Workshop on Energy and Environmental Research

Abstract:
On November 1, 2002, Kauaʻi’s electric utility changed from investor-owned to cooperative ownership. I examine how this change affected retail electricity prices using a panel of Kauaʻi and Hawaiʻi’s three other vertically integrated electric utilities, which remained investor-owned. Difference-in-differences and synthetic-control comparisons estimate Kauaʻi’s price trajectory under continued investor ownership. Comparisons of fuel and purchased-power costs, generation, procurement, and financing help explain the subsequent price differences. Estimated effects are small or sensitive to specification during the earlier post-conversion years, but Kauaʻi’s prices fall substantially below the estimated counterfactual beginning in the mid-2010s. Across two main specifications, average prices in 2025 are an estimated 9.5–12.2 cents per kWh lower, measured in 2024 dollars—approximately 21–25 percent below the counterfactual. The divergence coincides with Kauaʻi’s expansion of renewable generation and reduced reliance on oil. The findings are consistent with cooperative ownership changing incentives for investment and procurement, although attributing the price difference to ownership requires distinguishing these decisions from other island-specific changes.