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Editor’s Note: Today we begin a deeper look at the Hawaii Public Utilities Commission as it nears its 100th anniversary.

The Hawaii is many things: underfunded, understaffed, ineffectual, indecisive and absolutely essential.

The commission marks its 100th anniversary this year at one of the most critical times in its existence.

The nation’s highest electric rates are forcing some people to cook on kiawe and burn candles at night. Soaring costs are also deepening social divisions; people who can afford to get off the grid do, sticking those less fortunate with the tab.

Hawaii’s near-total reliance on oil to fuel its power plants further complicates the picture, particularly since there’s no clear path forward. We have legislative mandates like achieving 40 percent renewable generation by 2030, but we don’t know what will get us there. Liquefied natural gas? An undersea cable? Geothermal? All or none of the above?

Oil made sense decades ago, when barrels were cheap, prices constant and the consequences of climate change less apparent. But now the fossil-fuel addiction isn’t just hurting the environment, it is undermining the economy and the state’s overall security.

The commission’s three members, appointed by the governor to six-year terms, have the power to change the situation. Their decisions affect everyone in the isles, as well as investors overseas.

Their most recent actions suggest a more assertive — some even say activist — approach to bringing down electricity rates and holding the utility accountable.

The issues are complex and convoluted. The commission’s core mission is to make sure the performance of the regulated companies is aligned with the public’s interest. Recently, this has meant determining how much profit and its neighbor island subsidiaries can make on the backs of ratepayers.

In May, the commission cut HECO’s return on its Maui subsidiary from 10 percent to 9 percent and ordered the utility to return more than $8 million to its customers. It was one of the few times in recent history that the PUC has bucked the powerful utility, which provides electric service to every county but Kauai.

Since then, the PUC has also taken HECO on in another important public policy issue: a practice known as “decoupling” that allows the for-profit HECO to make money while still working to bring electricity prices down. The PUC says decoupling is not working to the advantage of ratepayers and has begun a review that could hurt HECO’s profits even more.

PUC Changed With the Times

Controversy is nothing new for the commissioners, who also oversee hundreds of phone, vehicle, water, gas and sewage companies. While it’s the electric utilities that receive the bulk of their attention these days, the commission used to focus more on breaking up monopolies in the motor vehicle and telecommunications industries.

Technology is a driving force, whether it’s adapting to an influx of wireless service providers in the late 20th century or understanding the more recent challenges of integrating intermittent renewable energy sources like solar and wind.

The commission’s ability to effectively regulate such diverse industries has evolved over the past century along with its composition and authority.

In 1913, the commission started with three part-time members, $5,000 and an incredibly broad definition of “public utility.” Among the commission’s first orders of business was to clarify what exactly it was regulating.

The commission narrowed the scope from “every person, company or corporation” to “every business which is virtually a monopoly” and identified more clearly what types of businesses would be regulated, settling on transportation, telecommunications, light, power, heat, cold, water, gas, oil and storage.

The commission embarked on a series of investigations into the rates and practices of electric, phone, gas, storage and interisland navigation utilities. But the public was losing faith in the commission’s effectiveness. In 1933, the commission tried to turn this around by expanding to five part-time members, with a requirement that one would be from each neighboring county and two from Oahu.

When Hawaii became a state in 1959, the commission fought to assert its independence. But a constitutional requirement pushed the PUC under the Department of Treasury and Regulation.

The department’s director controlled the commission’s purchasing and represented it in talks with the Legislature and governor, according to the commission’s . The department’s argument that the move increased efficiency was undercut by the divisions it caused within the commission.

An internal fight over the next several years culminated in a 1970 Supreme Court decision. A conflict-of-interest case over phone rates heated up when the commission did not side with the department’s director, who was using the commission’s staff to present his position before the commission and to appeal it to the court, the commission’s annual report says.

Eventually the commission was moved from the Department of Regulatory Agencies to the Department of Budget and Finance, which it falls under today. The Department of Regulatory Agencies director became the consumer advocate and the Public Utilities Division became the Division of Consumer Advocacy.

During this massive restructuring, debate returned to the question of whether five part-time commissioners were effective. In 1976, the commission reorganized again, this time to its current makeup of three full-time commissioners.

The neighbor islands held a majority in the commission and the regulation of passenger carriers was a county-specific concern, the commission’s annual report says. The requirement for neighbor island representation was removed, but new assistant positions in the neighboring counties were added.

The commission’s composition is still an issue today. In recent years, lawmakers have introduced to expand to a five-member commission with guaranteed neighbor island representation. But none of the measures have passed.

Another key development in the evolution of how Hawaii is preparing for a more energy sustainable future came in 1987 when the commission started looking at “integrated resource planning.” The first so-called IRP process began in 1990, but the framework was revised in 2011.

Dozens of meetings among dozens of key players have yet to produce much in the way of results. The latest year-long community planning process to help HECO utilities come up with five-year energy plans for Oahu, Big Island and Maui has disappointed some members of the planning group.

The plans are due to the commission by June 28, but some members say HECO has effectively cut the community out of the process by not offering more of a chance to review or comment on the final drafts.

Staffing and Money are Key Issues

The commission operates with just over three dozen people and $11 million a year.

The agency is authorized to hire more staff, but it hasn’t had room to accommodate them. That’s expected to change since the Legislature approved almost $4 million this past session for renovations and new office space in 2015. This means at least two more years of insufficient staffing at a time when HECO is scrambling to find big energy projects to help power Oahu and critical decisions need to be made for a proposed $1 billion undersea cable project between Oahu and Maui County.

The commission’s budget was heavily cut under Gov. Linda Lingle‘s administration during the recession, including a 10 percent cut in 2010 alone.

The Legislature has restored most of the eliminated positions over the past couple years, but the agency has had trouble spending the money freely. The Department of Budget and Finance, which oversees the commission, requires layers of approval.

More than 90 percent of the commission’s funding comes from fees the agency charges utility companies, which are passed on to ratepayers as a surcharge. In 2012, the utilities and transportation carriers paid $19 million into the fund.

But the Legislature set up the fund in such a way that it can siphon off the money the commission collects. Lawmakers decide how much the agency should get to spend the following year and dump the rest into the general fund for other programs.

The special fund is just one area the commissioners, legislators, energy experts and others have targeted for reform. Lawmakers have said they will be scrutinizing special funds this summer.

Officials also are reviewing the competitive bidding process, which some experts have identified as a barrier to a properly functioning agency.

Bids are solicited from multiple companies to do energy projects. HECO Executive Vice President Robbie Alm said it’s so slow that it’s hard to get developers to stick around long enough for contracts to be awarded because financial conditions fluctuate.

But concerns remain that, without a competitive bidding requirement, HECO could push through projects that the community doesn’t want. Big projects are pending too.

The Hawaii Clean Energy Initiative, launched in 2008, required the state to move to 40 percent clean energy production and reduce demand by 30 percent by 2030. That set the stage for big wind projects — wind farms on smaller islands like Lanai and Molokai whose power would be shipped to Oahu via undersea cables. Lanai and Molokai residents have been vocal and sometimes angry opponents of turning their rural islands into power sources for teeming Oahu, where 75 percent of the state’s population lives.

There’s a fear that the commission will let HECO line up projects and invest in them to the point that the company can say it’s spent so much money that it should be allowed to proceed in spite of any environmental or other issues that may arise along the way.

“If they don’t get a handle on that now, that kind of approach is going to cause them a world of hurt down the road,” said Lanai resident Sally Kaye, a member of the commission’s 68-member .

Alm said it will be easy to get to 15 percent renewable by 2015, the initiative’s next benchmark. The state will likely hit 18 percent before then, he said, but it will be difficult for Hawaii to reach 40 percent renewables by 2030.

“You can’t PV your way to 40 percent,” he said, referring to photovoltaics. “You can’t do it without wind and cable.”

Cautious Optimism As Commission Moves Forward

As the commission looks toward its next 100 years, fundamental changes must be made, critics say. Some can be made legislatively, others have to happen internally.

Even long-time critics, however, acknowledge the current commission is perhaps the most experienced and well-suited to help Hawaii fulfill its vision of an affordable and clean energy future.

Henry Curtis, executive director of , a non-profit environmental and community action group, recalled the “blundering, foolish agency” that the commission was in the 1970s and ’80s, when it was ripped apart by independent audits.

He credited former commissioners Carlito Caliboso and Les Kondo as being instrumental in opening up the agency and fighting for overdue reforms, including increased transparency in the docket process by which rate cases are decided.

Now the commission has Mina Morita at the helm. In 2011, she stepped down as a state lawmaker, representing the north shore of Kauai, to head the commission. She chaired the House Energy and Environmental Protection Committee for 13 years, where she gained the reputation as someone who does her homework and becomes an expert on a variety of issues.

Another commissioner, Mike Champley, was appointed by Gov. Neil Abercrombie in 2011. He has worked in the energy industry for more than 40 years, including time as a senior executive at a major energy company.

Abercrombie tapped the commission’s newest member, Honolulu attorney Lorraine Akiba, in 2012. She has served as the former state Labor and Industrial Relations director and head of the Hawaii Democratic Party. Her broad experience in the public and private sector is expected to round out the commission as a whole.

“Never in PUC history have the commissioners been so well informed on energy policy,” Curtis said. “You have three people with enormous responsibility at a time when the utility is floundering trying to figure out what the model is that’s going to make them survive.”

Still, Curtis said the commission lacks direction. And until that happens, he said lawmakers should hold off on throwing money at the agency.

Morita doesn’t think “activist” is the right word to describe the current commission. But she acknowledges its more assertive attitude, particularly of late.

“It reflects styles,” she said. “We’re going through a once in a lifetime transformation. It really is exciting work.”

This timeline, compiled from the commission’s 2012 annual report, shows some of the key development’s in the commission’s 100-year history. Click on the blue line and drag your mouse left or right to move forward or backward on the timeline.