SB2694 amends Hawaii’s Water Carrier Act to require the Public Utilities Commission (PUC) to establish automatic adjustment mechanisms for water carriers, including a water carrier inflationary cost index mechanism tied to changes in wharfage rates set by the Department of Transportation’s Harbors Division. The bill is designed to address inflation, regulatory lag, and other economic factors by allowing rates to be adjusted between full rate cases, subject to PUC oversight and tariff filing requirements. It applies a structured schedule: the mechanism must be established by July 1, 2026, applied annually through June 30, 2029, and may continue on an annual basis from July 1, 2029 through June 30, 2033.
The measure also amends tariff and rate-setting provisions in chapter 271G, Hawaii Revised Statutes, to clarify that requests for automatic adjustment mechanisms must be filed as a 45-day tariff transmittal or as part of a general rate case. It defines “automatic adjustment mechanism” as a rate adjustment mechanism that allows a water carrier to change rates between rate cases, and it updates notice and review provisions for tariff changes. The bill preserves existing PUC authority to review, suspend, and investigate rate changes, while expressly allowing the commission to waive or exempt a water carrier from chapter requirements or related orders if doing so is justified.
A key limitation is that customers eligible for preferential agricultural water rates under section 269-26.5 are exempt from any automatic adjustment mechanism authorized by the bill. The act is temporary: it takes effect on July 1, 2026, and is repealed on July 1, 2033, with the amended statutory provisions set to revert to their prior form at that time. In practical terms, the bill creates a time-limited regulatory framework for more frequent, formula-based rate adjustments for water carriers, especially those transporting property.
The overall sentiment reflected in the legislative history appears favorable. The bill advanced through Senate Transportation, Commerce and Consumer Protection, and Ways and Means, and later passed House and Senate conference unanimously, indicating broad bipartisan support and little recorded opposition at the final stages. The final enactment as Act 016 suggests the measure was viewed as a workable utility-regulatory update rather than a controversial policy shift.
The main points of contention likely centered on rate increases, regulatory flexibility, and consumer protection. Water carriers may support automatic adjustments because they reduce delays in recovering inflationary costs and provide more predictable revenue, while shippers and other customers may be concerned about more frequent rate changes and reduced scrutiny between rate cases. The exemption for preferential agricultural water customers also suggests an effort to shield a sensitive user class from higher costs, and the PUC’s retained waiver authority indicates lawmakers wanted flexibility to avoid applying the mechanism where it would be unjust, unreasonable, or not in the public interest.
SB2694 amends chapter 271G, Hawaii Revised Statutes, governing water carriers, by adding a new statutory framework for automatic adjustment mechanisms and revising tariff and rate-case procedures. It requires the PUC to establish a water carrier inflationary cost index mechanism tied to wharfage rate changes, sets filing and review rules for such mechanisms, and updates the definition of automatic adjustment mechanism. The bill also temporarily authorizes more formula-based rate changes, preserves PUC oversight and hearing rights, exempts preferential agricultural water customers, and sunsets the changes in 2033 before restoring the prior statutory language.
The bill appears to have enjoyed strong support throughout the legislative process. It passed key Senate committees with favorable votes, moved through conference without recorded dissent, and was enacted as Act 016. The unanimous or near-unanimous votes in later stages suggest consensus that the bill addressed a practical regulatory issue for water carriers and the PUC rather than a politically divisive matter.
The likely areas of disagreement were the balance between rate stability and carrier cost recovery, and the extent to which the PUC should allow automatic rate changes outside full rate cases. Water carriers would favor the mechanism as a way to address inflation and regulatory lag, while shippers, consumers, and other affected parties could worry about less frequent scrutiny and higher transportation costs. The bill’s exemption for preferential agricultural water customers and the PUC’s waiver authority indicate lawmakers were attentive to concerns about fairness and over-application of the new mechanism.