Hawaii electrical utilities could face more regulation

Hawaii lawmakers are considering legislation to increase electrical utility regulation pertaining to wildfires in the wake of the Aug. 8 Maui disaster.

Several bills have been introduced in the Legislature this year with such intent, including one requiring grid operations that minimize catastrophic wildfire risk, one requiring regulatory approval of wildfire mitigation plans and one helping residential property owners in fire-prone areas reduce wildfire impacts.

Other pending bills would allow electrical utilities to sell low-interest bonds secured by future ratepayer revenue to recover costs of implementing wildfire mitigation plans and to pay for catastrophic wildfire expenses including legal claims.

Hawaiian Electric, which faces numerous lawsuits alleging that company utility lines pummeled by gale-force winds caused the Maui inferno that destroyed most of Lahaina and killed 100 people, has proposed some of the new legislation competing with measures introduced by others, including the administration of Gov. Josh Green.

A pair of bills from Green’s administration would allow regulated Hawaii electrical utilities to pay for wildfire mitigation work approved by the state Public Utilities Commission using proceeds from bonds secured by ratepayer revenue.

Such bonds would benefit ratepayers by lowering finance costs for system improvements that reduce wildfire risk.

Typically, such costs get passed on to ratepayers, and Hawaiian Electric faces higher borrowing costs because the Maui wildfires led to the company’s credit rating being slashed from investment to junk grade.

Jim Kelly, Hawaiian Electric vice president of government and community relations, said in an interview that the cost for bonds securitized by customer bill revenue is less than even investment-­grade bonds.

“It would be a lot cheaper, so the impact on the bill and on the customer would be a lot less,” he said. “It’s an important tool. … It’s going to be very expensive work that’s going to need to be done in the coming years.”

Hawaiian Electric serves Oahu, Maui, Molokai, Lanai and Hawaii island. Kauai is served by the Kauai Island Utility Cooperative.

The two bills from Green’s administration, House Bill 2407 and Senate Bill 3096, had not yet been scheduled for a public hearing as of Friday.

“The governor believes we need to ensure wildfire mitigation and prevention policies and plans are adopted,” Blake Oshiro, senior adviser in the governor’s office, said in a statement. “We also need to find reasonable ways to finance these improvements and investments.”

Hawaiian Electric produced a written wildfire mitigation plan in January 2023 and sent it to the PUC in October in response to an information request.

In November the PUC took initial steps directing all public utilities to develop and submit reports on their ongoing efforts and future mitigation plans to address natural hazards, including wildfires, by May 21.

The PUC said in a statement, “The administration’s bill is critical because it creates a formal process requiring electric utilities to develop and submit wildfire protection plans to the Commission for review and approval. The bill language also includes financing structures that will assist the utilities in recovering certain costs while protecting the ratepayers.”

Hawaiian Electric prefers a pair of bills it produced, HB 2265 and SB 2922, which would allow the company to use bonds secured by rate revenue to pay for costs and expenses arising out of catastrophic wildfires, including legal settlements or damages, as well as for wildfire risk mitigation.

These two bills also had not yet been scheduled for a hearing as of Friday.

A PUC representative said the agency is still evaluating these two bills and therefore reserved comment.

If any of the four bills pertaining to secured bond financing passes, it would be up to the PUC to determine whether certain costs are just and reasonable for stakeholders, including customers.

There is some question as to whether any bill is needed to allow Hawaiian Electric to receive PUC approval to sell bonds secured by rate revenue to pay for costs related to wildfires or wildfire risk.

Kelly said the legislation proposed by Hawaiian Electric was modeled on legislation in California and Oregon after catastrophic wildfires there.

Another bill sought by Hawaiian Electric, SB 2997, would require electrical utilities to design and operate in compliance with a risk-based wildfire protection plan approved by the PUC. This bill, along with companion measure HB 2281, would provide a civil liability shield for actions in accordance with an approved plan or any part of a proposed draft removed by the PUC.

SB 2997 and HB 2281 had not been scheduled for a hearing as of Friday.

One other bill not heard yet also would require electric utilities to design and operate in compliance with a risk-based wildfire protection plan, but would establish a civil penalty for violations and not provide liability protection.

This bill, HB 2102, also would require utilities to report wildfires caused by or occurring in connection with their operations, and make the PUC investigate certain wildfires.