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Electric utility segment | 3 Months Ended
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Mar. 31, 2016
Electric utility subsidiary [Abstract] |
Electric utility segment | Electric utility segment Revenue taxes. The Utilities’ 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). The Utilities included in the three months ended March 31, 2016 and 2015 approximately $43 million and $51 million, respectively, of revenue taxes in “revenues” and in “taxes, other than income taxes” expense. Recent tax developments. On December 18, 2015, Congress passed, and President Obama signed into law, the “Protecting Americans from Tax Hikes (PATH) Act of 2015” and the “Consolidating Appropriations Act, 2016,” providing government funding and a number of significant tax changes. The provision with the greatest impact on the Company is the extension of bonus depreciation. The PATH Act retroactively extended 50% bonus depreciation for qualified property acquired and placed in service in 2015 and continues 50% bonus depreciation through 2017. The bonus depreciation percentage decreases to 40% in 2018 and 30% in 2019 and terminates thereafter. The extension of bonus depreciation is expected to result in an increase in 2015 tax depreciation of approximately $117 million, primarily attributable to the Utilities. The PATH Act also made the research credit permanent, providing a 20% credit on the amount that the cost of qualified research expenditures for the tax year exceeds an amount based on prior expenditures. Additionally, the “Consolidating Appropriations Act, 2016” extended a variety of energy-related credits that were expired or soon to expire. These credits include the production credit for wind facilities and the 30% investment credit for qualified solar energy property, with various phase-out dates through 2021. Unconsolidated variable interest entities. HECO Capital Trust III. 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 sheets as of March 31, 2016 and December 31, 2015 each consisted of $51.5 million of 2004 Debentures; $50.0 million of 2004 Trust Preferred Securities; and $1.5 million of trust common securities. Trust III’s income statements for the three months ended March 31, 2016 and 2015 each 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. As 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, 2016, the Utilities had five PPAs for firm capacity and other PPAs with smaller IPPs and Schedule Q providers (i.e., customers with cogeneration and/or small power production facilities with a capacity of 100 kilowatts or less who buy power from or sell power to the Utilities), none of which are currently required to be consolidated as VIEs. Purchases from all IPPs were as follows:
|  | Three months ended March 31
(in millions) |  | 2016 |  | 2015
AES Hawaii |  | $ | 38 |  |  | $ | 34 |
Kalaeloa |  | 29 |  |  | 44 |
HEP |  | 11 |  |  | 11 |
Hpower |  | 16 |  |  | 16 |
Puna Geothermal Venture |  | 7 |  |  | 7 |
Hawaiian Commercial & Sugar (HC&S) |  | — |  |  | 2 |
Other IPPs |  | 15 |  |  | 22 |
Total IPPs |  | $ | 116 |  |  | $ | 136 |
In October 2015 the amended PPA between Maui Electric and HC&S became effective following PUC approval in September 2015. The amended PPA amends the pricing structure and rates for energy sold to Maui Electric, eliminates the capacity payment to HC&S, eliminates Maui Electric’s minimum purchase obligation, provides that Maui Electric may request up to 4 MW of scheduled energy during certain months, and be provided up to 16 MW of emergency power, and extends the term of the PPA from 2014 to 2017. In 2016 HC&S requested to terminate the PPA in January of 2017, approximately 1 year early due to HC&S ceasing sugar operations. 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 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 2015, 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 additives cost component 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. Hawaiian Electric and Kalaeloa are in negotiations to address the upcoming end of the PPA term ending on May 23, 2016. The PPA will automatically extend on a month-to-month basis as long as the parties are still negotiating in good faith. The month-to-month term extensions shall end 60 days after either party notifies the other in writing that negotiations have terminated. 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. The energy payments paid by Hawaiian Electric will fluctuate as fuel prices change, however, 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, 2016, Hawaiian Electric’s accounts payable to Kalaeloa amounted to $8 million. AES Hawaii, Inc. In March 1988, Hawaiian Electric entered into a PPA with AES Barbers Point, Inc. (now known as AES Hawaii, Inc.), which, as amended (through Amendment No. 2) and approved by the PUC, provided that Hawaiian Electric would purchase 180 MW of firm capacity for a period of 30 years beginning in September 1992. In November 2015, Hawaiian Electric entered into an Amendment No. 3, for which PUC approval has been requested. If approved by the PUC, Amendment No. 3 would increase the firm capacity from 180 MW to a maximum of 189 MW. The payments that Hawaiian Electric makes to AES Hawaii for energy associated with the first 180 MW of firm capacity include a fuel component, a variable O&M component and a fixed O&M component, all of which are subject to adjustment based on changes in the Gross National Product Implicit Price Deflator. If Amendment No. 3 is approved by the PUC, payments for energy associated with firm capacity in excess of 180 MW will not include any O&M component or be subject to adjustment based on changes in the Gross National Product Implicit Price Delflator. The capacity payments that Hawaiian Electric makes to AES Hawaii are fixed in accordance with the PPA and, if approved by the PUC, Amendment No. 3. Pursuant to the current accounting standards for VIEs, Hawaiian Electric is deemed to have a variable interest in AES Hawaii by reason of the provisions of Hawaiian Electric’s PPA with AES Hawaii. However, management has concluded that Hawaiian Electric is not the primary beneficiary of AES Hawaii because Hawaiian Electric does not have the power to control the most significant activities of AES Hawaii that impact AES Hawaii’s economic performance, including operations and maintenance of AES Hawaii’s facility. Thus, Hawaiian Electric has not consolidated AES Hawaii in its consolidated financial statements. As of March 31, 2016, Hawaiian Electric’s accounts payable to AES Hawaii amounted to $13 million. Commitments and contingencies. Fuel contracts. The Utilities have contractual agreements to purchase minimum quantities of fuel oil, diesel fuel and biodiesel for multi-year periods, some through October 2017. Fossil fuel prices are tied to the market prices of crude oil and petroleum products in the Far East and U.S. West Coast and the biodiesel price is tied to the market prices of animal fat feedstocks in the U.S. West Coast and U.S. Midwest. Hawaiian Electric and Chevron Products Company (Chevron), a division of Chevron USA, Inc., are parties to the Low Sulfur Fuel Oil Supply Contract (LSFO Contract) for the purchase/sale of low sulfur fuel oil (LSFO), which terminates on December 31, 2016 and may automatically renew for annual terms thereafter unless earlier terminated by either party. The PUC approved the recovery of costs incurred under this contract on April 30, 2013. On August 27, 2014, Chevron and Hawaiian Electric entered into a first amendment of the LSFO Contract. The amendment reduces the price of fuel above certain volumes, allows for increases in the volume of fuel, and modifies the specification of certain petroleum products supplied under the contract. In addition, Chevron agreed to supply a blend of LSFO and diesel as soon as January 2016 (for supply through the end of the contract term, December 31, 2016) to help Hawaiian Electric meet more stringent EPA air emission requirements known as Mercury and Air Toxics Standards. In March 2015, the amendment was approved by the PUC. The Utilities are also parties to amended contracts for the supply of industrial fuel oil and diesel fuels with Chevron and Hawaii Independent Energy, LLC, (HIE), respectively, which were scheduled to end December 31, 2015, but have been extended through December 31, 2016. Both agreements may be automatically renewed for annual terms thereafter unless earlier terminated by either of the respective parties. In August 2014, Chevron and the Utilities entered into a third amendment to the Inter-Island Industrial Fuel Oil and Diesel Fuel Supply Contract (Inter-island Fuel Supply Contract), which amendment extended the term of the contract through December 31, 2016 and provided for automatic renewal for annual terms thereafter unless earlier terminated by either party. In February 2015, Hawaiian Electric executed a similar extension, through December 31, 2016, of the corresponding Inter-Island Industrial Fuel Oil and Diesel Fuel Supply Contract with HIE. In June 2015, the Utilities issued Requests for Proposals (RFP) for most of their fuel needs with supplies beginning in 2017 after the expiration of Chevron LSFO and Chevron/HIE Interisland contracts on December 31, 2016. Proposals were received in July 2015. On February 18, 2016, Hawaiian Electric and Chevron entered into a fuel supply contract for LSFO, diesel and fuel to meet MATS requirements (2016 LSFO Contract) for the island of Oahu which terminates on December 31, 2019 and may automatically renew for annual terms thereafter unless earlier terminated by either party. Also on February 18, 2016, the Utilities and Chevron entered into a supply contract for industrial fuel oil, diesel and ultra-low sulfur diesel (Petroleum Fuels Contract) for the islands of Oahu, Maui, Molokai and the island of Hawaii , which terminates on December 31, 2019 and may automatically renew for annual terms thereafter unless earlier terminated by either party. Finally, on February 18, 2016, Hawaii Electric Light and Chevron entered into a fuels terminalling agreement which terminates on December 31, 2019 for the island of Hawaii and may automatically renew for annual terms thereafter unless earlier terminated by either party. Currently, terminalling services are provided for under the Inter-island Fuel Supply Contract with Chevron that expires on December 31, 2016. Each of these contracts are for a term of three years and become effective upon PUC approval, which approval has been requested by an application filed in February 2016, and each contract can be terminated if PUC approval is not received by October 1, 2016. Additionally, Chevron is required to comply with the agreed upon fuel specifications as set forth in the 2016 LSFO Contract and the Petroleum Fuels Contract. The energy charge for energy purchased from Kalaeloa Partners, L.P. (Kalaeloa) under Hawaiian Electric’s PPA with Kalaeloa is based, in part, on the price Kalaeloa pays HIE for LSFO under a Facility Fuel Supply Contract (fuel contract) between them (assigned to HIE upon its purchase of the assets of Tesoro Hawaii Corp. as described above). The term of the fuel contract between Kalaeloa and HIE ends May 31, 2016 and may be extended for terms thereafter unless terminated by one of the parties. The costs incurred under the Utilities’ fuel contracts are included in their respective ECACs, to the extent such costs are not recovered through the Utilities’ base rates. AES Hawaii, Inc. Under a PPA entered into in March 1988, as amended, for a period of 30 years beginning September 1992, Hawaiian Electric agreed to purchase 180 MW of firm capacity from AES Hawaii. In August 2012, Hawaiian Electric filed an application with the PUC seeking an exemption from the PUC’s Competitive Bidding Framework to negotiate an amendment to the PPA to purchase 186 MW of firm capacity, and amend the energy pricing formula in the PPA. The PUC approved the exemption in April 2013, but Hawaiian Electric and AES Hawaii were not able to reach agreement on an amendment. In June 2015, AES Hawaii filed an arbitration demand regarding a dispute about whether Hawaiian Electric was obligated to buy up to 9 MW of additional capacity based on a 1992 letter. Hawaiian Electric responded to the arbitration demand and, in October 2015, AES Hawaii and Hawaiian Electric entered into a Settlement Agreement to stay the arbitration proceeding. The Settlement Agreement includes certain conditions precedent which, if satisfied, will release the parties from the claims under the arbitration proceeding. Among the conditions precedent is the successful negotiation of an amendment to the existing purchase power agreement and PUC approval of such amendment. On November 13, 2015, Hawaiian Electric entered into Amendment No. 3 to the AES Hawaii PPA, subject to PUC approval. Amendment No. 3 provides more favorable pricing for the additional 9 MW than the existing pricing, the benefit of which will be passed on to customers, and among other things, provides (1) for an increase in firm capacity of up to 9 MW (the Additional Capacity) above the 180 MW capacity of the AES Hawaii facility, subject to a demonstration of such increased available capacity, (2) for the payment for the Additional Capacity to include a Priority Peak Capacity Charge, a Non-Peak Capacity Charge, a Priority Peak Energy Charge and a Non-Peak Energy Charge and (3) that AES will make certain operational commitments to improve reliability, and Hawaiian Electric will pay a reliability bonus according to a schedule for reduced Full Plant Trips. On January 22, 2016, Amendment No. 3 was filed with the PUC for approval. If such approval is obtained, the final condition to the Settlement Agreement’s release of the parties from the arbitration claims will be satisfied. The arbitration proceeding has been stayed to allow the PUC approval proceeding to proceed. Liquefied natural gas. On May 31, 2015, the previous August 2014 agreement with FortisBC Energy Inc. (Fortis) for liquefaction capacity for liquefied natural gas (LNG) was superseded with a liquefaction Heads of Agreement by and between FortisBC Holdings Inc. and Hawaiian Electric. The agreement, which is subject to PUC approval, other regulatory approvals and permits and other conditions precedent before it becomes effective, provides for LNG liquefaction capacity purchases of 700,000 tonnes per year for the first five years, 600,000 tonnes per year for the next five years and 500,000 tonnes per year for the last ten years. Fortis must also obtain regulatory and other approvals for the agreement to become effective. The Fortis agreement is assignable and can be assigned to the selected bidder in the Utilities’ RFP for the supply of containerized LNG and will help ensure that liquefaction capacity is available at pricing that management believes will lower customer bills. Utility projects. Many public utility projects require PUC approval and various permits from other governmental agencies. Difficulties in obtaining, or the inability to obtain, the necessary approvals or permits can result in significantly increased project costs or even cancellation of projects. In the event a project does not proceed, or if it becomes probable the PUC will disallow cost recovery for all or part of a project, project costs may need to be written off in amounts that could result in significant reductions in Hawaiian Electric’s consolidated net income. Renewable energy project matters. In February 2012, the PUC granted Hawaiian Electric’s request for deferred accounting treatment for the inter-island project support costs. The amount of the deferred costs was limited to $5.89 million. Through December 31, 2013, Hawaiian Electric deferred $3.1 million related to outside contractor service costs incurred with the Oahu 200 MW RFP, and began amortizing such costs over 3 years beginning in July 2014. In May 2012, the PUC instituted a proceeding for a competitive bidding process for up to 50 MW of firm renewable geothermal dispatchable energy (Geothermal RFP) on the island of Hawaii, and in July 2012, Hawaii Electric Light filed an application to defer 2012 costs related to the Geothermal RFP. In November 2015, the PUC approved the deferral of $2.1 million of costs related to the Geothermal RFP, and will review the prudency and reasonableness of the deferred costs in the next Hawaii Electric Light rate case. In February 2013, Hawaii Electric Light issued the Final Geothermal RFP. Six bids were received, but Hawaii Electric Light notified bidders that none of the submitted bids sufficiently met both the low-cost and technical requirements of the Geothermal RFP. In October 2014, Hawaii Electric Light issued Addendum No. 1 (Best and Final Offer) and Attachment A (Best and Final Offer Bidder's Response Package) directly to five eligible bidders. The submittals received in January 2015 were considered for final selection of one project to proceed with PPA negotiations. In February 2015, Ormat Technologies, Inc. was selected for an award and began PPA negotiations with Hawaii Electric Light. In February 2016, Hawaii Electric Light provided the PUC with a status update notifying the PUC that the selected bidder had determined the proposed project not to be economically and financially viable, resulting in conclusion of PPA negotiations. On March 8, 2016, the Independent Observer issued a report on the results of the negotiation phase of the Geothermal RFP. Enterprise Resource Planning/Enterprise Asset Management (ERP/EAM) Implementation Project. The Utilities submitted its Enterprise Information System Roadmap to the PUC in June 2014 and refiled an application for an ERP/EAM implementation project in July 2014 with an estimated cost of $82.4 million. The refiled application addressed the concerns raised by the PUC, about the initial application, regarding the benefits to customers of completing this project. The estimated cost of the project included the cost of ERP software that had been purchased and recorded as a deferred cost. To address the Consumer Advocate’s position that the proceeding should be stayed to determine if the project as proposed in the application is reasonable and necessary for future operations as an indirect NEE subsidiary, in May 2015, the Utilities filed a report describing the impact the pending merger with NEE would have on the scope, costs and benefits of the ERP/EAM project. The report indicated that the two viable courses of action for replacing its current system are Option A (to proceed with the project as initially scoped in the Application), and Option B (to move the Utilities to NEE’s existing ERP/EAM solutions). Option B is estimated to cost approximately $20.8 million less than Option A, but can only be pursued if the merger is approved. The Utilities requested the PUC to approve the commencement of work on Option B if the merger is approved; and in the alternative, Option A if the merger is not approved. In October 2015, the PUC issued a D&O (1) finding that there is a need to replace the existing ERP/EAM system, (2) denying the Utilities request to defer the costs for the ERP software purchased in 2012 and (3) deferring any ruling on whether it is reasonable and in the public interest for the Utilities to commence with the project under Options B or A. As a result, the Utilities expensed the ERP software costs of $4.8 million in the third quarter of 2015, and pursuant to the remaining procedural schedule in the docket, in April 2015: (1) the Utilities filed additional information on the cost and benefits of the project, (2) the Consumer Advocate filed comments on that additional information and (3) the Utilities filed a reply to the Consumer Advocate’s comments. There are no steps remaining in the procedural schedule, and the Utilities are awaiting the issuance of a final D&O. Schofield Generating Station Project. In August 2012, the PUC approved a waiver from the competitive bidding framework to allow Hawaiian Electric to negotiate with the U.S. Army for the construction of a 50 MW utility owned and operated firm, renewable and dispatchable generation facility at Schofield Barracks. In September 2015, the PUC approved Hawaiian Electric’s application to expend $167 million for the project. In approving the project, the PUC placed a cost cap of $167 million for the project, stated 90% of the cap is allowed for cost recovery through cost recovery mechanisms other than base rates, and stated the $167 million cap will be adjusted downward due to any reduction in the cost of the engine contract due to a reduction in the foreign exchange rate. Hawaiian Electric was required to take all necessary steps to lock in the lowest possible exchange rate. On January 5, 2016, Hawaiian Electric executed a window forward agreement which lowered the cost of the engine contract by $9.7 million, resulting in a revised project cost cap of $157.3 million. The generating station is now expected to be placed in service in the first quarter of 2018. 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 and Clean Water Act (CWA), have increased significantly and management anticipates that such activity will continue. Clean Water Act Section 316(b). On August 14, 2014, the EPA published in the Federal Register the final 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 regulations were effective October 14, 2014 and apply to the cooling water systems for the steam generating units at Hawaiian Electric’s power plants on the island of Oahu. The regulations prescribe a process, including a number of required site-specific studies, for states to develop facility-specific entrainment and impingement controls to be incorporated in each facility’s National Pollutant Discharge Elimination System permit. In the case of Hawaiian Electric’s power plants, there are a number of studies that have yet to be completed before Hawaiian Electric and the State of Hawaii Department of Health (DOH) can determine what entrainment or impingement controls, if any, might be necessary at the affected facilities to comply with the new 316(b) rule. Mercury Air Toxics Standards. On February 16, 2012, EPA published the final rule establishing the National Emission Standards for Hazardous Air Pollutants for fossil-fuel fired steam electrical generating units (EGUs) in the Federal Register. 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. Hawaiian Electric received a one-year extension to comply by April 16, 2016. Hawaiian Electric initially selected a MATS compliance strategy based on switching to lower emission fuels, but has since continued developing and refining its emission control strategy. Hawaiian Electric’s liquid oil-fired steam generating units that are subject to the MATS limits may be able to comply with the new standards without a significant fuel switch in combination with a suite of operational changes. On April 16, 2012, Hawaiian Electric submitted to the EPA a Petition for Reconsideration and Stay (Petition) that asked the EPA to revise an emissions standard for non-continental oil-fired EGUs on the grounds that the promulgated standard was incorrectly derived. On April 21, 2015, the EPA denied Hawaiian Electric's Petition and Hawaiian Electric subsequently filed a lawsuit on June 29, 2015 appealing EPA’s denial. On April 4, 2016, the D.C. Circuit Court of Appeals granted Hawaiian Electric’s uncontested motion to dismiss the case. Hawaiian Electric believes it can comply with the MATS standards due to the operational changes it has made to reduce emissions. 1-Hour Sulfur Dioxide National Ambient Air Quality Standard. On August 1, 2015, the EPA published the Data Requirements Rule for the 2010 1-Hour Sulfur Dioxide (SO 2) Primary National Ambient Air Quality Standard (NAAQS). Hawaiian Electric is working with the DOH to gather data EPA requires through the installation and operation of two new 1-hour SO 2 air quality monitoring stations on the island of Oahu. This data will be integrated into the DOH’s statewide monitoring network and will assist the State’s development of its strategy to maintain the NAAQS and comply with the new 1-Hour SO 2 Rule in its State Implementation Plan. Recent Settlements. Hawaiian Electric resolved outstanding claims raised by the U.S. Fish and Wildlife Service (USFWS) and the Hawaii Department of Land and Natural Resources, Division of Forestry and Wildlife (DOFAW) in March 2016. The USFWS and DOFAW had alleged that Hawaiian Electric violated the Endangered Species Act of 1973 in April of 2011, by clearing vegetation and impacting the habitat for Achatinella mustelina, an endangered Hawaiian tree snail, while servicing its facilities on Mt. Kaala on Oahu. In the respective final settlements resolving the governments’ claims, Hawaiian Electric did not admit any liability, but paid a penalty of $250 to the U.S. Fish and Wildlife Service, and provided $200,000 to the Division of Forestry and Wildlife to rebuild an aging predator-proof snail enclosure in the Pahole Natural Area Reserve. Potential Clean Air Act Enforcement. On July 1, 2013, Hawaii Electric Light and Maui Electric (the Utilities) received a letter from the U.S. Department of Justice (DOJ) alleging potential violations of the Prevention of Significant Deterioration and Title V requirements of the Clean Air Act involving the Hill and Kahului Power Plants. In correspondence dated November 4, 2014, the DOJ also identified potential violations by Hawaiian Electric at its Kahe facility and proposed resolving the identified, potential violations by entering into a consent decree pursuant to which the Utilities would install certain pollution controls and pay a penalty. The Utilities continue to negotiate with the DOJ to resolve these issues, but are unable to estimate the amount or effect of a consent decree, if any, at this time. 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 identified environmental impacts in the subsurface soil at the Site. Although Maui Electric never operated at the Site or owned the Site property, after 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 environmental contamination. 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, residual fuel oils and other subsurface contaminants. Maui Electric has a reserve balance of $3.6 million as of March 31, 2016 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. Pearl Harbor sediment study. In July 2014, the U.S. Navy notified Hawaiian Electric of the Navy’s determination that Hawaiian Electric is a Potentially Responsible Party responsible for cleanup of PCB contamination in sediment in the area offshore of the Waiau Power Plant as part of the Pearl Harbor Superfund Site. The Navy has also requested that Hawaiian Electric reimburse the costs incurred by the Navy to date to investigate the area. The Navy has completed a remedial investigation and a feasibility study (FS) for the remediation of contaminated sediment at several locations in Pearl Harbor and issued its Final FS Report on June 29, 2015. On February 2, 2016, the Navy released the Proposed Plan for Pearl Harbor Sediment Remediation and Hawaiian Electric submitted comments. The extent of the contamination, the appropriate remedial measures to address it and Hawaiian Electric’s potential responsibility for any associated costs have not been determined. On March 23, 2015, Hawaiian Electric received a letter from the EPA requesting that Hawaiian Electric submit a work plan to assess potential sources and extent of PCB contamination onshore at the Waiau Power Plant. Hawaiian Electric submitted a sampling and analysis (SAP) work plan to the EPA and the DOH. Sampling of outfall sediments at the Waiau Power Plant was completed in accordance with the SAP in December 2015. The extent of the onshore contamination, the appropriate remedial measures to address it and any associated costs have not yet been determined. As of March 31, 2016, the reserve account recorded by Hawaiian Electric to address the PCB contamination stands at $4.3 million. The reserve represents the probable and reasonably estimable cost to complete the onshore and offshore investigations and the remediation of PCB contamination in the offshore sediment. The final remediation costs will depend on the results of the onshore investigation and assessment of potential source control requirements, as well as the further investigation of contaminated sediment offshore from the Waiau Power Plant. Global climate change and greenhouse gas emissions reduction. National and international concerns 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 federal legislative and regulatory proposals and action by the State of Hawaii to reduce GHG emissions. In July 2007, the State Legislature passed 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. On June 20, 2014, the Governor signed the final regulations required to implement Act 234 (i.e., the final GHG rule), which went into effect on June 30, 2014. In general, Act 234 and the corresponding GHG rule require affected sources (that have the potential to emit GHGs in excess of established thresholds) to reduce their GHG emissions by 16% below 2010 emission levels by 2020. In accordance with the GHG rule, the Utilities submitted their Emissions Reduction Plan (EmRP) to the DOH on June 30, 2015, demonstrating how they will comply. The Utilities have committed to a 16% reduction in GHG emissions company-wide. Pursuant to the State’s GHG rule, the DOH will incorporate the proposed facility-specific GHG emission limits into each facility’s covered source permit based on the 2020 levels specified in Hawaiian Electric’s approved EmRP. The GHG rule also requires affected sources to pay an annual fee that is based on tons per year of GHG emissions starting on the effective date of the regulations. The fee for the Utilities is estimated to be approximately $0.5 million annually. The latest assessment of the proposed federal and final state GHG rules is that the continued growth in renewable power generation will significantly reduce the compliance costs and risk for the Utilities. As part of a negotiated amendment to the Power Purchase Agreement between Hawaiian Electric and AES Hawaii (AES), Hawaiian Electric will include the AES facility on Oahu as a partner in the Utilities’ EmRP. Similarly, with the proposed acquisition of the Hamakua Energy Partners (HEP) facility by Hawaii Electric Light, the GHG emissions from the HEP facility will be addressed in the Utilities’ EmRP. Both the AES PPA amendment and the HEP acquisition are subject to PUC approval so the inclusion of these facilities in the Utilities’ EmRP is also subject to PUC approval. On September 22, 2009, the EPA issued its “Final Mandatory Reporting of Greenhouse Gases Rule,” which requires certain sources that emit GHGs to report their GHG emissions. Following these requirements, the Utilities have submitted the required reports for 2010 through 2015 to the EPA. The EPA issued the final federal rule for GHG emission reductions from existing EGUs, also known as the Clean Power Plan, on August 3, 2015. The Clean Power Plan set interim state-wide emissions limits for EGUs operating in the 48 contiguous states that must be met on average from 2022 through 2029; final limits will apply from 2030. The final Clean Power Plan did not set forth guidelines for Alaska, Hawaii, Puerto Rico or Guam, therefore Hawaiian Electric is not currently subject to this Rule. The Utilities have taken, and continue to identify opportunities to take, direct action to reduce GHG emissions from their operations, including 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 Campbell Industrial Park combustion turbine No. 1 (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 LNG 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 more comprehensive GHG regulations that might be promulgated; however, the various initiatives that the Utilities are pursuing are likely to provide a sound basis for appropriately managing the Utilities’ carbon footprint and thereby meet both state and federal GHG reduction goals. 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. This effect could potentially result in impacts to coastal and other low-lying areas (where much of the Utilities’ electric infrastructure is sited), and result in increased flooding and storm damage due to heavy rainfall, increased rates of beach erosion, saltwater intrusion into freshwater aquifers and terrestrial ecosystems, and higher water tables in low-lying areas. The effects of climate change on the weather (for example, more intense or more frequent rain events, flooding, or hurricanes), sea levels, and freshwater 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. 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. Hawaiian Electric has recorded estimated AROs related to removing retired generating units at its Honolulu and Waiau power plants. These removal projects are ongoing, with activity and expenditures occurring in partial settlement of these liabilities. Both removal projects are expected to continue through 2016. 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) |  | 2016 |  | 2015
Balance, beginning of period |  | $ | 26,848 |  |  | $ | 29,419 |
Accretion expense |  | 3 |  |  | 6 |
Liabilities incurred |  | — |  |  | — |
Liabilities settled |  | (138 | ) |  | (1,614 | )
Revisions in estimated cash flows |  | — |  |  | — |
Balance, end of period |  | $ | 26,713 |  |  | $ | 27,811 |
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 rate adjustments for certain other operation and maintenance (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 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 return on average common equity (ROACE) allowed in its most recent rate case. Decoupling provides for more timely cost recovery and earning on investments. 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. In October 2013, the PUC issued orders that bifurcated the proceeding (into Schedule A and Schedule B issues). On February 7, 2014, the PUC issued a decision and order (D&O) on the Schedule A issues, which made certain modifications to the decoupling mechanism. Specifically, the D&O required:
• | 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.
As required, the Utilities have made available to the public, on the Utilities’ websites, performance metrics identified by the PUC. The Utilities are updating the performance metrics on a quarterly basis. On March 31, 2015, the PUC issued an Order (the March Order) related to the Schedule B portion of the proceeding to make certain further modifications to the decoupling mechanism, and to establish a briefing schedule with respect to certain issues in the proceeding. The March Order modified the RAM portion of the decoupling mechanism to be capped at the lesser of the RAM Revenue Adjustment as currently determined (adjusted to eliminate the 90% limitation on the current RAM Period Rate Base RAM adjustment that was ordered in the Schedule A portion of the proceeding) and a RAM Revenue Adjustment calculated based on the cumulative annual compounded increase in Gross Domestic Product Price Index (GDPPI) applied to the 2014 annualized target revenues (adjusted for certain items specified in the Order). The 2014 annualized target revenues represent the target revenues from the last rate case, and RAM revenues, offset by earnings sharing credits, if any, allowed under the decoupling mechanism through the 2014 decoupling filing. The Utilities may apply to the PUC for approval of recovery of revenues for Major Projects (including related baseline projects grouped together for consideration as Major Projects) through the RAM above the RAM cap or outside of the RAM through the Renewable Energy Infrastructure Program (REIP) surcharge or other adjustment mechanism. The RAM was amended on an interim basis pending the outcome of the PUC’s review of the Utilities’ Power Supply Improvement Plans. The triennial rate case cycle required under the decoupling mechanism continues to serve as the maximum period between the filing of general rate cases, and the amendments to the RAM do not limit or dilute the ordinary opportunities for the Utilities to seek rate relief according to conventional/traditional ratemaking procedures. In making the modifications to the RAM Adjustment, the PUC stated the changes are designed to provide the PUC with control of and prior regulatory review over substantial additions to baseline projects between rate cases. The modifications do not deprive the Utilities of the opportunity to recover any prudently incurred expenditure or limit orderly recovery for necessary expanded capital programs. The RBA, which is the sales decoupling component, was retained by the PUC in its March Order, and the PUC made no change in the authorized return on common equity. The PUC stated that performance-based ratemaking is not adopted at this time. As required by the March Order, the Parties filed initial and reply briefs related to the following issues: (1) whether and, if so, how the conventional performance incentive mechanisms proposed in this proceeding should be refined and implemented in this docket; (2) what are the appropriate steps, processes and timing for determining measures to improve the efficiency and effectiveness of the general rate case filing and review process; and (3) what are the appropriate steps, processes and timing to further consider the merits of the proposed changes to the ECAC identified in this proceeding. In identifying the issue on possible changes to the ECAC, the PUC stated that changes to the ECAC should be made with great care to avoid unintended consequences. In accordance with the March Order, the Utilities and the Consumer Advocate filed on June 15, 2015, their Joint Proposed Modified REIP Framework/Standards and Guidelines regarding the eligibility of projects for cost recovery above the RAM Cap through the REIP surcharge. On the same date, the Utilities filed their proposed standards and guidelines on the eligibility of projects for cost recovery through the RAM above the RAM Cap. On June 30, 2015, the Consumer Advocate filed comments on this proposal, and the County of Hawaii filed comments on both the REIP and the RAM above the RAM Cap proposals. On October 26, 2015, Hawaiian Electric filed an application to recover the revenue requirements associated with 2015 net plant additions in the amount of $40.3 million (later reduced to $35.7 million) and other associated costs for its Underground Cable Program and the 138kV Transmission and 46kV Sub-Transmission Structures Major Baseline Projects through the RAM above the 2015 RAM Cap. On October 30, 2015, Maui Electric filed an application to recover the revenue requirements associated with 2015 net plant additions in the amount of $4.3 million and other associated costs for its transmission and distribution and generation plant reliability Major Baseline Project through the RAM above the 2015 RAM Cap. In November 2015, the Consumer Advocate filed preliminary statements of position (PSOPs) on these two applications, recommending that the PUC reject the applications. In December 2015, the Utilities filed responses to the Consumer Advocate’s PSOPs, pointing out that the PUC had already authorized the filing of such applications for recovery of capital costs above the RAM Cap and requesting that the PUC proceed with review of the applications. In March 2016, Maui Electric withdrew its October 30, 2015 application. Maui Electric determined that the application is unnecessary because it could recover the revenue requirements associated with its 2015 net plant additions under the RAM Cap due to: (1) the extension of bonus depreciation in 2015 which resulted in an increased level of accumulated deferred income taxes as an offset to 2015 net plant additions; and (2) the recorded amount of net plant additions in 2015 was less than the estimate of net plant additions in the application. In April 2016, Hawaiian Electric reduced its 2015 net plant additions in its October 26, 2015 application for the same reason as Maui Electric regarding the extension of bonus depreciation in 2015. Annual decoupling filings. On March 31, 2016, the Utilities submitted to the PUC their annual decoupling filings for tariffed rates that will be effective from June 1, 2016 through May 31, 2017. The net annual incremental amounts to be collected (refunded) were comprised as follows:
($ in millions) |  | Hawaiian Electric |  | Hawaii Electric Light |  | Maui Electric
2016 Annual incremental RAM adjusted revenues |  | $ | 11.0 |  |  | $ | 2.9 |  |  | $ | 2.4 |
Annual change in accrued earnings sharing credits |  | $ | — |  |  | $ | — |  |  | $ | 0.5 |
Annual change in accrued RBA balance as of December 31, 2015 (and associated revenue taxes) (refunded) |  | $ | (13.6 | ) |  | $ | (2.5 | ) |  | $ | (4.3 | )
Net annual incremental amount to be collected (refunded) under the tariffs |  | $ | (2.6 | ) |  | $ | 0.4 |  |  | $ | (1.4 | )
Impact on typical residential customer monthly bill (in dollars) * |  | $ | 0.01 |  |  | $ | 0.41 |  |  | $ | (0.95 | )
* Based on a 500 kilowatthour (KWH) bill for Hawaiian Electric, Maui Electric and Hawaii Electric Light. The bill impact for Lanai and Molokai customers is a decrease of $0.76, based on a 400 KWH bill. Although Hawaiian Electric’s net annual incremental amount is a refund, the typical residential customer monthly bill will increase $0.01 due to lower anticipated KWH sales. Potential impact of lava flows. In June 2014, lava from the Kilauea Volcano on the island of Hawaii began flowing toward the town of Pahoa. Hawaii Electric Light monitored utility property and equipment near the affected areas and protected that property and equipment to the extent possible (e.g., building barriers around poles). In March 2015 Hawaii Electric Light filed an application with the PUC requesting approval to defer costs incurred to monitor, prepare for, respond to, and take other actions necessary in connection with the June 2014 Kilauea lava flow such that Hawaii Electric Light can request PUC approval to recover those costs in a future rate case. The Consumer Advocate objected to the request. A PUC decision is pending. 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 directed each of Hawaiian Electric and Maui Electric to file within 120 days its respective Power Supply Improvement Plans (PSIPs), and the PSIPs were filed in August 2014. 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) 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 - the Utilities’ Plan was filed in August 2014.
• | Plan to implement an on-going distribution circuit monitoring program to measure real-time voltage and other power quality parameters - the Utilities’ Plan was filed in June 2014.
• | Action Plan for improving efficiencies in the interconnection requirements studies - the Utilities’ Plan was filed in May 2014.
• | The Utilities are to file monthly reports providing details about interconnection requirements studies.
• | Integrated interconnection queue for each distribution circuit for each island grid - the Utilities’ integrated interconnection queue plan was filed in August 2014 and the integrated interconnection queues were implemented in January 2015.
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 (see “Distributed Energy Resources (DER) Investigative Proceeding” below) 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 an integrated Demand Response Portfolio Plan that will enhance system operations and reduce costs to customers. The Utilities’ Plan was filed in July 2014. Subsequently, the Utilities submitted status updates and an update and supplemental report to the Plan. On July 28, 2015, the PUC issued an order appointing a special advisor to guide, monitor and review the Utility’s Plan design and implementation. On December 30, 2015, the Utilities filed applications with the PUC (1) for approval of their proposed DR Portfolio Tariff Structure, Reporting Schedule and Cost Recovery of Program Costs through the Demand-Side Management (DSM) Surcharge, and (2) for approval to defer and recover certain computer software and software development costs for a Demand Response Management System (DRMS) through the Renewable Energy Infrastructure Program (REIP) Surcharge. 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 (SICRP) 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 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. The Maui Electric PSIP was filed in August 2014, and is currently being reviewed by the PUC in a new docket along with the Hawaiian Electric and Hawaii Electric Light PSIPs. Maui Electric filed its second annual SICRP status update in September 2015. Review of PSIPs. Collectively, the PUC’s April 2014 resource planning orders confirm the energy policy and operational priorities that will guide the Utilities’ strategies and plans going forward. PSIPs for Hawaiian Electric, Maui Electric and Hawaii Electric Light were filed in August 2014. The PSIPs each include a tactical plan to transform how electric utility services will be offered to meet customer needs and produce higher levels of renewable energy. Each plan contains a diversified mix of technologies, including significant distributed and utility‑scale renewable resources, that is expected to result, on a consolidated basis, in over 65% of the Utilities’ energy being produced from renewable resources by 2030. Under these plans, the Utilities will support sustainable growth of rooftop solar, expand use of energy storage systems, empower customers by developing smart grids, offer new products and services to customers (e.g., community solar, microgrids and voluntary “demand response” programs), switch from high-priced oil to lower cost liquefied natural gas, retire higher-cost, less efficient existing oil-based steam generators and lower full service residential customer bills in real dollars. In November 2015, the PUC issued an order in the proceeding to review the PSIPs filed. The order provided observations and concerns on the PSIPs submitted. In November 2015, as required by the order, the Utilities submitted a Proposed Revision Plan, which included a schedule and a work plan to supplement, amend and update the PSIPs in order to address the PUC’s observations and concerns, including an Interim PSIP Update filing in February 2016 and updated PSIPs by April 1, 2016. The parties and participants filed comments on the Utilities Proposed Revision Plan in January 2016. The PUC is expected to provide further guidance regarding the substance and course of the proceeding. In February 2016, the Utilities filed their PSIP Update Interim Status Report with the PUC, which discusses the status of the Utilities’ ongoing planning and analysis for a diverse mix of energy resources to meet the state’s 100% RPS goal by 2045. The updated PSIPs were filed on April 1, 2016. Distributed Energy Resources (DER) Investigative Proceeding. In March 2015, the PUC issued an order to address DER issues. On June 29, 2015, the Utilities submitted their final Statement of Position in the DER proceeding, which included:
(1) | new pricing provisions for future rooftop photovoltaic (PV) systems,
(2) | technical standards for advanced inverters,
(3) | new options for customers including battery-equipped rooftop PV systems,
(4) | a pilot time-of-use rate,
(5) | an improved method of calculating the amount of rooftop PV that can be safely installed, and
(6) | a streamlined and standardized PV application process.
On October 12, 2015, the PUC issued a D&O establishing DER reforms that: (1) promote rapid adoption of the next generation of solar PV and other distributed energy technologies; (2) encourage more competitive pricing of distributed energy resource systems; (3) lower overall energy supply costs for all customers; and (4) help to manage DER in terms of each island’s limited grid capacity. The D&O approved a customer self-supply tariff and a customer grid supply tariff to govern customer generators connected to the Utilities’ systems. These tariffs replace the Net Energy Metering (NEM) program. The D&O ordered the Utilities, among other things, (a) to collaborate with inverter manufacturers to develop a test plan by December 15, 2015 for the highest priority advanced inverter functions that are not UL certified and (b) to complete the circuit-level hosting capacity analysis for all islands in the Utilities’ service territories by December 10, 2015. The DER Phase 2 of this docket began in November 2015 and focused on further developing competitive markets for distributed energy resources, including storage. On October 21, 2015, The Alliance for Solar Choice, LLC (TASC) filed a complaint in Hawaii state court seeking an order enjoining the PUC from implementing the D&O and declaring that the D&O be reversed, modified and/or remanded to the PUC for further proceedings. On January 19, 2016, the Circuit Court entered a final judgment against TASC on all of its claims. TASC has filed a notice of appeal from the final judgment. TASC also filed a second appeal of the D&O directly with the Intermediate Court of Appeals. On April 20, 2016, the Intermediate Court of Appeals approved stipulations to dismiss both appeals with prejudice. Derivative financial instrument. On January 5, 2016, Hawaiian Electric executed a window forward agreement to hedge the foreign currency risk associated with the anticipated purchase of engines from a European manufacturer to be included as part of the Schofield generating station. This window forward agreement has been designated as a cash flow hedge under which a single guaranteed exchange rate agreed upon on a certain date for future currency transactions scheduled to occur on specific dates with a “window” or range of plus/minus 30 days. Unrealized gains are recorded at fair value as assets in “other current assets,” and unrealized losses are recorded at fair value as liabilities in “other current liabilities,” both for the period they are outstanding. For this window forward agreement, the effective portion is reported as a component of accumulated other comprehensive income until reclassified into net income consistent with any gains or losses recognized on the engines. The generating station is expected to be placed in service in the first quarter of 2018.
|  | March 31, 2016 |  | December 31, 2015
(dollars in thousands) |  | Notional amount |  | Fair value |  | Notional amount |  | Fair value
Window forward contract |  | $ | 31,335 |  |  | $ | 1,640 |  |  | $ | — |  |  | $ | — |
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 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 Three months ended March 31, 2016
(in thousands) |  | Hawaiian Electric |  | Hawaii Electric Light |  | Maui Electric |  | Other subsidiaries |  | Consolidating adjustments |  | Hawaiian Electric Consolidated
Revenues |  | $ | 337,175 |  |  | 73,183 |  |  | 71,706 |  |  | — |  |  | (12 | ) |  | $ | 482,052 |
Expenses |  |  |  |  |  |  |  |  |  |  |  |
Fuel oil |  | 74,085 |  |  | 14,374 |  |  | 25,281 |  |  | — |  |  | — |  |  | 113,740 |
Purchased power |  | 91,917 |  |  | 16,797 |  |  | 7,145 |  |  | — |  |  | — |  |  | 115,859 |
Other operation and maintenance |  | 69,558 |  |  | 16,441 |  |  | 17,909 |  |  | — |  |  | — |  |  | 103,908 |
Depreciation |  | 31,522 |  |  | 9,449 |  |  | 5,810 |  |  | — |  |  | — |  |  | 46,781 |
Taxes, other than income taxes |  | 32,684 |  |  | 6,891 |  |  | 6,863 |  |  | — |  |  | — |  |  | 46,438 |
Total expenses |  | 299,766 |  |  | 63,952 |  |  | 63,008 |  |  | — |  |  | — |  |  | 426,726 |
Operating income |  | 37,409 |  |  | 9,231 |  |  | 8,698 |  |  | — |  |  | (12 | ) |  | 55,326 |
Allowance for equity funds used during construction |  | 1,406 |  |  | 127 |  |  | 206 |  |  | — |  |  | — |  |  | 1,739 |
Equity in earnings of subsidiaries |  | 7,929 |  |  | — |  |  | — |  |  | — |  |  | (7,929 | ) |  | — |
Interest expense and other charges, net |  | (11,865 | ) |  | (2,965 | ) |  | (2,490 | ) |  | — |  |  | 12 |  |  | (17,308 | )
Allowance for borrowed funds used during construction |  | 529 |  |  | 49 |  |  | 84 |  |  | — |  |  | — |  |  | 662 |
Income before income taxes |  | 35,408 |  |  | 6,442 |  |  | 6,498 |  |  | — |  |  | (7,929 | ) |  | 40,419 |
Income taxes |  | 9,771 |  |  | 2,346 |  |  | 2,436 |  |  | — |  |  | — |  |  | 14,553 |
Net income |  | 25,637 |  |  | 4,096 |  |  | 4,062 |  |  | — |  |  | (7,929 | ) |  | 25,866 |
Preferred stock dividends of subsidiaries |  | — |  |  | 134 |  |  | 95 |  |  | — |  |  | — |  |  | 229 |
Net income attributable to Hawaiian Electric |  | 25,637 |  |  | 3,962 |  |  | 3,967 |  |  | — |  |  | (7,929 | ) |  | 25,637 |
Preferred stock dividends of Hawaiian Electric |  | 270 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 270 |
Net income for common stock |  | $ | 25,367 |  |  | 3,962 |  |  | 3,967 |  |  | — |  |  | (7,929 | ) |  | $ | 25,367 |
Hawaiian Electric Company, Inc. and Subsidiaries Consolidating Statement of Comprehensive Income Three months ended March 31, 2016
(in thousands) |  | Hawaiian Electric |  | Hawaii Electric Light |  | Maui Electric |  | Other subsidiaries |  | Consolidating adjustments |  | Hawaiian Electric Consolidated
Net income for common stock |  | $ | 25,367 |  |  | 3,962 |  |  | 3,967 |  |  | — |  |  | (7,929 | ) |  | $ | 25,367 |
Other comprehensive income, net of taxes: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Derivatives qualified as cash flow hedges: |  |  |  |  |  |  |  |  |  |  |  |
Effective portion of foreign currency hedge net unrealized gain, net of taxes |  | 1,002 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 1,002 |
Retirement benefit plans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Less: amortization of prior service credit and net losses recognized during the period in net periodic benefit cost, net of tax benefits |  | 3,236 |  |  | 458 |  |  | 418 |  |  | — |  |  | (876 | ) |  | 3,236 |
Less: reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of taxes |  | (3,222 | ) |  | (458 | ) |  | (418 | ) |  | — |  |  | 876 |  |  | (3,222 | )
Other comprehensive income, net of taxes |  | 1,016 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 1,016 |
Comprehensive income attributable to common shareholder |  | $ | 26,383 |  |  | 3,962 |  |  | 3,967 |  |  | — |  |  | (7,929 | ) |  | $ | 26,383 |
Hawaiian Electric Company, Inc. and Subsidiaries Consolidating Statement of Income Three months ended March 31, 2015
(in thousands) |  | Hawaiian Electric |  | Hawaii Electric Light |  | Maui Electric |  | Other subsidiaries |  | Consolidating adjustments |  | Hawaiian Electric Consolidated
Revenues |  | $ | 399,741 |  |  | 88,055 |  |  | 85,674 |  |  | — |  |  | (28 | ) |  | $ | 573,442 |
Expenses |  |  |  |  |  |  |  |  |  |  |  |
Fuel oil |  | 118,403 |  |  | 23,385 |  |  | 35,018 |  |  | — |  |  | — |  |  | 176,806 |
Purchased power |  | 103,250 |  |  | 21,893 |  |  | 10,864 |  |  | — |  |  | — |  |  | 136,007 |
Other operation and maintenance |  | 70,084 |  |  | 16,399 |  |  | 17,519 |  |  | — |  |  | — |  |  | 104,002 |
Depreciation |  | 29,389 |  |  | 9,313 |  |  | 5,541 |  |  | — |  |  | — |  |  | 44,243 |
Taxes, other than income taxes |  | 38,201 |  |  | 8,384 |  |  | 8,163 |  |  | — |  |  | — |  |  | 54,748 |
Total expenses |  | 359,327 |  |  | 79,374 |  |  | 77,105 |  |  | — |  |  | — |  |  | 515,806 |
Operating income |  | 40,414 |  |  | 8,681 |  |  | 8,569 |  |  | — |  |  | (28 | ) |  | 57,636 |
Allowance for equity funds used during construction |  | 1,123 |  |  | 145 |  |  | 145 |  |  | — |  |  | — |  |  | 1,413 |
Equity in earnings of subsidiaries |  | 7,692 |  |  | — |  |  | — |  |  | — |  |  | (7,692 | ) |  | — |
Interest expense and other charges, net |  | (11,238 | ) |  | (2,680 | ) |  | (2,435 | ) |  | — |  |  | 28 |  |  | (16,325 | )
Allowance for borrowed funds used during construction |  | 388 |  |  | 53 |  |  | 58 |  |  | — |  |  | — |  |  | 499 |
Income before income taxes |  | 38,379 |  |  | 6,199 |  |  | 6,337 |  |  | — |  |  | (7,692 | ) |  | 43,223 |
Income taxes |  | 11,235 |  |  | 2,277 |  |  | 2,338 |  |  | — |  |  | — |  |  | 15,850 |
Net income |  | 27,144 |  |  | 3,922 |  |  | 3,999 |  |  | — |  |  | (7,692 | ) |  | 27,373 |
Preferred stock dividends of subsidiaries |  | — |  |  | 134 |  |  | 95 |  |  | — |  |  | — |  |  | 229 |
Net income attributable to Hawaiian Electric |  | 27,144 |  |  | 3,788 |  |  | 3,904 |  |  | — |  |  | (7,692 | ) |  | 27,144 |
Preferred stock dividends of Hawaiian Electric |  | 270 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 270 |
Net income for common stock |  | $ | 26,874 |  |  | 3,788 |  |  | 3,904 |  |  | — |  |  | (7,692 | ) |  | $ | 26,874 |
Hawaiian Electric Company, Inc. and Subsidiaries Consolidating Statement of Comprehensive Income Three months ended March 31, 2015
(in thousands) |  | Hawaiian Electric |  | Hawaii Electric Light |  | Maui Electric |  | Other subsidiaries |  | Consolidating adjustments |  | Hawaiian Electric Consolidated
Net income for common stock |  | $ | 26,874 |  |  | 3,788 |  |  | 3,904 |  |  | — |  |  | (7,692 | ) |  | $ | 26,874 |
Other comprehensive income, net of taxes: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Retirement benefit plans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Less: amortization of prior service credit and net losses recognized during the period in net periodic benefit cost, net of tax benefits |  | 4,933 |  |  | 651 |  |  | 600 |  |  | — |  |  | (1,251 | ) |  | 4,933 |
Less: reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of taxes |  | (4,911 | ) |  | (651 | ) |  | (600 | ) |  | — |  |  | 1,251 |  |  | (4,911 | )
Other comprehensive income, net of taxes |  | 22 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 22 |
Comprehensive income attributable to common shareholder |  | $ | 26,896 |  |  | 3,788 |  |  | 3,904 |  |  | — |  |  | (7,692 | ) |  | $ | 26,896 |
Hawaiian Electric Company, Inc. and Subsidiaries Consolidating Balance Sheet March 31, 2016
(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 |  | $ | 43,972 |  |  | 6,219 |  |  | 3,016 |  |  | — |  |  | — |  |  | $ | 53,207 |
Plant and equipment |  | 4,059,986 |  |  | 1,213,924 |  |  | 1,082,096 |  |  | — |  |  | — |  |  | 6,356,006 |
Less accumulated depreciation |  | (1,325,559 | ) |  | (490,883 | ) |  | (468,486 | ) |  | — |  |  | — |  |  | (2,284,928 | )
Construction in progress |  | 163,196 |  |  | 16,648 |  |  | 18,160 |  |  | — |  |  | — |  |  | 198,004 |
Utility property, plant and equipment, net |  | 2,941,595 |  |  | 745,908 |  |  | 634,786 |  |  | — |  |  | — |  |  | 4,322,289 |
Nonutility property, plant and equipment, less accumulated depreciation |  | 5,762 |  |  | 82 |  |  | 1,531 |  |  | — |  |  | — |  |  | 7,375 |
Total property, plant and equipment, net |  | 2,947,357 |  |  | 745,990 |  |  | 636,317 |  |  | — |  |  | — |  |  | 4,329,664 |
Investment in wholly owned subsidiaries, at equity |  | 557,885 |  |  | — |  |  | — |  |  | — |  |  | (557,885 | ) |  | — |
Current assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  | 29,307 |  |  | 12,070 |  |  | 7,564 |  |  | 101 |  |  | — |  |  | 49,042 |
Advances to affiliates |  | — |  |  | 12,500 |  |  | 7,000 |  |  | — |  |  | (19,500 | ) |  | — |
Customer accounts receivable, net |  | 69,744 |  |  | 18,399 |  |  | 15,596 |  |  | — |  |  | — |  |  | 103,739 |
Accrued unbilled revenues, net |  | 60,022 |  |  | 12,857 |  |  | 12,488 |  |  | — |  |  | — |  |  | 85,367 |
Other accounts receivable, net |  | 13,180 |  |  | 1,271 |  |  | 1,269 |  |  | — |  |  | (8,947 | ) |  | 6,773 |
Fuel oil stock, at average cost |  | 34,553 |  |  | 5,688 |  |  | 8,163 |  |  | — |  |  | — |  |  | 48,404 |
Materials and supplies, at average cost |  | 30,543 |  |  | 6,892 |  |  | 16,821 |  |  | — |  |  | — |  |  | 54,256 |
Prepayments and other |  | 18,430 |  |  | 2,223 |  |  | 2,436 |  |  | — |  |  | (1,286 | ) |  | 21,803 |
Regulatory assets |  | 80,918 |  |  | 5,563 |  |  | 2,711 |  |  | — |  |  | — |  |  | 89,192 |
Total current assets |  | 336,697 |  |  | 77,463 |  |  | 74,048 |  |  | 101 |  |  | (29,733 | ) |  | 458,576 |
Other long-term assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Regulatory assets |  | 586,873 |  |  | 112,052 |  |  | 100,291 |  |  | — |  |  | — |  |  | 799,216 |
Unamortized debt expense |  | 304 |  |  | 60 |  |  | 56 |  |  | — |  |  | — |  |  | 420 |
Other |  | 47,516 |  |  | 14,129 |  |  | 12,850 |  |  | — |  |  | — |  |  | 74,495 |
Total other long-term assets |  | 634,693 |  |  | 126,241 |  |  | 113,197 |  |  | — |  |  | — |  |  | 874,131 |
Total assets |  | $ | 4,476,632 |  |  | 949,694 |  |  | 823,562 |  |  | 101 |  |  | (587,618 | ) |  | $ | 5,662,371 |
Capitalization and liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Capitalization |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Common stock equity |  | $ | 1,731,304 |  |  | 293,358 |  |  | 264,426 |  |  | 101 |  |  | (557,885 | ) |  | $ | 1,731,304 |
Cumulative preferred stock—not subject to mandatory redemption |  | 22,293 |  |  | 7,000 |  |  | 5,000 |  |  | — |  |  | — |  |  | 34,293 |
Long-term debt, net |  | 875,308 |  |  | 213,608 |  |  | 190,000 |  |  | — |  |  | — |  |  | 1,278,916 |
Total capitalization |  | 2,628,905 |  |  | 513,966 |  |  | 459,426 |  |  | 101 |  |  | (557,885 | ) |  | 3,044,513 |
Current liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Short-term borrowings from non-affiliates |  | 12,998 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 12,998 |
Short-term borrowings from affiliate |  | 19,500 |  |  | — |  |  | — |  |  | — |  |  | (19,500 | ) |  | — |
Accounts payable |  | 73,021 |  |  | 12,391 |  |  | 9,678 |  |  | — |  |  | — |  |  | 95,090 |
Interest and preferred dividends payable |  | 18,543 |  |  | 4,173 |  |  | 4,301 |  |  | — |  |  | (2 | ) |  | 27,015 |
Taxes accrued |  | 87,303 |  |  | 22,787 |  |  | 20,435 |  |  | — |  |  | (1,286 | ) |  | 129,239 |
Regulatory liabilities |  | — |  |  | 4,063 |  |  | 1,353 |  |  | — |  |  | — |  |  | 5,416 |
Other |  | 62,307 |  |  | 9,019 |  |  | 12,625 |  |  | — |  |  | (8,945 | ) |  | 75,006 |
Total current liabilities |  | 273,672 |  |  | 52,433 |  |  | 48,392 |  |  | — |  |  | (29,733 | ) |  | 344,764 |
Deferred credits and other liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Deferred income taxes |  | 477,446 |  |  | 102,039 |  |  | 90,353 |  |  | — |  |  | 288 |  |  | 670,126 |
Regulatory liabilities |  | 259,907 |  |  | 87,514 |  |  | 30,956 |  |  | — |  |  | — |  |  | 378,377 |
Unamortized tax credits |  | 55,446 |  |  | 15,555 |  |  | 14,901 |  |  | — |  |  | — |  |  | 85,902 |
Defined benefit pension and other postretirement benefit plans liability |  | 405,024 |  |  | 69,103 |  |  | 73,390 |  |  | — |  |  | — |  |  | 547,517 |
Other |  | 49,944 |  |  | 13,625 |  |  | 14,371 |  |  | — |  |  | (288 | ) |  | 77,652 |
Total deferred credits and other liabilities |  | 1,247,767 |  |  | 287,836 |  |  | 223,971 |  |  | — |  |  | — |  |  | 1,759,574 |
Contributions in aid of construction |  | 326,288 |  |  | 95,459 |  |  | 91,773 |  |  | — |  |  | — |  |  | 513,520 |
Total capitalization and liabilities |  | $ | 4,476,632 |  |  | 949,694 |  |  | 823,562 |  |  | 101 |  |  | (587,618 | ) |  | $ | 5,662,371 |
Hawaiian Electric Company, Inc. and Subsidiaries Consolidating Balance Sheet December 31, 2015
(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 |  | $ | 43,557 |  |  | 6,219 |  |  | 3,016 |  |  | — |  |  | — |  |  | $ | 52,792 |
Plant and equipment |  | 4,026,079 |  |  | 1,212,195 |  |  | 1,077,424 |  |  | — |  |  | — |  |  | 6,315,698 |
Less accumulated depreciation |  | (1,316,467 | ) |  | (486,028 | ) |  | (463,509 | ) |  | — |  |  | — |  |  | (2,266,004 | )
Construction in progress |  | 147,979 |  |  | 11,455 |  |  | 15,875 |  |  | — |  |  | — |  |  | 175,309 |
Utility property, plant and equipment, net |  | 2,901,148 |  |  | 743,841 |  |  | 632,806 |  |  | — |  |  | — |  |  | 4,277,795 |
Nonutility property, plant and equipment, less accumulated depreciation |  | 5,659 |  |  | 82 |  |  | 1,531 |  |  | — |  |  | — |  |  | 7,272 |
Total property, plant and equipment, net |  | 2,906,807 |  |  | 743,923 |  |  | 634,337 |  |  | — |  |  | — |  |  | 4,285,067 |
Investment in wholly owned subsidiaries, at equity |  | 556,528 |  |  | — |  |  | — |  |  | — |  |  | (556,528 | ) |  | — |
Current assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  | 16,281 |  |  | 2,682 |  |  | 5,385 |  |  | 101 |  |  | — |  |  | 24,449 |
Advances to affiliates |  | — |  |  | 15,500 |  |  | 7,500 |  |  | — |  |  | (23,000 | ) |  | — |
Customer accounts receivable, net |  | 93,515 |  |  | 20,508 |  |  | 18,755 |  |  | — |  |  | — |  |  | 132,778 |
Accrued unbilled revenues, net |  | 60,080 |  |  | 12,531 |  |  | 11,898 |  |  | — |  |  | — |  |  | 84,509 |
Other accounts receivable, net |  | 16,421 |  |  | 1,275 |  |  | 1,674 |  |  | — |  |  | (8,962 | ) |  | 10,408 |
Fuel oil stock, at average cost |  | 49,455 |  |  | 8,310 |  |  | 13,451 |  |  | — |  |  | — |  |  | 71,216 |
Materials and supplies, at average cost |  | 30,921 |  |  | 6,865 |  |  | 16,643 |  |  | — |  |  | — |  |  | 54,429 |
Prepayments and other |  | 25,505 |  |  | 9,091 |  |  | 2,295 |  |  | — |  |  | (251 | ) |  | 36,640 |
Regulatory assets |  | 63,615 |  |  | 4,501 |  |  | 4,115 |  |  | — |  |  | — |  |  | 72,231 |
Total current assets |  | 355,793 |  |  | 81,263 |  |  | 81,716 |  |  | 101 |  |  | (32,213 | ) |  | 486,660 |
Other long-term assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Regulatory assets |  | 608,957 |  |  | 114,562 |  |  | 100,981 |  |  | — |  |  | — |  |  | 824,500 |
Unamortized debt expense |  | 359 |  |  | 74 |  |  | 64 |  |  | — |  |  | — |  |  | 497 |
Other |  | 47,731 |  |  | 14,693 |  |  | 13,062 |  |  | — |  |  | — |  |  | 75,486 |
Total other long-term assets |  | 657,047 |  |  | 129,329 |  |  | 114,107 |  |  | — |  |  | — |  |  | 900,483 |
Total assets |  | $ | 4,476,175 |  |  | 954,515 |  |  | 830,160 |  |  | 101 |  |  | (588,741 | ) |  | $ | 5,672,210 |
Capitalization and liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Capitalization |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Common stock equity |  | $ | 1,728,325 |  |  | 292,702 |  |  | 263,725 |  |  | 101 |  |  | (556,528 | ) |  | $ | 1,728,325 |
Cumulative preferred stock—not subject to mandatory redemption |  | 22,293 |  |  | 7,000 |  |  | 5,000 |  |  | — |  |  | — |  |  | 34,293 |
Long-term debt, net |  | 875,163 |  |  | 213,580 |  |  | 189,959 |  |  | — |  |  | — |  |  | 1,278,702 |
Total capitalization |  | 2,625,781 |  |  | 513,282 |  |  | 458,684 |  |  | 101 |  |  | (556,528 | ) |  | 3,041,320 |
Current liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Short-term borrowings from affiliate |  | 23,000 |  |  | — |  |  | — |  |  | — |  |  | (23,000 | ) |  | — |
Accounts payable |  | 84,631 |  |  | 17,702 |  |  | 12,513 |  |  | — |  |  | — |  |  | 114,846 |
Interest and preferred dividends payable |  | 15,747 |  |  | 4,255 |  |  | 3,113 |  |  | — |  |  | (4 | ) |  | 23,111 |
Taxes accrued |  | 131,668 |  |  | 30,342 |  |  | 29,325 |  |  | — |  |  | (251 | ) |  | 191,084 |
Regulatory liabilities |  | — |  |  | 1,030 |  |  | 1,174 |  |  | — |  |  | — |  |  | 2,204 |
Other |  | 41,083 |  |  | 8,760 |  |  | 13,194 |  |  | — |  |  | (8,958 | ) |  | 54,079 |
Total current liabilities |  | 296,129 |  |  | 62,089 |  |  | 59,319 |  |  | — |  |  | (32,213 | ) |  | 385,324 |
Deferred credits and other liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Deferred income taxes |  | 466,133 |  |  | 100,681 |  |  | 87,706 |  |  | — |  |  | 286 |  |  | 654,806 |
Regulatory liabilities |  | 254,033 |  |  | 84,623 |  |  | 30,683 |  |  | — |  |  | — |  |  | 369,339 |
Unamortized tax credits |  | 54,078 |  |  | 15,406 |  |  | 14,730 |  |  | — |  |  | — |  |  | 84,214 |
Defined benefit pension and other postretirement benefit plans liability |  | 409,021 |  |  | 69,893 |  |  | 74,060 |  |  | — |  |  | — |  |  | 552,974 |
Other |  | 51,273 |  |  | 13,243 |  |  | 13,916 |  |  | — |  |  | (286 | ) |  | 78,146 |
Total deferred credits and other liabilities |  | 1,234,538 |  |  | 283,846 |  |  | 221,095 |  |  | — |  |  | — |  |  | 1,739,479 |
Contributions in aid of construction |  | 319,727 |  |  | 95,298 |  |  | 91,062 |  |  | — |  |  | — |  |  | 506,087 |
Total capitalization and liabilities |  | $ | 4,476,175 |  |  | 954,515 |  |  | 830,160 |  |  | 101 |  |  | (588,741 | ) |  | $ | 5,672,210 |
Hawaiian Electric Company, Inc. and Subsidiaries Consolidating Statement of Changes in Common Stock Equity Three months ended March 31, 2016
(in thousands) |  | Hawaiian Electric |  | Hawaii Electric Light |  | Maui Electric |  | Other subsidiaries |  | Consolidating adjustments |  | Hawaiian Electric Consolidated
Balance, December 31, 2015 |  | $ | 1,728,325 |  |  | 292,702 |  |  | 263,725 |  |  | 101 |  |  | (556,528 | ) |  | $ | 1,728,325 |
Net income for common stock |  | 25,367 |  |  | 3,962 |  |  | 3,967 |  |  | — |  |  | (7,929 | ) |  | 25,367 |
Other comprehensive income, net of taxes |  | 1,016 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 1,016 |
Common stock dividends |  | (23,400 | ) |  | (3,302 | ) |  | (3,265 | ) |  | — |  |  | 6,567 |  |  | (23,400 | )
Common stock issuance expenses |  | (4 | ) |  | (4 | ) |  | (1 | ) |  | — |  |  | 5 |  |  | (4 | )
Balance, March 31, 2016 |  | $ | 1,731,304 |  |  | 293,358 |  |  | 264,426 |  |  | 101 |  |  | (557,885 | ) |  | $ | 1,731,304 |
Hawaiian Electric Company, Inc. and Subsidiaries Consolidating Statement of Changes in Common Stock Equity Three months ended March 31, 2015
(in thousands) |  | Hawaiian Electric |  | Hawaii Electric Light |  | Maui Electric |  | Other subsidiaries |  | Consolidating adjustments |  | Hawaiian Electric Consolidated
Balance, December 31, 2014 |  | $ | 1,682,144 |  |  | 281,846 |  |  | 256,692 |  |  | 101 |  |  | (538,639 | ) |  | $ | 1,682,144 |
Net income for common stock |  | 26,874 |  |  | 3,788 |  |  | 3,904 |  |  | — |  |  | (7,692 | ) |  | 26,874 |
Other comprehensive income, net of taxes |  | 22 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 22 |
Common stock dividends |  | (22,601 | ) |  | (2,505 | ) |  | (3,794 | ) |  | — |  |  | 6,299 |  |  | (22,601 | )
Common stock issuance expenses |  | (5 | ) |  | — |  |  | — |  |  | — |  |  | — |  |  | (5 | )
Balance, March 31, 2015 |  | $ | 1,686,434 |  |  | 283,129 |  |  | 256,802 |  |  | 101 |  |  | (540,032 | ) |  | $ | 1,686,434 |
Hawaiian Electric Company, Inc. and Subsidiaries Consolidating Statement of Cash Flows Three months ended March 31, 2016
(in thousands) |  | Hawaiian Electric |  | Hawaii Electric Light |  | Maui Electric |  | Other subsidiaries |  | Consolidating adjustments |  | Hawaiian Electric Consolidated
Cash flows from operating activities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net income |  | $ | 25,637 |  |  | 4,096 |  |  | 4,062 |  |  | — |  |  | (7,929 | ) |  | $ | 25,866 |
Adjustments to reconcile net income to net cash provided by operating activities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Equity in earnings of subsidiaries |  | (7,954 | ) |  | — |  |  | — |  |  | — |  |  | 7,929 |  |  | (25 | )
Common stock dividends received from subsidiaries |  | 6,592 |  |  | — |  |  | — |  |  | — |  |  | (6,567 | ) |  | 25 |
Depreciation of property, plant and equipment |  | 31,522 |  |  | 9,449 |  |  | 5,810 |  |  | — |  |  | — |  |  | 46,781 |
Other amortization |  | 1,045 |  |  | 268 |  |  | 461 |  |  | — |  |  | — |  |  | 1,774 |
Increase in deferred income taxes |  | 9,764 |  |  | 1,277 |  |  | 2,517 |  |  | — |  |  | — |  |  | 13,558 |
Change in tax credits, net |  | 1,386 |  |  | 154 |  |  | 162 |  |  | — |  |  | — |  |  | 1,702 |
Allowance for equity funds used during construction |  | (1,406 | ) |  | (127 | ) |  | (206 | ) |  | — |  |  | — |  |  | (1,739 | )
Changes in assets and liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Decrease in accounts receivable |  | 22,606 |  |  | 2,113 |  |  | 3,563 |  |  | — |  |  | 15 |  |  | 28,297 |
Decrease (increase) in accrued unbilled revenues |  | 58 |  |  | (326 | ) |  | (590 | ) |  | — |  |  | — |  |  | (858 | )
Decrease in fuel oil stock |  | 14,902 |  |  | 2,622 |  |  | 5,288 |  |  | — |  |  | — |  |  | 22,812 |
Decrease (increase) in materials and supplies |  | 378 |  |  | (27 | ) |  | (178 | ) |  | — |  |  | — |  |  | 173 |
Decrease in regulatory assets |  | 79 |  |  | 397 |  |  | 1,109 |  |  | — |  |  | — |  |  | 1,585 |
Increase in accounts payable |  | 24,827 |  |  | 1,652 |  |  | 1,287 |  |  | — |  |  | — |  |  | 27,766 |
Change in prepaid and accrued income and utility revenue taxes |  | (31,916 | ) |  | (1,634 | ) |  | (8,466 | ) |  | — |  |  | (2 | ) |  | (42,018 | )
Increase in defined benefit pension and other postretirement benefit plans liability |  | 177 |  |  | 13 |  |  | 15 |  |  | — |  |  | — |  |  | 205 |
Change in other assets and liabilities |  | 15,249 |  |  | 5,562 |  |  | 169 |  |  | — |  |  | (13 | ) |  | 20,967 |
Net cash provided by operating activities |  | 112,946 |  |  | 25,489 |  |  | 15,003 |  |  | — |  |  | (6,567 | ) |  | 146,871 |
Cash flows from investing activities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Capital expenditures |  | (97,363 | ) |  | (16,649 | ) |  | (11,171 | ) |  | — |  |  | — |  |  | (125,183 | )
Contributions in aid of construction |  | 11,585 |  |  | 969 |  |  | 1,207 |  |  | — |  |  | — |  |  | 13,761 |
Other |  | 22 |  |  | 23 |  |  | — |  |  | — |  |  | — |  |  | 45 |
Advances from affiliates |  | — |  |  | 3,000 |  |  | 500 |  |  | — |  |  | (3,500 | ) |  | — |
Net cash used in investing activities |  | (85,756 | ) |  | (12,657 | ) |  | (9,464 | ) |  | — |  |  | (3,500 | ) |  | (111,377 | )
Cash flows from financing activities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Common stock dividends |  | (23,400 | ) |  | (3,302 | ) |  | (3,265 | ) |  | — |  |  | 6,567 |  |  | (23,400 | )
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 |  | 9,498 |  |  | — |  |  | — |  |  | — |  |  | 3,500 |  |  | 12,998 |
Other |  | 8 |  |  | (8 | ) |  | — |  |  | — |  |  | — |  |  | — |
Net cash used in financing activities |  | (14,164 | ) |  | (3,444 | ) |  | (3,360 | ) |  | — |  |  | 10,067 |  |  | (10,901 | )
Net increase in cash and cash equivalents |  | 13,026 |  |  | 9,388 |  |  | 2,179 |  |  | — |  |  | — |  |  | 24,593 |
Cash and cash equivalents, beginning of period |  | 16,281 |  |  | 2,682 |  |  | 5,385 |  |  | 101 |  |  | — |  |  | 24,449 |
Cash and cash equivalents, end of period |  | $ | 29,307 |  |  | 12,070 |  |  | 7,564 |  |  | 101 |  |  | — |  |  | $ | 49,042 |
Hawaiian Electric Company, Inc. and Subsidiaries Consolidating Statement of Cash Flows Three months ended March 31, 2015
(in thousands) |  | Hawaiian Electric |  | Hawaii Electric Light |  | Maui Electric |  | Other subsidiaries |  | Consolidating adjustments |  | Hawaiian Electric Consolidated
Cash flows from operating activities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net income |  | $ | 27,144 |  |  | 3,922 |  |  | 3,999 |  |  | — |  |  | (7,692 | ) |  | $ | 27,373 |
Adjustments to reconcile net income to net cash provided by operating activities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Equity in earnings of subsidiaries |  | (7,717 | ) |  | — |  |  | — |  |  | — |  |  | 7,692 |  |  | (25 | )
Common stock dividends received from subsidiaries |  | 6,324 |  |  | — |  |  | — |  |  | — |  |  | (6,299 | ) |  | 25 |
Depreciation of property, plant and equipment |  | 29,389 |  |  | 9,313 |  |  | 5,541 |  |  | — |  |  | — |  |  | 44,243 |
Other amortization |  | 590 |  |  | 500 |  |  | 608 |  |  | — |  |  | — |  |  | 1,698 |
Increase in deferred income taxes |  | 12,048 |  |  | 719 |  |  | 2,365 |  |  | — |  |  | — |  |  | 15,132 |
Change in tax credits, net |  | 2,246 |  |  | 200 |  |  | 130 |  |  | — |  |  | — |  |  | 2,576 |
Allowance for equity funds used during construction |  | (1,123 | ) |  | (145 | ) |  | (145 | ) |  | — |  |  | — |  |  | (1,413 | )
Changes in assets and liabilities: |  |  |  |  |  |  |  |  |  |  |  |
Decrease in accounts receivable |  | 21,703 |  |  | 2,147 |  |  | 4,408 |  |  | — |  |  | 846 |  |  | 29,104 |
Decrease in accrued unbilled revenues |  | 21,726 |  |  | 1,426 |  |  | 4,728 |  |  | — |  |  | — |  |  | 27,880 |
Decrease in fuel oil stock |  | 8,654 |  |  | 5,817 |  |  | 6,260 |  |  | — |  |  | — |  |  | 20,731 |
Decrease (increase) in materials and supplies |  | (1,115 | ) |  | 75 |  |  | (317 | ) |  | — |  |  | — |  |  | (1,357 | )
Increase in regulatory assets |  | (8,903 | ) |  | (1,522 | ) |  | (402 | ) |  | — |  |  | — |  |  | (10,827 | )
Increase (decrease) in accounts payable |  | 16,520 |  |  | (2,548 | ) |  | 1,408 |  |  | — |  |  | — |  |  | 15,380 |
Change in prepaid and accrued income and utility revenue taxes |  | (52,273 | ) |  | (1,807 | ) |  | (9,616 | ) |  | — |  |  | — |  |  | (63,696 | )
Increase in defined benefit pension and other postretirement benefit plans liability |  | — |  |  | — |  |  | 110 |  |  | — |  |  | — |  |  | 110 |
Change in other assets and liabilities |  | (8,614 | ) |  | 203 |  |  | (517 | ) |  | — |  |  | (846 | ) |  | (9,774 | )
Net cash provided by operating activities |  | 66,599 |  |  | 18,300 |  |  | 18,560 |  |  | — |  |  | (6,299 | ) |  | 97,160 |
Cash flows from investing activities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Capital expenditures |  | (92,242 | ) |  | (14,902 | ) |  | (11,730 | ) |  | — |  |  | — |  |  | (118,874 | )
Contributions in aid of construction |  | 8,121 |  |  | 758 |  |  | 266 |  |  | — |  |  | — |  |  | 9,145 |
Other |  | 175 |  |  | 26 |  |  | 42 |  |  | — |  |  | — |  |  | 243 |
Advances from (to) affiliates |  | 3,500 |  |  | — |  |  | — |  |  | — |  |  | (3,500 | ) |  | — |
Net cash used in investing activities |  | (80,446 | ) |  | (14,118 | ) |  | (11,422 | ) |  | — |  |  | (3,500 | ) |  | (109,486 | )
Cash flows from financing activities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Common stock dividends |  | (22,601 | ) |  | (2,505 | ) |  | (3,794 | ) |  | — |  |  | 6,299 |  |  | (22,601 | )
Preferred stock dividends of Hawaiian Electric and subsidiaries |  | (270 | ) |  | (134 | ) |  | (95 | ) |  | — |  |  | — |  |  | (499 | )
Net increase (decrease) in short-term borrowings from non-affiliates and affiliate with original maturities of three months or less |  | 30,000 |  |  | (500 | ) |  | (3,000 | ) |  | — |  |  | 3,500 |  |  | 30,000 |
Other |  | (214 | ) |  | (1 | ) |  | (1 | ) |  | — |  |  | — |  |  | (216 | )
Net cash provided by (used in) financing activities |  | 6,915 |  |  | (3,140 | ) |  | (6,890 | ) |  | — |  |  | 9,799 |  |  | 6,684 |
Net increase (decrease) in cash and cash equivalents |  | (6,932 | ) |  | 1,042 |  |  | 248 |  |  | — |  |  | — |  |  | (5,642 | )
Cash and cash equivalents, beginning of period |  | 12,416 |  |  | 612 |  |  | 633 |  |  | 101 |  |  | — |  |  | 13,762 |
Cash and cash equivalents, end of period |  | $ | 5,484 |  |  | 1,654 |  |  | 881 |  |  | 101 |  |  | — |  |  | $ | 8,120 |

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- Definition Electric utility subsidiary [Abstract] + References No definition available. + Details
Name: | he_ElectricutilitysubsidiaryAbstract
Namespace Prefix: | he_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration