Electric utility subsidiary

3 Months Ended

Mar. 31, 2014

Electric utility subsidiary [Abstract]

Electric utility segment

Revenue taxes. The Utilities’ operating revenues include amounts for the recovery of various Hawaii state revenue taxes. Revenue taxes are generally recorded as an expense in the period the related revenues are recognized. However, the Utilities’ revenue tax payments to the taxing authorities in the period are based on the prior year’s billed revenues (in the case of public service company taxes and PUC fees) or on the current year’s cash collections from electric sales (in the case of franchise taxes). For the three months ended March 31, 2014 and 2013, the Utilities included approximately $65 million and $64 million, respectively, of revenue taxes in “operating revenues” and in “taxes, other than income taxes” expense.

Recent tax developments. In September 2013, the Internal Revenue Service (IRS) issued final regulations addressing the acquisition, production and improvement of tangible property, which were effective January 1, 2014. Management is currently evaluating the impact of these new regulations, but does not expect a material impact on the Utilities since specific guidance on network (i.e., transmission and distribution) assets and generation property had already been received. The IRS also proposed regulations addressing the disposition of property.

The Utilities adopted the safe harbor guidelines with respect to network assets in 2011 and in June 2013, the IRS released a revenue procedure relating to deductions for repairs of generation property, which provides some guidance (that is elective) for taxpayers that own steam or electric generation property. This guidance defines the relevant components of generation property to be used in determining whether such component expenditures should be deducted as repairs or capitalized and depreciated by taxpayers. The revenue procedure also provides an extrapolation methodology that could be used by taxpayers in determining deductions for prior years’ repairs without going back to the specific documentation of those years. The guidance does not provide specific methods for determining the repairs amount. Management intends to adopt this guidance through an election in its 2014 tax return.

In March 2014, HEI filed with the IRS an application, which requested a change in the method of accounting for revenues recorded to the Utilities’ revenue balancing accounts (RBAs) (from an accrual basis to a cash collections basis) for income tax purposes. On April 28, 2014, the Utilities received approval for this change from the IRS, effective January 1, 2014. HEI expects to execute a consent agreement with the IRS and will include the effects of this change in its estimated income tax payments for 2014. This change will result in improved cash flows by deferring the payment of income taxes on the RBA revenues recognized until the revenues are collected and reduce the interest to be accrued on the RBA balance as proposed by the Consumer Advocate.

Unconsolidated variable interest entities.

HECO Capital Trust III. Trust III was created and exists for the exclusive purposes of (i) issuing in March 2004 2,000,000 6.50% Cumulative Quarterly Income Preferred Securities, Series 2004 (2004 Trust Preferred Securities) ($50 million aggregate liquidation preference) to the public and trust common securities ($1.5 million aggregate liquidation preference) to Hawaiian Electric, (ii) investing the proceeds of these trust securities in 2004 Debentures issued by Hawaiian Electric in the principal amount of $31.5 million and issued by Hawaii Electric Light and Maui Electric each in the principal amount of $10 million, (iii) making distributions on these trust securities and (iv) engaging in only those other activities necessary or incidental thereto. The 2004 Trust Preferred Securities are mandatorily redeemable at the maturity of the underlying debt on March 18, 2034, which maturity may be extended to no later than March 18, 2053; and are currently redeemable at the issuer’s option without premium. The 2004 Debentures, together with the obligations of the Utilities under an expense agreement and Hawaiian Electric’s obligations under its trust guarantee and its guarantee of the obligations of Hawaii Electric Light and Maui Electric under their respective debentures, are the sole assets of Trust III. Taken together, Hawaiian Electric’s obligations under the Hawaiian Electric debentures, the Hawaiian Electric indenture, the subsidiary guarantees, the trust agreement, the expense agreement and trust guarantee provide, in the aggregate, a full, irrevocable and unconditional guarantee of payments of amounts due on the Trust Preferred Securities. Trust III has at all times been an unconsolidated subsidiary of Hawaiian Electric. Since Hawaiian Electric, as the holder of 100% of the trust common securities, does not absorb the majority of the variability of Trust III, Hawaiian Electric is not the primary beneficiary and does not consolidate Trust III in accordance with accounting rules on the consolidation of VIEs. Trust III’s balance sheet as of March 31, 2014 and December 31, 2013 each consisted of $51.5 million of 2004 Debentures; $50 million of 2004 Trust Preferred Securities; and $1.5 million of trust common securities. Trust III’s income statement for the three months ended March 31, 2014 and 2013 consisted of $0.8 million of interest income received from the 2004 Debentures; $0.8 million of distributions to holders of the Trust Preferred Securities; and $25,000 of common dividends on the trust common securities to Hawaiian Electric. So long as the 2004 Trust Preferred Securities are outstanding, Hawaiian Electric is not entitled to receive any funds from Trust III other than pro-rata distributions, subject to certain subordination provisions, on the trust common securities. In the event of a default by Hawaiian Electric in the performance of its obligations under the 2004 Debentures or under its Guarantees, or in the event any of the Utilities elect to defer payment of interest on any of their respective 2004 Debentures, then Hawaiian Electric will be subject to a number of restrictions, including a prohibition on the payment of dividends on its common stock.

Power purchase agreements. As of March 31, 2014, the Utilities had six PPAs for firm capacity and several other PPAs with variable generation independent power producers (IPPs) and Schedule Q providers (i.e., customers with cogeneration and/or small power production facilities with a capacity of 100 kilowatts (kWs) or less who buy power from or sell power to the Utilities), none of which are currently required to be consolidated as VIEs. Approximately 90% of the firm capacity is purchased from AES Hawaii, Inc. (AES Hawaii), Kalaeloa Partners, L.P. (Kalaeloa), Hamakua Energy Partners, L.P. (HEP) and HPOWER. Purchases from all IPPs were as follows:



	Three months ended March 31
(in millions)	2014		2013
AES Hawaii	$	33	$	23
Kalaeloa	67		65
HEP	12		12
HPOWER	16		15
Other IPPs	37		38
Total IPPs	$	165	$	153

Some of the IPPs provided sufficient information for Hawaiian Electric to determine that the IPP was not a VIE, or was either a “business” or “governmental organization,” and thus excluded from the scope of accounting standards for VIEs. Other IPPs, including the three largest, declined to provide the information necessary for Hawaiian Electric to determine the applicability of accounting standards for VIEs.

Since 2004, Hawaiian Electric has continued its efforts to obtain from the IPPs the information necessary to make the determinations required under accounting standards for VIEs. In each year from 2005 to 2013, the Utilities sent letters to the identified IPPs requesting the required information. All of these IPPs declined to provide the necessary information, except that Kalaeloa later agreed to provide the information pursuant to the amendments to its PPA (see below) and an entity owning a wind farm provided information as required under its PPA. Management has concluded that the consolidation of two entities owning wind farms was not required as Hawaii Electric Light and Maui Electric do not have variable interests in the entities because the PPAs do not require them to absorb any variability of the entities. If the requested information is ultimately received from the remaining IPPs, a possible outcome of future analyses of such information is the consolidation of one or more of such IPPs in the Consolidated Financial Statements. The consolidation of any significant IPP could have a material effect on the Consolidated Financial Statements, including the recognition of a significant amount of assets and liabilities and, if such a consolidated IPP were operating at a loss and had insufficient equity, the potential recognition of such losses. If the Utilities determine they are required to consolidate the financial statements of such an IPP and the consolidation has a material effect, the Utilities would retrospectively apply accounting standards for VIEs.

Kalaeloa Partners, L.P. In October 1988, Hawaiian Electric entered into a PPA with Kalaeloa, subsequently approved by the PUC, which provided that Hawaiian Electric would purchase 180 megawatts (MW) of firm capacity for a period of 25 years beginning in May 1991. In October 2004, Hawaiian Electric and Kalaeloa entered into amendments to the PPA, subsequently approved by the PUC, which together effectively increased the firm capacity from 180 MW to 208 MW. The energy payments that Hawaiian Electric makes to Kalaeloa include: (1) a fuel component, with a fuel price adjustment based on the cost of low sulfur fuel oil, (2) a fuel additive component, with an adjustment based on changes in the Gross National Product Implicit Price Deflator, and (3) a non-fuel component, with an adjustment based on changes in the Gross National Product Implicit Price Deflator. The capacity payments that Hawaiian Electric makes to Kalaeloa are fixed in accordance with the PPA. Kalaeloa also has a steam delivery cogeneration contract with another customer, the term of which coincides with the PPA. The facility has been certified by the Federal Energy Regulatory Commission as a Qualifying Facility under the Public Utility Regulatory Policies Act of 1978.

Pursuant to the current accounting standards for VIEs, Hawaiian Electric is deemed to have a variable interest in Kalaeloa by reason of the provisions of Hawaiian Electric’s PPA with Kalaeloa. However, management has concluded that Hawaiian Electric is not the primary beneficiary of Kalaeloa because Hawaiian Electric does not have the power to direct the activities that most significantly impact Kalaeloa’s economic performance nor the obligation to absorb Kalaeloa’s expected losses, if any, that could potentially be significant to Kalaeloa. Thus, Hawaiian Electric has not consolidated Kalaeloa in its consolidated financial statements. A significant factor affecting the level of expected losses Hawaiian Electric could potentially absorb is the fact that Hawaiian Electric’s exposure to fuel price variability is limited to the remaining term of the PPA as compared to the facility’s remaining useful life. Although Hawaiian Electric absorbs fuel price variability for the remaining term of the PPA, the PPA does not currently expose Hawaiian Electric to losses as the fuel and fuel related energy payments under the PPA have been approved by the PUC for recovery from customers through base electric rates and through Hawaiian Electric’s ECAC to the extent the fuel and fuel related energy payments are not included in base energy rates. As of March 31, 2014, Hawaiian Electric’s accounts payable to Kalaeloa amounted to $23 million.

Commitments and contingencies.

Environmental regulation. The Utilities are subject to environmental laws and regulations that regulate the operation of existing facilities, the construction and operation of new facilities and the proper cleanup and disposal of hazardous waste and toxic substances. In recent years, legislative, regulatory and governmental activities related to the environment, including proposals and rulemaking under the Clean Air Act (CAA) and Clean Water Act (CWA), have increased significantly and management anticipates that such activity will continue.

On April 20, 2011, the Federal Register published the federal Environmental Protection Agency’s (EPA’s) proposed regulations required by section 316(b) of the CWA designed to protect aquatic organisms from adverse impacts associated with existing power plant cooling water intake structures. The proposed regulations would apply to the cooling water systems for the steam generating units at Hawaiian Electric’s power plants on the island of Oahu. If adopted as proposed, management believes the proposed regulations would require significant capital and annual O&M expenditures. On June 11, 2012, the EPA published additional information on the section 316(b) rule making that indicates that the EPA is considering establishing lower cost compliance alternatives in the final rule. The EPA has delayed issuance of the final section 316(b) rule.

On February 16, 2012, the Federal Register published the EPA’s final rule establishing the EPA’s National Emission Standards for Hazardous Air Pollutants for fossil-fuel fired steam electrical generating units (EGUs). The final rule, known as the Mercury and Air Toxics Standards (MATS), applies to the 14 EGUs at Hawaiian Electric’s power plants. MATS establishes the Maximum Achievable Control Technology standards for the control of hazardous air pollutants emissions from new and existing EGUs. Based on a review of the final rule and the benefits and costs of alternative compliance strategies, Hawaiian Electric has selected a MATS compliance strategy based on switching to lower emission fuels. The use of lower emission fuels will provide for MATS compliance at lower overall costs and avoid the reduction in operational flexibility imposed by emissions control equipment. Hawaiian Electric requested and received a one-year extension, resulting in a MATS compliance date of April 16, 2016. Hawaiian Electric also has pending with the EPA a Petition for Reconsideration and Stay dated April 16, 2012, and a Request for Expedited Consideration dated August 14, 2013. The submittals ask the EPA to revise an emissions standard for non-continental oil-fired EGUs on the grounds that the promulgated standard was incorrectly derived. The Petition and Request submittals to the EPA included additional data to demonstrate that the existing standard is erroneous. Hawaiian Electric has been in contact with the EPA regarding the status of its Petition and does not expect a decision before the end of 2014.

On February 6, 2013, the EPA issued a guidance document titled “Next Steps for Area Designations and Implementation of the Sulfur Dioxide National Ambient Air Quality Standard,” which outlines a process that will provide the states additional flexibility and time for their development of one-hour sulfur dioxide National Ambient Air Quality Standard (NAAQS) implementation plans. The EPA expects to publish a proposed data requirements rule for the one-hour sulfur dioxide NAAQS in the Federal Register in May 2014. Hawaiian Electric will work with the Department of Health of the State of Hawaii (DOH) and the EPA in the rulemaking process for these implementation plans to ensure development of cost-effective strategies for NAAQS compliance. Based on the February 6, 2013 EPA guidance document, current estimates of the compliance date for the one-hour sulfur dioxide NAAQS is in the 2022 or later timeframe. Pending litigation may result in an accelerated timeframe, but the impact of the litigation cannot be predicted at this time.

Depending upon the final outcome of the CWA 316(b) regulations, the specific measures required for MATS compliance, and the rules and guidance developed for implementation of more stringent National Ambient Air Quality Standards, the Utilities may be required to incur material capital expenditures and other compliance costs, but such amounts are not determinable at this time. Additionally, the combined effects of these regulatory initiatives may result in a decision to retire or deactivate certain generating units earlier than anticipated.

Hawaiian Electric, Hawaii Electric Light and Maui Electric, like other utilities, periodically experience petroleum or other chemical releases into the environment associated with current operations and report and take action on these releases when and as required by applicable law and regulations. The Utilities believe the costs of responding to such releases identified to date will not have a material adverse effect, individually or in the aggregate, on Hawaiian Electric’s consolidated results of operations, financial condition or liquidity.

Potential Clean Air Act Enforcement. On July 1, 2013, Hawaii Electric Light and Maui Electric received a letter from the U.S. Department of Justice (DOJ) asserting potential violations of the Prevention of Significant Deterioration (PSD) and Title V requirements of the Clean Air Act involving the Hill and Kahului Power Plants. The EPA referred the matter to the DOJ for enforcement based on Hawaii Electric Light’s and Maui Electric’s responses to information requests in 2010 and 2012. The letter expresses an interest in resolving the matter without the issuance of a notice of violation. The parties had preliminary discussions in February 2014, and plan to continue working toward resolving the matter. Hawaii Electric Light and Maui Electric cannot currently estimate the amount or effect of a settlement, if any.

Former Molokai Electric Company generation site. In 1989, Maui Electric acquired by merger Molokai Electric Company. Molokai Electric Company had sold its former generation site (Site) in 1983, but continued to operate at the Site under a lease until 1985. The EPA has since performed Brownfield assessments of the Site that identified environmental impacts in the subsurface. Although Maui Electric never operated at the Site and operations there had stopped four years before the merger, in discussions with the EPA and the DOH, Maui Electric agreed to undertake additional investigations at the Site and an adjacent parcel that Molokai Electric Company had used for equipment storage (the Adjacent Parcel) to determine the extent of impacts of subsurface contaminants. A 2011 assessment by a Maui Electric contractor of the Adjacent Parcel identified environmental impacts, including elevated polychlorinated biphenyls (PCBs) in the subsurface soils. In cooperation with the DOH and EPA, Maui Electric is further investigating the Site and the Adjacent Parcel to determine the extent of impacts of PCBs, fuel oils, and other subsurface contaminants. In March 2012, Maui Electric accrued an additional $3.1 million (reserve balance of $3.6 million as of March 31, 2014) for the additional investigation and estimated cleanup costs at the Site and the Adjacent Parcel; however, final costs of remediation will depend on the results of continued investigation. Maui Electric received DOH and EPA comments on a draft site investigation plan for site characterization in the fourth quarter of 2013. Management concluded that these comments did not require a change to the reserve balance. Maui Electric provided written responses to the agencies’ comments in March 2014, and is currently awaiting approval of those responses by both agencies prior to revising the draft site investigation plan accordingly.

Global climate change and greenhouse gas emissions reduction. National and international concern about climate change and the contribution of greenhouse gas (GHG) emissions (including carbon dioxide emissions from the combustion of fossil fuels) to climate change have led to action by the State and to federal legislative and regulatory proposals to reduce GHG emissions.

In July 2007, Act 234, which requires a statewide reduction of GHG emissions by January 1, 2020 to levels at or below the statewide GHG emission levels in 1990, became law in Hawaii. The Utilities participated in a Task Force established under Act 234, which was charged with developing a work plan and regulatory approach to reduce GHG emissions, as well as in initiatives aimed at reducing their GHG emissions, such as those being implemented under the Energy Agreement. On October 19, 2012, the DOH posted the proposed regulations required by Act 234 for public hearing and comment. In general, the proposed regulations would require affected sources that have the potential to emit GHGs in excess of established thresholds to reduce GHG emissions by 25% below 2010 emission levels by 2020. The proposed regulations also assess affected sources an annual fee based on tons per year of GHG emissions, beginning with emissions in calendar year 2012. The proposed DOH GHG rule also tracks the federal “Prevention of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule” (GHG Tailoring Rule, see below) and would create new thresholds for GHG emissions from new and existing stationary source facilities. Hawaiian Electric submitted comments on the proposed regulations in January 2013. In October 2013, the DOH announced that it intends to issue a final rule that would change the required emission reduction from 25% to 16% and delay the accrual of GHG emissions fees until after the rule is promulgated, among other changes, but the final rule has not yet been formally approved or released. Hawaiian Electric continues to monitor this rulemaking proceeding and will participate in the further development of the regulations.

Several approaches (e.g., “cap and trade”) to GHG emission reduction have been either introduced or discussed in the U.S. Congress; however, no federal legislation has yet been enacted.

On September 22, 2009, the EPA issued its Final Mandatory Reporting of Greenhouse Gases Rule, which requires that sources emitting GHGs above certain threshold levels monitor and report GHG emissions. The Utilities have submitted the required reports for 2010 through 2013 to the EPA. In December 2009, the EPA made the finding that motor vehicle GHG emissions endanger public health or welfare. Since then, the EPA has also issued rules that begin to address GHG emissions from stationary sources, like the Utilities’ EGUs.

In June 2010, the EPA issued its GHG Tailoring Rule. Effective January 2, 2011, under the Prevention of Significant Deterioration program, permitting of new or modified stationary sources that have the potential to emit GHGs in greater quantities than the thresholds in the GHG Tailoring Rule will entail GHG emissions evaluation, analysis and, potentially, control requirements. On January 8, 2014, the EPA published in the Federal Register its new proposal for New Source Performance Standards for GHG from new generating units. This proposed rule on GHG from new EGUs does not apply to oil-fired combustion turbines or diesel engine generators, and is not otherwise expected to have significant impacts on the Utilities. President Obama also directed the EPA Administrator to issue proposed standards, regulations, or guidelines for GHG emissions from existing, modified and reconstructed power plants by no later than June 1, 2014, and final standards no later than June 1, 2015. Hawaiian Electric will participate in the federal GHG rulemaking process. The Utilities will continue to evaluate the impact of proposed GHG rules and regulations as they develop. Final regulations may impose significant compliance costs, and may require reductions in fossil fuel use and the addition of renewable energy resources in excess of the requirements of the RPS law.

While the timing, extent and ultimate effects of climate change cannot be determined with any certainty, climate change is predicted to result in sea level rise, which could potentially impact coastal and other low-lying areas (where much of the Utilities’ electric infrastructure is sited), and could cause erosion of beaches, saltwater intrusion into aquifers and surface ecosystems, higher water tables and increased flooding and storm damage due to heavy rainfall. The effects of climate change on the weather (for example, floods or hurricanes), sea levels, and water availability and quality have the potential to materially adversely affect the results of operations, financial condition and liquidity of the Utilities. For example, severe weather could cause significant harm to the Utilities’ physical facilities.

The Utilities have taken, and continue to identify opportunities to take, direct action to reduce GHG emissions from their operations, including, but not limited to, supporting DSM programs that foster energy efficiency, using renewable resources for energy production and purchasing power from IPPs generated by renewable resources, burning renewable biodiesel in Hawaiian Electric’s CIP CT-1, using biodiesel for startup and shutdown of selected Maui Electric generating units, and testing biofuel blends in other Hawaiian Electric and Maui Electric generating units. The Utilities are also working with the State of Hawaii and other entities to pursue the use of liquefied natural gas as a cleaner and lower cost fuel to replace, at least in part, the petroleum oil that would otherwise be used. Management is unable to evaluate the ultimate impact on the Utilities’ operations of eventual comprehensive GHG regulation. However, management believes that the various initiatives it is undertaking will provide a sound basis for managing the Utilities’ carbon footprint and meeting GHG reduction goals that will ultimately emerge.

Asset retirement obligations. Asset retirement obligations (AROs) represent legal obligations associated with the retirement of certain tangible long-lived assets, are measured as the present value of the projected costs for the future retirement of specific assets and are recognized in the period in which the liability is incurred if a reasonable estimate of fair value can be made. The Utilities' recognition of AROs have no impact on their earnings. The cost of the AROs is recovered over the life of the asset through depreciation. AROs recognized by the Utilities relate to obligations to retire plant and equipment, including removal of asbestos and other hazardous materials.

Changes to the ARO liability included in “Other liabilities” on Hawaiian Electric’s balance sheet were as follows:



	Three months ended March 31
(in thousands)	2014			2013
Balance, beginning of period	$	43,106		$	48,431
Accretion expense	370			124
Liabilities incurred	—			—
Liabilities settled	(2,240		)	(642		)
Revisions in estimated cash flows	—			—
Balance, end of period	$	41,236		$	47,913

Decoupling. In 2010, the PUC issued an order approving decoupling, which was implemented by Hawaiian Electric on March 1, 2011, by Hawaii Electric Light on April 9, 2012 and by Maui Electric on May 4, 2012. Decoupling is a regulatory model that is intended to facilitate meeting the State of Hawaii’s goals to transition to a clean energy economy and achieve an aggressive renewable portfolio standard. The decoupling model implemented in Hawaii delinks revenues from sales and includes annual revenue adjustments for certain O&M expenses and rate base changes. The decoupling mechanism has three components: (1) a sales decoupling component via a revenue balancing account (RBA), (2) a revenue escalation component via a revenue adjustment mechanism (RAM) and (3) an earnings sharing mechanism, which would provide for a reduction of revenues between rate cases in the event the utility exceeds the ROACE allowed in its most recent rate case. Decoupling provides for more timely cost recovery and earning on investments. The implementation of decoupling has resulted in an improvement in the Utilities’ under-earning situation that has existed over the last several years. Prior to and during the transition to decoupling, however, the Utilities’ returns have been below PUC-allowed returns.

On May 31, 2013, as provided for in its original order issued in 2010 approving decoupling and citing three years of implementation experience for Hawaiian Electric, the PUC opened an investigative docket to review whether the decoupling mechanisms are functioning as intended, are fair to the Utilities and their ratepayers, and are in the public interest. The PUC affirmed its support for the continuation of the sales decoupling (RBA) mechanism and stated its interest in evaluating the RAM to ensure it provides the appropriate balance of risks, costs, incentives and performance requirements, as well as administrative efficiency, and whether the current interest rate applied to the outstanding RBA balance is reasonable. The Utilities and the Consumer Advocate are named as parties to this proceeding and filed a joint statement of position that any material changes to the current decoupling mechanism should be made prospectively after 2016, unless the Utilities and the Consumer Advocate mutually agree to the change in this proceeding. The PUC granted several parties’ motions to intervene. In October 2013, the PUC issued orders that bifurcated the proceeding (Schedule A and Schedule B) and identified issues and procedural schedules for both Schedules. The schedule B part of the proceeding is intended to take place over a longer period, with panel hearings scheduled for August 2014.

Schedule A issues include:


•	for the RBA, the reasonableness of the interest rate related to the carrying charge of the outstanding RBA balance and whether there should be a risk sharing adjustment to the RBA;


•	for the RAM, whether it is reasonable to true up all actual prior year baseline projects, which are those capital projects less than $2.5 million, at year end or implement alternative methods to calculate the RAM rate base;


•	whether a risk sharing mechanism should be incorporated into the RBA;


•	whether performance metrics should be determined and reported; and


•	whether other factors should be considered if potential changes to existing RBA and RAM provisions are required.

Schedule B issues include:


•	whether performance metrics and incentives (rewards or penalties) should be implemented to control costs and encourage the Utilities to make necessary or appropriate changes to strategic and action plans;


•	whether the allocation of risk as a result of the decoupling mechanism is fairly reflected in the cost of capital allowed in rates;


•	changes or alternatives to the existing RAM; and


•	changes to ratemaking procedures to improve efficiency and/or effectiveness.

Oral arguments on Schedule A issues were held in January 2014. On February 7, 2014, the PUC issued a D&O on the Schedule A issues, which made certain modifications to the decoupling mechanism. Specifically, the D&O requires:


•	An adjustment to the Rate Base RAM Adjustment to include 90% of the amount of the current RAM Period Rate Base RAM Adjustment that exceeds the Rate Base RAM Adjustment from the prior year, to be effective with the Utilities’ 2014 decoupling filing.


•	Effective March 1, 2014, the interest rate to be applied on the outstanding RBA balances to be the short term debt rate used in each Utilities last rate case (ranging from 1.25% to 3.25%), instead of the 6% that had been previously approved.

The D&O requires the Utilities to immediately investigate the possibility of deferring the payment of income taxes on the accrued amounts of decoupling revenue, and to report the results with recommendations to the PUC within 120 days. The PUC reserves the right to determine in the next decoupling and rate case filings whether each Utilities’ allowed income taxes should be adjusted for this change.

As required, the Utilities developed websites to present certain Schedule A performance metrics and proposed additional performance metrics, which are all currently being reviewed by the PUC and the parties and, after PUC approval, will be available to the public. The Utilities also updated the PUC on their progress in investigating the tax treatment of the revenues included in the RBA balances and provided information to the PUC concerning the application to the IRS for an accounting methods change. On April 28, 2014, the Utilities received approval for this change from the IRS, effective January 1, 2014. HEI expects to execute a consent agreement with the IRS and will include the effects of this change in its estimated income tax payments for 2014. This change will reduce the amount of interest to be accrued on the RBA balance as proposed by the Consumer Advocate (see "Recent tax developments" above).

The Schedule A issues on whether it is reasonable to automatically include all actual prior year capital expenditures on baseline projects in the Rate Base RAM and whether a risk sharing mechanism should be incorporated into the RBA, particularly with respect to the PUC’s concerns regarding maintaining and enhancing the Utilities' incentives to control costs and appropriately allocating risk and compensation for risk, will be addressed in the Schedule B proceedings.

Management cannot predict the outcome of the proceedings or the ultimate impact of the proceedings on the results of operation of the Utilities.

April 2014 regulatory orders. In April 2014, the PUC issued four orders that collectively address certain key policy, resource planning and operational issues for the Utilities. The four orders are as follows:

Integrated Resource Planning. The PUC did not accept the Utilities’ Integrated Resource Plan and Action Plans submission, and, in lieu of an approved plan, has commenced other initiatives to enable resource planning. The PUC also terminated the Utilities' integrated resource planning (IRP) cycle, including the filing of a mid-cycle evaluation report, and formally concluded the IRP advisory group. The PUC directed each of Hawaiian Electric and Maui Electric to file within 120 days its respective Power Supply Improvement Plans (PSIPs). The PSIPs will be reviewed by the PUC in a new docket. The PUC also directed the Utilities to file within 90 days a Demand Response Portfolio Plan. The PUC also provided its inclinations on the future of Hawaii’s electric utilities in an exhibit to the order. The exhibit provides the PUC’s perspectives on the vision, business strategies and regulatory policy changes required to align the Utilities' business model with customers’ interests and the state’s public policy goals.

Reliability Standards Working Group. The PUC ordered the Utilities (and in some cases the Kauai Island Utility Cooperative (KIUC)) to take timely actions intended to lower energy costs, improve system reliability and address emerging challenges to integrate additional renewable energy. In addition to the PSIPs mentioned above, the PUC ordered certain filing requirements which include the following:


•	Distributed Generation Interconnection Plan to be filed within 120 days.


•	Plan to implement an on-going distribution circuit monitoring program to measure real-time voltage and other power quality parameters to be filed within 60 days. The plan shall achieve full implementation of the distribution circuit monitoring program within 180 days.


•	Action Plan for improving efficiencies in the interconnection requirements studies to be filed within 30 days. The Utilities are to file monthly reports providing details about interconnection requirements studies.


•	Proposal to implement an integrated interconnection queue for each distribution circuit for each island grid to be filed within 120 days.

The PUC also stated it would be opening new dockets to address (1) reliability standards, (2) the technical, economic and policy issues associated with distributed energy resources and (3) the Hawaii electricity reliability administrator, which is a third party position which the legislature has authorized the PUC to create by contract to provide support for the PUC in developing and periodically updating local grid reliability standards and procedures and interconnection requirements and overseeing grid access and operation.

Policy Statement and Order Regarding Demand Response Programs. The PUC provided guidance concerning the objectives and goals for demand response programs, and ordered the Utilities to develop within 90 days an integrated Demand Response Portfolio Plan that will enhance system operations and reduce costs to customers.

Maui Electric Company 2012 Test Year Rate Case. The PUC acknowledged the extensive analyses provided by Maui Electric in its System Improvement and Curtailment Reduction Plan filed in September 2013. The PUC stated that it is encouraged by the changes in Maui Electric’s operations that have led to a significant reduction in the curtailment of renewables, but stated that Maui Electric has not set forth a clearly defined path that addresses integration and curtailment of additional renewables. The PUC directed Maui Electric to present a PSIP within 120 days to address present and future system operations so as to not only reduce curtailment, but to optimize the operation of its system for its customers’ benefit.

Collectively, these orders confirm the energy policy and operational priorities that will guide the Utilities' strategies and plans going forward.

Consolidating financial information. Hawaiian Electric is not required to provide separate financial statements or other disclosures concerning Hawaii Electric Light and Maui Electric to holders of the 2004 Debentures issued by Hawaii Electric Light and Maui Electric to HECO Capital Trust III (Trust III) since all of their voting capital stock is owned, and their obligations with respect to these securities have been fully and unconditionally guaranteed, on a subordinated basis, by Hawaiian Electric. Consolidating information is provided below for Hawaiian Electric and each of its subsidiaries for the periods ended and as of the dates indicated.

Hawaiian Electric also unconditionally guarantees Hawaii Electric Light’s and Maui Electric’s obligations (a) to the State of Hawaii for the repayment of principal and interest on Special Purpose Revenue Bonds issued for the benefit of Hawaii Electric Light and Maui Electric, (b) under their respective private placement note agreements and the Hawaii Electric Light notes and Maui Electric notes issued thereunder and (c) relating to the trust preferred securities of Trust III. Hawaiian Electric is also obligated, after the satisfaction of its obligations on its own preferred stock, to make dividend, redemption and liquidation payments on Hawaii Electric Light’s and Maui Electric’s preferred stock if the respective subsidiary is unable to make such payments.

Hawaiian Electric Company, Inc. and Subsidiaries

Consolidating Statement of Income (unaudited)

Three months ended March 31, 2014



(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments		Hawaiian Electric Consolidated
Revenues	$	512,455		104,931		102,693		—	(17	)	$	720,062
Expenses
Fuel oil	203,547			31,500		51,253		—	—		286,300
Purchased power	123,969			29,491		11,456		—	—		164,916
Other operation and maintenance	58,515			14,047		16,044		—	—		88,606
Depreciation	27,301			8,975		5,327		—	—		41,603
Taxes, other than income taxes	48,184			9,763		10,024		—	—		67,971
Total expenses	461,516			93,776		94,104		—	—		649,396
Operating income	50,939			11,155		8,589		—	(17	)	70,666
Allowance for equity funds used during construction	1,472			65		72		—	—		1,609
Equity in earnings of subsidiaries	8,917			—		—		—	(8,917	)	—
Interest expense and other charges, net	(10,487		)	(2,748	)	(2,505	)	—	17		(15,723		)
Allowance for borrowed funds used during construction	559			25		30		—	—		614
Income before income taxes	51,400			8,497		6,186		—	(8,917	)	57,166
Income taxes	15,710			3,202		2,335		—	—		21,247
Net income	35,690			5,295		3,851		—	(8,917	)	35,919
Preferred stock dividends of subsidiaries	—			134		95		—	—		229
Net income attributable to Hawaiian Electric	35,690			5,161		3,756		—	(8,917	)	35,690
Preferred stock dividends of Hawaiian Electric	270			—		—		—	—		270
Net income for common stock	$	35,420		5,161		3,756		—	(8,917	)	$	35,420

Hawaiian Electric Company, Inc. and Subsidiaries

Consolidating Statement of Comprehensive Income (Loss) (unaudited)

Three months ended March 31, 2014



(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments		Hawaiian Electric Consolidated
Net income for common stock	$	35,420		5,161		3,756		—	(8,917	)	$	35,420
Other comprehensive income (loss), net of taxes:
Retirement benefit plans:
Less: amortization of transition obligation, prior service credit and net losses recognized during the period in net periodic benefit cost, net of tax benefits	2,519			344		253		—	(597	)	2,519
Less: reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of taxes	(2,510		)	(344	)	(253	)	—	597		(2,510		)
Other comprehensive income, net of taxes	9			—		—		—	—		9
Comprehensive income attributable to common shareholder	$	35,429		5,161		3,756		—	(8,917	)	$	35,429

Hawaiian Electric Company, Inc. and Subsidiaries

Consolidating Statement of Income (unaudited)

Three months ended March 31, 2013



(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments		Hawaiian Electric Consolidated
Revenues	$	507,058		106,012		104,399		—	(28	)	$	717,441
Expenses
Fuel oil	221,967			32,936		50,197		—	—		305,100
Purchased power	111,155			30,122		12,087		—	—		153,364
Other operation and maintenance	72,418			14,888		14,507		—	—		101,813
Depreciation	24,707			8,547		5,026		—	—		38,280
Taxes, other than income taxes	48,144			9,691		9,928		—	—		67,763
Total expenses	478,391			96,184		91,745		—	—		666,320
Operating income	28,667			9,828		12,654		—	(28	)	51,121
Allowance for equity funds used during construction	983			138		94		—	—		1,215
Equity in earnings of subsidiaries	10,985			—		—		—	(10,985	)	—
Interest expense and other charges, net	(9,590		)	(2,855	)	(2,102	)	—	28		(14,519		)
Allowance for borrowed funds used during construction	568			92		70		—	—		730
Income before income taxes	31,613			7,203		10,716		—	(10,985	)	38,547
Income taxes	6,914			2,649		4,056		—	—		13,619
Net income	24,699			4,554		6,660		—	(10,985	)	24,928
Preferred stock dividends of subsidiaries	—			134		95		—	—		229
Net income attributable to Hawaiian Electric	24,699			4,420		6,565		—	(10,985	)	24,699
Preferred stock dividends of Hawaiian Electric	270			—		—		—	—		270
Net income for common stock	$	24,429		4,420		6,565		—	(10,985	)	$	24,429

Hawaiian Electric Company, Inc. and Subsidiaries

Consolidating Statement of Comprehensive Income (Loss) (unaudited)

Three months ended March 31, 2013



(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments		Hawaiian Electric Consolidated
Net income for common stock	$	24,429		4,420		6,565		—	(10,985	)	$	24,429
Other comprehensive income (loss), net of taxes:
Retirement benefit plans:
Less: amortization of transition obligation, prior service credit and net losses recognized during the period in net periodic benefit cost, net of tax benefits	5,331			759		657		—	(1,416	)	5,331
Less: reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of taxes	(5,313		)	(761	)	(656	)	—	1,417		(5,313		)
Other comprehensive income (loss), net of taxes	18			(2	)	1		—	1		18
Comprehensive income attributable to common shareholder	$	24,447		4,418		6,566		—	(10,984	)	$	24,447

Hawaiian Electric Company, Inc. and Subsidiaries

Consolidating Balance Sheet (unaudited)

March 31, 2014



(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consoli- dating adjustments		Hawaiian Electric Consolidated
Assets
Property, plant and equipment
Utility property, plant and equipment
Land	$	43,367		5,462		3,016		—	—		$	51,845
Plant and equipment	3,606,787			1,141,789		1,014,323		—	—		5,762,899
Less accumulated depreciation	(1,234,520		)	(459,712	)	(440,228	)	—	—		(2,134,460		)
Construction in progress	127,187			9,657		11,758		—	—		148,602
Utility property, plant and equipment, net	2,542,821			697,196		588,869		—	—		3,828,886
Nonutility property, plant and equipment, less accumulated depreciation	4,953			82		1,531		—	—		6,566
Total property, plant and equipment, net	2,547,774			697,278		590,400		—	—		3,835,452
Investment in wholly owned subsidiaries, at equity	526,020			—		—		—	(526,020	)	—
Current assets
Cash and cash equivalents	12,952			2,442		1,864		101	—		17,359
Advances to affiliates	19,500			100		—		—	(19,600	)	—
Customer accounts receivable, net	114,517			26,004		23,495		—	—		164,016
Accrued unbilled revenues, net	96,721			17,330		17,813		—	—		131,864
Other accounts receivable, net	19,007			4,320		2,840		—	(9,477	)	16,690
Fuel oil stock, at average cost	134,673			13,012		20,662		—	—		168,347
Materials and supplies, at average cost	37,707			7,270		15,112		—	—		60,089
Prepayments and other	17,931			2,707		12,958		—	(1,297	)	32,299
Regulatory assets	62,643			6,958		7,854		—	—		77,455
Total current assets	515,651			80,143		102,598		101	(30,374	)	668,119
Other long-term assets
Regulatory assets	378,608			64,379		59,521		—	—		502,508
Unamortized debt expense	6,195			1,533		1,396		—	—		9,124
Other	42,110			11,351		13,925		—	—		67,386
Total other long-term assets	426,913			77,263		74,842		—	—		579,018
Total assets	$	4,016,358		854,684		767,840		101	(556,394	)	$	5,082,589
Capitalization and liabilities
Capitalization
Common stock equity	$	1,606,283		277,022		248,897		101	(526,020	)	$	1,606,283
Cumulative preferred stock—not subject to mandatory redemption	22,293			7,000		5,000		—	—		34,293
Long-term debt, net	830,546			189,999		186,000		—	—		1,206,545
Total capitalization	2,459,122			474,021		439,897		101	(526,020	)	2,847,121
Current liabilities
Current portion of long-term debt	—			11,400		—		—	—		11,400
Short-term borrowings from non-affiliates	34,996			—		—		—	—		34,996
Short-term borrowings from affiliate	100			—		19,500		—	(19,600	)	—
Accounts payable	151,818			18,953		12,055		—	—		182,826
Interest and preferred dividends payable	16,400			3,882		3,826		—	(8	)	24,100
Taxes accrued	133,801			31,545		29,685		—	(1,297	)	193,734
Regulatory liabilities	1,135			—		302		—	—		1,437
Other	47,374			9,950		14,621		—	(9,469	)	62,476
Total current liabilities	385,624			75,730		79,989		—	(30,374	)	510,969
Deferred credits and other liabilities
Deferred income taxes	365,668			80,454		68,919		—	—		515,041
Regulatory liabilities	236,468			78,142		34,869		—	—		349,479
Unamortized tax credits	46,658			14,457		14,429		—	—		75,544
Defined benefit pension and other postretirement benefit plans liability	199,070			27,750		30,781			—		257,601
Other	61,762			13,985		13,067		—	—		88,814
Total deferred credits and other liabilities	909,626			214,788		162,065		—	—		1,286,479
Contributions in aid of construction	261,986			90,145		85,889		—	—		438,020
Total capitalization and liabilities	$	4,016,358		854,684		767,840		101	(556,394	)	$	5,082,589

Hawaiian Electric Company, Inc. and Subsidiaries

Consolidating Balance Sheet (unaudited)

December 31, 2013



(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consoli- dating adjustments		Hawaiian Electric Consolidated
Assets
Property, plant and equipment
Utility property, plant and equipment
Land	$	43,407		5,460		3,016		—	—		$	51,883
Plant and equipment	3,558,569			1,136,923		1,006,383		—	—		5,701,875
Less accumulated depreciation	(1,222,129		)	(453,721	)	(435,379	)	—	—		(2,111,229		)
Construction in progress	124,494			7,709		11,030		—	—		143,233
Utility property, plant and equipment, net	2,504,341			696,371		585,050		—	—		3,785,762
Nonutility property, plant and equipment, less accumulated depreciation	4,953			82		1,532		—	—		6,567
Total property, plant and equipment, net	2,509,294			696,453		586,582		—	—		3,792,329
Investment in wholly owned subsidiaries, at equity	523,674			—		—		—	(523,674	)	—
Current assets
Cash and cash equivalents	61,245			1,326		153		101	—		62,825
Advances to affiliates	6,839			1,000		—		—	(7,839	)	—
Customer accounts receivable, net	121,282			28,088		26,078		—	—		175,448
Accrued unbilled revenues, net	107,752			17,100		19,272		—	—		144,124
Other accounts receivable, net	16,373			4,265		2,451		—	(9,027	)	14,062
Fuel oil stock, at average cost	99,613			14,178		20,296		—	—		134,087
Materials and supplies, at average cost	37,377			6,883		14,784		—	—		59,044
Prepayments and other	29,798			8,334		16,140		—	(1,415	)	52,857
Regulatory assets	54,979			6,931		7,828		—	—		69,738
Total current assets	535,258			88,105		107,002		101	(18,281	)	712,185
Other long-term assets
Regulatory assets	381,346			64,552		60,288		—	—		506,186
Unamortized debt expense	6,051			1,580		1,372		—	—		9,003
Other	42,163			11,270		13,993		—	—		67,426
Total other long-term assets	429,560			77,402		75,653		—	—		582,615
Total assets	$	3,997,786		861,960		769,237		101	(541,955	)	$	5,087,129
Capitalization and liabilities
Capitalization
Common stock equity	$	1,593,564		274,802		248,771		101	(523,674	)	$	1,593,564
Cumulative preferred stock—not subject to mandatory redemption	22,293			7,000		5,000		—	—		34,293
Long-term debt, net	830,547			189,998		186,000		—	—		1,206,545
Total capitalization	2,446,404			471,800		439,771		101	(523,674	)	2,834,402
Current liabilities
Current portion of long-term debt	—			11,400		—		—	—		11,400
Short-term borrowings from affiliate	1,000			—		6,839		—	(7,839	)	—
Accounts payable	145,062			24,383		20,114		—	—		189,559
Interest and preferred dividends payable	15,190			3,885		2,585		—	(8	)	21,652
Taxes accrued	175,790			37,899		37,171		—	(1,415	)	249,445
Regulatory liabilities	1,705			—		211		—	—		1,916
Other	48,443			9,033		15,424		—	(9,019	)	63,881
Total current liabilities	387,190			86,600		82,344		—	(18,281	)	537,853
Deferred credits and other liabilities
Deferred income taxes	359,621			79,947		67,593		—	—		507,161
Regulatory liabilities	235,786			76,475		35,122		—	—		347,383
Unamortized tax credits	44,931			14,245		14,363		—	—		73,539
Defined benefit pension and other postretirement benefit plans liability	202,396			28,427		31,339		—	—		262,162
Other	63,374			14,703		13,658		—	—		91,735
Total deferred credits and other liabilities	906,108			213,797		162,075		—	—		1,281,980
Contributions in aid of construction	258,084			89,763		85,047		—	—		432,894
Total capitalization and liabilities	$	3,997,786		861,960		769,237		101	(541,955	)	$	5,087,129

Hawaiian Electric Company, Inc. and Subsidiaries

Consolidating Statement of Changes in Common Stock Equity (unaudited)

Three months ended March 31, 2014



(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments		Hawaiian Electric Consolidated
Balance, December 31, 2013	$	1,593,564		274,802		248,771		101	(523,674	)	$	1,593,564
Net income for common stock	35,420			5,161		3,756		—	(8,917	)	35,420
Other comprehensive income, net of taxes	9			—		—		—	—		9
Common stock dividends	(22,707		)	(2,941	)	(3,629	)	—	6,570		(22,707		)
Common stock issuance expenses	(3		)	—		(1	)	—	1		(3		)
Balance, March 31, 2014	$	1,606,283		277,022		248,897		101	(526,020	)	$	1,606,283

Hawaiian Electric Company, Inc. and Subsidiaries

Consolidating Statement of Changes in Common Stock Equity (unaudited)

Three months ended March 31, 2013



(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments		Hawaiian Electric Consolidated
Balance, December 31, 2012	$	1,472,136		268,908		228,927		104	(497,939	)	$	1,472,136
Net income for common stock	24,429			4,420		6,565		—	(10,985	)	24,429
Other comprehensive income (loss), net of taxes	18			(2	)	1		—	1		18
Common stock dividends	(20,070		)	(3,610	)	(3,442	)	—	7,052		(20,070		)
Balance, March 31, 2013	$	1,476,513		269,716		232,051		104	(501,871	)	$	1,476,513

Hawaiian Electric Company, Inc. and Subsidiaries

Consolidating Statement of Cash Flows (unaudited)

Three months ended March 31, 2014



(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments		Hawaiian Electric Consolidated
Cash flows from operating activities
Net income	$	35,690		5,295		3,851		—	(8,917	)	$	35,919
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Equity in earnings of subsidiaries	(8,942		)	—		—		—	8,917		(25		)
Common stock dividends received from subsidiaries	6,595			—		—		—	(6,570	)	25
Depreciation of property, plant and equipment	27,301			8,975		5,327		—	—		41,603
Other amortization	235			501		885		—	—		1,621
Increase in deferred income taxes	17,123			862		2,359		—	—		20,344
Change in tax credits, net	1,741			217		74		—	—		2,032
Allowance for equity funds used during construction	(1,472		)	(65	)	(72	)	—	—		(1,609		)
Change in cash overdraft	—			—		(1,038	)	—	—		(1,038		)
Changes in assets and liabilities:
Decrease in accounts receivable	4,131			2,029		2,194		—	450		8,804
Decrease (increase) in accrued unbilled revenues	11,031			(230	)	1,459		—	—		12,260
Decrease (increase) in fuel oil stock	(35,060		)	1,166		(366	)	—	—		(34,260		)
Increase in materials and supplies	(330		)	(387	)	(328	)	—	—		(1,045		)
Increase in regulatory assets	(8,188		)	(881	)	(189	)	—	—		(9,258		)
Decrease in accounts payable	(837		)	(6,032	)	(9,155	)	—	—		(16,024		)
Decrease in prepaid and accrued income and utility revenue taxes	(39,581		)	(2,791	)	(5,154	)	—	—		(47,526		)
Decrease in defined benefit pension and other postretirement benefit plans liability	(103		)	—		(102	)	—	—		(205		)
Change in other assets and liabilities	(10,874		)	1,041		(698	)	—	(450	)	(10,981		)
Net cash provided by (used in) operating activities	(1,540		)	9,700		(953	)	—	(6,570	)	637
Cash flows from investing activities
Capital expenditures	(49,432		)	(7,530	)	(7,500	)	—	—		(64,462		)
Contributions in aid of construction	4,541			1,121		1,296		—	—		6,958
Advances from (to) affiliates	(12,661		)	900		—		—	11,761		—
Net cash used in investing activities	(57,552		)	(5,509	)	(6,204	)	—	11,761		(57,504		)
Cash flows from financing activities
Common stock dividends	(22,707		)	(2,941	)	(3,629	)	—	6,570		(22,707		)
Preferred stock dividends of Hawaiian Electric and subsidiaries	(270		)	(134	)	(95	)	—	—		(499		)
Net increase in short-term borrowings from non-affiliates and affiliate with original maturities of three months or less	34,096			—		12,661		—	(11,761	)	34,996
Other	(320		)	—		(69	)	—	—		(389		)
Net cash provided by (used in) financing activities	10,799			(3,075	)	8,868		—	(5,191	)	11,401
Net increase (decrease) in cash and cash equivalents	(48,293		)	1,116		1,711		—	—		(45,466		)
Cash and cash equivalents, beginning of period	61,245			1,326		153		101	—		62,825
Cash and cash equivalents, end of period	$	12,952		2,442		1,864		101	—		$	17,359

Hawaiian Electric Company, Inc. and Subsidiaries

Consolidating Statement of Cash Flows (unaudited)

Three months ended March 31, 2013



(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments		Hawaiian Electric Consolidated
Cash flows from operating activities
Net income	$	24,699		4,554		6,660		—	(10,985	)	$	24,928
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in earnings of subsidiaries	(11,010		)	—		—		—	10,985		(25		)
Common stock dividends received from subsidiaries	7,052			—		—		—	(7,052	)	—
Depreciation of property, plant and equipment	24,707			8,547		5,026		—	—		38,280
Other amortization	(8		)	358		607		—	—		957
Increase in deferred income taxes	13,572			2,755		1,648		—	—		17,975
Change in tax credits, net	1,299			(17	)	100		—	—		1,382
Allowance for equity funds used during construction	(983		)	(138	)	(94	)	—	—		(1,215		)
Changes in assets and liabilities:
Decrease (increase) in accounts receivable	34,652			(13	)	3,495		—	569		38,703
Decrease (increase) in accrued unbilled revenues	(1,707		)	(2,091	)	2,481		—	—		(1,317		)
Decrease (increase) in fuel oil stock	(30,155		)	2,056		(1,173	)	—	—		(29,272		)
Increase in materials and supplies	(1,853		)	(614	)	(878	)	—	—		(3,345		)
Increase in regulatory assets	(13,071		)	(2,464	)	(2,211	)	—	—		(17,746		)
Increase (decrease) in accounts payable	44,887			(903	)	(5,050	)	—	—		38,934
Change in prepaid and accrued income and utility revenue taxes	(41,093		)	(8,078	)	(4,495	)	—	—		(53,666		)
Increase (decrease) in defined benefit pension and other postretirement benefit plans liability	—			(57	)	10		—	—		(47		)
Change in other assets and liabilities	(4,413		)	2,464		1,493		—	(569	)	(1,025		)
Net cash provided by operating activities	46,575			6,359		7,619		—	(7,052	)	53,501
Cash flows from investing activities
Capital expenditures	(47,709		)	(10,118	)	(10,088	)	—	—		(67,915		)
Contributions in aid of construction	7,816			3,432		462		—	—		11,710
Advances from (to) affiliates	(3,600		)	1,400		—		—	2,200		—
Net cash used in investing activities	(43,493		)	(5,286	)	(9,626	)	—	2,200		(56,205		)
Cash flows from financing activities
Common stock dividends	(20,070		)	(3,610	)	(3,442	)	—	7,052		(20,070		)
Preferred stock dividends of Hawaiian Electric and subsidiaries	(270		)	(134	)	(95	)	—	—		(499		)
Net increase in short-term borrowings from non-affiliates and affiliate with original maturities of three months or less	41,652			—		3,600		—	(2,200	)	43,052
Other	2			—		—		—	—		2
Net cash provided by (used in) financing activities	21,314			(3,744	)	63		—	4,852		22,485
Net increase (decrease) in cash and cash equivalents	24,396			(2,671	)	(1,944	)	—	—		19,781
Cash and cash equivalents, beginning of period	8,265			5,441		3,349		104	—		17,159
Cash and cash equivalents, end of period	$	32,661		2,770		1,405		104	—		$	36,940