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Maui windstorm and wildfires | 9 Months Ended
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Sep. 30, 2023
Unusual or Infrequent Items, or Both [Abstract] |
Maui windstorm and wildfires | Maui windstorm and wildfires On August 8, 2023, a number of brush fires in the West Maui (Lahaina) and Upcountry Maui areas, caused widespread property damage, including damage to property of the Utilities, and at least 99 fatalities in Lahaina (the Maui windstorm and wildfires). The Maui windstorm and wildfires were fueled by extreme winds and drought-like conditions in those parts of Maui. According to the County of Maui, in addition to the loss of life, over 3,450 acres burned and over 2,500 structures were destroyed. In Lahaina, a fire was reported at about 6:30 a.m. (the “Morning Fire”) and appears to have been caused by power lines that fell in high winds and spread into a field near the Intermediate School. The Maui County Fire Department responded promptly to the Morning Fire, and according to the Fire Department’s public statement that morning, by 9 a.m. the Morning Fire was “100% contained.” The Maui County fire chief subsequently reported that the Fire Department had determined that the Morning Fire was “extinguished.” Shortly before 3 p.m. that day, while the power remained off, Utility crew members saw a small fire in the same field about 75 yards away from Lahainaluna Road. They immediately called 911 and reported the fire (the “Afternoon Fire”). At the time of the Afternoon Fire, the Company’s power lines in the area where that fire ignited were not energized and had not been energized for more than six hours. By the time the Maui County Fire Department arrived back on the scene, it was not able to contain the Afternoon Fire and it spread out of control toward Lahaina. No determination as to the cause of the Afternoon Fire has been made. The Company believes that most of the property damage and all of the fatalities are from the Afternoon Fire. The circumstances surrounding the Maui windstorm and wildfires are currently the subject of several investigations. As of September 30, 2023, on a consolidated basis, the Company has incurred $27.6 million of incremental expenses related to the Maui windstorm and wildfires, which excludes the $75 million contribution and insurance receivable as discussed in Subsequent event - One ‘Ohana Initiative below. In addition, the Utilities incurred $8.0 million of total capital costs related to the Maui windstorm and wildfires. Restoration costs and recoveries. The Utilities have since restored electric service to more than 95% of homes and businesses on the island of Maui that were affected by the Maui windstorm and wildfires. Replacement of poles, transformers, power lines and other equipment in and around Lahaina and Upcountry Maui that were damaged is ongoing. On August 21, 2023, Maui Electric filed an application with the Public Utilities Commission of the State of Hawaii (PUC), requesting the PUC’s approval for the deferral accounting treatment for incremental non-labor expenses related to the Utilities’ response and restoration efforts and other expenses arising from and associated with the Maui windstorm and wildfires, beginning from August 8, 2023 and until December 31, 2024, to preserve the Utilities’ ability to seek cost recovery through a separate request when the total costs and impacts are better known. On October 13, 2023, the Utilities filed an amended application to add Hawaiian Electric and Hawaii Electric Light as applicants. As of September 30, 2023, the amended application was subject to the PUC’s approval and no costs have been deferred. While the Utilities plan to seek recovery of damage to covered electrical infrastructure under their insurance programs, the timing and amount of any insurance recoveries are not determinable at this time and as such, an insurance receivable has not been recorded as of the date of this filing. The Company’s property insurance has a total policy limit of $500 million with a $1 million retention for damages related to Utility-owned non-generating assets, including overhead transmission and distribution assets within 1,000 feet of such assets. The Utilities believe capital expenditures related to restoration that are not covered by insurance will be managed under their current regulatory mechanisms, the recovery of which would be subject to PUC approval. ASB’s Lahaina branch, including most of its contents and automated teller machine, was destroyed in the fire. The Bank leased the property of its Lahaina location. Third-party claims and other proceedings. Multiple civil and class action lawsuits related to the Maui windstorm and wildfires have been filed in the Maui and Oahu Circuit Courts against HEI, the Utilities, and other defendants, including the County of Maui, the State of Hawaii and related state entities, private landowners and developers, and telecommunications companies (collectively “tort-related legal claims”). Most of these lawsuits allege that the defendants were responsible for, and/or negligent in failing to prevent or respond to the wildfires that led to the property destruction and loss of life. Other claims include, among other things, personal injury, wrongful death, emotional distress and inverse condemnation. One lawsuit asserting similar theories and claims was filed by the County of Maui against HEI and the Utilities. Additional lawsuits may be filed against the Company and other defendants in the future. The plaintiffs seek to recover damages and other costs, including punitive damages. For a discussion of the Company’s assessment of potential exposure to claims, see Subsequent event - One ‘Ohana Initiative below. On August 24, 2023, a putative securities class action captioned Bhangal v. Hawaiian Electric Industries, Inc., et al., No.: 3:23-cv-04332-JSC was filed in the United States District Court for the Northern District of California. The lawsuit alleges violations of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 promulgated thereunder against HEI and certain of its current and former officers, and Section 20(a) of the Exchange Act against certain of HEI’s current and former officers. Plaintiff broadly alleges that HEI and certain of its current and former officers made materially false and misleading statements or omissions regarding HEI’s wildfire prevention and safety protocols and related matters. Plaintiffs seek unspecified monetary damages. On October 5, 2023, the court entered an order extending Defendants’ time to respond to the complaint until after a lead plaintiff has been appointed by the court in accordance with relevant procedures of the Private Securities Litigation Reform Act of 1995 and Defendants have not yet responded to the complaint. A hearing on competing motions for appointment of lead plaintiff is scheduled for November 30, 2023. The Company intends to vigorously defend against this action. There is no assurance that the Company will be successful in the defense of the litigation or that insurance will be available or adequate to fund any potential settlement or judgment or the litigation costs of the action. The Company is unable to predict the outcome or reasonably estimate a range of possible loss at this time. Also, on September 11, 2023, a putative shareholder derivative action captioned Rice v. Connors, et al., No. 1CCV-23-0001181 was filed in the Circuit Court of the First Circuit, State of Hawai‘i. This action is purportedly brought by a shareholder on behalf of nominal defendants HEI and Hawaiian Electric against certain current and former officers and directors of HEI and Hawaiian Electric. Plaintiff asserts Hawai‘i state law breach of fiduciary duty, abuse of control, corporate waste and unjust enrichment claims allegedly arising from the fires that occurred on Maui in August 2023 and certain of HEI’s prior public disclosures. Plaintiff seeks, on behalf of HEI and Hawaiian Electric, compensatory and punitive damages, restitution and equitable relief in the form of changes to HEI’s corporate governance, policies and culture. On October 27, 2023, the plaintiff filed an amended complaint adding claims for aiding and abetting state law breach of fiduciary duty, and for purported violations of Hawai‘i’s Nonprofit Corporations Act §414D-302. Defendants have not yet been served, and no substantive proceedings have occurred. While the Company has obligations to indemnify and/or advance the defendants’ legal fees and costs in connection with this lawsuit, any monetary recovery in the derivative litigation should accrue to the Company. The Company is unable to predict the ultimate outcome and is unable to make a meaningful estimate of the amount or range of loss, if any, that could result from any unfavorable outcome. Legal costs in connection with the litigation and loss contingencies are expensed as incurred. For the three months ended September 30, 2023, the Company incurred and accrued $10.8 million ($6.3 million by the Utilities) of legal expenses to address these lawsuits and other legal matters related to the Maui windstorm and wildfires. The Company has $165 million of excess liability insurance for third party claims, including claims related to wildfires, with a possible retention of up to $1.5 million. Reimbursement of legal costs under the policy are recorded as a reduction of expense when probable and reasonably estimable. Subsequent event - One ‘Ohana Initiative. On November 8, 2023, Hawaii Governor Josh Green announced the One ‘Ohana Initiative (the Initiative) as a collective path forward to recovery from the Maui windstorm and wildfires. The Initiative is a new humanitarian aid fund expected to exceed $150 million, with the objective to compensate, in an expedited manner, those who have lost loved ones and those who have suffered severe injuries in the Maui windstorm and wildfires. The Initiative provides an alternative to a lengthy and expensive legal process. Beneficiaries are anticipated to receive payments of more than $1 million each as early as the second quarter of 2024 after an administrator is selected and processes are established. In exchange for receiving such a payment, beneficiaries will be required to waive their ability to pursue legal claims for wrongful death and severe injuries. Hawaiian Electric fully supports this humanitarian initiative and has pledged to contribute up to $75 million. The Governor announced that other parties, including the State of Hawaii, the County of Maui, and Kamehameha Schools have all agreed to contribute to the fund, and additional contributions from other parties are possible. Hawaiian Electric’s contribution to the Initiative will be less than half of the total, and Hawaiian Electric's insurance carriers have agreed to fund its share of the contributions to the fund. Hawaiian Electric’s contribution is reflective of its commitment to join with community partners to provide solutions to promote Maui’s recovery. Hawaiian Electric’s commitment to contribute to the Initiative is not an admission of guilt or reflection of fault or liability related to the wildfires. In connection with its commitment to contribute to the Initiative, the Utilities accrued, as of September 30, 2023, $75 million, and concurrently, recorded an insurance reimbursement receivable of an equivalent amount as the recovery of the Utilities’ contribution to the Initiative under its excess liability insurance policy is deemed probable. The Initiative contemplates additional phases, including a process to potentially resolve remaining tort-related legal claims, as well as seeking legislation to reduce wildfire risk and provide financial support to help ensure a strong energy future for all of Hawaii. While the Utilities plan to participate in a process with the State and community partners to explore solutions to support Maui’s recovery and compensate victims for damages, the Utilities are unable to reasonably estimate any additional potential loss, or range of loss. If additional liabilities were to be incurred, the loss could be material to the Utilities’ results of operations, financial positions and cash flows. If any such losses were to be sufficiently high, the Utilities may not have liquidity or the ability to access liquidity at levels necessary to satisfy such losses. The Utilities charged the pending contribution to expense, included in “Expenses-Other operation and maintenance” and “Expenses-Electric utility” in the Hawaiian Electric and subsidiaries Condensed Consolidated Statements of Income and HEI and subsidiaries’ Condensed Consolidated Statements of Income, respectively, which was offset by the probable insurance recovery.
(in millions) |  | September 30, 2023
2023 Maui windstorm and wildfires |  |
One ‘Ohana Initiative contribution 1 |  | $ | 75 |
Insurance recovery 2 |  | (75) |
1 As of September 30, 2023, One ‘Ohana Initiative contribution is included in “Current liabilities-Other” and “Liabilities-Other” in the Hawaiian Electric and subsidiaries’ Condensed Consolidated Balance Sheet and HEI and subsidiaries’ Condensed Consolidated Balance Sheet, respectively. 2 As of September 30, 2023, One ‘Ohana Initiative insurance recoveries is included in “Current assets-Other accounts receivables, net” and “Assets-Accounts receivable and unbilled revenues, net” in the Hawaiian Electric and subsidiaries’ Condensed Consolidated Balance Sheet and HEI and subsidiaries’ Condensed Consolidated Balance Sheet, respectively.

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