Electric utility segment

9 Months Ended

Sep. 30, 2018

Electric utility subsidiary [Abstract]

Electric utility segment

Electric utility segment

Revenue taxes. The Utilities’ revenues include amounts for recovery of various Hawaii state revenue taxes. Revenue taxes are generally recorded as an expense in the period the related revenues are recognized. For the third quarters of 2018 and 2017 and the nine months ended September 30, 2018 and 2017, the Utilities’ revenues include recovery of revenue taxes of approximately $61 million, $54 million, $166 million and $150 million, respectively, which amounts are included in “Taxes, other than income taxes” expense, in the unaudited condensed consolidated statements of income. However, the Utilities pay revenue taxes to the taxing authorities in the period based on (1) the prior year’s billed revenues (in the case of public service company taxes and PUC fees) in the current year or (2) the current year’s cash collections from electric sales (in the case of franchise taxes) after year-end.

Unconsolidated variable interest entities.

Power purchase agreements.  As of September 30, 2018, the Utilities had five PPAs for firm capacity and other PPAs with independent power producers (IPPs) and Schedule Q providers (i.e., customers with cogeneration and/or power production facilities who buy power from or sell power to the Utilities), none of which is currently required to be consolidated as VIEs.

Pursuant to the current accounting standards for VIEs, the Utilities are deemed to have a variable interest in Kalaeloa Partners, L.P. (Kalaeloa), AES Hawaii, Inc. (AES Hawaii) and the predecessor of Hamakua Energy by reason of the provisions of the PPA that the Utilities have with the three IPPs. However, management has concluded that the Utilities are not the primary beneficiary of Kalaeloa, AES Hawaii and the predecessor of Hamakua Energy because the Utilities do not have the power to direct the activities that most significantly impact the three IPPs’ economic performance nor the obligation to absorb their expected losses, if any, that could potentially be significant to the IPPs. Thus, the Utilities have not consolidated Kalaeloa, AES Hawaii and the predecessor of Hamakua Energy in its unaudited condensed consolidated financial statements. In November 2017, HEI acquired the Hamakua project through Hamakua Energy, an indirect subsidiary of Pacific Current, and has consolidated it in HEI’s unaudited condensed consolidated financial statements since the acquisition.

For the other PPAs with IPPs, the Utilities have concluded that the consolidation of the IPPs was not required because either the Utilities do not have variable interests in the IPPs due to the absence of an obligation in the PPAs for the Utilities to absorb any variability of the IPPs, or the IPPs were considered a “governmental organization,” and thus excluded from the scope of accounting standards for VIEs. Two IPPs of as-available energy declined to provide the information necessary for Utilities to determine the applicability of accounting standards for VIEs. If information is ultimately received from the IPPs, a possible outcome of future analyses of such information is the consolidation of one or both of such IPPs in the unaudited condensed consolidated financial statements. The consolidation of any significant IPP could have a material effect on the unaudited condensed consolidated financial statements, including the recognition of a significant amount of assets and liabilities and, if such a consolidated IPP were operating at a loss and had insufficient equity, the potential recognition of such losses. If the Utilities determine they are required to consolidate the financial statements of such an IPP and the consolidation has a material effect, the Utilities would retrospectively apply accounting standards for VIEs to the IPP.

Commitments and contingencies.

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

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

	Three months ended September 30				Nine months ended September 30
(in millions)	2018		2017		2018		2017
Kalaeloa	$	62	$	48	$	154	$	136
AES Hawaii	38		39		107		103
HPOWER	19		18		51		51
Puna Geothermal Venture	—		10		15		28
Hamakua Energy	17		8		39		25
Other IPPs 1	41		38		112		98
Total IPPs	$	177	$	161	$	478	$	441

¹  Includes wind power, solar power, feed-in tariff projects and other PPAs.

Kalaeloa Partners, L.P.  Under a 1988 PPA, as amended, Hawaiian Electric is committed to purchase 208 MW of firm capacity from Kalaeloa. Hawaiian Electric and Kalaeloa are currently in negotiations to address the PPA term that ended on May 23, 2016. The PPA automatically extends on a month-to-month basis as long as the parties are still negotiating in good faith, but would end 60 days after either party notifies the other in writing that negotiations have terminated. Hawaiian Electric and Kalaeloa have agreed that neither party will terminate the PPA prior to October 31, 2019. This agreement contemplates continued negotiations between the parties and accounts for time needed for PUC approval of a negotiated resolution.

AES Hawaii, Inc. Under a PPA entered into in March 1988, as amended (through Amendment No. 2) for a period of 30 years beginning September 1992, Hawaiian Electric agreed to purchase 180 MW of firm capacity from AES Hawaii. In August 2012, Hawaiian Electric filed an application with the PUC seeking an exemption from the PUC’s Competitive Bidding Framework to negotiate an amendment to the PPA to purchase 186 MW of firm capacity, and amend the energy pricing formula in the PPA. The PUC approved the exemption in April 2013, but Hawaiian Electric and AES Hawaii were not able to reach agreement on the amendment. In June 2015, AES Hawaii filed an arbitration demand regarding a dispute about whether Hawaiian Electric was obligated to buy up to 9 MW of additional capacity based on a 1992 letter. Hawaiian Electric responded to the arbitration demand and in October 2015, AES Hawaii and Hawaiian Electric entered into a settlement agreement to stay the arbitration proceeding. The settlement agreement included certain conditions precedent which, if satisfied, would have released the parties from the claims under the arbitration proceeding. Among the conditions precedent was the successful negotiation and PUC approval of an amendment to the existing PPA.

In November 2015, Hawaiian Electric entered into Amendment No. 3 for which PUC approval was requested and subsequently denied in January 2017. Approval of Amendment No. 3 would have satisfied the final condition for effectiveness of the settlement agreement and resolved AES Hawaii's claims. Following the PUC's decision, the parties agreed to extend the stay of the arbitration proceeding, while settlement discussions continued. In February 2018, Hawaiian Electric reached agreement with AES Hawaii on Amendment No. 4, which was submitted to the PUC for approval in April 2018. Amendment No. 4, among other things, provides (1) that AES Hawaii will make certain operational commitments to improve reliability, (2) for inclusion of AES Hawaii in the Utilities’ greenhouse gas partnership, (3) provisions to allow AES Hawaii to reduce coal combustion by modifying its fuel consumption to include biomass upon approval by Hawaiian Electric, and (4) for release of an option agreement by Hawaiian Electric for land owned by AES Hawaii. Amendment No. 4 includes a stay of the arbitration proceeding pending review by the PUC. If approved by the PUC, Amendment No. 4 will resolve AES Hawaii’s claims. In June 2018, the PUC issued an order suspending the Amendment No. 4 docket pending a DOH decision on AES’ request for approval of its Emission Reduction Plan and partnership with Hawaiian Electric.

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

Utility projects.  Many public utility projects require PUC approval and various permits from other governmental agencies. Difficulties in obtaining, or the inability to obtain, the necessary approvals or permits can result in significantly increased project costs or even cancellation of projects. In the event a project does not proceed, or if it becomes probable the PUC will disallow cost recovery for all or part of a project, or if PUC-imposed caps on project costs are expected to be exceeded, project costs may need to be written off in amounts that could result in significant reductions in Hawaiian Electric’s consolidated net income.

Enterprise Resource Planning/Enterprise Asset Management (ERP/EAM) implementation project. On August 11, 2016, the PUC approved the Utilities’ request to commence the ERP/EAM implementation project, subject to certain conditions, including a $77.6 million cap on cost recovery as well as a requirement that the Utilities pass onto customers a minimum of $244 million in benefits associated with the system over its 12-year service life. The D&O approved the deferral of certain project costs and allowed the accrual of allowance for funds used during construction (AFUDC), but limited the AFUDC rate to 1.75%. Pursuant to the D&O and subsequent orders, in 2017 and 2018, the Utilities filed project justification, status and cost reports; bottom-up, low-level analyses of the project’s benefits; and proposed performance metrics and tracking mechanism for passing the project’s benefits on to customers.

Over the past years, the Utilities collaborated with the Consumer Advocate to reach substantive agreement regarding the approach for delivering the $244 million in system benefits to customers. On September 17, 2018, Utilities provided the Consumer Advocate with their final drafts of the rate case-centric benefit delivery mechanism and ERP/EAM annual enterprise systems benefits report for its review. The parties will file these documents with the PUC upon final agreement.

Monthly reports on the status and costs of the project continue to be filed. The ERP/EAM Implementation Project went live in October 2018. In the Hawaiian Electric 2017 rate case, a settlement agreement approved by the PUC included authorization for the deferred project costs to accrue a return at 1.75% after the project goes into service and until the deferred project costs are included in rate base, and for amortization of the deferred costs to not begin until the amortization expense is incorporated in rates and the unamortized deferred project costs are included in rate base. As of September 30, 2018, the Project incurred costs of $73.3 million of which $12.9 million were charged to other operation and maintenance (O&M) expense, $2.6 million relate to capital costs and $57.8 million are deferred costs.

Schofield Generating Station Project. In June 2018, Hawaiian Electric placed into service a 50 MW utility owned and operated firm, renewable and dispatchable generation facility at Schofield Barracks. The project is located on land leased from the U.S. Army under a 35-year lease. PUC orders resulted in a project cost cap of $157.3 million of which capital costs up to $141.6 million (90% of the cost cap) are recoverable through the Major Project Interim Recovery (MPIR) adjustment mechanism. Recovery of capital costs under the MPIR adjustment mechanism was approved by the PUC on June 27, 2018. (See “Decoupling” section below for MPIR guidelines and capital cost recovery discussion.) A decision on recovery of related incremental operation and maintenance expense (approximately $1.8 million annualized) during the interim period (i.e., between the in-service date and the next rate case) is pending. Project costs incurred as of September 30, 2018 amounted to $142.5 million. Cost recovery of capital costs in excess of $141.6 million is to be addressed in the next general rate case.

West Loch PV Project. In July 2016, Hawaiian Electric announced plans to build, own and operate a utility-owned, grid-tied 20-MW (ac) solar facility on property owned by the Department of the Navy. In June 2017, the PUC approved the expenditure of funds for the project, including Hawaiian Electric’s proposed project cost cap of $67 million and a performance guarantee to provide energy at 9.56 cents/KWH or less to the system.

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

Hawaiian Electric executed a fixed-price Engineering, Procurement, and Construction (EPC) contract for the project on December 6, 2017. The EPC contract includes the cost of the solar panels for the project, which is not subject to modification due to any tariffs that may be imposed under the current photovoltaic (PV) cell and module import tariffs. Construction of the facility began in the second quarter of 2018, and the facility is expected to be placed in service in the second quarter of 2019. Project costs incurred as of September 30, 2018 amounted to $28.6 million.

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

Hawaiian Telcom’s delinquency will be resolved by new agreements with Hawaiian Telcom approved by the PUC in October 2018. These new agreements provide for the purchase by the Utilities of Hawaiian Telcom’s interest in all the joint poles, and licensing and operating agreements between the Utilities and Hawaiian Telcom subsequent to the transfer of the joint pole interest to the Utilities. The Utilities’ consideration of approximately $48 million for acquiring Hawaiian Telcom’s interest in the poles will be offset in part by the receivables owed by Hawaiian Telcom to the Utilities. As of September 30, 2018, receivables from Hawaiian Telcom under the joint pole agreement, net of a reserve for a portion of the interest, were $17.4 million ($11.6 million at Hawaiian Electric, $4.7 million at Hawaii Electric Light, and $1.1 million at Maui Electric). The remaining consideration for acquiring Hawaiian Telcom’s interest in the joint poles will be settled through the set-off of current and future license fees due from Hawaiian Telcom, after which Hawaiian Telcom would make cash payments for license fees under the agreement.

Environmental regulation.  The Utilities are subject to environmental laws and regulations that regulate the operation of existing facilities, the construction and operation of new facilities and the proper cleanup and disposal of hazardous waste and toxic substances.

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

Former Molokai Electric Company generation site.  In 1989, Maui Electric acquired 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 Environmental Protection Agency (EPA) has since identified environmental impacts in the subsurface soil at the Site. Although Maui Electric never operated at the Site or owned the Site property, after discussions with the EPA and the Hawaii Department of Health (DOH), Maui Electric agreed to undertake additional investigations at the Site and an adjacent parcel that Molokai Electric Company had used for equipment storage (the Adjacent Parcel) to determine the extent of environmental contamination. A 2011 assessment by a Maui Electric contractor of the Adjacent Parcel identified environmental impacts, including elevated polychlorinated biphenyls (PCBs) in the subsurface soils. In cooperation with the DOH and EPA, Maui Electric is further investigating the Site and the Adjacent Parcel to determine the extent of impacts of PCBs, residual fuel oils and other subsurface contaminants. Maui Electric has a reserve balance of $2.7 million as of September 30, 2018, representing the probable and reasonably estimable cost to complete the additional investigation and estimated cleanup costs at the Site and the Adjacent Parcel; however, final costs of remediation will depend on the results of continued investigation.

Pearl Harbor sediment study. In July 2014, the U.S. Navy notified Hawaiian Electric of the Navy’s determination that Hawaiian Electric is a Potentially Responsible Party responsible for cleanup of PCB contamination in sediment in the area offshore of the Waiau Power Plant as part of the Pearl Harbor Superfund Site. The Navy has also requested that Hawaiian Electric reimburse the costs incurred by the Navy to investigate the area. The Navy has completed a remedial investigation and a feasibility study (FS) for the remediation of contaminated sediment at several locations in Pearl Harbor and issued its Final FS Report on June 29, 2015. On February 2, 2016, the Navy released the Proposed Plan for Pearl Harbor Sediment Remediation and Hawaiian Electric submitted comments. The extent of the contamination, the appropriate remedial measures to address it and Hawaiian Electric’s potential responsibility for any associated costs have not been determined.

On March 23, 2015, Hawaiian Electric received a letter from the EPA requesting that Hawaiian Electric submit a work plan to assess potential sources and extent of PCB contamination onshore at the Waiau Power Plant. Hawaiian Electric submitted a sampling and analysis (SAP) work plan to the EPA and the DOH. Onshore sampling at the Waiau Power Plant was completed in two phases in December 2015 and June 2016. Appropriate remedial measures are being developed to address the extent of the onshore contamination, and any associated costs have not yet been determined.

As of September 30, 2018, the reserve account balance recorded by Hawaiian Electric to address the PCB contamination was $4.6 million. The reserve represents the probable and reasonably estimable cost to complete the onshore and offshore investigations and the remediation of PCB contamination in the offshore sediment. The final remediation costs will depend on the assessment of potential source control requirements, as well as the further investigation of contaminated sediment offshore from the Waiau Power Plant by the Navy.

Regulatory proceedings

Decoupling.Decoupling is a regulatory model that is intended to facilitate meeting the State of Hawaii’s goals to transition to a clean energy economy and achieve an aggressive renewable portfolio standard. The decoupling model, implemented in Hawaii in 2011, delinks revenues from sales and includes annual rate adjustments. The decoupling mechanism has the following major components: (1) a sales decoupling component via a revenue balancing account (RBA), (2) a revenue escalation component via a rate adjustment mechanism (RAM), (3) major project interim recovery component (MPIR), (4) performance incentive mechanisms (PIMs), and (5) an earnings sharing mechanism, which would provide for a reduction of revenues between rate cases in the event the utility exceeds the return on average common equity (ROACE) allowed in its most recent rate case. Under the decoupling mechanism, triennial general rate cases are required.

Rate adjustment mechanism. The RAM is based on the lesser of: a) an inflationary adjustment for certain O&M expenses and return on investment for certain rate base changes, or b) cumulative annual compounded increase in Gross Domestic Product Price Index applied to annualized target revenues (the RAM Cap). Annualized target revenues reset upon the issuance of an interim or final D&O in a rate case.

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

• Hawaiian Electric's RAM revenues were limited to the RAM Cap in 2017 and 2018.

• Maui Electric's RAM revenues in 2017 and 2018 were below the RAM Cap.

• Hawaii Electric Light’s RAM revenues in 2017 and 2018 were below the RAM Cap.

For the RAM years 2014 - 2016, Hawaiian Electric was allowed to record RAM revenue beginning on January 1 and to bill such amounts from June 1 of the applicable year through May 31 of the following year. Subsequent to 2016, Hawaiian Electric reverted to the RAM provisions initially approved in March 2011—i.e., RAM is both accrued and billed from June 1 of each year through May 31 of the following year.

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

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

The PUC has approved recovery of capital costs under the MPIR for Schofield generation station, which would adjust revenues in July through December 2018 by $3.4 million and be collected in customer bills beginning in June 2019. A decision on recovery of related incremental O&M expenses is pending. In February 2019, Hawaiian Electric will file an MPIR for 2019 (which will accrue effective January 1, 2019) which will include the 2019 return on project amount (up to the capped amount) in rate base, depreciation and incremental O&M expenses (if approved for recovery by the PUC), for collection from June 2020 through May 2021.

Performance incentive mechanisms. The PUC has ordered the following performance incentive mechanisms (PIM), which will be reflected in the annual decoupling filing beginning in 2019. The PIM tariff requires the performance targets, deadbands and the amount of maximum financial incentives used to determine the PIM financial incentive levels for each of the PIMs to be re-determined upon issuance of an interim or final order in a general rate case for each utility.

• Service Quality performance incentives are measured on a calendar-year basis beginning in 2018.

• Service Reliability Performance measured by System Average Interruption Duration and Frequency Indexes (penalties only). Target performance is based on each utility’s historical 10-year average performance with a deadband of one standard deviation. The maximum penalty for each performance index is 20 basis points applied to the common equity share of each respective utility’s approved rate base (or maximum penalties of approximately $6.7 million - for both indices in total for the three utilities).

• Call Center Performance measured by the percentage of calls answered within 30 seconds. Target performance is based on the annual average performance for each utility for the most recent 8 quarters with a deadband of 3% above and below the target. The maximum penalty or incentive is 8 basis points applied to the common equity share of each respective utility’s approved rate base (or maximum penalties or incentives of approximately $1.3 million - in total for the three utilities).

• Demand Response measured by the demand response resources acquired in 2018. The award is up to 5% of the aggregate annual contract value for cost-effective demand response capability contracted with aggregators by December 31, 2018. The maximum award is $0.5 million for the three utilities in total and there are no penalties. This incentive applies to one-time performance in 2018 only.

• Procurement of low-cost variable renewable resources through the request for proposal process in 2018 measured by comparison of the procurement price to target prices. The incentive is a percentage of the savings determined by comparing procured price to a target of 11.5 cents per kilowatt-hour for renewable projects with storage capability and 9.5 cents per kilowatt-hour for energy-only renewable projects. There are two phases to this incentive. Phase 1 has an incentive of 20% of the savings for purchased power agreements filed by December 31, 2018 and subsequently approved by the PUC, with a cap of $3.5 million for the three utilities in total. Phase 2 has scaled incentives of 15%, 10% and 5% of the savings for purchased power agreements filed in January, February and March 2019, respectively, and subsequently approved by the PUC, with a cap of $3 million for the three utilities in total. There are no penalties.

Annual decoupling filings. The net annual incremental amounts to be collected (refunded) from June 1, 2018 through May 31, 2019 are as follows:

(in millions)	Hawaiian Electric		Hawaii Electric Light		Maui Electric
2018 Annual incremental RAM adjusted revenues *	$	13.8	$	3.4	$	2.0
Annual change in accrued RBA balance as of December 31, 2017 (and associated revenue taxes)	$	6.6	$	0.7	$	3.2
2017 Tax Act Adjustment **	$	—	$	—	$	(2.8	)
Net annual incremental amount to be collected under the tariffs	$	20.4	$	4.1	$	2.4

* The 2018 annual RAM adjusted revenues for Maui Electric terminated on August 23, 2018, the effective date of interim increase tariff rates that were implemented pursuant to the Interim D&O issued in the Maui Electric consolidated 2015 and 2018 rate case.

**   Maui Electric incorporated a $2.8 million adjustment into its 2018 annual decoupling filing to incorporate the impact of the lower corporate income tax rate and the exclusion of the domestic production activities deduction, as a result of the 2017 Tax Cuts and Jobs Act (the Tax Act). Tax adjustments for Hawaiian Electric and Hawaii Electric Light are described in the discussion below of their respective on-going rate cases.

Performance-based regulation proceeding. On April 18, 2018, the PUC issued an order, instituting a proceeding to investigate performance-based regulation (PBR). The PUC intends to provide a forum to collaboratively develop modifications or new components to better align utility and customer interests. The PUC stated that PBR seeks to utilize both revenue adjustment mechanisms and performance mechanisms to more strongly align utilities’ incentives with customer interests.

The order stated that, in general, the PUC is interested in ratemaking elements and/or mechanisms that result in:

• Greater cost control and reduced rate volatility;

• Efficient investment and allocation of resources regardless of classification as capital or operating expense;

• Fair distribution of risks between utilities and customers; and

• Fulfillment of State policy goals.

Through this investigation, the PUC intends to: (1) identify specific areas of utility performance that should be improved; (2) determine appropriate metrics for measuring successful outcomes in those areas; and (3) establish reasonable financial rewards and/or penalties that are sufficient to incent the utility to achieve those outcomes.

The proceeding has two phases. Phase 1 examines the current regulatory framework and identifies those areas of utility performance that are deserving of further focus in Phase 2. The PUC provided staff reports to the parties, held technical workshops and the parties filed briefs on: 1) goals and outcomes and 2) assessment of the existing regulatory framework. Metrics will be discussed in late 2018, to be followed by a PUC staff proposal, parties’ statements of position, and a PUC order related to Phase 1, which is expected after March 2019. Phase 2 will address design and implementation of performance incentive mechanisms, revenue adjustment mechanisms and other regulatory reforms. 

Performance-based ratemaking legislation. On April 24, 2018, Senate Bill No. 2939 SD2 was signed into law, which establishes performance metrics that the PUC shall consider while establishing performance incentives and penalty mechanisms under a performance-based ratemaking model. The law requires that the PUC establish these performance-based ratemaking mechanisms on or before January 1, 2020. The PUC opened a proceeding on April 18, 2018. See “Performance-based regulation proceeding” above.

Most recent rate proceedings.

Hawaiian Electric consolidated 2014 and 2017 test year rate cases. In June 2014, Hawaiian Electric submitted its 2014 test year rate case filing, stating that it intended to forgo the opportunity to seek a general rate increase in base rates. In December 2016, Hawaiian Electric filed an application with the PUC for a general rate increase, and the PUC issued an order consolidating the Hawaiian Electric filings for the 2014 and 2017 test year rate cases. On February 16, 2018, Hawaiian Electric implemented an interim increase of $36.0 million. On April 13, 2018, Hawaiian Electric implemented an additional interim rate adjustment to adjust rates for the impact of the Tax Act.

On June 22, 2018, the PUC issued its Final D&O, approving final rate relief of a $37.7 million increase before the Tax Act impact reduction of $38.3 million, based on an ROACE of 9.5% and an overall rate of return of 7.57%. The PUC indicated that the ECRC mechanism shall reflect a 98/2% risk-sharing split between ratepayers and Hawaiian Electric, with an annual maximum exposure cap of $2.5 million.

Maui Electric consolidated 2015 and 2018 test year rate cases. In December 2014, Maui Electric submitted its 2015 test year rate case filing, proposing no change to its base rates. In August 2017, the PUC issued an order consolidating the Maui Electric filings for the 2015 and 2018 test year rate cases. In October 2017, Maui Electric filed its 2018 test year rate case application and in February 2018, Maui Electric filed revised schedules to reflect the adjustments resulting from the Tax Act.

On August 9, 2018, the PUC approved an interim rate increase based on a stipulated settlement between Maui Electric and the Consumer Advocate of $12.5 million over revenues at current effective rates based on 7.43% rate of return (which incorporates a ROACE of 9.5% and a capital structure that includes a 57% common equity capitalization) on a $462 million rate base, with the depreciation rates approved in July 2018. Interim rates were effective on August 23, 2018.

Hawaii Electric Light 2016 and 2019 test year rate cases. In September 2016, Hawaii Electric Light filed an application with the PUC for a general rate increase.

In August 2017, the PUC issued an order granting an interim rate increase of $9.9 million based on the Stipulated Settlement Letter of Hawaii Electric Light and the Consumer Advocate filed on July 11, 2017 and an ROACE of 9.5% and subject to refund with interest, if it exceeds amounts allowed in a final order. The interim rate increase was implemented on August 31, 2017. On May 1, 2018, Hawaii Electric Light implemented an interim rate reduction of $9.9 million which was primarily to incorporate the effects of the Tax Act.

On June 29, 2018, the PUC issued its Final D&O, approving the rates implemented in the interim rate reduction.

On October 5, 2018, Hawaii Electric Light filed a notice that it intends to file an application for a general rate increase on or after December 5, 2018 but before January 1, 2019.

Tax Cuts and Jobs Act impact on utility rates. The Utilities began tracking the impact of the Tax Cuts and Jobs Act of 2017 (Tax Act) as of January 1, 2018. Each Utility accrued regulatory liabilities for estimated tax savings from January 1 to the date incorporated in rates:

• Hawaiian Electric incorporated the Tax Act reductions in rates (based on the 2017 test year rate case) effective April 13, 2018.

• Hawaii Electric Light incorporated the Tax Act reductions (based on the 2016 test year rate case) effective May 1, 2018.

• Maui Electric’s rates were adjusted for the Tax Act as follows:

◦ adjustments for the period January 1, 2018 through May 31, 2018 are in the annual Revenue Balancing Account adjustment, which became effective on June 1, 2018,

◦ adjustments for the period June 1, 2018 through August 22, 2018 are embedded in the Revenue Balancing Account, which will be incorporated in rates on June 1, 2019, and

◦ adjustments from August 23, 2018 and thereafter are incorporated in interim rates as a result of the 2018 test year rate case.

See discussion in “Decoupling” section above.

Condensed 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, which was issued by Hawaii Electric Light and Maui Electric to 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 and (c) relating to the trust preferred securities of Trust III. Hawaiian Electric is also obligated, after the satisfaction of its obligations on its own preferred stock, to make dividend, redemption and liquidation payments on Hawaii Electric Light’s and Maui Electric’s preferred stock if the respective subsidiary is unable to make such payments.

Hawaiian Electric Company, Inc. and Subsidiaries

Condensed Consolidating Statement of Income

Three months ended September 30, 2018

(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments		Hawaiian Electric Consolidated
Revenues	$	488,210		98,981		100,273		—	(55	)	$	687,409
Expenses
Fuel oil	141,357			26,429		38,765		—	—		206,551
Purchased power	138,135			24,091		15,364		—	—		177,590
Other operation and maintenance	78,988			15,253		19,312		—	—		113,553
Depreciation	34,282			10,072		6,629		—	—		50,983
Taxes, other than income taxes	46,096			9,215		9,385		—	—		64,696
Total expenses	438,858			85,060		89,455		—	—		613,373
Operating income	49,352			13,921		10,818		—	(55	)	74,036
Allowance for equity funds used during construction	1,648			39		275		—	—		1,962
Equity in earnings of subsidiaries	16,636			—		—		—	(16,636	)	—
Retirement defined benefits expense—other than service costs	(475		)	(104	)	(103	)	—	—		(682		)
Interest expense and other charges, net	(13,542		)	(3,026	)	(2,455	)	—	55		(18,968		)
Allowance for borrowed funds used during construction	810			49		147		—	—		1,006
Income before income taxes	54,429			10,879		8,682		—	(16,636	)	57,354
Income taxes	4,447			1,571		1,126		—	—		7,144
Net income	49,982			9,308		7,556		—	(16,636	)	50,210
Preferred stock dividends of subsidiaries	—			133		95		—	—		228
Net income attributable to Hawaiian Electric	49,982			9,175		7,461		—	(16,636	)	49,982
Preferred stock dividends of Hawaiian Electric	270			—		—		—	—		270
Net income for common stock	$	49,712		9,175		7,461		—	(16,636	)	$	49,712

Hawaiian Electric Company, Inc. and Subsidiaries

Condensed Consolidating Statement of Comprehensive Income

Three months ended September 30, 2018

(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments		Hawaiian Electric Consolidated
Net income for common stock	$	49,712		9,175		7,461		—	(16,636	)	$	49,712
Other comprehensive income (loss), net of taxes:
Retirement benefit plans:
Adjustment for amortization of prior service credit and net losses recognized during the period in net periodic benefit cost, net of tax benefits	4,753			705		606		—	(1,311	)	4,753
Reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of taxes	(4,725		)	(705	)	(606	)	—	1,311		(4,725		)
Other comprehensive income, net of taxes	28			—		—		—	—		28
Comprehensive income attributable to common shareholder	$	49,740		9,175		7,461		—	(16,636	)	$	49,740

Hawaiian Electric Company, Inc. and Subsidiaries

Condensed Consolidating Statement of Income

Three months ended September 30, 2017

(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments		Hawaiian Electric Consolidated
Revenues	$	429,267		84,334		85,198		—	(30	)	$	598,769
Expenses
Fuel oil	103,959			15,754		26,545		—	—		146,258
Purchased power	123,893			21,332		15,122		—	—		160,347
Other operation and maintenance	64,996			16,608		17,077		—	—		98,681
Depreciation	32,722			9,685		5,799		—	—		48,206
Taxes, other than income taxes	40,824			7,928		8,028		—	—		56,780
Total expenses	366,394			71,307		72,571		—	—		510,272
Operating income	62,873			13,027		12,627		—	(30	)	88,497
Allowance for equity funds used during construction	3,108			167		207		—	—		3,482
Equity in earnings of subsidiaries	12,767			—		—		—	(12,767	)	—
Retirement defined benefits expense—other than service costs	(1,225		)	15		(211	)	—	—		(1,421		)
Interest expense and other charges, net	(11,786		)	(2,899	)	(2,252	)	—	30		(16,907		)
Allowance for borrowed funds used during construction	1,173			72		94		—	—		1,339
Income before income taxes	66,910			10,382		10,465		—	(12,767	)	74,990
Income taxes	19,153			3,815		4,037		—	—		27,005
Net income	47,757			6,567		6,428		—	(12,767	)	47,985
Preferred stock dividends of subsidiaries	—			133		95		—	—		228
Net income attributable to Hawaiian Electric	47,757			6,434		6,333		—	(12,767	)	47,757
Preferred stock dividends of Hawaiian Electric	270			—		—		—	—		270
Net income for common stock	$	47,487		6,434		6,333		—	(12,767	)	$	47,487

Hawaiian Electric Company, Inc. and Subsidiaries

Condensed Consolidating Statement of Comprehensive Income

Three months ended September 30, 2017

(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments		Hawaiian Electric Consolidated
Net incomefor common stock	$	47,487		6,434		6,333		—	(12,767	)	$	47,487
Other comprehensive income (loss), net of taxes:
Retirement benefit plans:
Adjustment for amortization of prior service credit and net losses recognized during the period in net periodic benefit cost, net of tax benefits	3,618			476		404		—	(880	)	3,618
Reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of taxes	(3,596		)	(476	)	(404	)	—	880		(3,596		)
Other comprehensive income, net of taxes	22			—		—		—	—		22
Comprehensive income attributable to common shareholder	$	47,509		6,434		6,333		—	(12,767	)	$	47,509

Hawaiian Electric Company, Inc. and Subsidiaries

Condensed Consolidating Statement of Income

Nine months ended September 30, 2018

(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments		Hawaiian Electric Consolidated
Revenues	$	1,321,089		276,462		268,567		—	(156	)	$	1,865,962
Expenses
Fuel oil	375,862			64,348		105,026		—	—		545,236
Purchased power	367,317			72,589		38,332		—	—		478,238
Other operation and maintenance	228,773			50,366		54,666		—	—		333,805
Depreciation	103,112			30,165		18,533		—	—		151,810
Taxes, other than income taxes	125,214			25,835		25,275		—	—		176,324
Total expenses	1,200,278			243,303		241,832		—	—		1,685,413
Operating income	120,811			33,159		26,735		—	(156	)	180,549
Allowance for equity funds used during construction	7,123			274		842		—	—		8,239
Equity in earnings of subsidiaries	35,041			—		—		—	(35,041	)	—
Retirement defined benefits expense—other than service costs	(2,091		)	(312	)	(531	)	—	—		(2,934		)
Interest expense and other charges, net	(38,967		)	(8,855	)	(7,156	)	—	156		(54,822		)
Allowance for borrowed funds used during construction	3,198			190		427		—	—		3,815
Income before income taxes	125,115			24,456		20,317		—	(35,041	)	134,847
Income taxes	15,949			5,017		4,029		—	—		24,995
Net income	109,166			19,439		16,288		—	(35,041	)	109,852
Preferred stock dividends of subsidiaries	—			400		286		—	—		686
Net income attributable to Hawaiian Electric	109,166			19,039		16,002		—	(35,041	)	109,166
Preferred stock dividends of Hawaiian Electric	810			—		—		—	—		810
Net income for common stock	$	108,356		19,039		16,002		—	(35,041	)	$	108,356

Hawaiian Electric Company, Inc. and Subsidiaries

Condensed Consolidating Statement of Comprehensive Income

Nine months ended September 30, 2018

(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments		Hawaiian Electric Consolidated
Net income for common stock	$	108,356		19,039		16,002		—	(35,041	)	$	108,356
Other comprehensive income (loss), net of taxes:
Retirement benefit plans:
Adjustment for amortization of prior service credit and net losses recognized during the period in net periodic benefit cost, net of tax benefits	14,259			2,114		1,817		—	(3,931	)	14,259
Reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of taxes	(14,174		)	(2,113	)	(1,817	)	—	3,930		(14,174		)
Other comprehensive income, net of taxes	85			1		—		—	(1	)	85
Comprehensive income attributable to common shareholder	$	108,441		19,040		16,002		—	(35,042	)	$	108,441

Hawaiian Electric Company, Inc. and Subsidiaries

Condensed Consolidating Statement of Income

Nine months ended September 30, 2017

(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments		Hawaiian Electric Consolidated
Revenues	$	1,186,524		245,026		242,756		—	(51	)	$	1,674,255
Expenses
Fuel oil	301,774			47,486		82,527		—	—		431,787
Purchased power	340,498			63,403		36,637		—	—		440,538
Other operation and maintenance	200,648			49,850		51,939		—	—		302,437
Depreciation	98,167			29,056		17,355		—	—		144,578
Taxes, other than income taxes	113,483			23,080		23,012		—	—		159,575
Total expenses	1,054,570			212,875		211,470		—	—		1,478,915
Operating income	131,954			32,151		31,286		—	(51	)	195,340
Allowance for equity funds used during construction	7,823			416		669		—	—		8,908
Equity in earnings of subsidiaries	29,306			—		—		—	(29,306	)	—
Retirement defined benefits expense—other than service costs	(3,812		)	183		(650	)	—	—		(4,279		)
Interest expense and other charges, net	(36,405		)	(8,899	)	(7,372	)	—	51		(52,625		)
Allowance for borrowed funds used during construction	2,910			172		289		—	—		3,371
Income before income taxes	131,776			24,023		24,222		—	(29,306	)	150,715
Income taxes	36,370			8,973		9,280		—	—		54,623
Net income	95,406			15,050		14,942		—	(29,306	)	96,092
Preferred stock dividends of subsidiaries	—			400		286		—	—		686
Net income attributable to Hawaiian Electric	95,406			14,650		14,656		—	(29,306	)	95,406
Preferred stock dividends of Hawaiian Electric	810			—		—		—	—		810
Net income for common stock	$	94,596		14,650		14,656		—	(29,306	)	$	94,596

Hawaiian Electric Company, Inc. and Subsidiaries

Condensed Consolidating Statement of Comprehensive Income

Nine months ended September 30, 2017

(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments		Hawaiian Electric Consolidated
Net incomefor common stock	$	94,596		14,650		14,656		—	(29,306	)	$	94,596
Other comprehensive income (loss), net of taxes:
Derivatives qualifying as cash flow hedges:
Reclassification adjustment to net income, net of taxes	454			—		—		—	—		454
Retirement benefit plans:
Adjustment for amortization of prior service credit and net losses recognized during the period in net periodic benefit cost, net of tax benefits	10,857			1,428		1,214		—	(2,642	)	10,857
Reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of taxes	(10,790		)	(1,427	)	(1,214	)	—	2,641		(10,790		)
Other comprehensive income, net of taxes	521			1		—		—	(1	)	521
Comprehensive income attributable to common shareholder	$	95,117		14,651		14,656		—	(29,307	)	$	95,117

Hawaiian Electric Company, Inc. and Subsidiaries

Condensed Consolidating Balance Sheet

September 30, 2018

(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consoli- dating adjustments		Hawaiian Electric Consolidated
Assets
Property, plant and equipment
Utility property, plant and equipment
Land	$	44,030		5,873		3,612		—	—		$	53,515
Plant and equipment	4,404,946			1,227,530		1,087,570		—	—		6,720,046
Less accumulated depreciation	(1,513,351		)	(541,451	)	(512,906	)	—	—		(2,567,708		)
Construction in progress	154,566			11,060		27,460		—	—		193,086
Utility property, plant and equipment, net	3,090,191			703,012		605,736		—	—		4,398,939
Nonutility property, plant and equipment, less accumulated depreciation	5,933			115		1,532		—	—		7,580
Total property, plant and equipment, net	3,096,124			703,127		607,268		—	—		4,406,519
Investment in wholly owned subsidiaries, at equity	571,574			—		—		—	(571,574	)	—
Current assets
Cash and cash equivalents	3,867			3,027		229		101	—		7,224
Advances to affiliates	2,000			—		—		—	(2,000	)	—
Customer accounts receivable, net	124,792			29,364		24,629		—	—		178,785
Accrued unbilled revenues, net	94,956			15,810		16,936		—	—		127,702
Other accounts receivable, net	10,312			1,352		1,069		—	(9,355	)	3,378
Fuel oil stock, at average cost	61,110			11,483		19,229		—	—		91,822
Materials and supplies, at average cost	32,407			7,840		18,260		—	—		58,507
Prepayments and other	44,458			8,604		7,670		—	—		60,732
Regulatory assets	75,541			6,217		7,672		—	—		89,430
Total current assets	449,443			83,697		95,694		101	(11,355	)	617,580
Other long-term assets
Regulatory assets	527,650			115,114		98,730		—	—		741,494
Other	77,899			20,363		18,272		—	—		116,534
Total other long-term assets	605,549			135,477		117,002		—	—		858,028
Total assets	$	4,722,690		922,301		819,964		101	(582,929	)	$	5,882,127
Capitalization and liabilities
Capitalization
Common stock equity	$	1,876,237		294,220		277,253		101	(571,574	)	$	1,876,237
Cumulative preferred stock—not subject to mandatory redemption	22,293			7,000		5,000		—	—		34,293
Long-term debt, net	1,000,020			217,724		200,887		—	—		1,418,631
Total capitalization	2,898,550			518,944		483,140		101	(571,574	)	3,329,161
Current liabilities
Current portion of long-term debt	29,996			10,998		8,999		—	—		49,993
Short-term borrowings from non-affiliates	85,913			—		—		—	—		85,913
Short-term borrowings from affiliate	—			—		2,000		—	(2,000	)	—
Accounts payable	90,937			12,289		19,706		—	—		122,932
Interest and preferred dividends payable	19,994			4,243		4,030		—	(9	)	28,258
Taxes accrued	136,485			30,829		28,462		—	—		195,776
Regulatory liabilities	3,124			2,850		4,185		—	—		10,159
Other	64,697			9,594		16,109		—	(9,346	)	81,054
Total current liabilities	431,146			70,803		83,491		—	(11,355	)	574,085
Deferred credits and other liabilities
Deferred income taxes	285,789			56,417		58,863		—	—		401,069
Regulatory liabilities	649,761			174,739		97,693		—	—		922,193
Unamortized tax credits	61,299			16,271		15,503		—	—		93,073
Defined benefit pension and other postretirement benefit plans liability	332,743			64,026		63,510		—	—		460,279
Other	63,402			21,101		17,764		—	—		102,267
Total deferred credits and other liabilities	1,392,994			332,554		253,333		—	—		1,978,881
Total capitalization and liabilities	$	4,722,690		922,301		819,964		101	(582,929	)	$	5,882,127

Hawaiian Electric Company, Inc. and Subsidiaries

Condensed Consolidating Balance Sheet

December 31, 2017

(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consoli- dating adjustments		Hawaiian Electric Consolidated
Assets
Property, plant and equipment
Utility property, plant and equipment
Land	$	43,972		6,189		3,016		—	—		$	53,177
Plant and equipment	4,140,892			1,206,776		1,053,372		—	—		6,401,040
Less accumulated depreciation	(1,451,612		)	(528,024	)	(496,716	)	—	—		(2,476,352		)
Construction in progress	231,571			8,182		23,341		—	—		263,094
Utility property, plant and equipment, net	2,964,823			693,123		583,013		—	—		4,240,959
Nonutility property, plant and equipment, less accumulated depreciation	5,933			115		1,532		—	—		7,580
Total property, plant and equipment, net	2,970,756			693,238		584,545		—	—		4,248,539
Investment in wholly owned subsidiaries,at equity	557,013			—		—		—	(557,013	)	—
Current assets
Cash and cash equivalents	2,059			4,025		6,332		101	—		12,517
Advances to affiliates	—			—		12,000		—	(12,000	)	—
Customer accounts receivable, net	86,987			22,510		18,392		—	—		127,889
Accrued unbilled revenues, net	77,176			15,940		13,938		—	—		107,054
Other accounts receivable, net	11,376			2,268		1,210		—	(7,691	)	7,163
Fuel oil stock, at average cost	64,972			8,698		13,203		—	—		86,873
Materials and supplies, at average cost	28,325			8,041		18,031		—	—		54,397
Prepayments and other	17,928			4,514		2,913		—	—		25,355
Regulatory assets	76,203			5,038		7,149		—	—		88,390
Total current assets	365,026			71,034		93,168		101	(19,691	)	509,638
Other long-term assets
Regulatory assets	557,464			122,783		100,660		—	—		780,907
Other	60,157			16,311		15,061		—	—		91,529
Total other long-term assets	617,621			139,094		115,721		—	—		872,436
Total assets	$	4,510,416		903,366		793,434		101	(576,704	)	$	5,630,613
Capitalization and liabilities
Capitalization
Common stock equity	$	1,845,283		286,647		270,265		101	(557,013	)	$	1,845,283
Cumulative preferred stock—not subject to mandatory redemption	22,293			7,000		5,000		—	—		34,293
Long-term debt, net	924,979			202,701		190,836		—	—		1,318,516
Total capitalization	2,792,555			496,348		466,101		101	(557,013	)	3,198,092
Current liabilities
Current portion of long-term debt	29,978			10,992		8,993		—	—		49,963
Short-term borrowings-non-affiliate	4,999			—		—		—	—		4,999
Short-term borrowings-affiliate	12,000			—		—		—	(12,000	)	—
Accounts payable	121,328			17,855		20,427		—	—		159,610
Interest and preferred dividends payable	15,677			4,174		2,735		—	(11	)	22,575
Taxes accrued	133,839			34,950		30,312		—	—		199,101
Regulatory liabilities	607			1,245		1,549		—	—		3,401
Other	43,121			9,818		14,197		—	(7,680	)	59,456
Total current liabilities	361,549			79,034		78,213		—	(19,691	)	499,105
Deferred credits and other liabilities
Deferred income taxes	281,223			56,955		55,863		—	—		394,041
Regulatory liabilities	613,329			169,139		94,901		—	—		877,369
Unamortized tax credits	59,039			16,167		15,163		—	—		90,369
Defined benefit pension and other postretirement benefit plans liability	340,983			66,447		65,518		—	—		472,948
Other	61,738			19,276		17,675		—	—		98,689
Total deferred credits and other liabilities	1,356,312			327,984		249,120		—	—		1,933,416
Total capitalization and liabilities	$	4,510,416		903,366		793,434		101	(576,704	)	$	5,630,613

Hawaiian Electric Company, Inc. and Subsidiaries

Condensed Consolidating Statement of Changes in Common Stock Equity

Nine months ended September 30, 2018

(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments		Hawaiian Electric Consolidated
Balance, December 31, 2017	$	1,845,283		286,647		270,265		101	(557,013	)	$	1,845,283
Net income for common stock	108,356			19,039		16,002		—	(35,041	)	108,356
Other comprehensive income, net of taxes	85			1		—		—	(1	)	85
Common stock dividends	(77,479		)	(11,467	)	(9,014	)	—	20,481		(77,479		)
Common stock issuance expenses	(8		)	—		—		—	—		(8		)
Balance, September 30, 2018	$	1,876,237		294,220		277,253		101	(571,574	)	$	1,876,237

Hawaiian Electric Company, Inc. and Subsidiaries

Condensed Consolidating Statement of Changes in Common Stock Equity

Nine months ended September 30, 2017

(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments		Hawaiian Electric Consolidated
Balance, December 31, 2016	$	1,799,787		291,291		259,554		101	(550,946	)	$	1,799,787
Net income for common stock	94,596			14,650		14,656		—	(29,306	)	94,596
Other comprehensive income, net of taxes	521			1		—		—	(1	)	521
Common stock dividends	(65,825		)	(11,622	)	(8,959	)	—	20,581		(65,825		)
Common stock issuance expenses	(4		)	(1	)	—		—	1		(4		)
Balance, September 30, 2017	$	1,829,075		294,319		265,251		101	(559,671	)	$	1,829,075

Hawaiian Electric Company, Inc. and Subsidiaries

Condensed Consolidating Statement of Cash Flows

Nine months ended September 30, 2018

(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments		Hawaiian Electric Consolidated
Cash flows from operating activities
Net income	$	109,166		19,439		16,288		—	(35,041	)	$	109,852
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in earnings of subsidiaries	(35,116		)	—		—		—	35,041		(75		)
Common stock dividends received from subsidiaries	20,531			—		—		—	(20,481	)	50
Depreciation of property, plant and equipment	103,112			30,165		18,533		—	—		151,810
Other amortization	15,159			3,992		672		—	—		19,823
Deferred income taxes	7,182			1,195		4,458		—	—		12,835
Allowance for equity funds used during construction	(7,123		)	(274	)	(842	)	—	—		(8,239		)
Other	(1,227		)	(315	)	(410	)	—	—		(1,952		)
Changes in assets and liabilities:
Increase in accounts receivable	(41,566		)	(6,738	)	(6,499	)	—	1,664		(53,139		)
Decrease (increase) in accrued unbilled revenues	(17,780		)	130		(2,998	)	—	—		(20,648		)
Decrease (increase) in fuel oil stock	3,862			(2,785	)	(6,026	)	—	—		(4,949		)
Decrease (increase) in materials and supplies	(4,082		)	201		(229	)	—	—		(4,110		)
Increase in regulatory assets	(1,704		)	(2,245	)	(2,525	)	—	—		(6,474		)
Increase (decrease) in accounts payable	(10,541		)	234		1,595		—	—		(8,712		)
Change in prepaid and accrued income taxes, tax credits and revenue taxes	(20,949		)	(9,828	)	(6,029	)	—	(331	)	(37,137		)
Increase (decrease) in defined benefit pension and other postretirement benefit plans liability	6,018			(570	)	440		—	—		5,888
Change in other assets and liabilities	34,934			2,602		3,027		—	(1,664	)	38,899
Net cash provided by operating activities	159,876			35,203		19,455		—	(20,812	)	193,722
Cash flows from investing activities
Capital expenditures	(245,393		)	(43,417	)	(45,920	)	—	—		(334,730		)
Contributions in aid of construction	19,486			2,960		1,915		—	—		24,361
Other	4,518			1,177		3,785		—	331		9,811
Advances (to) from affiliates	(2,000		)	—		12,000		—	(10,000	)	—
Net cash used in investing activities	(223,389		)	(39,280	)	(28,220	)	—	(9,669	)	(300,558		)
Cash flows from financing activities
Common stock dividends	(77,479		)	(11,467	)	(9,014	)	—	20,481		(77,479		)
Preferred stock dividends of Hawaiian Electric and subsidiaries	(810		)	(400	)	(286	)	—	—		(1,496		)
Proceeds from issuance of long-term debt	75,000			15,000		10,000		—	—		100,000
Net increase in short-term borrowings from non-affiliates and affiliate with original maturities of three months or less	68,914			—		2,000		—	10,000		80,914
Other	(304		)	(54	)	(38	)	—	—		(396		)
Net cash provided by financing activities	65,321			3,079		2,662		—	30,481		101,543
Net increase (decrease) in cash and cash equivalents	1,808			(998	)	(6,103	)	—	—		(5,293		)
Cash and cash equivalents, beginning of period	2,059			4,025		6,332		101	—		12,517
Cash and cash equivalents, end of period	$	3,867		3,027		229		101	—		$	7,224

Hawaiian Electric Company, Inc. and Subsidiaries

Condensed Consolidating Statement of Cash Flows

Nine months ended September 30, 2017

(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments		Hawaiian Electric Consolidated
Cash flows from operating activities
Net income	$	95,406		15,050		14,942		—	(29,306	)	$	96,092
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in earnings of subsidiaries	(29,381		)	—		—		—	29,306		(75		)
Common stock dividends received from subsidiaries	20,656			—		—		—	(20,581	)	75
Depreciation of property, plant and equipment	98,167			29,056		17,355		—	—		144,578
Other amortization	2,168			1,718		2,232		—	—		6,118
Deferred income taxes	12,166			5,237		7,493		—	4,641		29,537
Allowance for equity funds used during construction	(7,823		)	(416	)	(669	)	—	—		(8,908		)
Other	216			566		(256	)	—	—		526
Changes in assets and liabilities:
Increase in accounts receivable	(6,114		)	(1,127	)	(1,912	)	—	1,066		(8,087		)
Increase in accrued unbilled revenues	(14,823		)	(1,581	)	(1,610	)	—	—		(18,014		)
Decrease (increase) in fuel oil stock	6,779			195		(797	)	—	—		6,177
Decrease (increase) in materials and supplies	1,063			(1,580	)	(1,763	)	—	—		(2,280		)
Decrease (increase) in regulatory assets	9,471			(2,935	)	(2,614	)	—	—		3,922
Increase (decrease) in accounts payable	7,010			(2,660	)	1,780		—	—		6,130
Change in prepaid and accrued income taxes, tax credits and revenue taxes	10,920			(758	)	210		—	(5,081	)	5,291
Increase (decrease) in defined benefit pension and other postretirement benefit plans liability	532			39		(118	)	—	—		453
Change in other assets and liabilities	(2,709		)	1,059		54		—	(1,066	)	(2,662		)
Net cash provided by operating activities	203,704			41,863		34,327		—	(21,021	)	258,873
Cash flows from investing activities
Capital expenditures	(236,727		)	(36,700	)	(33,548	)	—	—		(306,975		)
Contributions in aid of construction	34,787			3,460		2,356		—	—		40,603
Other	6,089			871		714		—	440		8,114
Advances (to) from affiliates	—			(3,100	)	6,000		—	(2,900	)	—
Net cash used in investing activities	(195,851		)	(35,469	)	(24,478	)	—	(2,460	)	(258,258		)
Cash flows from financing activities
Common stock dividends	(65,825		)	(11,622	)	(8,959	)	—	20,581		(65,825		)
Preferred stock dividends of Hawaiian Electric and subsidiaries	(810		)	(400	)	(286	)	—	—		(1,496		)
Proceeds from issuance of special purpose revenue bonds	162,000			28,000		75,000		—			265,000
Funds transferred for redemption of special purpose revenue bonds	(162,000		)	(28,000	)	(75,000	)	—	—		(265,000		)
Net increase in short-term borrowings from non-affiliates and affiliate with original maturities of three months or less	3,100			—		—		—	2,900		6,000
Other	(2,252		)	(407	)	(934	)	—	—		(3,593		)
Net cash used in financing activities	(65,787		)	(12,429	)	(10,179	)	—	23,481		(64,914		)
Net decrease in cash and cash equivalents	(57,934		)	(6,035	)	(330	)	—	—		(64,299		)
Cash and cash equivalents, beginning of period	61,388			10,749		2,048		101	—		74,286
Cash and cash equivalents, end of period	$	3,454		4,714		1,718		101	—		$	9,987