Hawaiian Electric is counting on 3 bills with worsening wildfires expected on the islands
When Hawaii’s state legislature came into session in January, dozens of bills were proposed seeking to mitigate wildfire risks. Following the devastating Maui fire in August, the governor’s office and the biggest utility in the state, Hawaiian Electric Co. (HECO), are throwing their support behind a number of initiatives in the state Senate and House of Representatives.
The efforts couldn’t come sooner, as the Hawaii Emergency Management Agency expects a 100% chance of wildfires in the state each year going forward, according to the 2023 Hawaii State Hazard Mitigation Plan published last fall. Hawaii may experience 12 wildfire events annually, based on historical information, the agency reported.
The need to build in protections and contingencies during this legislative session is particularly important for HECO, which has been named, along with its parent company Hawaiian Electric Industries, as a defendant in 101 lawsuits related to the Maui August 8 fires, the company stated in its fourth quarter analyst call on Feb. 13.
“We’re focused on bills that would establish a fund for property owners to recover damages from future catastrophic wildfires, wildfire risk mitigation planning requirements overseen by the Public Utilities Commission, along with cost recovery for implementing approved plans and securitization as a financing option,” Scott Seu, HEI president and CEO, told analysts during the quarterly call.
Three bills of interest touch on the priorities Seu stated, with versions introduced in both chambers of the legislature:
SB 2922 / HB 2265, the Catastrophic Wildfire Securitization Act
The Public Utilities Commission (PUC) would gain the ability of authorizing low-cost bonds to pay for wildfire-related costs and expenses, which were largely undefined in the bill. The bonds would be repaid by ratepayers.
The bill “would allow these approved costs and expenses to be financed at lower rates with less impact on customer bills, and it would enable the utilities to make investments to reduce risk of future wildfires at the lowest possible cost,” HECO’s director of regulatory non-rate proceedings Kevin Katsura told the committee.
The utility pointed out in its comments that 20 U.S. states have allowed investor-owned utilities to use securitized bonds, adding that regulators would determine a just and reasonable application of the measure.
Among the amendments recently made by the Hawaii state Senate Committee on Commerce and Consumer Protection, legislators changed the 90-day limit that the Public Utilities Commission had suggested to respond to the securitization claims to an undefined amount, with committee Chair Jarrett Keohokalole arguing that the regulators were too optimistic about due regulatory review for the securitization claims.
For example, the Consumer Advocacy division of the Department of Commerce and Consumer Affairs, would “probably seek outside services and an extended time frame beyond what is being proposed” to properly review requests, executive director Michael Angelo told the senators on Feb. 9.
SB 2997/HB 2281, the Wildfire Risk Mitigation Plan
The bill seeks to create standards for wildfire mitigation planning along with a formal review process within the PUC. Utilities would create wildfire protection plans and update them annually. It also shields electric utilities from civic liability for following the approved risk-based wildfire protection plan.
SB 2997 also allows cost recovery by the utility for wildfire safety expenses.
“Having the tools necessary to effectively manage risk and implement policy with clear direction, expected outcomes, and reasonably recover associated costs is imperative to the utilities continued viability,” the local chapter of the International Brotherhood of Electrical Workers said in written testimony.
SB 3344/HB 2700, the Wildfire Relief Fund
A separate relief fund regarding wildfire damages would, according to HECO’s testimony, allow claimants to receive compensation faster by avoiding litigation, while also sparing the utilities and other defendants, including Hawaiian counties, from lawsuits.
By avoiding the financial instability that can result from litigation due to catastrophic wildfires, electric utilities can focus on investing millions of dollars each year on renewable energy, decarbonization, and a resilient and reliable energy grid, HECO Chief Information Officer Jason Benn said.
“In order to continue to be able to make these large upfront investments, the utility must eliminate the financial uncertainty of future wildfire risks and regain access to capital,” Benn said. “We believe this bill and investments Hawaiian Electric and others will make to mitigate wildfire risk, will help do so.”
The Chamber of Commerce Hawaii supports the bill, stating in written testimony: “This bill would create an efficient process for recovering property damages and would protect the creditworthiness of the state, counties, large landowners, and utilities that contribute to the fund.”
While the Office of the Governor said it was open to the concept behind the legislation, it did not support the current bill, citing insufficient detail in the proposal. Funding has yet to be negotiated in the relief fund bill, and would likely occur later in the legislative process.
During the Feb. 9 Senate committee hearing on these bills, senators expressed their frustrations with the utility and regulators, and raised questions about broadening the scope of the wildfire fund.
“This isn’t new, we went through this in freaking 2019 with [Hurricane] Lane, Okay? And it’s gonna keep happening,” Sen. Angus McKelvey said.
McKelvey and Keohokalole asked the top regulator of the state’s PUC about the possibility of looking at all natural hazards. Keohokalole added his constituents have more to fear from losing power due to floods than wildfires.
Another complaint with the bill came from smaller utilities: Kauai Island Utility Cooperative spokesperson Beth Amaro said the bill language currently did not allow a cooperative utility to recover fund costs.
The Senate Committee on Commerce and Consumer Protection unanimously accepted the trio of bills with amendments on Feb. 14, advancing them.
Although the chambers of the legislature have until the end of the session on May 3 to approve bills, interested parties will be waiting for March 7 and April 11, the deadlines for bills to “cross-over” to other chambers, per the state’s legislative deadlines.
“Crossover is very important because at that point, that’s when you will see what one House or the House or the Senate, where they ultimately land on the initially proposed bills,” Scott Deghetto, HEI’s CFO and executive vice president, told analysts on the Q4 call.
On Feb. 2, two state House Committees also advanced their version of the wildfire relief fund bill, H.B. 2700, introduced by House Speaker Scott Saiki.
HEI’s leadership shared an update with analysts on Governor Josh Green’s wildfire fund for victims of the Maui fire in August. The One ‘Ohana Initiative announced in November included a recovery fund that would exceed $150 million, the governor’s office said in the release. Seu said the fund reached $175 million in commitments, to which the investor-owned utility will contribute up to $75 million. The fund is targeting a March 1 launch, according to Seu.
“The Office of the Governor has expressed the importance of legislation that can help stabilize the electric utility and Hawaii’s energy future,” Seu told analysts.
