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Electric utility segment

3 Months Ended

Mar. 31, 2021

Electric utility subsidiary [Abstract]

Unconsolidated variable interest entities.

Power purchase agreements. As of March 31, 2021, the Utilities had five PPAs for firm capacity (including the Puna Geothermal Venture (PGV) PPA as PGV went offline in May 2018 due to lava flow on Hawaii Island, but returned to service with firm capacity of 13 MW in the first quarter of 2021) and other PPAs with independent power producers (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 are 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 condensed consolidated financial statements. Hamakua Energy is an indirect subsidiary of Pacific Current and is consolidated in HEI’s condensed consolidated financial statements.

For the other PPAs with 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 an obligation in the PPAs for the Utilities to absorb any variability of the IPPs, or the IPP was considered a “governmental organization,” and thus excluded from the scope of accounting standards for VIEs. The consolidation of any significant IPP could have a material effect on the unaudited condensed 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 to the IPP.

Commitments and contingencies.

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.

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


	Three months ended March 31
(in millions)		2021		2020
Kalaeloa		$	37	$	38
AES Hawaii		30		31
HPOWER		17		17
Hamakua Energy		11		13
Puna Geothermal Venture		4		—
Wind IPPs		29		28
Solar IPPs		12		11
Other IPPs 1		2		2
Total IPPs		$	142	$	140

1Includes hydro power and other PPAs

Kalaeloa Partners, L.P. Under a 1988 PPA, as amended, Hawaiian Electric is committed to purchase 208 MW of firm capacity from Kalaeloa. Hawaiian Electric and Kalaeloa continue 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. Hawaiian Electric and Kalaeloa have agreed that neither party will terminate the PPA (which has been subject to automatic extension on a month-to-month basis) prior to May 31, 2021, to allow for 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 ending September 2022, Hawaiian Electric agreed to purchase 180 MW of firm capacity from AES Hawaii. Hawaiian

Electric and AES Hawaii have been in dispute over an additional 9 MW of capacity. In February 2018, Hawaiian Electric reached agreement with AES Hawaii on an amendment to the PPA. However, in June 2018, the PUC issued an order suspending review of the amendment pending a Department of Health of the State of Hawaii (DOH) decision on AES Hawaii’s request for approval of its Emission Reduction Plan and partnership with Hawaiian Electric. If approved by the PUC, the amendment will resolve AES Hawaii’s claims related to the additional capacity.

Hu Honua Bioenergy, LLC (Hu Honua). In May 2012, Hawaii Electric Light signed a PPA, which the PUC approved in December 2013, with Hu Honua for 21.5 MW of renewable, dispatchable firm capacity fueled by locally grown biomass from a facility on the island of Hawaii. Under the terms of the PPA, the Hu Honua plant was scheduled to be in service in 2016. However, Hu Honua encountered construction and litigation delays, which resulted in an amended and restated PPA between Hawaii Electric Light and Hu Honua dated May 9, 2017. In July 2017, the PUC approved the amended and restated PPA, which becomes effective once the PUC’s order is final and non-appealable. In August 2017, the PUC’s approval was appealed by a third party. On May 10, 2019, the Hawaii Supreme Court issued a decision remanding the matter to the PUC for further proceedings consistent with the court’s decision which must include express consideration of greenhouse gas (GHG) emissions that would result from approving the PPA, whether the cost of energy under the PPA is reasonable in light of the potential for GHG emissions, and whether the terms of the PPA are prudent and in the public interest, in light of its potential hidden and long-term consequences. On June 20, 2019, the PUC issued an order reopening the docket for further proceedings, including re-examining all of the issues in the proceedings. On September 29, 2019, the PUC issued an order setting the procedural schedule for the matter and on December 20, 2019, issued an order modifying the procedural schedule. Pre-hearing matters were completed on March 6, 2020. On July 9, 2020, the PUC issued an order denying Hawaii Electric Light’s request to waive the amended and restated PPA from the PUC’s competitive bidding requirements and therefore, dismissed the request for approval of the amended and restated PPA without prejudice to possible participation in any future competitive bidding process. On July 20, 2020, Hu Honua filed a motion for reconsideration of the PUC’s order which was denied by the PUC on September 9, 2020. On September 16, 2020, Hu Honua filed its notice of appeal to the Hawaii Supreme Court of the PUC’s order denying Hu Honua’s motion for reconsideration. Oral arguments were held before the Supreme Court on April 22, 2021.

Molokai New Energy Partners (MNEP). In July 2018, the PUC approved Maui Electric’s PPA with MNEP to purchase solar energy from a photovoltaic (PV) plus battery storage project. The 4.88 MW PV and 3 MW Battery Energy Storage System project was to deliver no more than 2.64 MW at any time to the Molokai system. On March 25, 2020, MNEP filed a complaint in the United Stated District Court for the District of Hawaii against Maui Electric claiming breach of contract. On June 3, 2020, Maui Electric provided Notice of Default and Termination of the PPA to MNEP terminating the PPA with an effective date of July 10, 2020. Thereafter, MNEP filed an amended Complaint to include claims relating to the termination and Hawaiian Electric filed its Answer to the Amended Complaint on September 11, 2020, disputing the facts presented by MNEP and all claims within the original and amended complaint.

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 or community support 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. The ERP/EAM Implementation Project went live in October 2018. Hawaii Electric Light and Hawaiian Electric began to incorporate their portion of the deferred project costs in rate base and started the amortization over a 12-year period in January 2020 and November 2020, respectively. The PUC required the benefit savings of the project to be passed on to customers.

In February 2019, the PUC approved a methodology for passing the future cost saving benefits of the new ERP/EAM system to customers developed by the Utilities in collaboration with the Consumer Advocate. The Utilities filed a benefits clarification document on June 10, 2019, reflecting $150 million in future net O&M expense reductions and cost avoidance, and $96 million in capital cost reductions and tax savings over the 12-year service life. To the extent the reduction in O&M expense relates to amounts reflected in electric rates, the Utilities would reduce future rates for such amounts. In October 2019, the PUC approved the Utilities and the Consumer Advocate’s Stipulated Performance Metrics and Tracking Mechanism. As of March 31, 2021, the Utilities’ regulatory liability was $11.2 million ($6.5 million for Hawaiian Electric, $1.9 million for Hawaii Electric Light and $2.8 million for Maui Electric) for the O&M expense savings that are being amortized or to be included in future rates. As part of the settlement agreement approved in the Hawaiian Electric 2020 test year rate case, the regulatory liability for Hawaiian Electric will be amortized over five years, beginning in November 2020, and the O&M benefits for Hawaiian Electric will be considered flowed through to customers. As part of the PBR proceeding, the regulatory liability as of

December 31, 2020 of approximately $1.6 million and $2.3 million, respectively, for Hawaii Electric Light and Maui Electric will be flowed to customers as part of the customer dividend in the annual revenue adjustment in 2021.

At the PUC’s direction, the Utilities have been filing Semi-Annual Enterprise System Benefits (SAESB) reports on the achieved benefits savings. The most recent SAESB report was filed on February 26, 2021 for the period July 1 through December 31, 2020.

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 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 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 federal Environmental Protection Agency (EPA) has since identified environmental impacts in the subsurface soil at the Site. In cooperation with the DOH and EPA, Maui Electric further investigated the Site and the Adjacent Parcel to determine the extent of impacts of polychlorinated biphenyls (PCBs), residual fuel oils and other subsurface contaminants. Maui Electric has a reserve balance of $2.7 million as of March 31, 2021, representing the probable and reasonably estimable undiscounted cost for remediation of the Site and the Adjacent Parcel; however, final costs of remediation will depend on the cleanup approach implemented.

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 the costs of investigation and cleanup of PCBs contamination in sediment in the area offshore of the Waiau Power Plant as part of the Pearl Harbor Superfund Site. Hawaiian Electric was also required by the EPA to assess potential sources and extent of PCB contamination onshore at Waiau Power Plant.

As of March 31, 2021, the reserve account balance recorded by Hawaiian Electric to address the PCB contamination was $9.8 million. The reserve balance represents the probable and reasonably estimable undiscounted cost for the onshore and offshore investigation and remediation. The final remediation costs will depend on the actual onshore and offshore cleanup costs.

Regulatory proceedings

Current decoupling. Decoupling is a regulatory model that is intended to provide the Utilities with financial stability and facilitate meeting the State of Hawaii’s goals to transition to a clean energy economy and achieve an aggressive renewable portfolio standard. The current decoupling mechanism has the following major components: (1) monthly revenue balancing account (RBA) revenues or refunds for the difference between PUC-approved target revenues and recorded adjusted revenues, which delinks revenues from kWh sales, (2) rate adjustment mechanism (RAM) revenues for escalation in certain O&M expenses and rate base changes, (3) major project interim recovery (MPIR) component, (4) performance incentive mechanisms (PIMs), and (5) 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.

Performance-based regulation framework. On December 23, 2020, the PUC issued a D&O (PBR D&O) approving a new performance-based regulation framework (PBR Framework). Under the PBR Framework, the Utilities’ current decoupling will continue to be used with modifications, as described below. The existing cost recovery mechanisms will continue as currently implemented (e.g., the Energy Cost Recovery Clause (ECRC), Purchased Power Adjustment Clause (PPAC), Demand Side Management surcharge (DSM), Renewable Energy Infrastructure Program (REIP), Demand Response Adjustment Clause (DRAC), Pension and Other Post-Employment Benefits (OPEB) tracking mechanisms). In addition to annual revenues provided by the annual revenue adjustment (ARA), the Utilities may seek relief for extraordinary projects or programs through the Exceptional Project Recovery Mechanism (EPRM) (formerly known as the Major Project Interim Recovery (MPIR) adjustment mechanism) and earn financial rewards for exemplary performance as provided through a portfolio of Performance Incentive Mechanisms (PIMs) and Shared Savings Mechanisms (SSMs). The PBR Framework will incorporate a variety of other performance mechanisms, including Scorecards, Reported Metrics, and an expedited Pilot Process. The PBR Framework also contains a number of safeguards, including a symmetric Earnings Sharing Mechanism (ESM) which protects the Utilities and customers from excessive earnings or losses, as measured by the Utilities’ Return on Equity (ROE) and a Re-Opener

mechanism, under which the PUC will open an examination, at its discretion, to determine if adjustments or modifications to specific PBR mechanisms are appropriate.

Subsequent to the issuance of the PBR D&O, the PUC has initiated a collaborative process during which working groups consisting of the PUC, the Utilities and other parties have addressed the development of the proposed PBR implementation tariffs and the final details of the Prioritized Performance Mechanisms (i.e., Interconnection Approval PIM, Low-to-Moderate Income (LMI) Energy Efficiency PIM, Advanced Metering Infrastructure (AMI) Utilization PIM and the portfolio of Scorecards and Reported Metrics). The Utilities and other parties filed their refined proposals addressing the Prioritized Performance Mechanisms on March 16, 2021 and April 9, 2021. An order addressing the Prioritized Performance Mechanisms is expected to be issued in May 2021. Written tariffs to implement the PBR Framework have been either approved (see below) or will be submitted for PUC approval in May 2021 and expected to go into effect June 1, 2021.

Rate adjustment mechanism. The existing RAM is based on the lesser of: a) an inflationary adjustment for certain O&M expenses and return on investment for certain rate base changes, or b) cumulative annual compounded increase in Gross Domestic Product Price Index applied to annualized target revenues (the RAM Cap). Annualized target revenues may be reset upon the issuance of an interim or final decision and order (D&O) in a rate case. All Utilities were limited to the RAM Cap in 2020. Under the new PBR Framework, the ARA mechanism will replace the RAM, effective on June 1, 2021. The transition to the new ARA includes the continuation of the 2020 RAM Revenue adjustment.

Annual revenue adjustment mechanism. The PBR Framework established a five-year multi-year rate period during which there will be no general rate cases. Target revenues will be adjusted according to an index-driven ARA based on (i) an inflation factor, (ii) a predetermined X-factor to encompass productivity, which is set at zero, (iii) a Z-factor to account for exceptional circumstances not in the Utilities’ control and (iv) a customer dividend consisting of a negative adjustment of 0.22% compounded annually and a flow through of the “pre-PBR” savings commitment from the management audit recommendations developed in a prior docket.

As a result of an Order issued by the PUC pursuant to a motion for partial reconsideration the customer dividend for “pre-PBR” savings commitment portion to be delivered to customers will be at a rate of $6.6 million per year from 2021 to 2025, and the Enterprise Resource Planning system benefits savings of $3.9 million, to be delivered to customers in 2021. The implementation of the ARA is scheduled to occur on June 1, 2021.

Earnings sharing mechanism. A symmetrical ESM for actual return on equity outside of a 300 basis points dead band above and below a target ROE of 9.5%, which is the current authorized ROE for the Utilities. There is a 50/50 sharing between customers and Utilities for the actual earnings falling within 150 basis points outside of the dead band in either direction, and a 90/10 sharing for any further difference. A reopening or review of the PBR terms will be triggered if the Utilities credit rating outlook indicates a potential credit downgrade below investment grade status, or if its earned ROE enters the outer most tier of the ESM.

Major project interim recovery. On April 27, 2017, the PUC issued an order that provided guidelines for interim recovery of revenues to support major projects placed in service between general rate cases.

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 approved costs of 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 must 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 that 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.

On March 31, 2021, the Utilities submitted 2021 MPIR amounts totaling $21.8 million for the Schofield Generating Station ($17.6 million), West Loch PV Project ($3.3 million), and Grid Modernization Strategy Phase 1 project ($0.9 million for all three utilities) for the accrual of revenues effective January 1, 2021, that included the 2021 return on project amount (based on approved amounts) in rate base, depreciation and incremental O&M expenses. Subject to PUC approval, as part of the transition to the PBR framework, the Utilities will begin recovery of the annualized 2021 MPIR amounts effective June 1, 2021 through the RBA rate adjustment.

Exceptional project recovery mechanism. The existing MPIR adjustment mechanism was renamed EPRM to include deferred and O&M expense projects and to permit the Utilities to include the full amount of approved costs in the EPRM for recovery in the first year the project goes into service, pro-rated for the portion of the year the project is in service. Any pending application for MPIR relief submitted by the Utilities prior to the PBR D&O, will be grandfathered under the MPIR Guidelines. The Utilities may alternatively request that pending MPIR applications be reviewed under EPRM Guidelines. EPRM recovery will be in accordance with the EPRM Guidelines limited to the lesser of actual incurred project costs or PUC- approved amounts, net of savings. To date, the Utilities have requested approval of four projects with total estimated capital costs of $95 million for recovery through EPRM.

Performance incentive mechanisms. The PUC has established the following PIMs: (1) Service Quality performance incentives, (2) Phase 1 Request for proposal (RFP) PIM for procurement of low-cost renewable energy, (3) Phase 2 RFP PIMs for generation and generation plus storage project, and Grid Services and standalone storage.

•Service Quality performance incentives (ongoing). Service Quality performance incentives are measured on a calendar-year basis. The PIM tariff requires the performance targets, deadbands and the amount of maximum financial incentives used to determine the PIM financial incentive levels for each of the PIMs to be re-determined upon issuance of an interim or final order in a general rate case for each utility.

•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 approved rate base (or maximum penalties of approximately $6.8 million - for both indices 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 reward is 8 basis points applied to the common equity share of each respective utility’s approved rate base (or maximum penalties or rewards of approximately $1.4 million - in total for the three utilities).

In December 2020, the Utilities accrued $0.9 million in estimated rewards for call center performance, net of service reliability penalties, for 2020. The net service quality performance rewards related to 2020 was reflected in the 2021 annual decoupling filing and pending PUC’s approval, will increase customer rates effective June 1, 2021.

•Phase 1 RFP PIM. Procurement of low-cost variable renewable resources through the request for proposal process in 2018 is measured by comparison of the procurement price to target prices. Half of the incentive was earned upon PUC approval of the PPAs. Based on the seven PPAs approved in 2019, the Utilities recognized $1.7 million in 2019 with the remaining award to be recognized in the year following the in-service date of the projects, which is estimated to occur from 2023 to 2024.

•Phase 2 RFP PIMs. The PUC order issued on October 9, 2019 establishes pricing thresholds, timelines to complete contracting, and other performance criteria for the performance incentive eligibility. The PIMs provide incentives only without penalties. The order requires contracts under the Grid Service RFP be filed for approval by May 2020 (subsequently extended to July 9, 2020), and by September 2020 under the Renewable RFPs, with a declining PIM for projects that are not filed by these deadlines. On July 9, 2020, the Utilities filed two Grid Service Purchase Agreements for the Grid Service RFP, which qualify for PIMs, however, details of the incentive metrics will be determined by PUC. On September 15, 2020, the Utilities filed eight power purchase agreements for the Phase 2 RFP. Of those eight, only one project qualified for a potential PIM incentive. On February 16, 2021, the Utilities filed one additional power purchase agreement that qualifies for the declining PIM. On December 31, 2020, the PUC approved the two Grid Services Purchase Agreements without further clarification regarding the PIM. The Utility has filed a letter to the PUC in January 2021 to seek guidance to the next step of defining the details of the incentive metrics.

•The PUC established the following two new PIMs in its PBR D&O, which were approved in an order issued on March 23, 2021. The effective date for these PIM tariffs is June 1, 2021.

•Renewable portfolio standard (RPS)-A PIM that provides a financial reward for accelerating the achievement of RPS goals. The Utilities may earn a reward for the amount of system generation above the interpolated statutory RPS goal at $20/MWh in 2021 and 2022, $15/MWh in 2023, and $10/MWh for the remainder of the multi-year rate period (MRP). Penalties are already prescribed in the RPS as $20/MWh for failing to meet RPS targets in 2030, 2040 and 2045. The evaluation period commenced on January 1, 2021.

•Grid Services Procurement PIM that provides financial rewards for grid services acquired in 2021 and 2022. The Utilities can earn a total maximum reward of $1.5 million over 2021 and 2022. The evaluation period commenced on January 1, 2021.

•The PUC also established the following three new PIMs in its PBR D&O, which are subject to PUC final design approval anticipated by June 1, 2021.

•Interconnection Approval PIM that provides financial rewards and penalties for interconnection times for distributed energy resources systems <100 kW in size. The Utilities can earn a total annual maximum reward of $3.0 million or a total annual maximum penalty of $0.9 million. The evaluation period commenced on January 1, 2021.

•Low-to-Moderate Income (LMI) Energy Efficiency PIM that provides financial rewards for collaboration between the Utilities and the third-party Public Benefits Fee Administrator to deliver energy savings for low- and moderate-income customers. The rewards for the PIM metrics will be collectively capped at $2.0 million. The PIM will initially have a duration of three years and be subject to an annual review. The evaluation period will commence as of the date of the effective tariff.

•Advanced Metering Infrastructure (AMI) Utilization PIM that provides financial rewards for acceleration of the number of customers with advanced meters enabled to support time-varying rates and next generation distributed energy resources programs. The Utilities can earn a total annual maximum reward of $2.0 million. The evaluation period will commence as of the date of the effective tariff.

Annual decoupling filings. The Utilities filed annual decoupling filings on March 31, 2021, which are subject to PUC approval. The net annual incremental amounts proposed to be collected (refunded) from June 1, 2021 through December 31, 2021 are as follows:


(in millions)	Hawaiian Electric		Hawaii Electric Light		Maui Electric		Total
2021 Annual incremental RAM adjusted revenues and ARA revenues	$	(13.8)	$	(2.0)	$	(5.9)	$	(21.7)
Annual change in accrued RBA balance as of December 31, 2020 (and associated revenue taxes)	10.4		5.7		8.9		25.0
Incremental Performance Incentive Mechanisms (net)	—		0.2		0.5		0.7
Incremental MPIR/EPRM Revenue Adjustment	12.6		0.1		0.1		12.8
Incremental Affiliate Transaction Refund/PUC Ordered Adjustment	—		N/A		2.0		2.0


Net annual incremental amount to be collected under the tariffs	$	9.1	$	4.0	$	5.6	$	18.7

Note: Columns may not foot due to rounding.

Most recent rate proceedings.

Hawaiian Electric 2020 test year rate case. On October 22, 2020, the PUC issued a final D&O approving the stipulated settlement agreement filed in the proceeding. As a result, there will be no increase in base electric rates established in the 2017 test year rate case. In the final D&O, the PUC approved the capital structure that consists of a 58% total equity ratio, and a ROACE of 9.5% for the 2020 test year. The resulting return on rate base (RORB) is 7.37%. The D&O approved the agreement to implement the overall lower depreciation rates approved in the last depreciation study proceeding, effective January 1, 2020. See “Annual revenue adjustment mechanism” under “Performance-based regulation framework” above, regarding the PUC’s decision on the treatment of Hawaiian Electric’s Management Audit savings commitment. Hawaiian Electric’s proposed RBA provision tariff and ECRC tariff submitted on November 6, 2020 were approved by the PUC on December 11, 2020 and took effect on January 1, 2021.

Hawaii Electric Light 2019 test year rate case. On July 28, 2020, the PUC issued a final D&O, approving the Stipulated Partial Settlement Letter in part and ordering final rates for the 2019 test year to remain at current effective rates such that there is a zero increase in rates. The PUC determined that an appropriate ROACE for the 2019 test year is 9.5%, approved a capital structure of 58% total equity and approved as fair a 7.52% RORB. In addition, the order, among others, (1) approved a 10-year amortization period for the state investment tax credit; and (2) approved a modification to Hawaii Electric Light’s ECRC to incorporate a 98%/2% risk-sharing split between customers and Hawaii Electric Light with an annual maximum exposure cap of +/- $600,000. The proposed final tariffs and PIM tariffs took effect on November 1, 2020, and the ECRC tariff took effect on January 1, 2021.

Regulatory assets for COVID-19 related costs. On May 4, 2020, the PUC issued an order, authorizing all utilities, including the Utilities, to establish regulatory assets to record costs resulting from the suspension of disconnections of service during the

pendency of the Governor’s Emergency Proclamation and until otherwise ordered by the PUC. In future proceedings, the PUC will consider the reasonableness of the costs, the appropriate period of recovery, any amount of carrying costs thereon, and any savings directly attributable to suspension of disconnects, and other related matters. As part of the order, the PUC prohibits the Utilities from charging late payment fees on past due payments. On June 30, 2020, the PUC issued an order approving the Utilities’ request made in April 2020 for deferral treatment of COVID-19 related costs through December 31, 2020. On March 8, 2021, the PUC approved the Utilities’ request to extend the deferral period to June 30, 2021. The Utilities are required to file quarterly reports to update the Utilities’ financial condition, report measures in place to assist their customers during the COVID-19 emergency situation, identify the planned deferred costs and details for the deferred costs, and identify funds received or benefits received that have resulted from the COVID-19 emergency period. The recovery of the regulatory assets would be determined in a subsequent proceeding and management believes the deferred costs are probable of recovery. In addition, starting in December 2020 and monthly moving forward until otherwise ordered by the PUC, the Utilities are required to file information on, among other things, number of customers, arrears balances, payment arrangements entered into, and available assistance used to assists customer bill payment. The monthly report is intended to assist the PUC in determining next steps regarding appropriate regulatory measures. As of March 31, 2021, the Utilities recorded a total of $22.2 million in regulatory assets pursuant to the orders.

Condensed consolidating financial information. Condensed consolidating financial information for Hawaiian Electric and its subsidiaries are presented for the three month periods ended March 31, 2021 and 2020, and as of March 31, 2021 and December 31, 2020.

Hawaiian Electric 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, and (b) under their respective private placement note agreements and the Hawaii Electric Light notes and Maui Electric notes issued thereunder. 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

Condensed Consolidating Statement of Income

Three months ended March 31, 2021


(in thousands)	Hawaiian Electric		Hawaii Electric Light	Maui Electric	Other subsidiaries	Consolidating adjustments	Hawaiian Electric Consolidated
Revenues	$	400,554	85,149	79,181	—	(20)	$	564,864
Expenses
Fuel oil	88,728		16,485	22,214	—	—	127,427
Purchased power	108,604		21,597	12,095	—	—	142,296
Other operation and maintenance	77,335		17,912	19,323	—	—	114,570
Depreciation	38,914		10,048	8,393	—	—	57,355
Taxes, other than income taxes	38,627		7,993	7,482	—	—	54,102

Total expenses	352,208		74,035	69,507	—	—	495,750
Operating income	48,346		11,114	9,674	—	(20)	69,114
Allowance for equity funds used during construction	1,748		132	311	—	—	2,191
Equity in earnings of subsidiaries	12,510		—	—	—	(12,510)	—
Retirement defined benefits expense—other than service costs	886		168	(33)	—	—	1,021
Interest expense and other charges, net	(12,832)		(2,581)	(2,590)	—	20	(17,983)
Allowance for borrowed funds used during construction	591		44	112	—	—	747
Income before income taxes	51,249		8,877	7,474	—	(12,510)	55,090
Income taxes	7,621		2,051	1,561	—	—	11,233
Net income	43,628		6,826	5,913	—	(12,510)	43,857
Preferred stock dividends of subsidiaries	—		134	95	—	—	229
Net income attributable to Hawaiian Electric	43,628		6,692	5,818	—	(12,510)	43,628
Preferred stock dividends of Hawaiian Electric	270		—	—	—	—	270
Net income for common stock	$	43,358	6,692	5,818	—	(12,510)	$	43,358

Hawaiian Electric Company, Inc. and Subsidiaries

Condensed Consolidating Statement of Comprehensive Income

Three months ended March 31, 2021


(in thousands)	Hawaiian Electric		Hawaii Electric Light	Maui Electric	Other subsidiaries	Consolidating adjustments	Hawaiian Electric Consolidated
Net income for common stock	$	43,358	6,692	5,818	—	(12,510)	$	43,358
Other comprehensive income (loss), net of taxes:
Retirement benefit plans:
Adjustment for amortization of prior service credit and net losses recognized during the period in net periodic benefit cost, net of taxes	5,845		835	761	—	(1,596)	5,845
Reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of taxes	(5,811)		(834)	(761)	—	1,595	(5,811)
Other comprehensive income, net of taxes	34		1	—	—	(1)	34
Comprehensive income attributable to common shareholder	$	43,392	6,693	5,818	—	(12,511)	$	43,392

Hawaiian Electric Company, Inc. and Subsidiaries

Condensed Consolidating Statement of Income

Three months ended March 31, 2020


(in thousands)	Hawaiian Electric		Hawaii Electric Light	Maui Electric	Other subsidiaries	Consolidating adjustments	Hawaiian Electric Consolidated
Revenues	$	421,166	89,293	87,198	—	(215)	$	597,442
Expenses
Fuel oil	120,535		22,432	30,254	—	—	173,221
Purchased power	107,951		19,521	12,344	—	—	139,816
Other operation and maintenance	85,637		19,104	22,806	—	—	127,547
Depreciation	38,011		9,760	8,079	—	—	55,850
Taxes, other than income taxes	40,501		8,342	8,207	—	—	57,050

Total expenses	392,635		79,159	81,690	—	—	553,484
Operating income	28,531		10,134	5,508	—	(215)	43,958
Allowance for equity funds used during construction	1,743		119	153	—	—	2,015
Equity in earnings of subsidiaries	8,804		—	—	—	(8,804)	—
Retirement defined benefits expense—other than service costs	(546)		194	(29)	—	—	(381)
Interest expense and other charges, net	(12,002)		(2,484)	(2,323)	—	215	(16,594)
Allowance for borrowed funds used during construction	602		36	50	—	—	688
Income before income taxes	27,132		7,999	3,359	—	(8,804)	29,686
Income taxes	2,957		1,798	527			5,282
Net income	24,175		6,201	2,832	—	(8,804)	24,404
Preferred stock dividends of subsidiaries	—		134	95	—		229
Net income attributable to Hawaiian Electric	24,175		6,067	2,737	—	(8,804)	24,175
Preferred stock dividends of Hawaiian Electric	270		—	—	—	—	270
Net income for common stock	$	23,905	6,067	2,737	—	(8,804)	$	23,905

Hawaiian Electric Company, Inc. and Subsidiaries

Condensed Consolidating Statement of Comprehensive Income

Three months ended March 31, 2020


(in thousands)	Hawaiian Electric		Hawaii Electric Light	Maui Electric	Other subsidiaries	Consolidating adjustments	Hawaiian Electric Consolidated
Net income for common stock	$	23,905	6,067	2,737	—	(8,804)	$	23,905
Other comprehensive income (loss), net of taxes:
Retirement benefit plans:
Adjustment for amortization of prior service credit and net losses recognized during the period in net periodic benefit cost, net of tax benefits	5,184		748	652	—	(1,400)	5,184
Reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of taxes	(5,158)		(747)	(652)	—	1,399	(5,158)
Other comprehensive income, net of taxes	26		1	—	—	(1)	26
Comprehensive income attributable to common shareholder	$	23,931	6,068	2,737	—	(8,805)	$	23,931

Hawaiian Electric Company, Inc. and Subsidiaries

Condensed Consolidating Balance Sheet

March 31, 2021


(in thousands)	Hawaiian Electric		Hawaii Electric Light	Maui Electric	Other subsi- diaries	Consoli- dating adjustments	Hawaiian Electric Consolidated
Assets
Property, plant and equipment
Utility property, plant and equipment
Land	$	42,411	5,606	3,594	—	—	$	51,611
Plant and equipment	4,986,417		1,358,367	1,207,095	—	—	7,551,879
Less accumulated depreciation	(1,706,529)		(604,021)	(549,169)	—	—	(2,859,719)
Construction in progress	160,331		13,927	29,730	—	—	203,988
Utility property, plant and equipment, net	3,482,630		773,879	691,250	—	—	4,947,759
Nonutility property, plant and equipment, less accumulated depreciation	5,305		115	1,532	—	—	6,952
Total property, plant and equipment, net	3,487,935		773,994	692,782	—	—	4,954,711
Investment in wholly owned subsidiaries, at equity	631,976		—	—	—	(631,976)	—
Current assets
Cash and cash equivalents	29,727		7,730	14,209	77	—	51,743
Restricted cash	11,506		—	—	—	—	11,506

Customer accounts receivable, net	101,605		21,358	18,686	—	—	141,649
Accrued unbilled revenues, net	72,784		14,911	14,118	—	—	101,813
Other accounts receivable, net	12,967		3,006	3,570	—	(14,470)	5,073
Fuel oil stock, at average cost	51,894		9,981	12,813	—	—	74,688
Materials and supplies, at average cost	40,395		9,873	19,458	—	—	69,726
Prepayments and other	29,769		3,534	3,791	—	(675)	36,419
Regulatory assets	42,852		2,840	8,630	—	—	54,322
Total current assets	393,499		73,233	95,275	77	(15,145)	546,939
Other long-term assets
Operating lease right-of-use assets	123,992		14,198	344	—	—	138,534
Regulatory assets	501,393		111,700	106,011	—	—	719,104
Other	102,767		18,591	20,424	—	(6,162)	135,620
Total other long-term assets	728,152		144,489	126,779	—	(6,162)	993,258
Total assets	$	5,241,562	991,716	914,836	77	(653,283)	$	6,494,908
Capitalization and liabilities
Capitalization
Common stock equity	$	2,157,385	320,494	311,405	77	(631,976)	$	2,157,385
Cumulative preferred stock—not subject to mandatory redemption	22,293		7,000	5,000	—	—	34,293
Long-term debt, net	1,176,229		246,310	253,324	—	—	1,675,863
Total capitalization	3,355,907		573,804	569,729	77	(631,976)	3,867,541
Current liabilities
Current portion of operating lease liabilities	64,423		1,844	34	—	—	66,301



Accounts payable	87,437		16,037	19,725	—	—	123,199
Interest and preferred dividends payable	20,075		3,698	4,400	—	(1)	28,172
Taxes accrued, including revenue taxes	107,552		25,372	22,876	—	(675)	155,125
Regulatory liabilities	17,000		5,901	7,469	—	—	30,370
Other	55,478		11,951	17,189	—	(14,618)	70,000
Total current liabilities	351,965		64,803	71,693	—	(15,294)	473,167
Deferred credits and other liabilities
Operating lease liabilities	71,431		12,353	318	—	—	84,102
Deferred income taxes	282,513		53,582	60,663	—	—	396,758
Regulatory liabilities	658,584		174,820	92,365	—	—	925,769
Unamortized tax credits	81,297		15,126	13,758	—	—	110,181
Defined benefit pension and other postretirement benefit plans liability	373,376		76,357	78,566	—	(6,013)	522,286
Other	66,489		20,871	27,744	—	—	115,104
Total deferred credits and other liabilities	1,533,690		353,109	273,414	—	(6,013)	2,154,200
Total capitalization and liabilities	$	5,241,562	991,716	914,836	77	(653,283)	$	6,494,908

Hawaiian Electric Company, Inc. and Subsidiaries

Condensed Consolidating Balance Sheet

December 31, 2020


(in thousands)	Hawaiian Electric		Hawaii Electric Light	Maui Electric	Other subsi-diaries	Consoli- dating adjustments	Hawaiian Electric Consolidated
Assets
Property, plant and equipment
Utility property, plant and equipment
Land	$	42,411	5,606	3,594	—	—	$	51,611
Plant and equipment	4,960,470		1,352,885	1,195,988	—	—	7,509,343
Less accumulated depreciation	(1,677,256)		(597,606)	(544,217)	—	—	(2,819,079)
Construction in progress	143,616		13,043	31,683	—	—	188,342
Utility property, plant and equipment, net	3,469,241		773,928	687,048	—	—	4,930,217
Nonutility property, plant and equipment, less accumulated depreciation	5,306		115	1,532	—	—	6,953
Total property, plant and equipment, net	3,474,547		774,043	688,580	—	—	4,937,170
Investment in wholly owned subsidiaries, at equity	626,890		—	—	—	(626,890)	—
Current assets
Cash and cash equivalents	42,205		3,046	2,032	77	—	47,360
Restricted cash	15,966		—	—	—	—	15,966
Advances to affiliates	26,700		—	—	—	(26,700)	—
Customer accounts receivable, net	102,736		23,989	21,107	—	—	147,832
Accrued unbilled revenues, net	73,628		13,631	13,777	—	—	101,036
Other accounts receivable, net	17,984		3,028	2,856	—	(16,195)	7,673
Fuel oil stock, at average cost	38,777		8,471	10,990	—	—	58,238
Materials and supplies, at average cost	38,786		9,896	18,662	—	—	67,344
Prepayments and other	34,306		5,197	4,580	—	—	44,083
Regulatory assets	22,095		1,954	6,386	—	—	30,435
Total current assets	413,183		69,212	80,390	77	(42,895)	519,967
Other long-term assets
Operating lease right-of-use assets	125,858		1,443	353	—	—	127,654
Regulatory assets	513,192		114,461	108,620	—	—	736,273
Other	98,307		17,992	20,010	—	—	136,309
Total other long-term assets	737,357		133,896	128,983	—	—	1,000,236
Total assets	$	5,251,977	977,151	897,953	77	(669,785)	$	6,457,373
Capitalization and liabilities
Capitalization
Common stock equity	$	2,141,918	317,451	309,363	77	(626,891)	$	2,141,918
Cumulative preferred stock—not subject to mandatory redemption	22,293		7,000	5,000	—	—	34,293
Long-term debt, net	1,116,426		216,447	228,429	—	—	1,561,302
Total capitalization	3,280,637		540,898	542,792	77	(626,891)	3,737,513
Current liabilities
Current portion of operating lease liabilities	64,599		98	33	—	—	64,730

Short-term borrowings-non-affiliate	49,979		—	—	—	—	49,979
Short-term borrowings-affiliate	—		18,800	7,900	—	(26,700)	—
Accounts payable	97,102		19,570	17,177	—	—	133,849
Interest and preferred dividends payable	14,480		3,138	2,790	—	(58)	20,350
Taxes accrued, including revenue taxes	135,018		29,869	27,637	—	—	192,524
Regulatory liabilities	20,224		8,785	8,292	—	—	37,301
Other	57,926		13,851	18,621	—	(16,136)	74,262
Total current liabilities	439,328		94,111	82,450	—	(42,894)	572,995
Deferred credits and other liabilities
Operating lease liabilities	67,824		1,344	326	—	—	69,494
Deferred income taxes	282,685		54,108	61,005	—	—	397,798
Regulatory liabilities	656,270		173,938	92,277	—	—	922,485
Unamortized tax credits	82,563		15,363	13,989	—	—	111,915
Defined benefit pension and other postretirement benefit plans liability	373,112		77,679	79,741	—	—	530,532
Other	69,558		19,710	25,373	—	—	114,641
Total deferred credits and other liabilities	1,532,012		342,142	272,711	—	—	2,146,865
Total capitalization and liabilities	$	5,251,977	977,151	897,953	77	(669,785)	$	6,457,373

Hawaiian Electric Company, Inc. and Subsidiaries

Condensed Consolidating Statement of Changes in Common Stock Equity

Three months ended March 31, 2021


(in thousands)	Hawaiian Electric		Hawaii Electric Light	Maui Electric	Other subsidiaries	Consolidating adjustments	Hawaiian Electric Consolidated
Balance, December 31, 2020	$	2,141,918	317,451	309,363	77	(626,891)	$	2,141,918
Net income for common stock	43,358		6,692	5,818	—	(12,510)	43,358
Other comprehensive income, net of taxes	34		1	—	—	(1)	34
Common stock dividends	(27,925)		(3,650)	(3,776)	—	7,426	(27,925)


Balance, March 31, 2021	$	2,157,385	320,494	311,405	77	(631,976)	$	2,157,385

Hawaiian Electric Company, Inc. and Subsidiaries

Condensed Consolidating Statement of Changes in Common Stock Equity

Three months ended March 31, 2020


(in thousands)	Hawaiian Electric		Hawaii Electric Light	Maui Electric	Other subsidiaries	Consolidating adjustments	Hawaiian Electric Consolidated
Balance, December 31, 2019	$	2,047,352	298,998	292,870	101	(591,969)	$	2,047,352
Net income for common stock	23,905		6,067	2,737	—	(8,804)	23,905
Other comprehensive income, net of taxes	26		1	—	—	(1)	26
Common stock dividends	(26,784)		(4,080)	(3,596)	—	7,676	(26,784)
Common stock issuance expenses	—		—	(1)	—	1	—
Balance, March 31, 2020	$	2,044,499	300,986	292,010	101	(593,097)	$	2,044,499

Hawaiian Electric Company, Inc. and Subsidiaries

Condensed Consolidating Statement of Cash Flows

Three months ended March 31, 2021


(in thousands)	Hawaiian Electric		Hawaii Electric Light	Maui Electric	Other subsidiaries	Consolidating adjustments	Hawaiian Electric Consolidated























Net cash provided by operating activities	$	18,764	9,635	10,988	—	(7,426)	$	31,961
Cash flows from investing activities
Capital expenditures	(45,293)		(12,728)	(12,340)	—	—	(70,361)

Advances from affiliates	26,700		—	—	—	(26,700)	—
Other	1,182		372	309	—	—	1,863
Net cash used in investing activities	(17,411)		(12,356)	(12,031)	—	(26,700)	(68,498)
Cash flows from financing activities
Common stock dividends	(27,925)		(3,650)	(3,776)	—	7,426	(27,925)
Preferred stock dividends of Hawaiian Electric and subsidiaries	(270)		(134)	(95)	—	—	(499)

Repayment of short-term debt	(50,000)		—	—	—	—	(50,000)
Proceeds from issuance of long-term debt	60,000		30,000	25,000	—	—	115,000

Net decrease in short-term borrowings from non-affiliates and affiliate with original maturities of three months or less	—		(18,800)	(7,900)	—	26,700	—
Other	(96)		(11)	(9)	—	—	(116)
Net cash provided by (used in) financing activities	(18,291)		7,405	13,220	—	34,126	36,460
Net increase (decrease) in cash and cash equivalents	(16,938)		4,684	12,177	—	—	(77)
Cash, cash equivalents and restricted cash, beginning of period	58,171		3,046	2,032	77	—	63,326
Cash, cash equivalents and restricted cash, end of period	41,233		7,730	14,209	77	—	63,249
Less: Restricted cash	(11,506)		—	—	—	—	(11,506)
Cash and cash equivalents, end of period	$	29,727	7,730	14,209	77	—	$	51,743

Hawaiian Electric Company, Inc. and Subsidiaries

Condensed Consolidating Statement of Cash Flows

Three months ended March 31, 2020


(in thousands)	Hawaiian Electric		Hawaii Electric Light	Maui Electric	Other subsidiaries	Consolidating adjustments	Hawaiian Electric Consolidated























Net cash provided by operating activities	$	29,004	9,478	7,931	—	(7,272)	$	39,141
Cash flows from investing activities
Capital expenditures	(83,191)		(18,181)	(17,772)	—	—	(119,144)
Advances from (to) affiliates	(17,000)		8,000	—	—	9,000	—
Other	2,752		64	301	—	(404)	2,713
Net cash used in investing activities	(97,439)		(10,117)	(17,471)	—	8,596	(116,431)
Cash flows from financing activities
Common stock dividends	(26,784)		(4,080)	(3,596)	—	7,676	(26,784)
Preferred stock dividends of Hawaiian Electric and subsidiaries	(270)		(134)	(95)	—	—	(499)


Proceeds from issuance of short-term debt	50,000		—	—	—	—	50,000
Proceeds from issuance of long-term debt	95,000		—	—	—	—	95,000

Net increase (decrease) in short-term borrowings from non-affiliates and affiliate with original maturities of three months or less	(46,987)		2,500	14,500	—	(9,000)	(38,987)
Other	(21)		(1)	(1)	—	—	(23)
Net cash provided by (used in) financing activities	70,938		(1,715)	10,808	—	(1,324)	78,707
Net increase (decrease) in cash and cash equivalents	2,503		(2,354)	1,268	—	—	1,417
Cash, cash equivalents and restricted cash, beginning of period	32,988		7,008	1,797	101	—	41,894
Cash, cash equivalents and restricted cash, end of period	35,491		4,654	3,065	101	—	43,311
Less: Restricted cash	(30,902)		—	—	—	—	(30,902)
Cash and cash equivalents, end of period	$	4,589	4,654	3,065	101	—	$	12,409