Hawaii lawmakers push electric utilities to reduce wildfire risks

The state Legislature appears poised to create a new way for Hawaii electric utilities to pay for wildfire risk mitigation that reduces the cost possibly passed onto ratepayers in an effort to help prevent another tragic fire in the state.

The Hawaii House of Representatives voted 41-10 Tuesday to pass legislation originally dubbed the Catastrophic Wildfire Securitization Act, Senate Bill 2922, after the Senate voted 25-0 to pass an earlier draft March 5.

However, more than 1,200 survivors of the Aug. 8 inferno that destroyed most of Lahaina object to Hawaiian Electric, the state-regulated utility serving Maui, being able to charge ratepayers who lost homes, businesses, family and friends for wildfire-related costs, and opposed the bill in testimony not considered by many lawmakers before Tuesday’s vote because it was received late for an April 2 public hearing.

Now it will be up to House and Senate negotiators to possibly agree upon a final draft of SB 2922 with no more opportunities for the public to testify on the legislation, which in addition to heavy admonishment from many Lahaina fire survivors received some support from the state consumer advocate, the office of Gov. Josh Green and others.

Deliberations could be complicated by another pending bill that would do the same thing as SB 2922 but also something else that Lahaina survivors find more objectionable, which is allow an electric utility to recoup expenses from ratepayers for damages stemming from a wildfire.

This measure, House Bill 2700, originally only aimed to establish a state-administered fund to provide compensation for property damage resulting from catastrophic wildfires. But a Senate committee in March added language for wildfire protection plans and how to finance them similar to what SB 2922 proposes.

The full Senate voted 24-1 to pass HB 2700 Tuesday, and now it also awaits a possible House-Senate compromise draft that could become law.

Even for the simpler and less controversial SB 2922, there appears to be misunderstanding by the general public and even some lawmakers about what the bill would do or not do.

Securitization

SB 2922 would require Hawaiian Electric and the Kauai Island Utility Cooperative to produce and comply with a risk-based wildfire protection plan approved by the state Public Utilities Commission.

The bill also would allow a utility to sell low-interest bonds secured by rate revenue to pay for plan-implementation costs approved by the PUC under its procedures that include public hearings and input from the state consumer advocate.

The bill wouldn’t give an electric utility any new ability to pass along costs to ratepayers. This ability already exists, and is subject to PUC approval. Typically, utility companies are allowed to recover fair and reasonable costs for investments in their systems.

By allowing low-interest bond financing secured by rate revenue, SB 2922 would benefit ratepayers by lowering the utility’s expense for wildfire prevention that the PUC may allow the utility to recover through higher customer bills.

Currently, Hawaiian Electric faces much higher borrowing costs because the Maui disaster led to the company’s credit rating being slashed from investment to junk grade.

“The State needs viable financing options to mitigate the risk of a future catastrophic wildfire occurring,” Michael Angelo, executive director of the Division of Consumer Advocacy at the state Department of Commerce and Consumer Affairs, said in written testimony on SB 2922. “Securitized bond financing, if bounded by adequate ratepayer protections and used with discipline, could offer a relatively low-interest source of funds.”

The Office of the Governor supports SB 2922 and said in written testimony, “The Governor is keenly aware of our state’s high electrical rates and the impact that it has on all of our residents. But, the wildfires were a stark and harsh signal to our state that we need to do more to protect against disasters like wildfires.”

Earlier drafts of the bill approved by the Senate aimed to allow Hawaiian Electric to use securitized bond financing to pay for legal costs. The company sought this provision in the bill and is accused, in more than 100 lawsuits, of causing the Lahaina disaster where gale-force winds blew down power lines.

In mid-March, a House committee cut this provision out of the bill. Still, some Lahaina fire survivors since then have told lawmakers that Hawaiian Electric shouldn’t be allowed to recoup expenses for restoring service to Lahaina or to cover litigation expenses using low-cost bond financing paid back by customers if approved by the PUC.

It is unclear whether Lahaina fire survivors who testified against the latest draft of the bill oppose the bond financing to help prevent another wildfire tragedy anywhere in the state.

Survivor ire

The House Finance Committee received 1,227 pieces of written testimony from fire survivors late for the bill’s last public hearing on April 2.

All or nearly all of the late testimony used the same wording to oppose SB 2922 and HB 2700, with each person adding their name and the address of their damaged or destroyed property.

“This bill allows HECO to go into significant debt to help it pay for billions of dollars of liabilities it owes because of its own corporate gross negligence in starting all Maui wildfires,” the testimony said. “Please reject this misguided effort … allowing HECO to go into debt and then have the very people it burned out of house and home (ratepayers) pay back this debt instead of their own company shareholders is absolutely wrong, does not hold HECO’s executives accountable for their acts, and should be rejected.”

During the April 2 hearing, Lars Johnson told committee members that it is audacious for Hawaiian Electric, long known as HECO, to ask fire survivors like himself to pay more for anything.

“HECO has no right to ask me for a damn thing,” Johnson said. “If anything, they should be required to provide free electricity for the west side (of Maui) for eternity.”

Johnson, a sixth-generation Maui resident, said he lost his house to the fire and saw a man burn to death.

“Making ratepayers pay for the cost of their negligence and mismanagement is not the way to go,” he told the committee, suggesting that wildfire costs should come out of employee salaries and stock options. “They should walk out of this broke. … I don’t want to see this happen again, but I don’t want to pay for it to have it fixed when I wasn’t the one who caused the problems.”

Jan Apo, a Maui attorney whose immediate and extended family lost about a dozen residences and rental homes to the fire, opposed the bill because it doesn’t help fire victims.

“The fire victims continue to suffer through this thing,” he told Finance Committee members. “There is nothing in that bill that would benefit the actual fire victims here.”

At least 101 people died in the fire. Apo, who is spearheading one of the lawsuits against Hawaiian Electric, said a cousin of his was among those killed and that another relative of his was badly burned.

Suzanne Conlon, a Maui resident helping with Apo’s lawsuit, also testified against SB 2922.

“I can’t support HECO asking for money to bail themselves out and then putting it on the back of ratepayers for the cost of their negligence and mismanagement,” she told the committee. “I urge you to oppose this effort.”

Chair of the Finance Committee, Rep. Kyle Yamashita (D, Pukalani-Makawao-­Ulupalakua), asked Hawaiian Electric representatives what would happen if SB 2922 doesn’t pass. Company officials responded that wildfire prevention work will cost ratepayers more, or less prevention will be done.

“The bottom line is the PUC determines the cost that customers will pay as part of this process,” Jimmy Alberts, Hawaiian Electric senior vice president and chief operations officer, told the committee. “Hawaii needs a wildfire mitigation plan and a cost-effective way to pay for it.”

Hawaiian Electric has not estimated what such a plan may cost. But two House committees on March 18 added a provision to SB 2922 that would prohibit the PUC from approving wildfire protection work financing if the cost to ratepayers potentially for decades equates to more than 5% of the average residential customer’s bill.

Lawmaker views

On Tuesday, some House members shared opposing views on the bill ahead of voting.

“At the heart of this, this is a bailout bill for HECO at the expense of families across the state,” said Rep. Jeanne Kapela (D, Volcano-Hawaiian Ocean View). “My electricity bill is already high enough. So for those reasons alone, I cannot support this bill.”

Rep. Terez Amato (D, Kihei-Wailea) criticized SB 2922 for not precluding Hawaiian Electric from passing wildfire prevention costs onto ratepayers. “This bill does not serve the people of Hawaii,” she said.

Rep. Elijah Pierick (R, Royal Kunia-Waipahu-­Honouliuli) suggested that Hawaiian Electric seeks to increase customer rates in part because their executives are highly paid, including what he said is a $575,000 salary for the CEO and $1.5 million paid to a restructuring expert for 15 months of work.

“This doesn’t sound like a good idea,” he said. “I’m voting no.”

Others opposing the bill included Rep. Elle Cochran (D, Waihee-Lahaina-­Lahainaluna).

Rep. Gene Ward (R, Hawaii Kai-Kalama Valley) urged colleagues to support the bill in part because Hawaiian Electric needs lower capital costs to survive.

Rep. Nicole Lowen (D, Kailua-Kona-Honokohau-­Puuanahulu) said there is a lot of misunderstanding about the bill that she and most of her colleagues voted to pass.

“I think the thing that we have to remember is that our electric utility is currently in a really bad financial situation,” said Lowen, chair of the House Energy and Environmental Protection Committee that considered the bill at a March 14 public hearing. “Their credit rating is, you know, in the pits. They’re gonna have to borrow money regardless, and ratepayers are gonna pay for that regardless.”

Lowen said she has concerns about the current version of the bill that she said needs tightening up, but that the issue isn’t whether to support a fee on customer bills that helps pay for wildfire prevention.

“The choice is between (Hawaiian Electric) borrowing at a lower rate that ratepayers pay for, or borrowing at a higher rate that ratepayers pay for,” she said.