on top of the double-digit rate increase in March and record inflation, HECO’s pending price jump will still be a stretch for Hawaii’s hard-pressed residents.

Tom Ogawa, owner of Honolulu’s Lighting Concepts, told Hawaii News Now that his electricity bills have nearly doubled in a matter of months, from $600 a month earlier this year to almost $1,000 now. He said the company has tried to economize by turning down its air conditioning and lights when there are no customers in the store, but the increases have been so high it had to raise its prices.

That ripple effect is something that too many people overlook. Not only will Hawaii residents have to pay more for their own electricity use, but they also will have to pay more for the goods and services provided by businesses, which also have to pay more for electricity.

And the economic effect isn’t limited to higher prices.

Tina Yamaki, president of the Retail Merchants of Hawaii, explained to Hawaii News Now that “businesses can’t always absorb these increased costs that have been happening. So we have to pass it on to our customer. And unfortunately, if we can’t pass it on to the customer, sometimes we have to let some employees go in order to make it.”

So the rate hike means higher energy bills, higher prices in general and possible job losses.

Which brings us to the main cause of HECO’s most recent rate increase. Let us put aside for the moment the arguments for and against coal and just focus on one question: Did the lawmakers who put into motion back in 2020 the closure of Hawaii’s last coal-fired power plant adequately consider the effect it might have on Hawaii’s cost of living?

At the time, Hawaii already had some of the highest energy prices in the nation. A 2021 report ranked Hawaii as the most expensive state in the country for energy, with an average monthly energy bill of $321, or about $3,850 a year.

That amount dwarfed what residents of second-place Connecticut were paying, which was about $250 a month, or $3,000 a year. In other words, energy costs for residents with the second highest energy prices in the nation were paying about $850 a year less than Hawaii residents.

Closing Hawaii’s coal-fired power plant might have seemed like a good idea three years ago, but it was assumed there would be other energy sources ready by 2023 to fill the gap: solar farms, windmills and so on.

That part of the plan is behind schedule, so because of poor planning and a stubborn commitment to idealism over practicality, we are left paying higher prices for the power we need to function as a modern society.

This is not to say that renewable energy is not desirable. Rather, I’m saying we need to give more consideration to the economic impact such top-down social engineering will have on average Hawaii residents before we go ahead with it.

That is true not only about energy policy, but for many other issues we face in Hawaii as well. It is critical that we have informed debate — and that we see greater civic involvement.

Our lawmakers need to know that their proposed grand schemes will always have a cost, and that all such proposals deserve a second look and serious debate.
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Keli‘i Akina is president and CEO of Grassroot Institute of Hawaii.

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Grassroot Institute of Hawaii is a nonprofit, nonpartisan research institute dedicated to the principles of individual liberty, the free market and accountable government. Through research papers, policy briefings, commentaries and conferences, the Institute seeks to educate and inform Hawaii's policy makers, news media and general public. Committed to its independence, the Grassroot Institute of Hawaii neither seeks nor accepts government funding. The institute is a 501(c)(3) organization supported by all those who share a concern for Hawaii's future and an appreciation of the role of sound ideas and more informed choices.