3 · Electric utility segment

Regulatory assets and liabilities. Regulatory assets represent deferred costs and accrued decoupling revenues which are expected to be recovered through rates over PUC-authorized periods. Generally, the Utilities do not earn a return on their regulatory assets; however, they have been allowed to recover interest on certain regulatory assets and to include certain regulatory assets in rate base. Regulatory liabilities represent amounts included in rates and collected from ratepayers for costs expected to be incurred in the future, or amounts collected in excess of costs incurred that are refundable to customers. For example, the regulatory liability for cost of removal in excess of salvage value represents amounts that have been collected from ratepayers for costs that are expected to be incurred in the future to retire utility plant. Generally, the Utilities include regulatory liabilities in rate base or are required to apply interest to certain regulatory liabilities. In the table below, noted in parentheses are the original PUC authorized amortization or recovery periods and, if different, the remaining amortization or recovery periods as of December 31, 2017 are noted.

Regulatory assets were as follows:



December 31	2017		2016
(in thousands)
Retirement benefit plans (balance primarily varies with plans’ funded statuses)	$	637,204	$	745,367
Income taxes (1 to 55 years)	118,201		90,100
Decoupling revenue balancing account and RAM regulatory asset (1 to 2 years)	64,087		73,485
Unamortized expense and premiums on retired debt and equity issuances (19 to 30 years; 6 to 18 years remaining)	11,993		12,299
Vacation earned, but not yet taken (1 year)	11,224		10,970
Other (1 to 50 years; 1 to 46 years remaining)	26,588		25,230
	$	869,297	$	957,451
Included in:
Current assets	$	88,390	$	66,032
Long-term assets	780,907		891,419
	$	869,297	$	957,451

Regulatory liabilities were as follows:



December 31	2017		2016
(in thousands)
Cost of removal in excess of salvage value (1 to 60 years)	$	453,986	$	394,072
Income taxes (1 to 55 years)	406,324		—
Retirement benefit plans (5 years beginning with respective utility’s next rate case)	9,961		10,824
Other (5 years; 1 to 2 years remaining)	10,499		5,797
	$	880,770	$	410,693
Included in:
Current liabilities	$	3,401	$	3,762
Long-term liabilities	877,369		406,931
	$	880,770	$	410,693

The regulatory asset and liability relating to retirement benefit plans was recorded as a result of pension and OPEB tracking mechanisms adopted by the PUC in rate case decisions for the Utilities in 2007 (see Note 8).

Major customers. The Utilities received 11% ($239 million), 11% ($226 million) and 11% ($265 million) of their operating revenues from the sale of electricity to various federal government agencies in 2017, 2016 and 2015, respectively.

Cumulative preferred stock. The following series of cumulative preferred stock are redeemable only at the option of the respective company at the following prices in the event of voluntary liquidation or redemption:



December 31, 2017	Voluntary liquidation price		Redemption price
Series
C, D, E, H, J and K (Hawaiian Electric)	$	20	$	21
I (Hawaiian Electric)	20		20
G (Hawaii Electric Light)	100		100
H (Maui Electric)	100		100

Hawaiian Electric is obligated to make dividend, redemption and liquidation payments on the preferred stock of each of its subsidiaries if the respective subsidiary is unable to make such payments, but this obligation is subordinated to Hawaiian Electric's obligation to make payments on its own preferred stock.

Related-party transactions. HEI charged the Utilities $6.2 million, $6.5 million and $6.5 million for general management and administrative services in 2017, 2016 and 2015, respectively. The amounts charged by HEI to its subsidiaries for services provided by HEI employees are allocated primarily on the basis of time expended in providing such services.

From November 24, 2017 to December 31, 2017, Hamakua Energy, LLC (an indirect subsidiary of HEI) sold energy and capacity to Hawaii Electric Light (subsidiary of Hawaiian Electric and indirect subsidiary of HEI) under a PPA in the amount of $3 million.

Hawaiian Electric’s short-term borrowings totaled nil at December 31, 2017 and 2016. The interest charged on short-term borrowings from HEI is based on the lower of HEI’s or Hawaiian Electric’s effective weighted average short-term external borrowing rate. If both HEI and Hawaiian Electric do not have short-term external borrowings, the interest is based on the average of the effective rate for 30-day dealer-placed commercial paper quoted by the Wall Street Journal plus 0.15%.

Borrowings among the Utilities are eliminated in consolidation. Interest charged by HEI to Hawaiian Electric was not material for the years ended December 31, 2017 and 2016.

Unconsolidated variable interest entities.

HECO Capital Trust III. Trust III was created and exists for the exclusive purposes of (i) issuing in March 2004 2,000,000 6.50% Cumulative Quarterly Income Preferred Securities, Series 2004 (2004 Trust Preferred Securities) ($50 million aggregate liquidation preference) to the public and trust common securities ($1.5 million aggregate liquidation preference) to Hawaiian Electric, (ii) investing the proceeds of these trust securities in 2004 Debentures issued by Hawaiian Electric in the principal amount of$31.5 million and issued by Hawaii Electric Light and Maui Electric each in the principal amount of $10 million, (iii) making distributions on these trust securities and (iv) engaging in only those other activities necessary or incidental thereto. The 2004 Trust Preferred Securities are mandatorily redeemable at the maturity of the underlying debt on March 18, 2034, which maturity may be extended to no later than March 18, 2053; and are currently redeemable at the issuer’s option without premium. The 2004 Debentures, together with the obligations of the Utilities under an expense agreement and Hawaiian Electric’s obligations under its trust guarantee and its guarantee of the obligations of Hawaii Electric Light and Maui Electric under their respective debentures, are the sole assets of Trust III. Taken together, Hawaiian Electric’s obligations under the Hawaiian Electric debentures, the Hawaiian Electric indenture, the subsidiary guarantees, the trust agreement, the expense agreement and trust guarantee provide, in the aggregate, a full, irrevocable and unconditional guarantee of payments of amounts due on the Trust Preferred Securities. Trust III has at all times been an unconsolidated subsidiary of Hawaiian Electric. Since Hawaiian Electric, as the holder of 100% of the trust common securities, does not have the power to direct the activities that most significantly impact the economic performance of Trust III nor the obligation to absorb their expected losses, if any, that could potentially be significant to the Trust III, Hawaiian Electric is not the primary beneficiary and does not consolidate Trust III in accordance with accounting rules on the consolidation of VIEs. Trust III’s balance sheet as of December 31, 2017 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 statement for 2017 consisted of $3.4 million of interest income received from the 2004 Debentures; $3.3 million of distributions to holders of the Trust Preferred Securities; and $0.1 million 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 December 31, 2017, the Utilities had five PPAs for firm capacity and other PPAs with IPPs and Schedule Q providers (i.e., customers with cogeneration and/or power production facilities who buy power from or sell power to the Utilities), none of which is currently required to be consolidated as VIEs.

Pursuant to the current accounting standards for VIEs, the Utilities are deemed to have a variable interest in Kalaeloa Partners, L.P. (Kalaeloa), AES Hawaii, Inc. (AES Hawaii) and Hamakua Energy by reason of the provisions of the PPA that the Utilities have with the three IPPs. However, management has concluded that the Utilities are not the primary beneficiary of Kalaeloa, AES Hawaii and Hamakua Energy because the Utilities do not have the power to direct the activities that most significantly impact the three IPPs’ economic performance nor the obligation to absorb their expected losses, if any, that could potentially be significant to the IPPs. Thus, the Utilities have not consolidated Kalaeloa, AES Hawaii and Hamakua Energy in its consolidated financial statements. HEI, however, owns Hamakua Energy and consolidates it in the HEI consolidated financial statements.

For the other IPPs, the Utilities have concluded that the consolidation of the IPPs was not required because either the Utilities do not have variable interests in the IPPs due to the absence of obligation in the PPAs for the Utilities to absorb any variability of the IPPs, or the IPPs were either a “business” or “governmental organization,” and thus excluded from the scope of accounting standards for VIEs. Two IPPs of as-available energy declined to provide the information necessary for Utilities to determine the applicability of accounting standards for VIEs.

If information is ultimately received from the IPPs, a possible outcome of future analyses of such information is the consolidation of one or both 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.

Commitments and contingencies.

Fuel contracts. The Utilities have contractual agreements to purchase minimum quantities of low sulfur fuel oil (LSFO), industrial fuel oil (IFO), diesel fuel and biodiesel for multi-year periods, some through December 2019. 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. Based on the average price per barrel as of December 31, 2017, the estimated cost of minimum purchases under the fuel supply contracts is $130 million in 2018 and $130 million in 2019. The actual cost of purchases in 2018 and future years could vary substantially from this estimate of minimum purchases as a result of changes in market prices, quantities actually purchased, entry into new supply contracts and/or other factors. The Utilities purchased $0.6 billion, $0.4 billion and $0.6 billion of fuel under contractual agreements in 2017, 2016 and 2015, respectively.

On February 18, 2016, the Utilities signed two fuel supply contracts with Chevron Products Company (Chevron) for: (1) Oahu’s LSFO and diesel (for purposes of blending with LSFO) to meet the Environmental Protection Agency’s Mercury and Air Toxic Standards; and (2) IFO, diesel and ultra-low sulfur diesel for Oahu, Maui, Molokai and the island of Hawaii. The contract began on January 1, 2017, terminates on December 31, 2019 and may automatically renew for annual terms thereafter unless terminated earlier by either party. Both of these fuel contracts were recently assigned by Chevron to Island Energy Services, LLC, a subsidiary of One Rock Capital Partners, L.P., who purchased Chevron’s Hawaii assets on November 1, 2016. Both of these fuel contracts replace prior fuel supply contracts with Chevron and Par Hawaii Refining, LLC (Par), which both expired on December 31, 2016.

Hawaii Electric Light also signed a contract with Chevron, now Island Energy Services, LLC, for terminalling services in Hilo, Hawaii for 2017 through 2019. The terminalling services were provided by Chevron as part of the fuel supply contract but as mentioned above, that contract expired December 31, 2016. Now Hilo terminalling services are contracted in a stand-alone contract.

The PUC approved all of the contracts with Chevron, now Island Energy Services, LLC. All of the costs incurred under these contracts are included in the Utilities’ respective Energy Cost Adjustment Clauses (ECACs) to the extent such costs are not recovered through the base rates.

Hawaiian Electric also has three contracts for biodiesel. Two of the contracts are with Pacific Biodiesel Technologies, LLC (PBT) and one contingency contract is in place with REG Marketing & Logistics, LLC (REG). PBT has agreed to supply biodiesel to Hawaiian Electric’s Campbell Industrial Park (CIP) generating facility through November 2018. While fuel is delivered to CIP, the contract provides that biodiesel can be trucked to the Honolulu International Airport Emergency Facility and to any other generating facility on Oahu owned by Hawaiian Electric. Hawaiian Electric intends to shift the biodiesel supply to Schofield generating station when that new facility comes online and as long as the PBT contract remains in effect. On October 27, 2017, Hawaiian Electric signed a new biodiesel supply contract with PBT that will replace the existing PBT contract in November 2018, upon PUC approval. PBT also has a spot buy contract with Hawaiian Electric to purchase additional quantities of biodiesel at or below the price of diesel. Very few purchases of “at parity” biodiesel have been purchased, however the contract remains in effect and was recently extended through June 2018.

Hawaiian Electric also has a contingency contract with REG. REG will supply biodiesel in the event PBT is unable to supply quantities above the contract maximum volume, should something unexpected occur. Hawaiian Electric did not purchase any biofuel from REG during 2016 and 2017. Hawaiian Electric has secured a one-year extension of this contract through November 2018.

The costs incurred under the Utilities’ biodiesel contracts are included in their respective ECACs, to the extent such costs are not recovered through the Utilities’ base rates.

The energy charge for energy purchased from Kalaeloa Partners, L.P. (Kalaeloa) under Hawaiian Electric’s purchase power agreement (PPA) with Kalaeloa is based in part on the price Kalaeloa pays PAR (formerly known as Hawaii Independent Energy, LLC) for LSFO in a fuel contract between the two parties.

The costs incurred for LSFO under Hawaiian Electric's fuel contract with Kalaeloa is included in Hawaiian Electric's ECAC, to the extent such costs are not recovered through base rates.

Contingencies. The Utilities are subject in the normal course of business to pending and threatened legal proceedings. Management does not anticipate that the aggregate ultimate liability arising out of these pending or threatened legal proceedings will be material to its financial position. However, the Utilities cannot rule out the possibility that such outcomes could have a material effect on the results of operations or liquidity for a particular reporting period in the future.

Interim increases. For the year ended December 31, 2017, the Utilities recognized $3 million of revenues with respect to interim orders related to general rate increase requests. Such amounts recorded are subject to refund, with interest, if they exceed amounts in a final order.

Power purchase agreements. Purchases from all IPPs were as follows:



Years ended December 31	2017		2016		2015
(in millions)
Kalaeloa	$	180	$	152	$	187
AES Hawaii	140		149		134
HPOWER	67		71		66
Puna Geothermal Venture	38		28		29
Hamakua Energy	35		29		44
Hawaiian Commercial & Sugar	—		1		8
Other IPPs	127		133		126
Total IPPs	$	587	$	563	$	594

As of December 31, 2017, the Utilities had five firm capacity PPAs for a total of 551 megawatts (MW) of firm capacity. The PUC allows rate recovery for energy and firm capacity payments to IPPs under these agreements. Assuming that each of the agreements remains in place for its current term (and as amended) and the minimum availability criteria in the PPAs are met, aggregate minimum fixed capacity charges are expected to be approximately $0.1 billion per year for 2018 through 2022 and a total of $0.9 billion in the period from 2023 through 2048.

In general, the Utilities base their payments under the PPAs upon available capacity and actually supplied energy and they are generally not required to make payments for capacity if the contracted capacity is not available, and payments are reduced, under certain conditions, if available capacity drops below contracted levels. In general, the payment rates for capacity have been predetermined for the terms of the agreements. Energy payments will vary over the terms of the agreements. The Utilities pass on changes in the fuel component of the energy charges to customers through the ECAC in their rate schedules. The Utilities do not operate, or participate in the operation of, any of the facilities that provide power under the agreements. Title to the facilities does not pass to Hawaiian Electric or its subsidiaries upon expiration of the agreements, and the agreements do not contain bargain purchase options for the facilities.

Purchase power adjustment clause. The PUC has approved purchased power adjustment clauses (PPACs) for the Utilities. Purchased power capacity, O&M and other non-energy costs previously recovered through base rates are now recovered in the PPACs and, subject to approval by the PUC, such costs resulting from new purchased power agreements can be added to the PPACs outside of a rate case. Purchased energy costs continue to be recovered through the ECAC to the extent they are not recovered through base rates.

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 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.

Hawaiian Electric and Kalaeloa are in negotiations to address the PPA term that ended on May 23, 2016. The PPA automatically extends on a month-to-month basis as long as the parties are still negotiating in good faith, but would end 60 days after either party notifies the other in writing that negotiations have terminated. Hawaiian Electric and Kalaeloa have agreed that neither party will terminate the PPA prior to October 31, 2018. This agreement contemplates continued negotiations between the parties and accounts for time needed for PUC approval of a negotiated resolution.

AES Hawaii, Inc. Under a PPA entered into in March 1988, as amended (through Amendment No. 2), 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 the 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 included certain conditions precedent which, if satisfied would have released the parties from the claims under the arbitration proceeding. Among the conditions precedent was the successful negotiation and PUC approval of an amendment to the existing PPA.

In November 2015, Hawaiian Electric entered into Amendment No. 3 for which PUC approval was requested and

subsequently denied in January 2017. Approval of Amendment No. 3 would have satisfied the final condition for effectiveness

of the Settlement Agreement and resolved AES Hawaii’s claims. Following the PUC’s decision, the parties agreed to extend the

stay of the arbitration proceeding while settlement discussions continued. In February 2018, Hawaiian Electric reached agreement with AES Hawaii on Amendment No. 4 which is subject to PUC approval. Amendment No. 4 among other things, provides, (1) that AES Hawaii will make certain operational commitments to improve reliability, (2) for inclusion of AES Hawaii in the Utilities’ greenhouse gas partnership, (3) provisions to allow AES Hawaii to reduce coal combustion by modifying its fuel consumption to include biomass upon approval, and (4) for release of an option agreement by Hawaiian Electric for land owned by AES Hawaii. Amendment No. 4 includes a stay of the arbitration proceeding pending review by the PUC. If approved by the PUC, Amendment No. 4 will resolve AES Hawaii’s claims.

Hu Honua Bioenergy, LLC. In May 2012, Hawaii Electric Light signed a PPA, which the PUC approved in December 2013, with Hu Honua Bioenergy, LLC (Hu Honua) for 21.5 MW of renewable, dispatchable firm capacity fueled by locally grown biomass from a facility on the island of Hawaii. Per the terms of the PPA, the Hu Honua plant was scheduled to be in service in 2016. However, Hu Honua encountered construction delays, failed to meet its obligations under the PPA and failed to provide adequate assurances that it could perform or had the financial means to perform. Hawaii Electric Light terminated the PPA on March 1, 2016. On November 30, 2016, Hu Honua filed a civil complaint in the United States District Court for the District of Hawaii that included claims purportedly arising out of the termination of Hu Honua’s PPA. On May 26, 2017, Hawaii Electric Light and Hu Honua entered into a settlement agreement that will settle all claims related to the termination of the original PPA. The settlement agreement was contingent on the PUC’s approval of an amended and restated PPA between Hawaii Electric Light and Hu Honua dated May 5, 2017. In July 2017, the PUC approved the amended and restated PPA. On August 25, 2017, the PUC’s approval was appealed by a third party. The appeal is still pending. Hu Honua is expected to be on-line by the end of 2018.

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, or if PUC imposed caps on project costs are expected to be exceeded, project costs may need to be written off in amounts that could result in significant reductions in Hawaiian Electric’s consolidated net income.

Enterprise Resource Planning/Enterprise Asset Management (ERP/EAM) implementation project. On August 11, 2016, the PUC approved the Utilities’ request to commence the ERP/EAM implementation project, subject to certain conditions, including a $77.6 million cap on cost recovery as well as a requirement that the Utilities pass onto customers a minimum of $244 million in benefits associated with the system over its 12-year service life. The decision and order (D&O) approved the deferral of certain project costs and allowed the accrual of allowance for funds used during construction (AFUDC), but limited the AFUDC rate to 1.75%. Pursuant to the D&O and subsequent orders, in September 2017, the Utilities filed a bottom-up, low-level analysis of the project’s benefits and performance metrics and tracking mechanism for passing the project’s benefits on to customers.

On November 30, 2017, the PUC issued an order, which, among other things, directed the Utilities’ to file a position statement regarding the reasonableness of the project, a reworked low-level benefits analysis and initial details of the metrics that will be used to demonstrate the achievement of benefits. On December 18, 2017, the Utilities’ filed their response to the order, re-affirming the need for the project and guaranteed minimum level of $244 million in benefits to customers. The updated low-level benefits analysis provided in the response estimated total benefits to be as much as $256 million. The response further noted that in Hawaiian Electric’s 2017 test year rate case, Hawaiian Electric and the Consumer Advocate have agreed in principle to a “rate case-centric” approach for a benefits delivery mechanism pending PUC approval. On January 4, 2018, the Consumer Advocate filed a statement of position on the Utilities’ response, stating that it does not recommend revocation of the PUC’s prior conditional approval of the project or reductions to the previously ordered cost caps, and continues to recommend the use of a rate case-centric approach to facilitate pass through of the system’s benefits to customers. Monthly reports on the status and costs of the project continue to be filed.

The ERP/EAM Implementation Project is expected to go-live by October 1, 2018. As of December 31, 2017, the Project incurred costs of $35.3 million of which $6.7 million were charged to other operation and maintenance expense, $2.6 million relate to capital costs and $26.0 million are deferred costs.

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 window forward contracts which lowered the cost of the engine contract by $9.7 million, resulting in a revised project cost cap of $157.3 million. Hawaiian Electric has received all of the major permits for the project, including a 35-year site lease from the U.S. Army. Construction of the facility began in October 2016, and the facility is expected to be placed in service in the second quarter of 2018. A request to recover the costs of the project and related operations and maintenance expense through the newly-established Major Project Interim Recovery (MPIR) adjustment mechanism is pending PUC approval. (See “Decoupling” section below for MPIR guidelines and capital cost recovery discussion.) Project costs incurred as of December 31, 2017 amounted to $121.6 million.

West Loch PV Project. In July 2016, Hawaiian Electric announced plans to build, own and operate a utility-owned, grid-tied 20-MW (ac) solar facility in conjunction with the Department of the Navy at a Navy/Air Force joint base. In June 2017, the PUC approved the expenditure of funds for the project, including Hawaiian Electric’s proposed project cost cap of $67 million and a performance guarantee to provide energy at 9.56 cents/KWH or less to the system. Project costs incurred as of December 31, 2017 amounted to $6.4 million.

In approving the project, the PUC agreed that the project is eligible for recovery of costs offset by related net benefits under the newly-established MPIR adjustment mechanism. (See “Decoupling” section below for MPIR guidelines and capital cost recovery discussion.) Hawaiian Electric provided supplemental materials in August 2017, as requested by the PUC, to support meeting the MPIR guidelines, accompanied by system performance guarantee and cost savings sharing mechanisms. A decision on these matters is pending.

Hawaiian Electric executed a fixed-price Engineering, Procurement, and Construction (EPC) contract for the project on December 5, 2017.

Hawaiian Telcom. The Utilities each have separate agreements for the joint ownership and maintenance of utility poles with Hawaiian Telcom, Inc. (Hawaiian Telcom), the respective county or counties in which each utility operates and other third parties, such as the State of Hawaii. The agreements set forth various circumstances requiring pole removal/installation/replacement and the sharing of costs among the joint pole owners. The agreements allow for the cost of work done by one joint pole owner to be shared by the other joint pole owners based on the apportionment of costs in the agreements. The Utilities have maintained, replaced and installed the majority of the jointly-owned poles in each of the respective service territories, and have billed the other joint pole owners for their respective share of the costs. The counties and the State have been reimbursing the Utilities for their share of the costs. However, Hawaiian Telcom has been delinquent in reimbursing the Utilities for its share of the costs.

Hawaiian Electric has initiated a dispute resolution process to collect the unpaid amounts from Hawaiian Telcom as specified by the joint pole agreement. This dispute resolution process is stayed pending settlement negotiations. For Hawaii Electric Light, the agreement does not specify an alternative dispute resolution process, and thus a complaint for payment was filed with the Circuit Court in June 2016. This complaint is stayed pending settlement negotiations. Maui Electric has not yet commenced any legal action to recover the delinquent amounts. The Utilities and Hawaiian Telcom have entered into a non-binding memorandum of understanding to endeavor to negotiate agreements, subject to PUC approval, for purchase by the Utilities of Hawaiian Telcom’s interest in all the joint poles, with payment of the purchase price of such interest in the poles to be offset in part by the receivables owed by Hawaiian Telcom to the Utilities. As of December 31, 2017, total receivables under the joint pole agreement, including interest, from Hawaiian Telcom are $22.3 million ($15.0 million at Hawaiian Electric, $6.0 million at Hawaii Electric Light, and $1.3 million at Maui Electric). Management expects to prevail on these claims but has reserved for the accrued interest of $4.9 million on the receivables.

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.

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

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 $3.0 million as of December 31, 2017, representing the probable and reasonably estimated cost to complete 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 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. Onshore sampling at the Waiau Power Plant was completed in two phases in December 2015 and June 2016. Appropriate remedial measures are being developed to address the extent of the onshore contamination, and any associated costs have not yet been determined.

As of December 31, 2017, the reserve account balance recorded by Hawaiian Electric to address the PCB contamination was $4.8 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 assessment of potential source control requirements, as well as the further investigation of contaminated sediment offshore from the Waiau Power Plant by the Navy.

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 legal obligations associated with the retirement of plant and equipment, including removal of asbestos and other hazardous materials.

The Utilities recorded AROs related to the removal of retired generating units at Hawaiian Electric’s Honolulu and Waiau power plants, certain types of transformers and underground storage tanks, and the abandonment of fuel pipelines, underground injection and supply wells. In 2017, for the retired generating unit removal projects, the AROs were reassessed (resulting in a downward revision in estimated cash flows), the removal projects were completed and the AROs were reduced to nil.

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



(in thousands)	2017			2016
Balance, January 1	$	25,589		$	26,848
Accretion expense	10			10
Liabilities incurred	5,370			—
Liabilities settled	(527		)	(1,269		)
Revisions in estimated cash flows	(24,407		)	—
Balance, December 31	$	6,035		$	25,589

The Utilities have not recorded AROs for assets that are expected to operate indefinitely or where the Utilities cannot estimate a settlement date (or range of potential settlement dates). As such ARO liabilities are not recorded for certain asset retirement activities, including various Utilities-owned generating facilities and certain electric transmission, distribution and telecommunications assets resulting from easements over property not owned by the Utilities.

Regulatory proceedings

Decoupling. 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. The decoupling mechanism has three components: (1) a sales decoupling component via a revenue balancing account (RBA), (2) a revenue escalation component via a rate adjustment mechanism (RAM) and (3) an earnings sharing mechanism, which would provide for a reduction of revenues between rate cases in the event the utility exceeds the ROACE allowed in its most recent rate case. Decoupling provides for more timely cost recovery and earning on investments.

For the RAM years 2014 - 2016, Hawaiian Electric was allowed to record RAM revenue beginning on January 1 and to bill such amounts from June 1 of the applicable year through May 31 of the following year. Subsequent to 2016, Hawaiian Electric reverted to the RAM provisions initially approved in March 2011— i.e., RAM is both accrued and billed from June 1 of each year through May 31 of the following year, and RAM revenues for the year 2017 were approximately $20 million lower than 2016 as a result of the reversion.

2015 decoupling order. On March 31, 2015, the PUC issued an Order (the 2015 Decoupling Order) that modified the RAM portion of the decoupling mechanism to be capped at the lesser of the RAM revenue adjustment as then determined (based on an inflationary adjustment for certain O&M expenses and return on investment for certain rate base changes) and a RAM revenue adjustment calculated based on the cumulative annual compounded increase in Gross Domestic Product Price Index applied to annualized target revenues (the RAM Cap). The 2015 Decoupling Order provided a specific basis for calculating the target revenues until the next rate case, at which time the target revenues will reset upon the issuance of an interim or final D&O in a rate case. The triennial rate case cycle required under the decoupling mechanism continues to serve as the maximum period between the filing of general rate cases.

The RAM Cap impacted the Utilities' recovery of capital investments as follows:


•	Hawaiian Electric's RAM revenues were limited to the RAM Cap in 2015, 2016 and 2017.


•	Maui Electric's RAM revenues were limited to the RAM Cap in 2015 and 2016; however, the 2017 RAM revenues were below the RAM Cap.


•	Hawaii Electric Light’s RAM revenues were below the RAM Cap in 2015, 2016 and 2017.

2017 decoupling order. On April 27, 2017, the PUC issued an Order (the 2017 Decoupling Order) that required the establishment of specific performance incentive mechanisms and provided guidelines for interim recovery of revenues to support major projects placed in service between general rate cases.

Measurement of performance under the following performance incentive mechanisms began January 1, 2018:

•

Service Reliability Performance measured by System Average Interruption Duration and Frequency Indexes (penalties only). Target performance is based on each utility’s historical 10-year average performance with a deadband of one standard deviation. The maximum penalty for each performance index is 20 basis points applied to the common equity share of each respective utility’s rate base (or approximately $6 million penalty for both in total for the three utilities).

•

Call Center Performance measured by the percentage of calls answered within 30 seconds. Target performance is based on the annual average performance for each utility for the most recent 8 quarters with a deadband of 3% above and below the target. The maximum penalty or incentive is 8 basis points applied to the common equity share of each respective utility’s rate base (or approximately $1.2 million penalty or incentive in total for the three utilities).

The 2017 Decoupling Order also established guidelines for MPIR. Projects eligible for recovery through the MPIR adjustment mechanism are major projects (i.e., projects with capital expenditures net of customer contributions in excess of $2.5 million), including but not restricted to renewable energy, energy efficiency, utility scale generation, grid modernization and smaller qualifying projects grouped into programs for review. The MPIR adjustment mechanism provides the opportunity to recover revenues for net costs of approved eligible projects placed in service between general rate cases wherein cost recovery is limited by a revenue cap and is not provided by other effective recovery mechanisms. The request for PUC approval must include a business case and all costs that are allowed to be recovered through the MPIR adjustment mechanism shall be offset by any related benefits. The guidelines provide for accrual of revenues approved for recovery upon in-service date to be collected from customers through the annual RBA tariff. Capital projects which are not recovered through the MPIR would be included in the RAM and be subject to the RAM cap, until the next rate case when the utilities would request recovery in base rates.

In the 2017 Decoupling Order, the PUC indicated that, in pending and subsequent rate cases, the PUC intends to require all fuel expenses and purchased energy expenses be recovered through an appropriately modified energy cost adjustment mechanism rather than through base rates, and will consider adopting processes to periodically reset fuel efficiency measures embedded in the energy cost adjustment mechanism to account for changes in the generating system.

Annual decoupling filings. On March 31, 2017, the Utilities submitted to the PUC, their annual decoupling filings. Maui Electric amended its annual decoupling filing on May 22, 2017, to update and revise certain cost information. On May 31, 2017, the PUC approved the annual decoupling filings for tariffed rates that are effective from June 1, 2017 through May 31, 2018. The net annual incremental amounts to be collected (refunded) are as follows:



($ in millions)	Hawaiian Electric			Hawaii Electric Light			Maui Electric
2017 Annual incremental RAM adjusted revenues	$	12.7		$	3.2		$	1.6
Annual change in accrued RBA balance as of December 31, 2016 (and associated revenue taxes) (refunded)	$	(2.4	)	$	(2.5	)	$	(0.2	)
Net annual incremental amount to be collected under the tariffs	$	10.3		$	0.7		$	1.4

Most recent rate proceedings.

Hawaiian Electric consolidated 2014 and 2017 test year rate cases. On June 27, 2014, Hawaiian Electric submitted its 2014 test year rate case filing, stating that it intended to forgo the opportunity to seek a general rate increase in base rates. On December 16, 2016, Hawaiian Electric filed an application with the PUC for a general rate increase of $106.4 million over revenues at current effective rates, based on a 2017 test year and an 8.28% rate of return (which incorporated a ROACE of 10.6%).

On December 23, 2016, the PUC issued an order consolidating the Hawaiian Electric filings for the 2014 and 2017 test year rate cases. The order concluded that Hawaiian Electric's 2014 rate case filing did not comply with the requirement in the decoupling order that Hawaiian Electric file an application for a general rate case every three years.

On November 15, 2017, Hawaiian Electric and the Consumer Advocate filed a Stipulated Settlement Letter indicating that it had resolved all issues in this proceeding, except for the narrow issue on whether the stipulated ROACE should be reduced from 9.75% (by up to 25 basis points) based solely on the impact of decoupling. Hawaiian Electric and the Consumer Advocate also agreed to certain revisions to the ECAC tariff, including increasing the LSFO target sales heat rate, the pass-through of minor energy generation for 100% fuel recovery, and the removal of target heat rates for the company-owned minor energy composite costs for diesel and biodiesel fuel.

On December 15, 2017, the PUC issued an interim decision and order (Interim D&O), which approved the interim rate relief set forth in Hawaiian Electric’s statement of probable entitlement filed on November 17, 2017, including the ROR of 7.57% and the ROACE of 9.50% and a capital structure that includes 57% common equity, but made the following downward adjustments: (1) reduced (estimated to be approximately $6 million in revenue requirement) the pension regulatory asset (and increased the post-retirement benefits other than pension (OPEB) regulatory liability) (net pension regulatory asset) that have accrued under the PUC-approved tracking mechanisms since Hawaiian Electric’s last base rate increase in 2011 and the corresponding amortization expense, based on the PUC’s rationale that by Hawaiian Electric’s request to forego a base rate increase in the 2014 test year rate case, Hawaiian Electric relinquished a part of the recovery of the net pension regulatory asset that would have been recovered as a result of the 2014 rate case; (2) reduced (estimated to be approximately $5 million in revenue requirement) the pension contribution regulatory asset established in 2011 by $17.2 million and the corresponding amortization expense, based on a finding that Hawaiian Electric should have begun amortizing the regulatory asset on July 22, 2011, the date of the interim rate increase for Hawaiian Electric’s 2011 test year rate case; and (3) a “hold-back” of $5 million relating to baseline plant additions from 2014 through the 2017 test year, pending further examination of the prudence of Hawaiian Electric’s baseline plant additions. The interim D&O indicated that the PUC intends to further review Hawaiian Electric’s ROACE, Hawaiian Electric’s change in methodology for allocation of indirect costs, modifications to the ECAC and the components of target revenues used in the decoupling mechanism in the remainder of the proceeding.

Hawaiian Electric filed a motion for partial reconsideration of the Interim D&O, and on January 18, 2018, the PUC issued an Order (January 18 Order) irrevocably reversing the net pension regulatory asset adjustment in the Interim D&O, among other things, and instead imposed a hold back of $6 million of revenues, and indicated the PUC will verify whether the $6 million is the appropriate revenue reduction amount to benefit customers; however no further adjustment will be made to the net pension regulatory asset in the final D&O.

On January 11, 2018, the PUC issued an amended procedural order, which narrowed the statement of issues for the remainder of the proceeding and included the issue of what adjustments are necessary as a result of the Tax Cuts and Jobs Act (Tax Act). Evidentiary hearings are now scheduled for March 12 to 16, 2018.

On January 19, 2018, Hawaiian Electric submitted revised schedules and revised revenue requirements, reflecting the Interim D&O and January 18 Order. The revised revenues requirements, based on an overall rate of return of 7.57%, which reflects a capital structure that includes 57% common equity and ROACE for interim purposes of 9.5%, and the adjustments resulting from the Interim D&O, indicated an interim increase in revenues of $36 million. On February 9, 2018, the PUC approved Hawaiian Electric’s proposed interim schedules, reflecting an interim increase of $36 million, to be effective on February 16, 2018.

On February 14, 2018, the Parties and Participants filed simultaneous testimonies on the amended statement of issues. Hawaiian Electric’s testimonies proposed an increase of $15.6 million over revenues at current effective rates, which reflected an ROACE of 9.75%, an alternative proposed treatment of the pension contributions regulatory asset and the reduction of the corporate income tax rate from 35% to 21% due to the Tax Act, and excluded any disallowance of baseline plant.

Maui Electric consolidated 2015 and 2018 test year rate cases. On December 30, 2014, Maui Electric submitted its 2015 test year rate case filing, proposing no change to its base rates. On June 9, 2017, Maui Electric filed a notice of intent with the PUC to file a general rate case application by December 30, 2017 for a 2018 test year. On August 4, 2017, the PUC issued an order consolidating the Maui Electric filings for the 2015 and 2018 test year rate cases. Similar to the PUC’s conclusion regarding Hawaiian Electric’s 2014 rate case filing, the order also found and concluded that Maui Electric’s 2015 rate case filing did not comply with the Mandatory Triennial Rate Case Cycle requirement in the decoupling order that Maui Electric file an application for a general rate case every three years. The order further stated that the PUC is not initiating an investigation/enforcement proceeding against Maui Electric regarding its compliance with the decoupling order, and the transfer and consolidation of Maui Electric’s 2015 rate case with the 2018 rate case is intended to ensure that ratepayers receive the attendant benefits of Maui Electric’s decision to voluntarily forgo a general rate increase in base rates for its mandated 2015 test year. The order stated that: “[T]he determination and disposition of any rates, accounts, adjustment mechanisms, and practices that would have been subject to review in the context of a 2015 test year rate case proceeding are subject to appropriate adjustment based on evidence and findings in the consolidated rate case proceeding.”

On October 12, 2017, Maui Electric filed its 2018 test year rate case application with the PUC for a general rate increase of $30.1 million over revenues at current effective rates (for a 9.3% increase in revenues) based on a 2018 test year and an 8.05% rate of return (which incorporates a ROACE of 10.6% and a capital structure that includes a 56.9% common equity capitalization) on a $473 million rate base. The requested rate increase is primarily to pay for operating costs, including system upgrades to increase reliability, integrate more renewable energy, and improve customer service. Further, Maui Electric requested that if a decision in a docket (filed in December 2016) seeking approval of new depreciation rates is rendered prior to new rates being established in the Maui Electric 2018 test year rate case, the new electric rates be based on the depreciation rates as a result of that docket. If the proposed depreciation rates are used to calculate Maui Electric’s 2018 test year revenue requirement, the requested revenue increase would be $46.6 million (14.3%) over revenues at current effective rates.

Maui Electric filed an exhibit with information responding to the PUC’s consolidation order, and explained why its forgoing of a general rate increase in the 2015 test year should not result in any further adjustments to Maui Electric’s revenue requirement in the 2018 test year.

On December 26, 2017, the PUC issued a procedural schedule that includes Maui Electric and the Consumer Advocate submitting statements of probable entitlement on June 25, 2018, an evidentiary hearing from July 16 to 20, 2018, and an interim D&O on August 13, 2018.

Hawaii Electric Light 2016 test year rate case. On September 19, 2016, Hawaii Electric Light filed an application with the PUC for a general rate increase of $19.3 million, based on an 8.44% rate of return (which incorporated a ROACE of 10.60%).

On July 11, 2017, Hawaii Electric Light and the Consumer Advocate filed a Stipulated Settlement Letter, which documented agreements reached with the Consumer Advocate on all of the issues in the proceeding, except for whether the stipulated ROACE should be reduced from 9.75% (by up to 25 basis points) based solely on the impact of decoupling, considering current circumstances and relevant precedents. On August 21, 2017, the PUC issued an order granting an interim rate increase of $9.9 million based on the Stipulated Settlement and an ROACE of 9.5% and subject to refund with interest, if it exceeds amounts allowed in a final order. The interim rate increase was implemented on August 31, 2017.

Tax Cuts and Jobs Act impact on utility rates. On January 26, 2018, the PUC issued an order opening a proceeding to investigate the impacts of the Tax Cuts and Jobs Act of 2017 (Tax Act), naming multiple public utilities in Hawaii as parties to the proceeding. The order directed the parties to immediately begin tracking the impacts of the Tax Act, as of January 1, 2018, and to use deferred regulatory accounting practices, such as the use of regulatory assets and liabilities, to record the differences resulting from the Tax Act and what would have been recorded if the Tax Act did not go into effect. The order further stated that the PUC will provide further direction regarding final utility rate adjustments as a result of the Tax Act through subsequent orders in dockets outside of this proceeding (i.e., in rate cases or order to show cause proceedings).

In accordance with the order, on January 31, 2018, the Utilities filed estimated impacts of the Tax Act. The filing stated that the lower corporate income tax rate would decrease the Utilities’ income tax expense starting in 2018 and accordingly reduce the income tax expense, net of rate base impacts, in revenue requirements by approximately $28.0 million for Hawaiian Electric, $6.6 million for Hawaii Electric Light, and $2.5 million for Maui Electric. The filing stated that the Utilities would propose reflecting the reduction in income tax expense into rates through the Hawaiian Electric 2017 rate case interim increase, the Hawaii Electric Light 2016 rate case interim increase, and through a separate sur-credit in advance of the interim D&O in the Maui Electric 2018 rate case. The filing further provided estimates of the impacts on revenue requirements due to the amortization of the credit for excess accumulated deferred income taxes (ADIT) and the offsetting rate base impact of a decrease in ADIT from the loss of bonus depreciation and the loss of the exclusion from taxability of contributions in aid of construction received from governmental entities (included in the income tax expense impact above). The Utilities indicated that they will track all of these impacts and begin to roll them into rates at a future date, when the methodology of the return to customers is decided. The Utilities will consider additional tax items as the Internal Revenue Service and Joint Committee on Taxation issue additional guidance.

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

Hawaiian Electric also unconditionally guarantees Hawaii Electric Light’s and Maui Electric’s obligations (a) to the State of Hawaii for the repayment of principal and interest on Special Purpose Revenue Bonds issued for the benefit of Hawaii Electric Light and Maui Electric, (b) under their respective private placement note agreements and the Hawaii Electric Light notes and Maui Electric notes issued thereunder (see Hawaiian Electric and Subsidiaries' Consolidated Statements of Capitalization) and (c) relating to the trust preferred securities of Trust III (see above under unconsolidated variable interest entities). 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.

Consolidating statement of income

Year ended December 31, 2017



(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments			Hawaiian Electric Consolidated
Revenues	$	1,598,504		333,467		325,678		—	(83	)	[1]	$	2,257,566
Expenses
Fuel oil	408,204			63,894		115,670		—	—			587,768
Purchased power	454,189			87,772		44,673		—	—			586,634
Other operation and maintenance	279,440			66,277		72,193		—	—			417,910
Depreciation	130,889			38,741		23,154		—	—			192,784
Taxes, other than income taxes	152,933			31,184		30,832		—	—			214,949
Total expenses	1,425,655			287,868		286,522		—	—			2,000,045
Operating income	172,849			45,599		39,156		—	(83	)		257,521
Allowance for equity funds used during construction	10,896			554		1,033		—	—			12,483
Equity in earnings of subsidiaries	38,057			—		—		—	(38,057	)	[2]	—
Interest expense and other charges, net	(48,277		)	(11,799	)	(9,644	)	—	83		[1]	(69,637		)
Allowance for borrowed funds used during construction	4,089			238		451		—	—			4,778
Income before income taxes	177,614			34,592		30,996		—	(38,057	)		205,145
Income taxes	56,583			13,912		12,704		—	—			83,199
Net income	121,031			20,680		18,292		—	(38,057	)		121,946
Preferred stock dividends of subsidiaries	—			534		381		—	—			915
Net income attributable to Hawaiian Electric	121,031			20,146		17,911		—	(38,057	)		121,031
Preferred stock dividends of Hawaiian Electric	1,080			—		—		—	—			1,080
Net income for common stock	$	119,951		20,146		17,911		—	(38,057	)		$	119,951

Consolidating statement of comprehensive income

Year ended December 31, 2017



(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments			Hawaiian Electric Consolidated
Net income for common stock	$	119,951		20,146		17,911		—	(38,057	)		$	119,951
Other comprehensive income (loss), net of taxes:
Derivatives qualified as cash flow hedges:
Reclassification adjustment to net income, net of taxes	454			—		—		—	—			454
Retirement benefit plans:
Net gains arising during the period, net of taxes	63,105			3,093		7,329		—	(10,422	)	[1]	63,105
Adjustment for amortization of prior service credit and net losses recognized during the period in net periodic benefit cost, net of tax benefits	14,477			1,903		1,619		—	(3,522	)	[1]	14,477
Reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of taxes	(78,724		)	(4,994	)	(9,003	)	—	13,997		[1]	(78,724		)
Other comprehensive income (loss), net of taxes	(688		)	2		(55	)	—	53			(688		)
Comprehensive income attributable to common shareholder	$	119,263		20,148		17,856		—	(38,004	)		$	119,263

Consolidating statement of income

Year ended December 31, 2016



(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments			Hawaiian Electric Consolidated
Revenues	$	1,474,384		311,385		308,705		—	(106	)	[1]	$	2,094,368
Expenses
Fuel oil	305,359			55,094		94,251		—	—			454,704
Purchased power	431,009			81,018		50,713		—	—			562,740
Other operation and maintenance	273,176			63,897		68,460		—	—			405,533
Depreciation	126,086			37,797		23,178		—	—			187,061
Taxes, other than income taxes	141,615			29,017		29,230		—	—			199,862
Total expenses	1,277,245			266,823		265,832		—	—			1,809,900
Operating income	197,139			44,562		42,873		—	(106	)		284,468
Allowance for equity funds used during construction	6,659			765		901		—	—			8,325
Equity in earnings of subsidiaries	42,391			—		—		—	(42,391	)	[2]	—
Interest expense and other charges, net	(45,839		)	(11,555	)	(9,536	)		106		[1]	(66,824		)
Allowance for borrowed funds used during construction	2,484			294		366		—	—			3,144
Income before income taxes	202,834			34,066		34,604		—	(42,391	)		229,113
Income taxes	59,437			12,277		13,087		—	—			84,801
Net income	143,397			21,789		21,517		—	(42,391	)		144,312
Preferred stock dividends of subsidiaries	—			534		381		—	—			915
Net income attributable to Hawaiian Electric	143,397			21,255		21,136		—	(42,391	)		143,397
Preferred stock dividends of Hawaiian Electric	1,080			—		—		—	—			1,080
Net income for common stock	$	142,317		21,255		21,136		—	(42,391	)		$	142,317

Consolidating statement of comprehensive income

Year ended December 31, 2016



(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments			Hawaiian Electric Consolidated
Net income for common stock	$	142,317		21,255		21,136		—	(42,391	)		$	142,317
Other comprehensive income (loss), net of taxes:
Derivatives qualified as cash flow hedges:
Effective portion of foreign currency hedge net unrealized losses arising during the period, net of tax benefits	(281		)	—		—		—	—			(281		)
Reclassification adjustment to net income, net of taxes	(173		)	—		—		—	—			(173		)
Retirement benefit plans:
Net losses arising during the period, net of tax benefits	(42,631		)	(5,141	)	(5,447	)	—	10,588		[1]	(42,631		)
Adjustment for amortization of prior service credit and net losses recognized during the period in net periodic benefit cost, net of tax benefits	13,254			1,718		1,549		—	(3,267	)	[1]	13,254
Reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of taxes	28,584			3,269		3,852		—	(7,121	)	[1]	28,584
Other comprehensive loss, net of tax benefits	(1,247		)	(154	)	(46	)	—	200			(1,247		)
Comprehensive income attributable to common shareholder	$	141,070		21,101		21,090		—	(42,191	)		$	141,070

Consolidating statement of income

Year ended December 31, 2015



(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments			Hawaiian Electric Consolidated
Revenues	$	1,644,181		345,549		345,517		—	(81	)	[1]	$	2,335,166
Expenses
Fuel oil	458,069			71,851		124,680		—	—			654,600
Purchased power	440,983			97,503		55,610		—	—			594,096
Other operation and maintenance	284,583			63,098		65,408		—	—			413,089
Depreciation	117,682			37,250		22,448		—	—			177,380
Taxes, other than income taxes	156,871			32,312		32,702		—	—			221,885
Total expenses	1,458,188			302,014		300,848		—	—			2,061,050
Operating income	185,993			43,535		44,669		—	(81	)		274,116
Allowance for equity funds used during construction	5,641			604		683		—	—			6,928
Equity in earnings of subsidiaries	42,920			—		—		—	(42,920	)	[2]	—
Interest expense and other charges, net	(45,899		)	(10,773	)	(9,779	)	—	81		[1]	(66,370		)
Allowance for borrowed funds used during construction	1,967			215		275		—	—			2,457
Income before income taxes	190,622			33,581		35,848		—	(42,920	)		217,131
Income taxes	53,828			12,292		13,302		—	—			79,422
Net income	136,794			21,289		22,546		—	(42,920	)		137,709
Preferred stock dividends of subsidiaries	—			534		381		—	—			915
Net income attributable to Hawaiian Electric	136,794			20,755		22,165		—	(42,920	)		136,794
Preferred stock dividends of Hawaiian Electric	1,080			—		—		—	—			1,080
Net income for common stock	$	135,714		20,755		22,165		—	(42,920	)		$	135,714

Consolidating statement of comprehensive income

Year ended December 31, 2015



(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments			Hawaiian Electric Consolidated
Net income for common stock	$	135,714		20,755		22,165		—	(42,920	)		$	135,714
Other comprehensive income (loss), net of taxes:
Retirement benefit plans:
Net gains (losses) arising during the period, net of taxes	5,638			(2,710	)	(1,352	)	—	4,062		[1]	5,638
Adjustment for amortization of prior service credit and net losses recognized during the period in net periodic benefit cost, net of tax benefits	20,381			2,728		2,503		—	(5,231	)	[1]	20,381
Reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of tax benefits	(25,139		)	104		(1,107	)	—	1,003		[1]	(25,139		)
Other comprehensive income, net of taxes	880			122		44		—	(166	)		880
Comprehensive income attributable to common shareholder	$	136,594		20,877		22,209		—	(43,086	)		$	136,594

Consolidating balance sheet

December 31, 2017



(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments			Hawaiian Electric Consolidated
Assets
Property, plant and equipment
Utility property, plant and equipment
Land	$	43,972		6,189		3,016		—	—			$	53,177
Plant and equipment	4,492,568			1,299,920		1,154,075		—	—			6,946,563
Less accumulated depreciation	(1,451,612		)	(528,024	)	(496,716	)	—	—			(2,476,352		)
Construction in progress	245,995			11,922		25,322		—	—			283,239
Utility property, plant and equipment, net	3,330,923			790,007		685,697		—	—			4,806,627
Nonutility property, plant and equipment, less accumulated depreciation	5,933			115		1,532		—	—			7,580
Total property, plant and equipment, net	3,336,856			790,122		687,229		—	—			4,814,207
Investment in wholly-owned subsidiaries, at equity	557,013			—		—		—	(557,013	)	[2]	—
Current assets
Cash and cash equivalents	2,059			4,025		6,332		101	—			12,517
Advances to affiliates	—			—		12,000		—	(12,000	)	[1]	—
Customer accounts receivable, net	86,987			22,510		18,392		—	—			127,889
Accrued unbilled revenues, net	77,176			15,940		13,938		—	—			107,054
Other accounts receivable, net	11,376			2,268		1,210		—	(7,691	)	[1]	7,163
Fuel oil stock, at average cost	64,972			8,698		13,203		—	—			86,873
Materials and supplies, at average cost	28,325			8,041		18,031		—	—			54,397
Prepayments and other	17,928			4,514		2,913		—	—			25,355
Regulatory assets	76,203			5,038		7,149		—	—			88,390
Total current assets	365,026			71,034		93,168		101	(19,691	)		509,638
Other long-term assets
Regulatory assets	557,464			122,783		100,660		—	—			780,907
Unamortized debt expense	436			77		98		—	—			611
Other	59,721			16,234		14,963		—	—			90,918
Total other long-term assets	617,621			139,094		115,721		—	—			872,436
Total assets	$	4,876,516		1,000,250		896,118		101	(576,704	)		$	6,196,281
Capitalization and liabilities
Capitalization
Common stock equity	$	1,845,283		286,647		270,265		101	(557,013	)	[2]	$	1,845,283
Cumulative preferred stock–not subject to mandatory redemption	22,293			7,000		5,000		—	—			34,293
Long-term debt, net	924,979			202,701		190,836		—	—			1,318,516
Total capitalization	2,792,555			496,348		466,101		101	(557,013	)		3,198,092
Current liabilities
Current portion of long-term debt	29,978			10,992		8,993		—	—			49,963
Short-term borrowings-non-affiliate	4,999			—		—		—	—			4,999
Short-term borrowings-affiliate	12,000			—		—		—	(12,000	)	[1]	—
Accounts payable	121,328			17,855		20,427		—	—			159,610
Interest and preferred dividends payable	15,677			4,174		2,735		—	(11	)	[1]	22,575
Taxes accrued	133,839			34,950		30,312		—	—			199,101
Regulatory liabilities	607			1,245		1,549		—	—			3,401
Other	43,121			9,818		14,197		—	(7,680	)	[1]	59,456
Total current liabilities	361,549			79,034		78,213		—	(19,691	)		499,105
Deferred credits and other liabilities
Deferred income taxes	281,223			56,955		55,863		—	—			394,041
Regulatory liabilities	613,329			169,139		94,901		—	—			877,369
Unamortized tax credits	59,039			16,167		15,163		—	—			90,369
Defined benefit pension and other postretirement benefit plans liability	340,983			66,447		65,518		—	—			472,948
Other	61,738			19,276		17,675		—	—			98,689
Total deferred credits and other liabilities	1,356,312			327,984		249,120		—	—			1,933,416
Contributions in aid of construction	366,100			96,884		102,684		—	—			565,668
Total capitalization and liabilities	$	4,876,516		1,000,250		896,118		101	(576,704	)		$	6,196,281

Consolidating balance sheet

December 31, 2016



(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments			Hawaiian Electric Consolidated
Assets
Property, plant and equipment
Utility property, plant and equipment
Land	$	43,956		6,181		3,016		—	—			$	53,153
Plant and equipment	4,241,060			1,255,185		1,109,487		—	—			6,605,732
Less accumulated depreciation	(1,382,972		)	(507,666	)	(478,644	)	—	—			(2,369,282		)
Construction in progress	180,194			12,510		19,038		—	—			211,742
Utility property, plant and equipment, net	3,082,238			766,210		652,897		—	—			4,501,345
Nonutility property, plant and equipment, less accumulated depreciation	5,760			115		1,532		—	—			7,407
Total property, plant and equipment, net	3,087,998			766,325		654,429		—	—			4,508,752
Investment in wholly-owned subsidiaries, at equity	550,946			—		—		—	(550,946	)	[2]	—
Current assets
Cash and cash equivalents	61,388			10,749		2,048		101	—			74,286
Advances to affiliates	—			3,500		10,000		—	(13,500	)	[1]	—
Customer accounts receivable, net	86,373			20,055		17,260		—	—			123,688
Accrued unbilled revenues, net	65,821			13,564		12,308		—	—			91,693
Other accounts receivable, net	7,652			2,445		1,416		—	(6,280	)	[1]	5,233
Fuel oil stock, at average cost	47,239			8,229		10,962		—	—			66,430
Materials and supplies, at average cost	29,928			7,380		16,371		—	—			53,679
Prepayments and other	16,502			5,352		2,179		—	(933	)	[3]	23,100
Regulatory assets	60,185			3,483		2,364		—	—			66,032
Total current assets	375,088			74,757		74,908		101	(20,713	)		504,141
Other long-term assets
Regulatory assets	662,232			120,863		108,324		—	—			891,419
Unamortized debt expense	151			23		34		—	—			208
Other	43,743			13,573		13,592		—	—			70,908
Total other long-term assets	706,126			134,459		121,950		—	—			962,535
Total assets	$	4,720,158		975,541		851,287		101	(571,659	)		$	5,975,428
Capitalization and liabilities
Capitalization
Common stock equity	$	1,799,787		291,291		259,554		101	(550,946	)	[2]	$	1,799,787
Cumulative preferred stock–not subject to mandatory redemption	22,293			7,000		5,000		—	—			34,293
Long-term debt, net	915,437			213,703		190,120		—	—			1,319,260
Total capitalization	2,737,517			511,994		454,674		101	(550,946	)		3,153,340
Current liabilities
Short-term borrowings-affiliate	13,500			—		—		—	(13,500	)	[1]	—
Accounts payable	86,369			18,126		13,319		—	—			117,814
Interest and preferred dividends payable	15,761			4,206		2,882		—	(11	)	[1]	22,838
Taxes accrued	120,176			28,100		25,387		—	(933	)	[3]	172,730
Regulatory liabilities	—			2,219		1,543		—	—			3,762
Other	41,352			7,637		12,501		—	(6,269	)	[1]	55,221
Total current liabilities	277,158			60,288		55,632		—	(20,713	)		372,365
Deferred credits and other liabilities
Deferred income taxes	524,433			108,052		100,911		—	263		[1]	733,659
Regulatory liabilities	281,112			93,974		31,845		—	—			406,931
Unamortized tax credits	57,844			15,994		15,123		—	—			88,961
Defined benefit pension and other postretirement benefit plans liability	444,458			75,005		80,263		—	—			599,726
Other	49,191			13,024		14,969		—	(263	)	[1]	76,921
Total deferred credits and other liabilities	1,357,038			306,049		243,111		—	—			1,906,198
Contributions in aid of construction	348,445			97,210		97,870		—	—			543,525
Total capitalization and liabilities	$	4,720,158		975,541		851,287		101	(571,659	)		$	5,975,428

Consolidating statements of changes in common stock equity



(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	135,714			20,755		22,165		—	(42,920	)	135,714
Other comprehensive income, net of taxes	880			122		44		—	(166	)	880
Issuance of common stock, net of expenses	(8		)	—		(1	)	—	1		(8		)
Common stock dividends	(90,405		)	(10,021	)	(15,175	)	—	25,196		(90,405		)
Balance, December 31, 2015	$	1,728,325		292,702		263,725		101	(556,528	)	$	1,728,325
Net income for common stock	142,317			21,255		21,136		—	(42,391	)	142,317
Other comprehensive loss, net of tax benefits	(1,247		)	(154	)	(46	)	—	200		(1,247		)
Issuance of common stock, net of expenses	23,991			(5	)	—		—	5		23,991
Common stock dividends	(93,599		)	(22,507	)	(25,261	)	—	47,768		(93,599		)
Balance, December 31, 2016	$	1,799,787		291,291		259,554		101	(550,946	)	$	1,799,787
Net income for common stock	119,951			20,146		17,911		—	(38,057	)	119,951
Other comprehensive income (loss), net of taxes	(688		)	2		(55	)	—	53		(688		)
Issuance of common stock, net of expenses	14,000			4		4,801		—	(4,805	)	14,000
Common stock dividends	(87,767		)	(24,796	)	(11,946	)	—	36,742		(87,767		)
Balance, December 31, 2017	$	1,845,283		286,647		270,265		101	(557,013	)	$	1,845,283

Consolidating statement of cash flows

Year ended December 31, 2017



(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments			Hawaiian Electric Consolidated
Cash flows from operating activities
Net income	$	121,031		20,680		18,292		—	(38,057	)	[2]	$	121,946
Adjustments to reconcile net income to net cash provided by operating activities
Equity in earnings of subsidiaries	(38,157		)	—		—		—	38,057		[2]	(100		)
Common stock dividends received from subsidiaries	36,867			—		—		—	(36,742	)	[2]	125
Depreciation of property, plant and equipment	130,889			38,741		23,154		—	—			192,784
Other amortization	2,398			3,225		2,875		—	—			8,498
Deferred income taxes	26,342			3,954		8,004		—	(263	)	[1]	38,037
Allowance for equity funds used during construction	(10,896		)	(554	)	(1,033	)	—	—			(12,483		)
Other	(1,154		)	430		(342	)	—	—			(1,066		)
Changes in assets and liabilities:
Decrease (increase) in accounts receivable	1,817			(359	)	45		—	1,411		[1]	2,914
Increase in accrued unbilled revenues	(11,355		)	(2,376	)	(1,630	)	—	—			(15,361		)
Increase in fuel oil stock	(17,733		)	(469	)	(2,241	)	—	—			(20,443		)
Decrease (increase) in materials and supplies	1,603			(661	)	(1,660	)	—	—			(718		)
Increase in regulatory assets	(8,395		)	(4,007	)	(4,854	)	—	—			(17,256		)
Increase (decrease) in accounts payable	23,519			(3,547	)	5,762		—	—			25,734
Change in prepaid and accrued income taxes, tax credits and revenue taxes	16,716			7,961		5,362		—	(177	)	[1]	29,862
Increase (decrease) in defined benefit pension and other postretirement benefit plans liability	709			52		(157	)	—	—			604
Change in other assets and liabilities	(16,213		)	(433	)	166		—	(1,411	)	[1]	(17,891		)
Net cash provided by operating activities	257,988			62,637		51,743		—	(37,182	)		335,186
Cash flows from investing activities
Capital expenditures	(339,279		)	(52,077	)	(50,242	)	—	—			(441,598		)
Contributions in aid of construction	57,527			4,293		2,913		—	—			64,733
Advances from (to) affiliates	—			3,500		(2,000	)	—	(1,500	)	[1]	—
Other	(1,711		)	649		400		—	5,240		[1], [2]	4,578
Net cash used in investing activities	(283,463		)	(43,635	)	(48,929	)	—	3,740			(372,287		)
Cash flows from financing activities
Common stock dividends	(87,767		)	(24,796	)	(11,946	)	—	36,742		[2]	(87,767		)
Preferred stock dividends of Hawaiian Electric and subsidiaries	(1,080		)	(534	)	(381	)	—	—			(1,995		)
Proceeds from issuance of common stock	14,000			—		4,800		—	(4,800	)	[2]	14,000
Proceeds from issuance of long-term debt	202,000			28,000		85,000		—	—			315,000
Funds transferred for redemption of special purpose revenue bonds	(162,000		)	(28,000	)	(75,000	)	—	—			(265,000		)
Net increase in short-term borrowings from non-affiliates and affiliate with original maturities of three months or less	3,499			—		—		—	1,500		[1]	4,999
Other	(2,506		)	(396	)	(1,003	)	—	—			(3,905		)
Net cash used in financing activities	(33,854		)	(25,726	)	1,470		—	33,442			(24,668		)
Net increase (decrease) in cash and cash equivalents	(59,329		)	(6,724	)	4,284		—	—			(61,769		)
Cash and cash equivalents, January 1	61,388			10,749		2,048		101	—			74,286
Cash and cash equivalents, December 31	$	2,059		4,025		6,332		101	—			$	12,517

Consolidating statement of cash flows

Year ended December 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	$	143,397		21,789		21,517		—	(42,391	)	[2]	$	144,312
Adjustments to reconcile net income to net cash provided by operating activities
Equity in earnings of subsidiaries	(42,491		)	—		—		—	42,391		[2]	(100		)
Common stock dividends received from subsidiaries	47,843			—		—		—	(47,768	)	[2]	75
Depreciation of property, plant and equipment	126,086			37,797		23,178		—	—			187,061
Other amortization	2,979			1,817		2,139		—	—			6,935
Deferred income taxes	54,721			7,027		12,661		—	(23	)	[1]	74,386
Allowance for equity funds used during construction	(6,659		)	(765	)	(901	)	—	—			(8,325		)
Other	(2,517		)	(750	)	(433	)	—	—			(3,700		)
Changes in assets and liabilities:
Decrease (increase) in accounts receivable	10,175			(718	)	1,776		—	(2,682	)	[1]	8,551
Increase in accrued unbilled revenues	(5,741		)	(1,033	)	(410	)	—	—			(7,184		)
Decrease in fuel oil stock	2,216			81		2,489		—	—			4,786
Decrease (increase) in materials and supplies	993			(515	)	272		—	—			750
Increase in regulatory assets	(16,161		)	(1,243	)	(869	)	—	—			(18,273		)
Increase (decrease) in accounts payable	(10,247		)	768		(1,135	)	—	—			(10,614		)
Change in prepaid and accrued income taxes, tax credits and revenue taxes	2,933			2,645		(3,478	)	—	23		[1]	2,123
Increase (decrease) in defined benefit pension and other postretirement benefit plans liability	599			53		(168	)	—	—			484
Change in other assets and liabilities	(11,682		)	(78	)	(2,272	)	—	2,682		[1]	(11,350		)
Net cash provided by operating activities	296,444			66,875		54,366		—	(47,768	)		369,917
Cash flows from investing activities
Capital expenditures	(236,425		)	(51,344	)	(32,668	)	—	—			(320,437		)
Contributions in aid of construction	23,611			3,412		3,077		—	—			30,100
Advances from (to) affiliates	—			12,000		(2,500	)	—	(9,500	)	[1]	—
Other	1,932			175		31		—	—			2,138
Net cash used in investing activities	(210,882		)	(35,757	)	(32,060	)	—	(9,500	)		(288,199		)
Cash flows from financing activities
Common stock dividends	(93,599		)	(22,507	)	(25,261	)	—	47,768		[2]	(93,599		)
Preferred stock dividends of Hawaiian Electric and subsidiaries	(1,080		)	(534	)	(381	)	—	—			(1,995		)
Proceeds from the issuance of common stock	24,000			—		—		—	—			24,000
Proceeds from the issuance of long-term debt	40,000			—		—		—	—			40,000
Net decrease in short-term borrowings from non-affiliates and affiliate with original maturities of three months or less	(9,500		)	—		—		—	9,500		[1]	—
Other	(276		)	(10	)	(1	)	—	—			(287		)
Net cash used in financing activities	(40,455		)	(23,051	)	(25,643	)	—	57,268			(31,881		)
Net increase (decrease) in cash and cash equivalents	45,107			8,067		(3,337	)	—	—			49,837
Cash and cash equivalents, January 1	16,281			2,682		5,385		101	—			24,449
Cash and cash equivalents, December 31	$	61,388		10,749		2,048		101	—			$	74,286

Consolidating statement of cash flows

Year ended December 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	$	136,794		21,289		22,546		—	(42,920	)	[2]	$	137,709
Adjustments to reconcile net income to net cash provided by operating activities
Equity in earnings of subsidiaries	(43,020		)	—		—		—	42,920		[2]	(100		)
Common stock dividends received from subsidiaries	25,296			—		—		—	(25,196	)	[2]	100
Depreciation of property, plant and equipment	117,682			37,250		22,448		—	—			177,380
Other amortization	4,678			2,124		2,137		—	—			8,939
Impairment of assets	4,573			724		724		—	—			6,021
Deferred income taxes	53,338			8,295		13,707		—	286		[1]	75,626
Allowance for equity funds used during construction	(5,641		)	(604	)	(683	)	—	—			(6,928		)
Other	8,687			(1,949	)	(222	)	—	—			6,516
Changes in assets and liabilities:
Decrease in accounts receivable	15,652			3,420		4,617		—	38		[1]	23,727
Decrease in accrued unbilled revenues	29,733			4,593		5,767		—	—			40,093
Decrease in fuel oil stock	25,060			5,490		4,280		—	—			34,830
Decrease (increase) in materials and supplies	2,233			(201	)	789		—	—			2,821
Decrease (increase) in regulatory assets	(20,356		)	(3,930	)	104		—	—			(24,182		)
Decrease in accounts payable	(42,751		)	(6,425	)	(5,379	)	—	—			(54,555		)
Change in prepaid and accrued income taxes, tax credits and revenue taxes	(50,382		)	(6,166	)	(6,548	)	—	—			(63,096		)
Decrease in defined benefit pension and other postretirement benefit plans liability	870			(161	)	416		—	—			1,125
Change in other assets and liabilities	(24,197		)	(3,545	)	(4,554	)	—	(324	)	[1]	(32,620		)
Net cash provided by operating activities	238,249			60,204		60,149		—	(25,196	)		333,406
Cash flows from investing activities
Capital expenditures	(267,621		)	(48,645	)	(33,895	)	—	—			(350,161		)
Contributions in aid of construction	35,955			2,160		2,124		—	—			40,239
Advances from (to) affiliates	16,100			(15,500	)	(7,500	)	—	6,900		[1]	—
Other	924			132		84		—	—			1,140
Net cash used in investing activities	(214,642		)	(61,853	)	(39,187	)	—	6,900			(308,782		)
Cash flows from financing activities
Common stock dividends	(90,405		)	(10,021	)	(15,175	)	—	25,196		[2]	(90,405		)
Preferred stock dividends of Hawaiian Electric and subsidiaries	(1,080		)	(534	)	(381	)	—	—			(1,995		)
Proceeds from the issuance of long-term debt	50,000			25,000		5,000		—	—			80,000
Net increase (decrease) in short-term borrowings from non-affiliates and affiliate with original maturities of three months or less	23,000			(10,500	)	(5,600	)	—	(6,900	)	[1]	—
Other	(1,257		)	(226	)	(54	)	—	—			(1,537		)
Net cash used in financing activities	(19,742		)	3,719		(16,210	)	—	18,296			(13,937		)
Net increase in cash and cash equivalents	3,865			2,070		4,752		—	—			10,687
Cash and cash equivalents, January 1	12,416			612		633		101	—			13,762
Cash and cash equivalents, December 31	$	16,281		2,682		5,385		101	—			$	24,449

Explanation of consolidating adjustments on consolidating schedules:


[1]	Eliminations of intercompany receivables and payables and other intercompany transactions.


[2]	Elimination of investment in subsidiaries, carried at equity.


[3]	Reclassification of accrued income taxes for financial statement presentation.