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Electric utility segment
 12 Months Ended
Dec. 31, 2014
Electric utility subsidiary  
Electric utility segment
4 · Electric utility segment
Regulatory assets and liabilities.  In accordance with ASC Topic 980, “Regulated Operations,” the Utilities’ financial statements reflect assets, liabilities, revenues and expenses based on current cost-based rate-making regulations. Their continued accounting under ASC Topic 980 generally requires that rates are established by an independent, third-party regulator; rates are designed to recover the costs of providing service; and it is reasonable to assume that rates can be charged to and collected from customers. Management believes the Utilities’ operations currently satisfy the ASC Topic 980 criteria. If events or circumstances should change so that those criteria are no longer satisfied, the Utilities expect that the regulatory assets, net of regulatory liabilities, would be charged to the statement of income in the period of discontinuance, which may result in a material adverse effect on the Company’s and the Utilities' financial condition, results of operations and/or liquidity.
Regulatory assets represent deferred costs expected to be fully 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. 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, 2014 are noted.
Regulatory assets were as follows:
December 31
2014

 
2013

(in thousands)
 

 
 

Retirement benefit plans (balance primarily varies with plans’ funded statuses)
$
683,243

 
$
350,821

Income taxes, net (1 to 55 years)
86,836

 
85,430

Decoupling revenue balancing account (1 to 2 years)
80,183

 
90,386

Unamortized expense and premiums on retired debt and equity issuances (19 to 30 years; 6 to 18 years remaining)
15,569

 
17,342

Vacation earned, but not yet taken (1 year)
10,248

 
9,149

Postretirement benefits other than pensions (18 years; less than 1 year remaining)
18

 
62

Other (1 to 50 years; 1 to 46 years remaining)
29,167

 
22,734

 
$
905,264

 
$
575,924

Included in:
 

 
 

Current assets
$
71,421

 
$
69,738

Long-term assets
833,843

 
506,186

 
$
905,264

 
$
575,924


Regulatory liabilities were as follows:
December 31
2014

 
2013

(in thousands)
 

 
 

Cost of removal in excess of salvage value (1 to 60 years)
$
331,000

 
$
315,164

Retirement benefit plans (5 years beginning with respective utility’s next rate case)
12,413

 
31,546

Other (5 years; 1 to 2 years remaining)
1,436

 
2,589

 
$
344,849

 
$
349,299

Included in:
 
 
 
Current liabilities
$
632

 
$
1,916

Long-term liabilities
344,217

 
347,383

 
$
344,849

 
$
349,299


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 10).
Major customers.  The Utilities received 12% ($350 million), 11% ($340 million) and 11% ($349 million) of their operating revenues from the sale of electricity to various federal government agencies in 2014, 2013 and 2012, 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, 2014
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 $7 million, $6.2 million and $6.1 million for general management and administrative services in 2014, 2013 and 2012, 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.
Hawaiian Electric’s short-term borrowings totaled nil at December 31, 2014 and 2013. 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 nil in each of 2014 and 2013 and de minimis in 2012.
Commitments and contingencies.
Fuel contracts.  The Utilities have contractual agreements to purchase minimum quantities of fuel oil, diesel fuel and biodiesel for multi-year periods, some through October 2017. Fossil fuel prices are tied to the market prices of crude oil and petroleum products in the Far East and U.S. West Coast and the biodiesel price is tied to the market prices of animal fat feedstocks in the U.S. West Coast and U.S. Midwest. Based on the average price per barrel as of December 31, 2014, the estimated cost of minimum purchases under the fuel supply contracts is $0.4 billion in 2015, $0.3 billion in 2016 and $6.4 million in 2017. The actual cost of purchases in 2015 and future years could vary substantially from this estimate as a result of changes in market prices, quantities actually purchased and/or other factors. The Utilities purchased $1.1 billion, $1.1 billion and $1.3 billion of fuel under contractual agreements in 2014, 2013 and 2012, respectively.
Hawaiian Electric and Chevron Products Company (Chevron), a division of Chevron USA, Inc., are parties to the Low Sulfur Fuel Oil Supply Contract (LSFO Contract) for the purchase/sale of low sulfur fuel oil (LSFO), which terminates on December 31, 2016 and may automatically renew for annual terms thereafter unless earlier terminated by either party. The PUC approved the recovery of costs incurred under this contract on April 30, 2013.
On August 27, 2014, Chevron and Hawaiian Electric entered into a first amendment of the LSFO Contract. The amendment reduces the price of fuel above certain volumes, allows for increases in the volume of fuel, and modifies the specification of certain petroleum products supplied under the contract. In addition, Chevron agreed to supply a blend of LSFO and diesel as soon as January 2016 (for supply through the end of the contract term, December 31, 2016) to help Hawaiian Electric meet more stringent EPA air emission requirements known as Mercury and Air Toxics Standards. The amendment is subject to approval of the PUC, and can be terminated if approval is not received by April 15, 2015.
Hawaiian Electric and Hawaii Independent Energy, LLC, (HIE) a wholly owned subsidiary of Par Petroleum Corporation of Houston Texas, were parties to an amended LSFO supply contract (assigned to HIE pursuant to its purchase of the Hawaii refinery and related assets of Tesoro Hawaii Corp), which ran through December 31, 2014, with a provision that it would automatically renew for annual terms thereafter unless earlier terminated by either party. On August 28, 2014, Hawaiian Electric provided notice to HIE that it would not renew the LSFO supply contract.
The Utilities are parties to amended contracts for the supply of industrial fuel oil and diesel fuels with Chevron and HIE, respectively, which end December 31, 2015. Both agreements may be automatically renewed for annual terms thereafter unless earlier terminated by either of the respective parties. In August 2014, Chevron and the Utilities entered into a third amendment to the Inter-Island Industrial Fuel Oil and Diesel Fuel Supply Contract, which amendment extended the term of the contract through December 31, 2016 and provided for automatic renewal for annual terms thereafter unless earlier terminated by either party. In February 2015, Hawaiian Electric executed a similar extension, through December 31, 2016, of the corresponding Inter-Island Industrial Fuel Oil and Diesel Fuel Supply Contract with HIE.
The energy charge for energy purchased from Kalaeloa Partners, L.P. (Kalaeloa) under Hawaiian Electric’s PPA with Kalaeloa is based, in part, on the price Kalaeloa pays HIE for LSFO under a Facility Fuel Supply Contract (fuel contract) between them (assigned to HIE upon its purchase of the assets of Tesoro Hawaii Corp. as described above). The term of the fuel contract between Kalaeloa and HIE ends May 31, 2016 and may be extended for terms thereafter unless terminated by one of the parties.
The costs incurred under the Utilities’ fuel contracts are included in their respective ECACs, to the extent such costs are not recovered through the Utilities’ base rates.
Power purchase agreements.  As of December 31, 2014, the Utilities had seven firm capacity PPAs for a total of 575 megawatts (MW) of firm capacity. Purchases from these seven independent power producers (IPPs) and all other IPPs totaled $0.7 billion for each of 2014, 2013 and 2012. 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 2015 through 2019 and a total of $0.5 billion in the period from 2020 through 2035.
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.
Hawaii Clean Energy Initiative.  In January 2008, the State of Hawaii (State) and the U.S. Department of Energy signed a memorandum of understanding establishing the Hawaii Clean Energy Initiative (HCEI). In October 2008, the Governor of the State, the State Department of Business, Economic Development and Tourism (DBEDT), the Division of Consumer Advocacy of the State Department of Commerce and Consumer Affairs and the Utilities (collectively, the parties), signed an agreement setting forth goals and objectives under the HCEI and the related commitments of the parties (the Energy Agreement), including pursuing a wide range of actions to decrease the State’s dependence on imported fossil fuels through substantial increases in renewable energy and programs intended to secure greater energy efficiency and conservation. Many of the actions and programs included in the Energy Agreement required approval of the PUC.
The parties to the Energy Agreement concluded that the agreements and policy directives in the Energy Agreement had been advanced or superseded by subsequent events, as well as by decisions and orders issued by the PUC, and accordingly ended the Energy Agreement on September 14, 2014. On September 15, 2014, the State of Hawaii and the U.S. Department of Energy executed a MOU recognizing that Hawaii is embarking on the next phase of its clean energy future. The MOU provides the framework for a comprehensive, sustained effort to better realize Hawaii's vast renewable energy potential and allow it to push forward in three main areas: the power sector, transportation and energy efficiency. This next phase will focus on stimulating deployment of clean energy infrastructure as a catalyst for economic growth, energy system innovation and test bed investments.
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. Further, completion of projects is subject to various risks, such as problems or disputes with vendors. In the event a project does not proceed, or if it becomes probable the PUC will disallow cost recovery for all or part of a project, project costs may need to be written off in amounts that could result in significant reductions in Hawaiian Electric’s consolidated net income.
In May 2011, the PUC ordered independently conducted regulatory audits on the reasonableness of costs incurred for Hawaiian Electric’s East Oahu Transmission Project (EOTP), Campbell Industrial Park (CIP) combustion turbine No. 1 (CT-1) project, and Customer Information System (CIS) project. However, in March 2012, the PUC eliminated the requirement for a regulatory audit for the EOTP Phase I in connection with an approved settlement of the EOTP Phase I project cost issues and, in March 2013, the PUC eliminated the requirement for an audit of the CIP CT-1 and CIS project costs as described below.
On January 28, 2013, the Utilities and the Consumer Advocate signed a settlement agreement (2013 Agreement), subject to PUC approval, to write off $40 million of costs in lieu of conducting the regulatory audits of the CIP CT-1 project and the CIS project. Based on the 2013 Agreement, as of December 31, 2012, the Utilities recorded an after-tax charge to net income of approximately $24 million — $17.1 million for Hawaiian Electric, $3.4 million for Hawaii Electric Light, and $3.2 million for Maui Electric. The remaining recoverable costs for these projects of $52 million were included in rate base as of December 31, 2012.
As part of the 2013 Agreement, Hawaii Electric Light would withdraw its 2013 test year rate case, and delay filing a new rate case until a 2016 test year. Additionally, Hawaiian Electric would delay the filing of its scheduled 2014 test year rate case to no earlier than January 2, 2014. For both Utilities, the existing terms of the last rate case decisions would continue. Hawaiian Electric would also be allowed to record Rate Adjustment Mechanism (RAM) revenues starting on January 1 of 2014, 2015 and 2016. The cash collection of RAM revenues would remain unchanged, starting June 1 of each year through May 31 of the following year.
On March 19, 2013, the PUC issued a decision and order (2013 D&O) approving the 2013 Agreement, with the following clarifications, none of which changed the financial impact of the settlement recorded as of December 31, 2012: (1) the PUC reiterated its authority to examine and ascertain what post go-live CIS costs would be subject to regulatory review in future rate cases; (2) the PUC discouraged requesting single issue cost deferral accounting and/or cost recovery mechanisms during the period of rate case deferral by Hawaiian Electric and Hawaii Electric Light; (3) the PUC approved the agreed-upon recovery of CIP CT-1 and CIS project costs through the RAM, as set forth in the 2013 Agreement, however not setting a precedent for future projects; and (4) the PUC reaffirmed its right to rule on the substance of the Maui Electric 2012 test year rate case in its ongoing rate case proceeding. On May 31, 2013, the PUC issued a final D&O in the Maui Electric 2012 test year rate case. See “Maui Electric 2012 test year rate case” below.
In March 2012, the PUC approved a settlement agreement reached among Hawaiian Electric, the Consumer Advocate and the Department of Defense, under which, in lieu of a regulatory audit, Hawaiian Electric would write off $9.5 million of EOTP Phase 1 gross plant in service and associated adjustments. This resulted in an after-tax charge to net income in the fourth quarter of 2011 of approximately $6 million and the elimination of the requirement for a Phase 1 regulatory audit. The PUC also provided for an additional increase of approximately $5 million in Hawaiian Electric’s 2011 test year rate case for the additional revenue requirements reflecting all remaining Phase 1 costs not previously included in rates or agreed to be written off.
Renewable energy projects.  The Utilities are committed to achieving or exceeding the State’s Renewable Portfolio Standard (RPS) goal of 40% renewable energy by 2030 and to decreasing the State’s dependence on imported fossil fuels. The Utilities continue to evaluate and pursue opportunities with developers of proposed projects to integrate power into its grid from a variety of renewable energy sources, including solar, biomass, wind, ocean thermal energy conversion, wave, geothermal and others.
In November 2013, Hawaiian Electric and Maui Electric filed an application for recovery of its actual deferred costs totaling $405,000 (split evenly between Hawaiian Electric and Maui Electric) for outside contractor services for additional studies to determine the value proposition of interconnecting the islands of Oahu and of Maui County (Maui, Lanai, and Molokai) through the Renewable Energy Intrastructure Program (REIP) surcharge. The application is currently pending before the PUC.
A revised draft Request for Proposals (RFP) for 200MW or more of renewable energy to be delivered to Oahu from any of the Hawaiian Islands was posted on Hawaiian Electric's website prior to the issuance of a proposed final RFP. In February 2012, the PUC granted Hawaiian Electric’s request for deferred accounting treatment for the inter-island project support costs. The amount of the deferred costs was limited to $5.89 million. On July 11, 2013, the PUC issued orders related to the 200 MW RFP, including an order initiating a proceeding to solicit information and evaluate whether an interisland grid interconnection transmission system between the islands of Oahu and Maui is in the public interest, given the potential for large-scale wind and solar projects on Maui.
In May 2012, the PUC instituted a proceeding for a competitive bidding process for up to 50 MW of firm renewable geothermal dispatchable energy (Geothermal RFP) on the island of Hawaii, and in July 2012, Hawaii Electric Light filed an application to defer 2012 costs related to the Geothermal RFP. In February 2013, Hawaii Electric Light issued the Final Geothermal RFP. Six bids were received, but Hawaii Electric Light notified bidders that none of the submitted bids sufficiently met both the low-cost and technical requirements of the Geothermal RFP. In October 2014, Hawaii Electric Light issued Addendum No. 1 (Best and Final Offer) and Attachment A (Best and Final Offer Bidder's Response Package) directly to five eligible bidders. The submittals received in January 2015 will be considered for final selection of one project to proceed with PPA negotiations.
In the fourth quarter of 2014, Hawaiian Electric filed applications requesting PUC approval of power purchase agreements for renewable as-available energy for seven projects that were granted waivers from the Competitive Bidding Framework.
Environmental regulation.  The Utilities are subject to environmental laws and regulations that regulate the operation of existing facilities, the construction and operation of new facilities and the proper cleanup and disposal of hazardous waste and toxic substances. In recent years, legislative, regulatory and governmental activities related to the environment, including proposals and rulemaking under the Clean Air Act (CAA) and Clean Water Act (CWA), have increased significantly and management anticipates that such activity will continue.
On August 14, 2014, the Environmental Protection Agency (EPA) published in the Federal Register the final regulations required by section 316(b) of the CWA designed to protect aquatic organisms from adverse impacts associated with existing power plant cooling water intake structures. The regulations were effective October 14, 2014 and apply to the cooling water systems for the steam generating units at Hawaiian Electric’s power plants on the island of Oahu. The regulations prescribe a process, including a number of required site-specific studies, for states to develop facility-specific entrainment and impingement controls to be incorporated in the facility’s National Pollutant Discharge Elimination System permit. In the case of Hawaiian Electric's power plants, there are a number of studies that have yet to be completed before Hawaiian Electric and the Department of Health of the State of Hawaii (DOH) can determine what entrainment or impingement controls, if any, might be appropriate.
On February 16, 2012, the Federal Register published the EPA’s final rule establishing the EPA’s National Emission Standards for Hazardous Air Pollutants for fossil-fuel fired steam electrical generating units (EGUs). The final rule, known as the Mercury and Air Toxics Standards (MATS), applies to the 14 EGUs at Hawaiian Electric’s power plants. MATS establishes the Maximum Achievable Control Technology standards for the control of hazardous air pollutants emissions from new and existing EGUs. Based on a review of the final rule and the benefits and costs of alternative compliance strategies, Hawaiian Electric has selected a MATS compliance strategy based on switching to lower emission fuels. The use of lower emission fuels will provide for MATS compliance at lower overall costs and avoid the reduction in operational flexibility imposed by emissions control equipment. Hawaiian Electric requested and received a one-year extension, resulting in a MATS compliance date of April 16, 2016. Hawaiian Electric also has pending with the EPA a Petition for Reconsideration and Stay dated April 16, 2012, and a Request for Expedited Consideration dated August 14, 2013. The submittals ask the EPA to revise an emissions standard for non-continental oil-fired EGUs on the grounds that the promulgated standard was incorrectly derived. The Petition and Request submittals to the EPA included additional data to demonstrate that the existing standard is erroneous. Hawaiian Electric has been in contact with the EPA regarding the status of its Petition, but has not been given a time frame for an EPA decision or action. Due to the EPA’s delay in taking action on Hawaiian Electric’s Petition for Reconsideration submitted in April 2012, Hawaiian Electric submitted to the EPA, on February 20, 2015, a Notice of Intent to Sue as a prerequisite to bringing a civil action.
On February 6, 2013, the EPA issued a guidance document titled “Next Steps for Area Designations and Implementation of the Sulfur Dioxide National Ambient Air Quality Standard,” which outlines a process that will provide the states additional flexibility and time for their development of one-hour sulfur dioxide (SO2) National Ambient Air Quality Standard (NAAQS) implementation plans. In May 2014, the EPA published a proposed data requirements rule for states to characterize their air quality in relation to the one-hour SO2 NAAQS. Under the proposed rule, the EPA expects to designate areas as attaining, or not attaining, the one-hour SO2 NAAQS in December 2017 or December 2020, depending on whether the area was characterized through modeling or monitoring. Hawaiian Electric will work with the DOH in implementing the one-hour SO2 NAAQS and in developing cost-effective strategies for NAAQS compliance, if needed.
Depending upon the specific measures required for compliance with the CWA 316(b) regulations and MATS, and the rules and guidance developed for compliance with the more stringent NAAQS, the Utilities may be required to incur material capital expenditures and other compliance costs, but such amounts and their timing are not determinable at this time. Additionally, the combined effects of these regulatory initiatives may result in a decision to retire or deactivate certain generating units earlier than anticipated.
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 and 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 adverse effect, individually or in the aggregate, on Hawaiian Electric’s consolidated results of operations, financial condition or liquidity.
Potential Clean Air Act Enforcement.  On July 1, 2013, Hawaii Electric Light and Maui Electric received a letter from the U.S. Department of Justice (DOJ) asserting potential violations of the Prevention of Significant Deterioration (PSD) and Title V requirements of the Clean Air Act involving the Hill and Kahului Power Plants. The EPA referred the matter to the DOJ for enforcement based on Hawaii Electric Light’s and Maui Electric’s responses to information requests in 2010 and 2012. The letter expresses an interest in resolving the matter without the issuance of a notice of violation. The parties had preliminary discussions in February 2014, and are continuing to negotiate toward a resolution of the DOJ’s claims. As part of the ongoing negotiations, the DOJ proposed in November 2014 entering into a consent decree pursuant to which the Utilities would install certain pollution controls and pay a penalty. The Utilities are currently reviewing the proposal, but are unable to estimate the amount or effect of a consent decree, if any, at this time.
Former Molokai Electric Company generation site.  In 1989, Maui Electric acquired by merger Molokai Electric Company. Molokai Electric Company had sold its former generation site (Site) in 1983, but continued to operate at the Site under a lease until 1985. The EPA has since performed Brownfield assessments of the Site that identified environmental impacts in the subsurface. Although Maui Electric never operated at the Site and operations there had stopped four years before the merger, in 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 impacts of subsurface contaminants. 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. In March 2012, Maui Electric accrued an additional $3.1 million (reserve balance of $3.6 million as of December 31, 2014) for the additional investigation and estimated cleanup costs at the Site and the Adjacent Parcel; however, final costs of remediation will depend on the results of continued investigation. Maui Electric received DOH and EPA comments on a draft site investigation plan for site characterization in the fourth quarter of 2013. Management concluded that these comments did not require a change to the reserve balance. The site investigation plan has been revised to address the EPA and DOH comments and the final site investigation plan was submitted to the DOH and EPA in December 2014.
Pearl Harbor sediment study. The U.S. Navy is conducting a feasibility study for the remediation of contaminated sediment in Pearl Harbor. In the course of its study, the Navy identified elevated levels of PCBs in the sediment offshore from the Waiau Power Plant. The results of the Navy’s study to date, including sampling data and possible remediation approaches, are undergoing further federal review. Hawaiian Electric submitted comments on the Navy’s study, including the further investigation and analyses that are necessary to identify appropriate remedial options and actions.
In July 2014, the Navy notified Hawaiian Electric of the Navy’s determination that Hawaiian Electric is responsible for cleanup of the area offshore of the Waiau Power Plant. The Navy has also requested that Hawaiian Electric reimburse the costs incurred by the Navy to date to investigate the area, and is asking Hawaiian Electric to engage in negotiations regarding the financing and undertaking of future response actions. The extent of the contamination, the appropriate remedial measures to address it, and Hawaiian Electric’s potential responsibility for any associated costs have not yet been determined. In December 2014, Hawaiian Electric recorded a reserve of $0.8 million for additional investigation of the PCBs in the sediment offshore from the Waiau Power Plant; however, final costs of remediation will depend on the results of the additional investigation.
Global climate change and greenhouse gas emissions reduction.  National and international concern about climate change and the contribution of greenhouse gas (GHG) emissions (including carbon dioxide emissions from the combustion of fossil fuels) to climate change have led to action by the State and to federal legislative and regulatory proposals to reduce GHG emissions.
In July 2007, Act 234, which requires a statewide reduction of GHG emissions by January 1, 2020 to levels at or below the statewide GHG emission levels in 1990, became law in Hawaii. On June 20, 2014, the Governor signed the final regulations required to implement Act 234 and the regulations went into effect on June 30, 2014. In general, the regulations will require affected sources that have the potential to emit GHGs in excess of established thresholds to reduce GHG emissions by 16% below 2010 emission levels by 2020. The regulations will also assess affected sources an annual fee based on tons per year of GHG emissions commencing on the effective date of the regulations, estimated to be approximately $0.5 million annually for the Utilities. The DOH GHG regulations also track the federal “Prevention of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule” (GHG Tailoring Rule, see below) and would create new thresholds for GHG emissions from new and existing stationary source facilities.
Several approaches (e.g., “cap and trade”) to GHG emission reduction have been either introduced or discussed in the U.S. Congress; however, no federal legislation has yet been enacted.
On September 22, 2009, the EPA issued its Final Mandatory Reporting of Greenhouse Gases Rule, which requires that sources emitting GHGs above certain threshold levels monitor and report GHG emissions. The Utilities have submitted the required reports for 2010 through 2013 to the EPA. In December 2009, the EPA made the finding that motor vehicle GHG emissions endanger public health or welfare. Since then, the EPA has also issued rules that begin to address GHG emissions from stationary sources, like the Utilities’ EGUs.
In June 2010, the EPA issued its GHG Tailoring Rule covering the permitting of new or modified stationary sources that have the potential to emit GHGs in greater quantities than the thresholds set forth in the rule, under the Prevention of Significant Deterioration program. On June 23, 2014, the U.S. Supreme Court issued a decision that invalidated the GHG Tailoring Rule, to the extent it regulated sources based solely on their GHG emissions. It also invalidated the GHG emissions threshold for regulation. On December 19, 2014, the EPA released two memorandums outlining the Agency’s plan for addressing the U.S. Supreme Court’s decision. Hawaiian Electric, Hawaii Electric Light and Maui Electric are evaluating the potential impacts of the Agency’s plan on utility operations and permitting. On January 8, 2014, the EPA published in the Federal Register its new proposal for New Source Performance Standards for GHG from new generating units. The proposed rule on GHG from new EGUs does not apply to oil- fired combustion turbines or diesel engine generators, and is not otherwise expected to have significant impacts on the Utilities.
On June 18, 2014, the EPA published in the Federal Register its proposed rule for GHG emissions from existing power plants. The rule sets interim and final state-wide, state-specific emission performance goals, expressed as lb CO2/MWh, that would apply to the state’s affected sources. The interim goal would apply as an average over the period 2020 through 2029, with the final goal to be met by 2030. On the same date, the EPA also published a separate rule for modified and reconstructed power plants. The EPA’s plan is to issue the final rules by mid-summer 2015. Hawaiian Electric is still evaluating the proposed rules for GHG emissions from existing, modified, and reconstructed sources, and how they might relate to the recently issued State GHG rules. Hawaiian Electric will participate in the federal GHG rulemaking process, and in the implementation of the State GHG rules, to try to reconcile federal GHG regulation, state GHG regulation, and any action the EPA may take as a result of the recent U.S. Supreme Court opinion, to facilitate clear and cost-effective compliance. The Utilities will continue to evaluate the impact of proposed GHG rules and regulations as they develop. Final regulations may impose significant compliance costs, and may require reductions in fossil fuel use and the addition of renewable energy resources in excess of the requirements of the RPS law.
The Utilities have taken, and continue to identify opportunities to take, direct action to reduce GHG emissions from their operations, including, but not limited to, supporting DSM programs that foster energy efficiency, using renewable resources for energy production and purchasing power from IPPs generated by renewable resources, burning renewable biodiesel in Hawaiian Electric’s CIP CT-1, using biodiesel for startup and shutdown of selected Maui Electric generating units, and testing biofuel blends in other Hawaiian Electric and Maui Electric generating units. The Utilities are also working with the State of Hawaii and other entities to pursue the use of liquefied natural gas as a cleaner and lower cost fuel to replace, at least in part, the petroleum oil that would otherwise be used. Management is unable to evaluate the ultimate impact on the Utilities’ operations of eventual comprehensive GHG regulation. However, management believes that the various initiatives it is undertaking will provide a sound basis for managing the Utilities’ carbon footprint and meeting GHG reduction goals that will ultimately emerge.
While the timing, extent and ultimate effects of climate change cannot be determined with any certainty, climate change is predicted to result in sea level rise, which could potentially impact coastal and other low-lying areas (where much of the Utilities’ electric infrastructure is sited), and could cause erosion of beaches, saltwater intrusion into aquifers and surface ecosystems, higher water tables and increased flooding and storm damage due to heavy rainfall. The effects of climate change on the weather (for example, floods or hurricanes), sea levels, and water availability and quality have the potential to materially adversely affect the results of operations, financial condition and liquidity of the Utilities. For example, severe weather could cause significant harm to the Utilities’ physical facilities.
Maui Electric 2012 test year rate case.  On May 31, 2013, the PUC issued a final D&O in the Maui Electric 2012 test year rate case. Final rates became effective August 1, 2013. The final D&O approved an increase in annual revenues of $5.3 million, which is $7.8 million less than the interim increase in annual revenues that had been in effect since June 1, 2012. Reductions from the interim D&O related primarily to:
(in millions)
 
Lower ROACE
$
4.0

Customer Information System expenses
0.3

Pension and OPEB expense based on 3-year average
1.5

Integrated resource planning expenses
0.9

Operational and Renewable Energy Integration study costs
1.1

Total adjustment
$
7.8


According to the PUC, the reduction in the allowed ROACE from the stipulated 10% to the final approved 9% is composed of 0.5% due to updated economic and financial market conditions manifested in lower interest rates in the 2012 test year and 0.5% for system inefficiencies reflected in over curtailment of renewable energy produced by independent power producers.
The reduction in the pension and OPEB expense is due to applying a 3-year average in the calculation of pension costs for the purpose of the 2012 test year. This is not a PUC decision to change the pension and OPEB tracking mechanisms, although the PUC emphasizes the need to evaluate alternatives to decrease or limit the growth in employee benefits costs.
The PUC also continued Maui Electric’s existing energy cost adjustment clause (ECAC) and power purchase adjustment clause (PPAC) design. The PUC stated that it will consider the Utilities' future actions to reduce fuel costs and increase use of renewable energy as it continues to review the design of the ECAC in the future.
Since the final rate increase was lower than the interim increase previously in effect, Maui Electric recorded a charge, net of revenue taxes, of $7.6 million in the second quarter of 2013 and refunded to customers approximately $9.7 million (which includes interest accrued since June 1, 2012) between September 2013 and early November 2013. As a result of the D&O, in the second quarter of 2013 Maui Electric also recorded adjustments to reduce expenses by reducing employee benefits expenses by $1.8 million for adjustments to pension and OPEB costs, and to reclassify $0.7 million of IRP costs to deferred accounts.
As required by the final D&O, Maui Electric filed in September 2013 a System Improvement and Curtailment Reduction Plan (SICRP), which identified actions that Maui Electric had already implemented to increase the use of wind energy and further actions that it is committed to implement to benefit customers.
Maui Electric 2015 test year rate case.  On December 30, 2014, Maui Electric filed its 2015 test year rate case in accordance with the three-year general rate case cycle established by the PUC in its Final D&O, issued on August 31, 2010, in the decoupling proceeding. This was an abbreviated rate case filing in which Maui Electric intends to forego the opportunity to seek a general rate increase in base rates, in recognition that its customers have been enduring a high bill environment. If Maui Electric were to seek an increase in base rates, the requested increase in revenue, based on its revenue requirement for a normalized 2015 test year, would have been $11.6 million, or 2.8%, over revenues at current effective rates with estimated 2015 rate adjustment mechanism (RAM) revenues. The normalized 2015 test year revenue requirement is based on an estimated cost of common equity of 10.75%. Management cannot predict any actions by the PUC as a result of this filing.
Asset retirement obligations.  AROs represent legal obligations associated with the retirement of certain tangible long-lived assets, are measured as the present value of the projected costs for the future retirement of specific assets and are recognized in the period in which the liability is incurred if a reasonable estimate of fair value can be made. The Utilities’ recognition of AROs have no impact on their earnings. The cost of the AROs is recovered over the life of the asset through depreciation. AROs recognized by the Utilities relate to obligations to retire plant and equipment, including removal of asbestos and other hazardous materials.
Hawaiian Electric has recorded estimated AROs related to removing retired generating units at its Honolulu and Waiau power plants. These removal projects are ongoing, with significant activity and expenditures occurring in 2014 in partial settlement of these liabilities. Both removal projects are expected to continue through 2015.
Changes to the ARO liability included in “Other liabilities” on Hawaiian Electric’s balance sheet were as follows:
(in thousands)
2014
 
2013
Balance, January 1
$
43,106

 
$
48,431

Accretion expense
890

 
1,263

Liabilities incurred
—

 
—

Liabilities settled
(14,577
)
 
(5,672
)
Revisions in estimated cash flows
—

 
(916
)
Balance, December 31
$
29,419

 
$
43,106


Decoupling. In 2010, the PUC issued an order approving decoupling, which was implemented by Hawaiian Electric on March 1, 2011, by Hawaii Electric Light on April 9, 2012 and by Maui Electric on May 4, 2012. Decoupling is a regulatory model that is intended to facilitate meeting the State of Hawaii’s goals to transition to a clean energy economy and achieve an aggressive renewable portfolio standard. The decoupling model implemented in Hawaii delinks revenues from sales and includes annual rate adjustments for certain O&M expenses and rate base changes. The decoupling mechanism has three components: (1) a sales decoupling component via a revenue balancing account (RBA), (2) a revenue escalation component via a 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. The implementation of decoupling has resulted in an improvement in the Utilities’ under-earning situation that has existed over the last several years.
On May 31, 2013, as provided for in its original order issued in 2010 approving decoupling and citing three years of implementation experience for Hawaiian Electric, the PUC opened an investigative docket to review whether the decoupling mechanisms are functioning as intended, are fair to the Utilities and their ratepayers, and are in the public interest. The PUC affirmed its support for the continuation of the sales decoupling (RBA) mechanism and stated its interest in evaluating the RAM to ensure it provides the appropriate balance of risks, costs, incentives and performance requirements, as well as administrative efficiency, and whether the current interest rate applied to the outstanding RBA balance is reasonable. The Utilities and the Consumer Advocate were named as parties to this proceeding and filed a joint statement of position that any material changes to the current decoupling mechanism should be made prospectively after 2016, unless the Utilities and the Consumer Advocate mutually agree to the change in this proceeding. The PUC granted several parties’ motions to intervene. In October 2013, the PUC issued orders that bifurcated the proceeding (Schedule A and Schedule B) and identified issues and procedural schedules for both Schedules.
Schedule A issues include:
•
for the RBA, the reasonableness of the interest rate related to the carrying charge of the outstanding RBA balance and whether there should be a risk sharing adjustment to the RBA;
•
for the RAM, whether it is reasonable to true up all actual prior year baseline projects, which are those capital projects less than $2.5 million, at year end or implement alternative methods to calculate the RAM rate base;
•
whether a risk sharing mechanism should be incorporated into the RBA;
•
whether performance metrics should be determined and reported; and
•
whether other factors should be considered if potential changes to existing RBA and RAM provisions are required.
Schedule B issues include:
•
whether performance metrics and incentives (rewards or penalties) should be implemented to control costs and encourage the Utilities to make necessary or appropriate changes to strategic and action plans;
•
whether the allocation of risk as a result of the decoupling mechanism is fairly reflected in the cost of capital allowed in rates;
•
changes or alternatives to the existing RAM; and
•
changes to ratemaking procedures to improve efficiency and/or effectiveness.
Oral arguments on Schedule A issues were held in January 2014. On February 7, 2014, the PUC issued a D&O on the Schedule A issues, which made certain modifications to the decoupling mechanism. Specifically, the D&O requires:
•
An adjustment to the Rate Base RAM Adjustment to include 90% of the amount of the current RAM Period Rate Base RAM Adjustment that exceeds the Rate Base RAM Adjustment from the prior year, to be effective with the Utilities’ 2014 decoupling filing.
•
Effective March 1, 2014, the interest rate to be applied on the outstanding RBA balances to be the short term debt rate used in each Utilities last rate case (ranging from 1.25% to 3.25%), instead of the 6% that had been previously approved.
The D&O required the Utilities to immediately investigate the possibility of deferring the payment of income taxes on the accrued amounts of decoupling revenue, and to report the results with recommendations to the PUC. The PUC reserved the right to determine in the next decoupling and rate case filings whether each Utilities’ allowed income taxes should be adjusted for this change. The Utilities updated the PUC on their progress in investigating the tax treatment of the revenues included in the RBA balances and provided information to the PUC concerning the application to the IRS for an accounting methods change to recognize RBA revenues for tax purposes when amounts are billed. On April 28, 2014, the Utilities received approval for this change from the IRS, effective January 1, 2014. This change will reduce the amount of interest to be accrued on the RBA balance as proposed by the Consumer Advocate (see "Recent tax developments" above).
As required, the Utilities developed websites to present certain Schedule A performance metrics and proposed additional performance metrics. These metrics are all currently being reviewed by the PUC and, if approved, will be available to the public.
The Schedule A issues on whether it is reasonable to automatically include all actual prior year capital expenditures on baseline projects in the Rate Base RAM and whether a risk sharing mechanism should be incorporated into the RBA, particularly with respect to the PUC’s concerns regarding maintaining and enhancing the Utilities' incentives to control costs and appropriately allocating risk and compensation for risk, will be addressed in the Schedule B proceedings.
On May 20, 2014, the Utilities and other parties filed their respective initial statements of position for the Schedule B issues in this proceeding. Specifically, the Utilities concluded that (1) the existing RAM provision can be modified to address concerns stated by the PUC regarding the review of baseline capital projects and the growth in plant additions, and (2) targeted incentives can be crafted to incentivize the activities identified by the PUC.
On September 15, 2014, the Utilities and other parties filed their respective reply statements of position for the Schedule B issues in this proceeding. Specifically, the Utilities concluded that (1) the existing RAM provision can be modified to address PUC concerns regarding the review of baseline capital projects, and to provide more incentives for the Utilities to control capital expenditure costs while aggressively moving forward with their plans, (2) if the RAM is to be replaced, the Utilities can support transition to a new appropriately designed incentive-based regulatory (IBR) model, (3) developing an IBR mechanism and process consistent with the objectives in the Utilities’ approved plans will also take reasonable time; thus, it would be more reasonable to target 2017 to begin implementation of any new IBR mechanism and decoupling should be retained in the meantime and (4) the Utilities would support the development of performance metrics to be implemented as part of a new IBR mechanism.
The Utilities and other parties participated in panel hearings on Schedule B issues in late October 2014.
In early December 2014, the PUC issued an order that amended the procedural schedule and issued information requests. On December 22, 2014, the Utilities and other parties filed their respective responses to PUC information requests. The proceeding is currently pending a PUC order instructing the parties regarding the issues and scope for limited briefs and reply briefs.
Management cannot predict the outcome of the proceedings or the ultimate impact of the proceedings on the results of operation of the Utilities.
April 2014 regulatory orders. In April 2014, the PUC issued four orders that collectively address certain key policy, resource planning and operational issues for the Utilities. The four orders are as follows:
Integrated Resource Planning. The PUC did not accept the Utilities’ Integrated Resource Plan and Action Plans submission, and, in lieu of an approved plan, has commenced other initiatives to enable resource planning. The PUC also terminated the Utilities' integrated resource planning (IRP) cycle, including the filing of a mid-cycle evaluation report, and formally concluded the IRP advisory group. The PUC directed each of Hawaiian Electric and Maui Electric to file within 120 days its respective Power Supply Improvement Plans (PSIPs), and the PSIPs were filed in August 2014. The PUC also provided its inclinations on the future of Hawaii’s electric utilities in an exhibit to the order. The exhibit provides the PUC’s perspectives on the vision, business strategies and regulatory policy changes required to align the Utilities' business model with customers’ interests and the state’s public policy goals.
Reliability Standards Working Group. The PUC ordered the Utilities (and in some cases the Kauai Island Utility Cooperative (KIUC)) to take timely actions intended to lower energy costs, improve system reliability and address emerging challenges to integrate additional renewable energy. In addition to the PSIPs mentioned above, the PUC ordered certain filing requirements which include the following:
•
Distributed Generation Interconnection Plan to be filed within 120 days. The Utilities’ Plan was filed in August 2014.
•
Plan to implement an on-going distribution circuit monitoring program to measure real-time voltage and other power quality parameters to be filed within 60 days. The plan shall achieve full implementation of the distribution circuit monitoring program within 180 days. The Utilities' Plan was filed in June 2014.
•
Action Plan for improving efficiencies in the interconnection requirements studies to be filed within 30 days. The Utilities' Plan was filed in May 2014.
•
The Utilities are to file monthly reports providing details about interconnection requirements studies.
•
Proposal to implement an integrated interconnection queue for each distribution circuit for each island grid to be filed within 120 days. The Utilities’ integrated interconnection queue plan was filed in August 2014 and the integrated interconnection queues were implemented in January 2015.
The PUC also stated it would be opening new dockets to address (1) reliability standards, (2) the technical, economic and policy issues associated with distributed energy resources and (3) the Hawaii electricity reliability administrator, which is a third party position which the legislature has authorized the PUC to create by contract to provide support for the PUC in developing and periodically updating local grid reliability standards and procedures and interconnection requirements and overseeing grid access and operation.
Policy Statement and Order Regarding Demand Response Programs. The PUC provided guidance concerning the objectives and goals for demand response programs, and ordered the Utilities to develop within 90 days an integrated Demand Response Portfolio Plan that will enhance system operations and reduce costs to customers. The Utilities’ Plan was filed in July 2014. In August 2014, the PUC invited public comment on the Utilities’ Plan. The Utilities submitted a status update in October 2014, and a second status update is planned to be filed with the PUC in March 2015.
Maui Electric Company 2012 Test Year Rate Case. The PUC acknowledged the extensive analyses provided by Maui Electric in its System Improvement and Curtailment Reduction Plan (SICRP) filed in September 2013. The PUC stated that it is encouraged by the changes in Maui Electric’s operations that have led to a significant reduction in the curtailment of renewables, but stated that Maui Electric has not set forth a clearly defined path that addresses integration and curtailment of additional renewables. The PUC directed Maui Electric to present a PSIP within 120 days to address present and future system operations so as to not only reduce curtailment, but to optimize the operation of its system for its customers’ benefit. The Maui Electric PSIP was filed in August 2014, and will be reviewed by the PUC in a new docket along with the Hawaiian Electric and Hawaii Electric Light PSIPs. Maui Electric filed its first annual SICRP status update in September 2014.
Review of PSIPs. Collectively, the PUC's April 2014 resource planning orders confirm the energy policy and operational priorities that will guide the Utilities' strategies and plans going forward.
PSIPs for Hawaiian Electric, Maui Electric and Hawaii Electric Light (updating its Power Supply Plan filed in April 2014) were filed in August 2014. The PSIPs each include a tactical plan to transform how electric utility services will be offered to meet customer needs and produce higher levels of renewable energy. Each plan contains a diversified mix of technologies, including significant distributed and utility‑scale renewable resources, that is expected to result, on a consolidated basis, in over 65% of the Utilities’ energy being produced from renewable resources by 2030. Under these plans, the Utilities will support sustainable growth of rooftop solar, expand use of energy storage systems, empower customers by developing smart grids, offer new products and services to customers (e.g., community solar, microgrids and voluntary “demand response” programs), switch from high-priced oil to lower cost liquefied natural gas, retire higher-cost, less efficient existing oil-based steam generators, and lower full service residential customer bills in real dollars.
The PSIPs will be reviewed by the PUC in a new docket, and a number of parties have moved to intervene in the proceeding. In September 2014, the PUC invited the public to comment on the PSIPs. In October 2014, the Utilities filed responses to information requests on the PSIPs from the PUC.
Transitional Distributed Generation Tariff. Consistent with their Distributed Generation Interconnection Plan, on January 20, 2015, the Utilities filed a motion which requested the PUC in pertinent part to:
(1) Reinstitute a program capacity threshold for the Utilities' existing Net Energy Metering (NEM) program;
(2) Approve the Utilities’ proposal to address both existing NEM program participants and those customers presently awaiting interconnection approval under the existing NEM program;
(3) Approve a new Transitional Distributed Generation (TDG) tariff to be available to customers seeking interconnection after the NEM program capacity is reached, which tariff more fairly allocates fixed grid costs to DG customers and credits customers for the value of the excess energy produced by their systems; and
(4) Approve a new standard form TDG contract to allow for the advanced technical capabilities required to integrate higher levels of distributed generation.
Once the requests in the motion are approved, it is contemplated that the Utilities will be able to increase existing circuit penetration limits based upon daytime minimum load, and identify strategic and cost effective investments to circuits and the system to support increased levels of DG. Such investments would be made for the benefit of all customers rather than charging costs only to those installing DG systems on the circuit.
The Utilities have requested approval of their motion within 60 days of filing or by March 20, 2015. On January 27, 2015, the Consumer Advocate opposed the Utilities’ motion, contended that further analysis is required to determine whether the Utilities’ requests are reasonable and in the public interest, and requested that the PUC hold the motion in abeyance until such further review can be conducted.
Management cannot predict the outcome of the proceedings to review the Plans submitted in response to the PUC’s April 2014 resource planning orders, or the ultimate impact of the proceedings on the results of operations of the Utilities.
Liquefied natural gas. In August 2014, Hawaiian Electric entered into a 15-year agreement with Fortis BC Energy Inc. (Fortis) for liquefaction capacity for liquefied natural gas (LNG) under tariffed rates approved by the British Columbia Utilities Commission. The agreement, which is subject to Hawaii PUC approval, other regulatory approvals and permits, and other conditions precedent before it becomes effective, provides for LNG liquefaction capacity purchases of 800,000 tonnes per year for the first five years, 700,000 tonnes per year for the next five years, and 600,000 tonnes per year for the last five years. Fortis must also obtain regulatory and other approvals for the agreement to become effective. The Fortis agreement is assignable and can be assigned to the selected bidder in the Utilities’ request for proposal (RFP) for the supply of containerized LNG and will help ensure that liquefaction capacity is available at pricing that management believes will lower customer bills.
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 Note 6). 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, 2014
(in thousands)
Hawaiian Electric
 
Hawaii Electric Light
 
Maui Electric
 
Other subsidiaries
 
Consolidating adjustments
 
 
Hawaiian Electric
Consolidated
Revenues
$
2,142,245

 
422,200

 
422,965

 
—

 
(87
)
[1]
 
$
2,987,323

Expenses
 
 
 
 
 
 
 
 
 
 
 
 
Fuel oil
821,246

 
117,215

 
193,224

 
—

 
—

 
 
1,131,685

Purchased power
537,821

 
123,226

 
60,961

 
—

 
—

 
 
722,008

Other operation and maintenance
283,532

 
65,471

 
61,609

 
—

 
—

 
 
410,612

Depreciation
109,204

 
35,904

 
21,279

 
—

 
—

 
 
166,387

Taxes, other than income taxes
201,426

 
39,521

 
39,916

 
—

 
—

 
 
280,863

   Total expenses
1,953,229

 
381,337

 
376,989

 
—

 
—

 
 
2,711,555

Operating income
189,016

 
40,863

 
45,976

 
—

 
(87
)
 
 
275,768

Allowance for equity funds used during construction
6,085

 
472

 
214

 
—

 
—

 
 
6,771

Equity in earnings of subsidiaries
40,964

 
—

 
—

 
—

 
(40,964
)
[2]
 
—

Interest expense and other charges, net
(44,041
)
 
(11,030
)
 
(9,773
)
 
—

 
87

[1]
 
(64,757
)
Allowance for borrowed funds used during construction
2,306

 
182

 
91

 
—

 
—

 
 
2,579

Income before income taxes
194,330

 
30,487

 
36,508

 
—

 
(40,964
)
 
 
220,361

Income taxes
55,609

 
11,264

 
13,852

 
—

 
—

 
 
80,725

Net income
138,721

 
19,223

 
22,656

 
—

 
(40,964
)
 
 
139,636

Preferred stock dividends of subsidiaries
—

 
534

 
381

 
—

 
—

 
 
915

Net income attributable to Hawaiian Electric
138,721

 
18,689

 
22,275

 
—

 
(40,964
)
 
 
138,721

Preferred stock dividends of Hawaiian Electric
1,080

 
—

 
—

 
—

 
—

 
 
1,080

Net income for common stock
$
137,641

 
18,689

 
22,275

 
—

 
(40,964
)
 
 
$
137,641


Consolidating statement of comprehensive income
Year ended December 31, 2014
(in thousands)
Hawaiian Electric
 
Hawaii Electric Light
 
Maui Electric
 
Other subsidiaries
 
Consolidating
adjustments
 
 
Hawaiian Electric
Consolidated
Net income for common stock
$
137,641

 
18,689

 
22,275

 
—

 
(40,964
)
 
 
$
137,641

Other comprehensive income (loss), net of taxes:
 
 
 
 
 
 
 
 
 
 
 
 
Retirement benefit plans:
 

 
 

 
 

 
 

 
 
 
 
 

Net losses arising during the period, net of tax benefits
(218,608
)
 
(28,725
)
 
(29,352
)
 
—

 
58,077

[1]
 
(218,608
)
Less: amortization of transition obligation, prior service credit and net losses recognized during the period in net periodic benefit cost, net of tax benefits
10,212

 
1,270

 
1,090

 
—

 
(2,360
)
[1]
 
10,212

Less: reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of taxes
207,833

 
27,437

 
28,257

 
—

 
(55,694
)
[1]
 
207,833

Other comprehensive loss, net of tax benefits
(563
)
 
(18
)
 
(5
)
 
—

 
23

 
 
(563
)
Comprehensive income attributable to common shareholder
$
137,078

 
18,671

 
22,270

 
—

 
(40,941
)
 
 
$
137,078


Consolidating statement of income
Year ended December 31, 2013
(in thousands)
Hawaiian Electric
 
Hawaii Electric Light
 
Maui Electric
 
Other subsidiaries
 
Consolidating adjustments
 
 
Hawaiian Electric
Consolidated
Revenues
$
2,124,174

 
431,517

 
424,603

 
—

 
(122
)
[1]
 
$
2,980,172

Expenses
 
 
 
 
 
 
 
 
 
 
 
 
Fuel oil
851,365

 
125,516

 
208,671

 
—

 
—

 
 
1,185,552

Purchased power
527,839

 
128,368

 
54,474

 
—

 
—

 
 
710,681

Other operation and maintenance
283,768

 
61,418

 
58,081

 
3

 
—

 
 
403,270

Depreciation
99,738

 
34,188

 
20,099

 
—

 
—

 
 
154,025

Taxes, other than income taxes
200,962

 
40,092

 
40,077

 
—

 
—

 
 
281,131

Impairment of utility assets
—

 
—

 
—

 
—

 
—

 
 
—

   Total expenses
1,963,672

 
389,582

 
381,402

 
3

 
—

 
 
2,734,659

Operating income (loss)
160,502

 
41,935

 
43,201

 
(3
)
 
(122
)
 
 
245,513

Allowance for equity funds used
   during construction
4,495

 
643

 
423

 
—

 
—

 
 
5,561

Equity in earnings of subsidiaries
41,410

 
—

 
—

 
—

 
(41,410
)
[2]
 
—

Interest expense and other charges, net
(39,107
)
 
(11,341
)
 
(8,953
)
 
 
 
122

[1]
 
(59,279
)
Allowance for borrowed funds used during construction
1,814

 
263

 
169

 
—

 
—

 
 
2,246

Income (loss) before income taxes
169,114

 
31,500

 
34,840

 
(3
)
 
(41,410
)
 
 
194,041

Income taxes
45,105

 
10,830

 
13,182

 
—

 
—

 
 
69,117

Net income (loss)
124,009

 
20,670

 
21,658

 
(3
)
 
(41,410
)
 
 
124,924

Preferred stock dividends of subsidiaries
—

 
534

 
381

 
—

 
—

 
 
915

Net income (loss) attributable to Hawaiian Electric
124,009

 
20,136

 
21,277

 
(3
)
 
(41,410
)
 
 
124,009

Preferred stock dividends of Hawaiian Electric
1,080

 
—

 
—

 
—

 
—

 
 
1,080

Net income (loss) for common stock
$
122,929

 
20,136

 
21,277

 
(3
)
 
(41,410
)
 
 
$
122,929


Consolidating statement of comprehensive income (loss)
Year ended December 31, 2013
(in thousands)
Hawaiian Electric
 
Hawaii Electric Light
 
Maui Electric
 
Other subsidiaries
 
Consolidating adjustments
 
 
Hawaiian Electric
Consolidated
Net income (loss) for common stock
$
122,929

 
20,136

 
21,277

 
(3
)
 
(41,410
)
 
 
$
122,929

Other comprehensive income, net of taxes:
 
 
 
 
 
 
 
 
 
 
 
 
Retirement benefit plans:
 

 
 

 
 

 
 

 
 

 
 
 

Net gains arising during the period, net of taxes
203,479

 
30,542

 
27,820

 
—

 
(58,362
)
[1]
 
203,479

Less: amortization of transition obligation, prior service credit and net losses recognized during the period in net periodic benefit cost, net of tax benefits
20,694

 
2,880

 
2,557

 
—

 
(5,437
)
[1]
 
20,694

Less: reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of tax benefits
(222,595
)
 
(33,277
)
 
(30,254
)
 
—

 
63,531

[1]
 
(222,595
)
Other comprehensive income, net of tax benefits
1,578

 
145

 
123

 
—

 
(268
)
 
 
1,578

Comprehensive income (loss) attributable to common shareholder
$
124,507

 
20,281

 
21,400

 
(3
)
 
(41,678
)
 
 
$
124,507


Consolidating statement of income
Year ended December 31, 2012
(in thousands)
Hawaiian Electric
 
Hawaii Electric Light
 
Maui Electric
 
Other subsidiaries
 
Consolidating adjustments
 
 
Hawaiian Electric
Consolidated
Revenues
$
2,228,233

 
441,013

 
440,270

 
—

 
(77
)
[1]
 
$
3,109,439

Expenses
 
 
 
 
 
 
 
 
 
 
 
 
Fuel oil
945,246

 
116,866

 
235,307

 
—

 
—

 
 
1,297,419

Purchased power
540,802

 
145,386

 
38,052

 
—

 
—

 
 
724,240

Other operation and maintenance
266,208

 
60,447

 
70,771

 
3

 
—

 
 
397,429

Depreciation
90,783

 
33,337

 
20,378

 
—

 
—

 
 
144,498

Taxes, other than income taxes
209,943

 
41,370

 
41,528

 
—

 
—

 
 
292,841

Impairment of utility assets
29,000

 
5,500

 
5,500

 
—

 
—

 
 
40,000

   Total expenses
2,081,982

 
402,906

 
411,536

 
3

 
—

 
 
2,896,427

Operating income (loss)
146,251

 
38,107

 
28,734

 
(3
)
 
(77
)
 
 
213,012

Allowance for equity funds used
   during construction
5,735

 
585

 
687

 
—

 
—

 
 
7,007

Equity in earnings of subsidiaries
28,836

 
—

 
—

 
—

 
(28,836
)
[2]
 
—

Interest expense and other charges, net
(40,842
)
 
(12,066
)
 
(9,224
)
 
—

 
77

[1]
 
(62,055
)
Allowance for borrowed funds used during construction
3,642

 
235

 
478

 
—

 
—

 
 
4,355

Income (loss) before income taxes
143,622

 
26,861

 
20,675

 
(3
)
 
(28,836
)
 
 
162,319

Income taxes
43,266

 
10,115

 
7,667

 
—

 
—

 
 
61,048

Net income (loss)
100,356

 
16,746

 
13,008

 
(3
)
 
(28,836
)
 
 
101,271

Preferred stock dividends of subsidiaries
—

 
534

 
381

 
—

 
—

 
 
915

Net income (loss) attributable to Hawaiian Electric
100,356

 
16,212

 
12,627

 
(3
)
 
(28,836
)
 
 
100,356

Preferred stock dividends of Hawaiian Electric
1,080

 
—

 
—

 
—

 
—

 
 
1,080

Net income (loss) for common stock
$
99,276

 
16,212

 
12,627

 
(3
)
 
(28,836
)
 
 
$
99,276


Consolidating statement of comprehensive income (loss)
Year ended December 31, 2012
(in thousands)
Hawaiian Electric
 
Hawaii Electric Light
 
Maui Electric
 
Other subsidiaries
 
Consolidating adjustments
 
 
Hawaiian Electric
Consolidated
Net income (loss) for common stock
$
99,276

 
16,212

 
12,627

 
(3
)
 
(28,836
)
 
 
$
99,276

Other comprehensive income (loss), net of taxes:
 
 
 
 
 
 
 
 
 
 
 
 
Retirement benefit plans:
 

 
 

 
 

 
 

 
 

 
 
 

Net losses arising during the period, net of tax benefits
(90,082
)
 
(13,577
)
 
(10,935
)
 
—

 
24,512

[1]
 
(90,082
)
Less: amortization of transition obligation, prior service credit and net losses recognized during the period in net periodic benefit cost, net of tax benefits
13,673

 
2,101

 
1,771

 
—

 
(3,872
)
[1]
 
13,673

Less: reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of tax benefits
75,471

 
11,442

 
9,093

 
—

 
(20,535
)
[1]
 
75,471

Other comprehensive loss, net of tax benefits
(938
)
 
(34
)
 
(71
)
 
—

 
105

 
 
(938
)
Comprehensive income (loss) attributable to common shareholder
$
98,338

 
16,178

 
12,556

 
(3
)
 
(28,731
)
 
 
$
98,338


Consolidating balance sheet
December 31, 2014
(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
$
43,819

 
5,464

 
3,016

 
—

 
—

 
 
$
52,299

Plant and equipment
3,782,438

 
1,179,032

 
1,048,012

 
—

 
—

 
 
6,009,482

Less accumulated depreciation
(1,253,866
)
 
(473,933
)
 
(447,711
)
 
—

 
—

 
 
(2,175,510
)
Construction in progress
134,376

 
12,421

 
11,819

 
—

 
—

 
 
158,616

Utility property, plant and equipment, net
2,706,767

 
722,984

 
615,136

 
—

 
—

 
 
4,044,887

Nonutility property, plant and equipment, less accumulated depreciation
4,950

 
82

 
1,531

 
—

 
—

 
 
6,563

Total property, plant and equipment, net
2,711,717

 
723,066

 
616,667

 
—

 
—

 
 
4,051,450

Investment in wholly-owned subsidiaries, at equity
538,639

 
—

 
—

 
—

 
(538,639
)
[2]
 
0

Current assets
 

 
 

 
 

 
 

 
 

 
 
 

Cash and equivalents
12,416

 
612

 
633

 
101

 
—

 
 
13,762

Advances to affiliates
16,100

 
—

 
—

 
—

 
(16,100
)
[1]
 
—

Customer accounts receivable, net
111,462

 
24,222

 
22,800

 
—

 
—

 
 
158,484

Accrued unbilled revenues, net
103,072

 
15,926

 
18,376

 
—

 
—

 
 
137,374

Other accounts receivable, net
9,980

 
981

 
2,246

 
—

 
(8,924
)
[1]
 
4,283

Fuel oil stock, at average cost
74,515

 
13,800

 
17,731

 
—

 
—

 
 
106,046

Materials and supplies, at average cost
33,154

 
6,664

 
17,432

 
—

 
—

 
 
57,250

Prepayments and other
44,680

 
8,611

 
13,567

 
—

 
(475
)
[3]
 
66,383

Regulatory assets
58,550

 
6,745

 
6,126

 
—

 
—

 
 
71,421

Total current assets
463,929

 
77,561

 
98,911

 
101

 
(25,499
)
 
 
615,003

Other long-term assets
 

 
 

 
 

 
 

 
 

 
 
 

Regulatory assets
623,784

 
107,454

 
102,788

 
—

 
(183
)
[1]
 
833,843

Unamortized debt expense
5,640

 
1,438

 
1,245

 
—

 
—

 
 
8,323

Other
53,106

 
15,366

 
13,366

 
—

 
—

 
 
81,838

Total other long-term assets
682,530

 
124,258

 
117,399

 
—

 
(183
)
 
 
924,004

Total assets
$
4,396,815

 
924,885

 
832,977

 
101

 
(564,321
)
 
 
$
5,590,457

Capitalization and liabilities
 

 
 

 
 

 
 

 
 

 
 
 

Capitalization
 

 
 

 
 

 
 

 
 

 
 
 

Common stock equity
$
1,682,144

 
281,846

 
256,692

 
101

 
(538,639
)
[2]
 
$
1,682,144

Cumulative preferred stock–not subject to mandatory redemption
22,293

 
7,000

 
5,000

 
—

 
—

 
 
34,293

Long-term debt, net
830,546

 
190,000

 
186,000

 
—

 
—

 
 
1,206,546

Total capitalization
2,534,983

 
478,846

 
447,692

 
101

 
(538,639
)
 
 
2,922,983

Current liabilities
 

 
 

 
 

 
 

 
 

 
 
 

Current portion of long-term debt
—

 
—

 
—

 
—

 
—

 
 
—

Short-term borrowings-affiliate
—

 
10,500

 
5,600

 
—

 
(16,100
)
[1]
 
—

Accounts payable
122,433

 
23,728

 
17,773

 
—

 
—

 
 
163,934

Interest and preferred dividends payable
15,407

 
3,989

 
2,931

 
—

 
(11
)
[1]
 
22,316

Taxes accrued
176,339

 
37,548

 
36,807

 
—

 
(292
)
[3]
 
250,402

Regulatory liabilities
191

 
—

 
441

 
—

 
—

 
 
632

Other
48,282

 
9,866

 
16,094

 
—

 
(9,096
)
[1]
 
65,146

Total current liabilities
362,652

 
85,631

 
79,646

 
—

 
(25,499
)
 
 
502,430

Deferred credits and other liabilities
 

 
 

 
 

 
 

 
 

 
 
 
Deferred income taxes
429,515

 
90,119

 
83,238

 
—

 
—

 
 
602,872

Regulatory liabilities
236,727

 
77,707

 
29,966

 
—

 
(183
)
[1]
 
344,217

Unamortized tax credits
49,865

 
14,902

 
14,725

 
—

 
—

 
 
79,492

Defined benefit pension and other
postretirement benefit plans liability
446,888

 
72,547

 
75,960

 
—

 
—

 
 
595,395

Other
52,446

 
10,658

 
13,532

 
—

 
—

 
 
76,636

Total deferred credits and other liabilities
1,215,441

 
265,933

 
217,421

 
—

 
(183
)
 
 
1,698,612

Contributions in aid of construction
283,739

 
94,475

 
88,218

 
—

 
—

 
 
466,432

Total capitalization and liabilities
$
4,396,815

 
924,885

 
832,977

 
101

 
(564,321
)
 
 
$
5,590,457

Consolidating balance sheet
December 31, 2013
(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
$
43,407

 
5,460

 
3,016

 
—

 
—

 
 
$
51,883

Plant and equipment
3,558,569

 
1,136,923

 
1,006,383

 
—

 
—

 
 
5,701,875

Less accumulated depreciation
(1,222,129
)
 
(453,721
)
 
(435,379
)
 
—

 
—

 
 
(2,111,229
)
Construction in progress
124,494

 
7,709

 
11,030

 
—

 
—

 
 
143,233

Utility property, plant and equipment, net
2,504,341

 
696,371

 
585,050

 
—

 
—

 
 
3,785,762

Nonutility property, plant and equipment, less accumulated depreciation
4,953

 
82

 
1,532

 
—

 
—

 
 
6,567

Total property, plant and equipment, net
2,509,294

 
696,453

 
586,582

 
—

 
—

 
 
3,792,329

Investment in wholly-owned subsidiaries, at equity
523,674

 
—

 
—

 
—

 
(523,674
)
[2]
 
—

Current assets
 

 
 

 
 

 
 

 
 

 
 
 

Cash and equivalents
61,245

 
1,326

 
153

 
101

 
—

 
 
62,825

Advances to affiliates
6,839

 
1,000

 
—

 
—

 
(7,839
)
[1]
 
—

Customer accounts receivable, net
121,282

 
28,088

 
26,078

 
—

 
—

 
 
175,448

Accrued unbilled revenues, net
107,752

 
17,100

 
19,272

 
—

 
—

 
 
144,124

Other accounts receivable, net
16,373

 
4,265

 
2,451

 
—

 
(9,027
)
[1]
 
14,062

Fuel oil stock, at average cost
99,613

 
14,178

 
20,296

 
—

 
—

 
 
134,087

Materials and supplies, at average cost
37,377

 
6,883

 
14,784

 
—

 
—

 
 
59,044

Prepayments and other
29,798

 
8,334

 
16,140

 
—

 
(1,415
)
[3]
 
52,857

Regulatory assets
54,979

 
6,931

 
7,828

 
—

 
—

 
 
69,738

Total current assets
535,258

 
88,105

 
107,002

 
101

 
(18,281
)
 
 
712,185

Other long-term assets
 

 
 

 
 

 
 

 
 

 
 
 

Regulatory assets
381,346

 
64,552

 
60,288

 
—

 
—

 
 
506,186

Unamortized debt expense
6,051

 
1,580

 
1,372

 
—

 
—

 
 
9,003

Other
42,163

 
11,270

 
13,993

 
—

 
—

 
 
67,426

Total other long-term assets
429,560

 
77,402

 
75,653

 
—

 
—

 
 
582,615

Total assets
$
3,997,786

 
861,960

 
769,237

 
101

 
(541,955
)
 
 
$
5,087,129

Capitalization and liabilities
 

 
 

 
 

 
 

 
 

 
 
 

Capitalization
 

 
 

 
 

 
 

 
 

 
 
 

Common stock equity
$
1,593,564

 
274,802

 
248,771

 
101

 
(523,674
)
[2]
 
$
1,593,564

Cumulative preferred stock–not subject to mandatory redemption
22,293

 
7,000

 
5,000

 
—

 
—

 
 
34,293

Long-term debt, net
830,547

 
189,998

 
186,000

 
—

 
—

 
 
1,206,545

Total capitalization
2,446,404

 
471,800

 
439,771

 
101

 
(523,674
)
 
 
2,834,402

Current liabilities
 

 
 

 
 

 
 

 
 

 
 
 

Current portion of long-term debt
—

 
11,400

 
—

 
—

 
—

 
 
11,400

Short-term borrowings-affiliate
1,000

 
—

 
6,839

 
—

 
(7,839
)
[1]
 
—

Accounts payable
145,062

 
24,383

 
20,114

 
—

 
—

 
 
189,559

Interest and preferred dividends payable
15,190

 
3,885

 
2,585

 
—

 
(8
)
[1]
 
21,652

Taxes accrued
175,790

 
37,899

 
37,171

 
—

 
(1,415
)
[3]
 
249,445

Regulatory liabilities
1,705

 
—

 
211

 
—

 
—

 
 
1,916

Other
48,443

 
9,033

 
15,424

 
—

 
(9,019
)
[1]
 
63,881

Total current liabilities
387,190

 
86,600

 
82,344

 
—

 
(18,281
)
 
 
537,853

Deferred credits and other liabilities
 

 
 

 
 

 
 

 
 

 
 
 

Deferred income taxes
359,621

 
79,947

 
67,593

 
—

 
—

 
 
507,161

Regulatory liabilities
235,786

 
76,475

 
35,122

 
—

 
—

 
 
347,383

Unamortized tax credits
44,931

 
14,245

 
14,363

 
—

 
—

 
 
73,539

Defined benefit pension and other
postretirement benefit plans liability
202,396

 
28,427

 
31,339

 
—

 
—

 
 
262,162

Other
63,374

 
14,703

 
13,658

 
—

 
—

 
 
91,735

Total deferred credits and other liabilities
906,108

 
213,797

 
162,075

 
—

 
—

 
 
1,281,980

Contributions in aid of construction
258,084

 
89,763

 
85,047

 
—

 
—

 
 
432,894

Total capitalization and liabilities
$
3,997,786

 
861,960

 
769,237

 
101

 
(541,955
)
 
 
$
5,087,129


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, 2011
$
1,402,841

 
280,468

 
235,568

 
107

 
(516,143
)
 
$
1,402,841

Net income (loss) for common stock
99,276

 
16,212

 
12,627

 
(3
)
 
(28,836
)
 
99,276

Other comprehensive loss, net of tax benefits
(938
)
 
(34
)
 
(71
)
 
—

 
105

 
(938
)
Issuance of common stock, net of expenses
44,001

 
—

 
—

 
—

 
—

 
44,001

Common stock dividends
(73,044
)
 
(27,738
)
 
(19,197
)
 
—

 
46,935

 
(73,044
)
Balance, December 31, 2012
$
1,472,136

 
268,908

 
228,927

 
104

 
(497,939
)
 
$
1,472,136

Net income (loss) for common stock
122,929

 
20,136

 
21,277

 
(3
)
 
(41,410
)
 
122,929

Other comprehensive income, net of taxes
1,578

 
145

 
123

 
—

 
(268
)
 
1,578

Issuance of common stock, net of expenses
78,499

 
—

 
12,461

 
—

 
(12,461
)
 
78,499

Common stock dividends
(81,578
)
 
(14,387
)
 
(14,017
)
 
—

 
28,404

 
(81,578
)
Balance, December 31, 2013
$
1,593,564

 
274,802

 
248,771

 
101

 
(523,674
)
 
$
1,593,564

Net income for common stock
137,641

 
18,689

 
22,275

 
—

 
(40,964
)
 
137,641

Other comprehensive loss, net of tax benefits
(563
)
 
(18
)
 
(5
)
 
—

 
23

 
(563
)
Issuance of common stock, net of expenses
39,994

 
—

 
—

 
—

 
—

 
39,994

Common stock dividends
(88,492
)
 
(11,627
)
 
(14,349
)
 
—

 
25,976

 
(88,492
)
Balance, December 31, 2014
$
1,682,144

 
281,846

 
256,692

 
101

 
(538,639
)
 
$
1,682,144


Consolidating statement of cash flows
Year ended December 31, 2014
(in thousands)
Hawaiian Electric
 
Hawaii Electric Light
 
Maui Electric
 
Other subsidiaries
 
Consolidating
adjustments
 
 
Hawaiian Electric
Consolidated
Cash flows from operating activities
 

 
 

 
 

 
 

 
 

 
 
 

Net income
$
138,721

 
19,223

 
22,656

 
—

 
(40,964
)
[2]
 
$
139,636

Adjustments to reconcile net income to net cash provided by operating activities
 

 
 

 
 

 
 

 
 

 
 
 

Equity in earnings
(41,064
)
 
—

 
—

 
—

 
40,964

[2]
 
(100
)
Common stock dividends received from subsidiaries
26,076

 
—

 
—

 
—

 
(25,976
)
[2]
 
100

Depreciation of property, plant and equipment
109,204

 
35,904

 
21,279

 
—

 
—

 
 
166,387

Other amortization (1)
1,749

 
2,596

 
2,065

 
—

 
—

 
 
6,410

Increase in deferred income taxes
56,901

 
12,083

 
13,963

 
—

 
—

 
 
82,947

Change in tax credits, net
4,998

 
680

 
384

 
—

 
—

 
 
6,062

Allowance for equity funds used during construction
(6,085
)
 
(472
)
 
(214
)
 
—

 
—

 
 
(6,771
)
Change in cash overdraft
—

 
—

 
(1,038
)
 
—

 
—

 
 
(1,038
)
Changes in assets and liabilities:
 

 
 

 
 

 
 

 
 

 
 
 

Decrease in accounts receivable
16,213

 
7,150

 
3,483

 
—

 
(103
)
[1]
 
26,743

Decrease in accrued unbilled revenues
4,680

 
1,174

 
896

 
—

 
—

 
 
6,750

Decrease in fuel oil stock
25,098

 
378

 
2,565

 
—

 
—

 
 
28,041

Decrease (increase) in materials and supplies
4,223

 
219

 
(2,648
)
 
—

 
—

 
 
1,794

Increase in regulatory assets
(14,620
)
 
(3,357
)
 
977

 
—

 
—

 
 
(17,000
)
Decrease in accounts payable (2)
(56,044
)
 
(6,645
)
 
(2,838
)
 
—

 
—

 
 
(65,527
)
Change in prepaid and accrued income taxes and revenue taxes
(4,166
)
 
(3,251
)
 
3,381

 
—

 
—

 
 
(4,036
)
Decrease in defined benefit pension and other postretirement benefit plans liability
(562
)
 
—

 
(399
)
 
—

 
—

 
 
(961
)
Change in other assets and liabilities (3)
(46,636
)
 
(12,577
)
 
(3,332
)
 
—

 
103

[1]
 
(62,442
)
Net cash provided by operating activities
218,686

 
53,105

 
61,180

 
—

 
(25,976
)
 
 
306,995

Cash flows from investing activities
 

 
 

 
 

 
 

 
 

 
 
 

Capital expenditures (4)
(237,970
)
 
(49,895
)
 
(48,814
)
 
—

 
—

 
 
(336,679
)
Contributions in aid of construction
30,021

 
7,695

 
4,090

 
—

 
—

 
 
41,806

Advances from affiliates
(9,261
)
 
1,000

 
—

 
—

 
8,261

[1]
 
—

Other (5)
604

 
492

 
68

 
—

 
—

 
 
1,164

Investment in consolidated subsidiary
—

 
—

 
—

 
—

 
—

 
 
—

Net cash used in investing activities
(216,606
)
 
(40,708
)
 
(44,656
)
 
—

 
8,261

 
 
(293,709
)
Cash flows from financing activities
 

 
 

 
 

 
 

 
 

 
 
 

Common stock dividends
(88,492
)
 
(11,627
)
 
(14,349
)
 
—

 
25,976

[2]
 
(88,492
)
Preferred stock dividends of Hawaiian Electric and subsidiaries
(1,080
)
 
(534
)
 
(381
)
 
—

 
—

 
 
(1,995
)
Proceeds from issuance of common stock
40,000

 
—

 
—

 
—

 
—

 
 
40,000

Proceeds from issuance of long-term debt
—

 
—

 
—

 
—

 
—

 
 
—

Repayment of long-term debt
—

 
(11,400
)
 
—

 
—

 
—

 
 
(11,400
)
Net increase (decrease) in short-term borrowings from non-affiliates and affiliate with original maturities of three months or less
(1,000
)
 
10,500

 
(1,239
)
 
—

 
(8,261
)
[2]
 
—

Other
(337
)
 
(50
)
 
(75
)
 
—

 
—

 
 
(462
)
Net cash used in financing activities
(50,909
)
 
(13,111
)
 
(16,044
)
 
—

 
17,715

 
 
(62,349
)
Net increase (decrease) in cash and cash equivalents
(48,829
)
 
(714
)
 
480

 
—

 
—

 
 
(49,063
)
Cash and cash equivalents, January 1
61,245

 
1,326

 
153

 
101

 
—

 
 
62,825

Cash and cash equivalents, December 31
$
12,416

 
612

 
633

 
101

 
—

 
 
$
13,762

(1) Prior to revision, other amortization for Maui Electric and Hawaiian Electric Consolidated were $3,746 and $8,091, respectively.
(2) Prior to revision, decrease in accounts payable for Hawaiian Electric, Hawaii Electric Light, Maui Electric and Hawaiian Electric Consolidated, were $(74,276), $(8,490), $(7,866) and $(90,632), respectively.
(3) Prior to revision, changes in other assets and liabilities for Hawaiian Electric, Hawaii Electric Light, Maui Electric, Consolidating adjustments and Hawaiian Electric Consolidated were $(46,032), $(12,085), $(4,945), $103 and $(62,959), respectively.
(4) Prior to revision, capital expenditures for Hawaiian Electric, Hawaii Electric Light, Maui Electric and Hawaiian Electric Consolidated, were $(219,738), $(48,050), $(43,786) and $(311,574), respectively.
(5) Prior to revision, cash flows from investing activities-other for Hawaiian Electric, Hawaii Electric Light, Maui Electric and Hawaiian Electric Consolidated, were nil.
Consolidating statement of cash flows
Year ended December 31, 2013
(in thousands)
Hawaiian Electric
 
Hawaii Electric Light
 
Maui Electric
 
Other subsidiaries
 
Consolidating
adjustments
 
 
Hawaiian Electric
Consolidated
 
As restated
 
As restated
 
As restated
 
 
 
 
 
 
As restated
Cash flows from operating activities
 

 
 

 
 

 
 

 
 

 
 
 

Net income (loss)
$
124,009

 
20,670

 
21,658

 
(3
)
 
(41,410
)
[2]
 
$
124,924

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities
 

 
 

 
 

 
 

 
 

 
 
 

    Equity in earnings
(41,510
)
 
—

 
—

 
—

 
41,410

[2]
 
(100
)
Common stock dividends received from subsidiaries
28,505

 
—

 
—

 
—

 
(28,405
)
[2]
 
100

Depreciation of property, plant and equipment
99,738

 
34,188

 
20,099

 
—

 
—

 
 
154,025

Other amortization
554

 
1,979

 
2,544

 
—

 
—

 
 
5,077

Increase in deferred income taxes
41,409

 
10,569

 
12,529

 
—

 
—

 
 
64,507

Change in tax credits, net
5,152

 
818

 
1,047

 
—

 
—

 
 
7,017

Allowance for equity funds used during construction
(4,495
)
 
(643
)
 
(423
)
 
—

 
—

 
 
(5,561
)
Change in cash overdraft
—

 
—

 
1,038

 
—

 
—

 
 
1,038

Changes in assets and liabilities:
 

 
 

 
 

 
 

 
 

 
 
 

Decrease (increase) in accounts receivable
49,974

 
(1,459
)
 
1,178

 
—

 
(248
)
[1]
 
49,445

Decrease (increase) in accrued unbilled revenues
(7,152
)
 
(2,707
)
 
33

 
—

 
—

 
 
(9,826
)
Decrease in fuel oil stock
23,563

 
1,307

 
2,462

 
—

 
—

 
 
27,332

Increase in materials and supplies
(5,598
)
 
(1,547
)
 
(814
)
 
—

 
—

 
 
(7,959
)
Increase in regulatory assets
(46,047
)
 
(9,237
)
 
(10,177
)
 
—

 
—

 
 
(65,461
)
Increase (decrease) in accounts payable (1)
18,527

 
1,525

 
(5,321
)
 
—

 
—

 
 
14,731

Change in prepaid and accrued income taxes and revenue taxes
4,632

 
(4,114
)
 
(2,546
)
 
—

 
—

 
 
(2,028
)
Increase (decrease) in defined benefit pension and other postretirement benefit plans liability
2,325

 
(1
)
 
(84
)
 
—

 
—

 
 
2,240

Change in other assets and liabilities (2)
(18,618
)
 
(6,513
)
 
(7,753
)
 
—

 
248

[1]
 
(32,636
)
Net cash provided by (used in) operating activities
274,968

 
44,835

 
35,470

 
(3
)
 
(28,405
)
 
 
326,865

Cash flows from investing activities
 

 
 

 
 

 
 

 
 

 
 
 

Capital expenditures (3)
(262,562
)
 
(58,416
)
 
(57,066
)
 
—

 
—

 
 
(378,044
)
Contributions in aid of construction
21,686

 
7,590

 
2,884

 
—

 
—

 
 
32,160

Advances from affiliates
2,561

 
17,050

 
—

 
—

 
(19,611
)
[1]
 
—

Other (4)
677

 
21

 
209

 
—

 
—

 
 
907

Investment in consolidated subsidiary
(12,461
)
 
—

 
—

 
—

 
12,461

[2]
 
—

Net cash used in investing activities
(250,099
)
 
(33,755
)
 
(53,973
)
 
—

 
(7,150
)
 
 
(344,977
)
Cash flows from financing activities
 

 
 

 
 

 
 

 
 

 
 
 

Common stock dividends
(81,578
)
 
(14,388
)
 
(14,017
)
 
—

 
28,405

[2]
 
(81,578
)
Preferred stock dividends of Hawaiian Electric and subsidiaries
(1,080
)
 
(534
)
 
(381
)
 
—

 
—

 
 
(1,995
)
Proceeds from the issuance of common stock
78,500

 
—

 
12,461

 
—

 
(12,461
)
[2]
 
78,500

Proceeds from the issuance of long-term debt
140,000

 
56,000

 
40,000

 
—

 
—

 
 
236,000

Repayment of long-term debt
(90,000
)
 
(56,000
)
 
(20,000
)
 
—

 
—

 
 
(166,000
)
Net decrease in short-term borrowings from non-affiliates and affiliate with original maturities of three months or less
(17,050
)
 
—

 
(2,561
)
 
—

 
19,611

[1]
 
—

Other
(681
)
 
(273
)
 
(195
)
 
—

 
—

 
 
(1,149
)
Net cash provided by (used in) financing activities
28,111

 
(15,195
)
 
15,307

 
—

 
35,555

 
 
63,778

Net increase (decrease) in cash and cash equivalents
52,980

 
(4,115
)
 
(3,196
)
 
(3
)
 
—

 
 
45,666

Cash and cash equivalents, January 1
8,265

 
5,441

 
3,349

 
104

 
—

 
 
17,159

Cash and cash equivalents, December 31
$
61,245

 
1,326

 
153

 
101

 
—

 
 
$
62,825

(1) Prior to restatement, decrease in accounts payable for Hawaiian Electric, Hawaii Electric Light, Maui Electric and Hawaiian Electric Consolidated, were $(6,136), $(4,756), $(9,936) and $(20,828), respectively.
(2) Prior to restatement,changes in other assets and liabilities for Hawaiian Electric, Hawaii Electric Light, Maui Electric, Consolidating adjustments and Hawaiian Electric Consolidated were $(17,941), $(6,262), $(7,544), $248 and $(31,499), respectively.
(3) Prior to restatement, capital expenditures for Hawaiian Electric, Hawaii Electric Light, Maui Electric and Hawaiian Electric Consolidated, were $(237,899), $(52,135), $(52,451) and $(342,485), respectively.
(4) Prior to restatement, cash flows from investing activities-other for Hawaiian Electric, Hawaii Electric Light, Maui Electric and Hawaiian Electric Consolidated, were nil, $(230), nil and $(230), respectively.
Consolidating statement of cash flows
Year ended December 31, 2012
(in thousands)
Hawaiian Electric
 
Hawaii Electric Light
 
Maui Electric
 
Other subsidiaries
 
Consolidating
adjustments
 
 
Hawaiian Electric
Consolidated
 
As restated
 
As restated
 
As restated
 
 
 
 
 
 
As restated
Cash flows from operating activities
 

 
 

 
 

 
 

 
 

 
 
 
Net income (loss)
$
100,356

 
16,746

 
13,008

 
(3
)
 
(28,836
)
[2]
 
$
101,271

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities
 

 
 

 
 

 
 

 
 

 
 
 

Equity in earnings
(28,936
)
 
—

 
—

 
—

 
28,836

[2]
 
(100
)
Common stock dividends received from subsidiaries
47,035

 
—

 
—

 
—

 
(46,935
)
[2]
 
100

Depreciation of property, plant and equipment
90,783

 
33,337

 
20,378

 
—

 
—

 
 
144,498

Other amortization
1,508

 
3,252

 
2,238

 
—

 
—

 
 
6,998

Impairment of utility assets
29,000

 
5,500

 
5,500

 
—

 
—

 
 
40,000

Increase in deferred income taxes
66,968

 
7,457

 
12,453

 
—

 
—

 
 
86,878

Change in tax credits, net
5,006

 
522

 
547

 
—

 
—

 
 
6,075

Allowance for equity funds used during construction
(5,735
)
 
(585
)
 
(687
)
 
—

 
—

 
 
(7,007
)
Changes in assets and liabilities:
 

 
 

 
 

 
 

 
 

 
 
 

Increase in accounts receivable
(48,451
)
 
(1,106
)
 
(2,164
)
 
—

 
4,717

[1]
 
(47,004
)
Decrease (increase) in accrued unbilled revenues
2,728

 
4,106

 
(3,306
)
 
—

 
—

 
 
3,528

Decrease in fuel oil stock
4,861

 
3,732

 
1,536

 
—

 
—

 
 
10,129

Increase in materials and supplies
(6,683
)
 
(636
)
 
(578
)
 
—

 
—

 
 
(7,897
)
Increase in regulatory assets
(55,605
)
 
(9,649
)
 
(7,147
)
 
—

 
—

 
 
(72,401
)
Increase (decrease) in accounts payable (1)
6,329

 
(5,774
)
 
5,767

 
—

 
—

 
 
6,322

Change in prepaid and accrued income taxes and revenue taxes
19,871

 
1,935

 
3,433

 
—

 
—

 
 
25,239

Decrease in defined benefit pension and other postretirement benefits plans liability
(434
)
 
(191
)
 
(119
)
 
—

 
—

 
 
(744
)
Change in other assets and liabilities (2)
(45,366
)
 
(11,335
)
 
(12,843
)
 
(1
)
 
(4,717
)
[1]
 
(74,262
)
Net cash provided by (used in) operating activities
183,235

 
47,311

 
38,016

 
(4
)
 
(46,935
)
 
 
221,623

Cash flows from investing activities
 

 
 

 
 

 
 

 
 

 
 
 

Capital expenditures (3)
(271,864
)
 
(43,396
)
 
(40,066
)
 
—

 
—

 
 
(355,326
)
Contributions in aid of construction
32,285

 
8,184

 
5,513

 
—

 
—

 
 
45,982

Other (4)
486

 
192

 
165

 
—

 
—

 
 
843

Advances from (to) affiliates
(9,400
)
 
28,100

 
18,500

 
—

 
(37,200
)
[1]
 
—

Net cash used in investing activities
(248,493
)
 
(6,920
)
 
(15,888
)
 
—

 
(37,200
)
 
 
(308,501
)
Cash flows from financing activities
 

 
 

 
 

 
 

 
 

 
 
 

Common stock dividends
(73,044
)
 
(27,738
)
 
(19,197
)
 
—

 
46,935

[2]
 
(73,044
)
Preferred stock dividends of Hawaiian Electric and subsidiaries
(1,080
)
 
(534
)
 
(381
)
 
—

 
—

 
 
(1,995
)
Proceeds from the issuance of long-term debt
367,000

 
31,000

 
59,000

 
—

 
—

 
 
457,000

Proceeds from issuance of common stock
44,000

 
—

 
—

 
—

 
—

 
 
44,000

Repayment of long-term debt
(259,580
)
 
(41,200
)
 
(67,720
)
 
—

 
—

 
 
(368,500
)
Net increase (decrease) in short-term borrowings from non-affiliates and affiliate with original maturities of three months or less
(46,600
)
 
—

 
9,400

 
—

 
37,200

[1]
 
—

Other
(1,992
)
 
139

 
(377
)
 
—

 
—

 
 
(2,230
)
Net cash provided by (used in) financing activities
28,704

 
(38,333
)
 
(19,275
)
 
—

 
84,135

 
 
55,231

Net increase (decrease) in cash and cash equivalents
(36,554
)
 
2,058

 
2,853

 
(4
)
 
—

 
 
(31,647
)
Cash and cash equivalents, January 1
44,819

 
3,383

 
496

 
108

 
—

 
 
48,806

Cash and cash equivalents, December 31
$
8,265

 
5,441

 
3,349

 
104

 
—

 
 
$
17,159

(1) Prior to restatement, increase (decrease) in accounts payable for Hawaiian Electric, Hawaii Electric Light, Maui Electric and Hawaiian Electric Consolidated, were $(31,743), $(8,110), $940 and $(38,913), respectively.
(2) Prior to restatement,changes in other assets and liabilities for Hawaiian Electric, Hawaii Electric Light, Maui Electric, Other subsidiaries, Consolidating adjustments and Hawaiian Electric Consolidated were $(44,880), $(11,143), $(12,678), $(1),$(4,717) and $(73,419), respectively.
(3) Prior to restatement, capital expenditures for Hawaiian Electric, Hawaii Electric Light, Maui Electric and Hawaiian Electric Consolidated, were $(233,792), $(41,060), $(35,239) and $(310,091), respectively.
(4) Prior to restatement, cash flows from investing activities-other for Hawaiian Electric, Hawaii Electric Light, Maui Electric and Hawaiian Electric Consolidated, were nil.

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.