A batch of bills to regulate actions by Hawaii’s public power utilities are up for debate in the Legislature this session, in response to the Aug. 8 West Maui wildfires. Certain provisions must be incorporated into final legislation, including: a requirement to create a wildfire protection plan approved by the Public Utilities Commission (PUC); civil penalties for failing to comply with an approved plan; and authorization to pay for wildfire mitigation work using specialized, low-interest bonds that are secured by expected ratepayer revenue.
Gov. Josh Green’s office backs House Bill 2407 and Senate Bill 3096, companion bills that apply to both Hawaiian Electric (HECO) and the Kauai Island Utility Cooperative. These specify that a mandatory, PUC-approved plan must require that the utility take steps to minimize catastrophic wildfire risk, and allow the utility to cover costs using revenue-secured bonds.
Revenue-secured bonds lower finance costs and therefore benefit ratepayers, who otherwise might have to cover a more expensive payment plan with even higher rates. This should be allowed, as making this option available is to the public’s benefit. While HECO’s credit rating has been slashed from investment to junk-grade status because of expectations that the company will be liable for some part of Lahaina’s wildfire devastation, the cost for bonds secured by expected revenue can be less than even investment-grade bonds.
More analysis is needed before this option is considered as a way to pay claims, but given the massive bill that’s likely to hit HECO, this option for covering mitigation costs is preferable to bankruptcy, with its uncertainties and legal costs.
The PUC supports this legislation, calling it “critical,” because it formalizes PUC’s power to require reasonable plan modifications and because the low-cost bond option protects ratepayers.
MEANWHILE, HECO has its own bills in the hopper. HB 2265 and SB 2922 would allow the company to use revenue-secured bonds secured by ratepayer revenue to pay off legal settlements and claims for damages from the catastrophic wildfires, as well as wildfire risk mitigation. The PUC and Hawaii’s Consumer Advocate have yet to comment on this strategy for paying claims, and the state and ratepayers must carefully weigh the benefits of the strategy against its effect on ratepayers before granting approval.
HECO-supported HB 2281 and SB 2997 require electrical utilities to create and operate under a “risk-based wildfire protection plan” approved by the PUC — but would also shield utilities from civil liability when they act in accordance with an approved plan, or under draft language that the PUC rejects. Any blanket “shield” should be a non-starter, as it gives a utility too much room to evade responsibility for poor decision-making.
A competing bill, HB 2102, requires electric utilities to make and follow a risk-based wildfire protection plan without shielding utilities from liability, and also includes a civil penalty for violations. Penalties that require HECO to meet benchmarks for action with no foot-dragging provide the utility with an incentive to meet timely deadlines, and so should be included.
MEANWHILE, SB 2091 requires an annual wildfire mitigation plan, submitted to the PUC, and also requires that the plan include protocols for de-energizing power lines, along with a procedure for notifying customers and public safety officials in affected areas. As HECO’s actions and timeline for shutting down power lines during the Maui wildfires has come under critical scrutiny as possible causes or contributors to the fire, requiring a protocol that anticipates deadly wildfire risks and minimizes power lines’ contribution to them is highly desirable.
HECO has stated that it supports SB 2091’s intent, but also proposes amendments, including a PUC action deadline, authorization to recover plan costs with higher rates, and a conditional liability shield. Clarity on PUC-regulated timelines and a provision to cover costs are indeed necessary; but it’s premature to endorse a shield on HECO’s liability. The utility, which has already begun making mitigations, should not be able to consider PUC-set standards a “lid” on its efforts to pursue safety.
Finally, SB 2092 would have the PUC mandate that a utility help pay for property owners’ wildfire risk mitigations and/or emergency equipment to use in case of a power cut-off, through rate rebates or discounts. Here, Consumer Advocate Michael Angelo’s testimony that this requirement is too narrow is persuasive, as the bill applies only to property owners (not renters) and only for wildfires. The Consumer Advocate’s office supports “a holistic system-wide approach” that considers the range of statewide hazards and needs of all stakeholders, beyond property owners. That is the correct approach here, and with any utility regulation that the Legislature ultimately adopts.
