Electric utility segment

12 Months Ended

Dec. 31, 2019

Electric utility subsidiary

Electric utility segment

Note 3 · Electric utility segment

Regulatory assets and liabilities.  Regulatory assets represent deferred costs and accrued decoupling revenues which are expected to be 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, or amounts collected in excess of costs incurred that are refundable to customers. 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, 2019 are noted.

Regulatory assets were as follows:

December 31	2019		2018
(in thousands)
Retirement benefit plans (balance primarily varies with plans’ funded statuses)	$	554,485	$	624,126
Income taxes (1-55 years)	102,612		114,076
Decoupling revenue balancing account and RAM (1-2 years)	—		49,560
Unamortized expense and premiums on retired debt and equity issuances (1-20 years; 1-19 years remaining)	10,228		10,065
Vacation earned, but not yet taken (1 year)	12,535		10,820
Other (1-39 years remaining)	35,220		24,779
Total regulatory assets	$	715,080	$	833,426
Included in:
Current assets	$	30,710	$	71,016
Long-term assets	684,370		762,410
Total regulatory assets	$	715,080	$	833,426

Regulatory liabilities were as follows:

December 31	2019		2018
(in thousands)
Cost of removal in excess of salvage value (1-60 years)	$	521,977	$	491,006
Income taxes (1-55 years)	386,990		413,339
Decoupling revenue balancing account and RAM (1-2 years)	16,370		—
Retirement benefit plans (balance primarily varies with plans’ funded statuses)	21,707		19,129
Other (1-19 years remaining)	25,266		26,762
Total regulatory liabilities	$	972,310	$	950,236
Included in:
Current liabilities	$	30,724	$	17,977
Long-term liabilities	941,586		932,259
Total regulatory liabilities	$	972,310	$	950,236

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 11% ($281 million), 11% ($273 million) and 11% ($239 million) of their operating revenues from the sale of electricity to various federal government agencies in 2019, 2018 and 2017, 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, 2019	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 $6.0 million, $5.9 million and $6.2 million for general management and administrative services in 2019, 2018 and 2017, 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.

For the years ended December 31, 2019 and December 31, 2018, Hamakua Energy, LLC (an indirect subsidiary of HEI) sold energy and capacity to Hawaii Electric Light (subsidiary of Hawaiian Electric and indirect subsidiary of HEI) under a PPA in the amount of $68 million and $56 million, respectively.

Hawaiian Electric’s short-term borrowings from HEI totaled nil at December 31, 2019 and 2018. Borrowings among the Utilities are eliminated in consolidation. Interest charged by HEI to Hawaiian Electric was not material for the years ended December 31, 2019 and 2018.

HECO Capital Trust III.  Trust III, a wholly-owned unconsolidated subsidiary of Hawaiian Electric, was created and exists for the exclusive purposes of (i) issuing in March 2004 2,000,000 6.50% Cumulative Quarterly Income Preferred Securities, Series 2004 (2004 Trust Preferred Securities) ($50 million aggregate liquidation preference) to the public and trust common securities ($1.5 million aggregate liquidation preference) to Hawaiian Electric, (ii) investing the proceeds of these trust securities in 2004 Debentures issued by Hawaiian Electric in the principal amount of $31.5 million and issued by Hawaii Electric Light and Maui Electric each in the principal amount of $10 million, (iii) making distributions on these trust securities and (iv) engaging in only those other activities necessary or incidental thereto. On May 15, 2019, Trust III redeemed $50 million of its outstanding 2004 Trust Preferred Securities and $1.5 million of trust common securities. Subsequently a Certificate of Cancellation of Statutory Trust was filed with the Delaware Secretary of State in order to cancel the Trust III, which became effective on June 10, 2019.

For the year-to-date period ending on the Trust’s cancellation date on June 10, 2019, Trust III’s income statement consisted of $1.2 million of interest income received from the 2004 Debentures; $1.2 million of distributions to holders of the Trust Preferred Securities; and $37,000 of common dividends on the trust common securities to Hawaiian Electric.

Unconsolidated variable interest entities.

Power purchase agreements.  As of December 31, 2019, the Utilities had four PPAs for firm capacity (excluding the PGV PPA as Puna Geothermal Venture (PGV) has been offline since May 2018 due to lava flow on Hawaii Island) and other PPAs with independent power producers (IPPs) and Schedule Q providers (i.e., customers with cogeneration and/or power production facilities who buy power from or sell power to the Utilities), none of which are currently required to be consolidated as VIEs.

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

For the other PPAs with IPPs, the Utilities have concluded that the consolidation of the IPPs was not required because either the Utilities do not have variable interests in the IPPs due to the absence of an obligation in the PPAs for the Utilities to absorb any variability of the IPPs, or the IPP was considered a “governmental organization,” and thus excluded from the scope of

accounting standards for VIEs. 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 Consolidated Financial Statements. The consolidation of any significant IPP could have a material effect on the 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: 

Years ended December 31	2019		2018		2017
(in millions)
Kalaeloa	$	214	$	216	$	180
AES Hawaii	139		140		140
HPOWER	76		69		67
Puna Geothermal Venture	—		15		38
Hamakua Energy	68		56		35
Wind IPPs	95		107		97
Solar IPPs	36		29		27
Other IPPs1	5		7		3
Total IPPs	$	633	$	639	$	587

¹ Includes hydro power and other PPAs

As of December 31, 2019, the Utilities had four firm capacity PPAs for a total of 516.5 megawatts (MW) of firm capacity. Since May 2018, PGV facility with 34.6 MW of firm capacity has been offline due to lava flow on Hawaii Island. 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 $51 million in 2020, $38 million each in 2021, 2022, 2023 and 2024, and $241 million from 2025 through 2033.

In general, the Utilities base their payments under the PPAs upon available capacity and actual energy supplied 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 ECRC 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 ECRC.

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. Hawaiian Electric and Kalaeloa have agreed that neither party will terminate the PPA (which has been subject to automatic extension on a month-to-month basis) prior to July 31, 2020, to allow for a negotiated resolution and PUC approval.

AES Hawaii, Inc. Under a PPA entered into in March 1988, as amended (through Amendment No. 2) for a period of 30 years ending September 2022, Hawaiian Electric agreed to purchase 180 MW of firm capacity from AES Hawaii. Hawaiian Electric and AES Hawaii have been in dispute over an additional 9 MW of capacity. In February 2018, Hawaiian Electric reached agreement with AES Hawaii on an amendment to the PPA. However, in June 2018, the PUC issued an order suspending review of the amendment pending a DOH decision on AES Hawaii’s request for approval of its Emission Reduction Plan and partnership with Hawaiian Electric. If approved by the PUC, the amendment will resolve AES Hawaii’s claims related to the additional capacity.

Hu Honua Bioenergy, LLC (Hu Honua). In May 2012, Hawaii Electric Light signed a PPA, which the PUC approved in December 2013, with Hu Honua for 21.5 MW of renewable, dispatchable firm capacity fueled by locally grown biomass from a facility on the island of Hawaii. Under the terms of the PPA, the Hu Honua plant was scheduled to be in service in 2016. However, Hu Honua encountered construction and litigation delays, which resulted in an amended and restated PPA between Hawaii Electric Light and Hu Honua dated May 5, 2017. In July 2017, the PUC approved the amended and restated PPA, which becomes effective once the PUC’s order is final and non-appealable. In August 2017, the PUC’s approval was appealed by a third party. On May 10, 2019, the Hawaii Supreme Court issued a decision remanding the matter to the PUC for further proceedings consistent with the court’s decision which must include express consideration of Green House Gas emissions that would result from approving the PPA, whether the cost of energy under the PPA is reasonable in light of the potential for GHG emissions, and whether the terms of the PPA are prudent and in the public interest, in light of its potential hidden and long-term consequences. On June 20, 2019, the PUC issued an order reopening the docket for further proceedings. On September 29, 2019, the PUC issued an order setting the procedural schedule for the matter and on December 20, 2019, issued an order modifying the procedural schedule. Pre-hearing matters will be conducted through March 6, 2020. Thereafter, the PUC will set the date for an evidentiary hearing and post-hearing briefing. Hu Honua expected to complete construction of the plant in the fourth quarter of 2019, but has been delayed.

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 achieve future cost savings consistent with a minimum of $246 million in ERP/EAM project-related benefits to be delivered to customers over the system’s 12-year service life. The decision and order (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%.

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 went 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 December 31, 2019, the total deferred project costs and accrued carrying costs after the project went into service amounted to $59.3 million.

In February 2019, the PUC approved a methodology for passing the future cost saving benefits of the new ERP/EAM system to customers developed by the Utilities in collaboration with the Consumer Advocate. The Utilities filed a benefits clarification document on June 10, 2019, reflecting $150 million in future net O&M expense reductions and cost avoidance, and $96 million in capital cost reductions and tax savings over the 12-year service life. To the extent the reduction in O&M expense relates to amounts reflected in electric rates, the Utilities would reduce future rates for such amounts. As of December 31, 2019, the Utilities recorded a total of $2.4 million as a regulatory liability for amounts to be returned to customers for reduction in O&M expense included in rates.

On September 13, 2019, the Utilities filed their Semi-Annual Enterprise System Benefits Report for the period January 1 through June 30, 2019. In October 2019, the PUC approved the Utilities and the Consumer Advocate’s Stipulated Performance Metrics and Tracking Mechanism.

West Loch PV Project. In November 2019, Hawaiian Electric placed into service a 20-MW (ac) utility-owned and operated renewable and dispatchable solar facility on property owned by the Department of the Navy. PUC orders resulted in a project cost cap of $67 million and a performance guarantee to provide energy at 9.56 cents/kWh or less to the system. Capital cost recovery under MPIR was approved by the PUC in December 2019 (See “Decoupling” section below for MPIR guidelines and cost recovery discussion.) Project costs incurred as of December 31, 2019 amounted to $51.4 million and generated

$13.4 million and $14.0 million in federal and state nonrefundable tax credits, respectively. The tax credits are being deferred and amortized, starting in 2020, over PUC-approved amortization periods.

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 EPA has since identified environmental impacts in the subsurface soil at the Site.In cooperation with the Hawaii Department of Health and EPA, Maui Electric further investigated the Site and the Adjacent Parcel to determine the extent of impacts of polychlorinated biphenyls (PCBs), residual fuel oils and other subsurface contaminants. Maui Electric has a reserve balance of $2.7 million as of December 31, 2019, representing the probable and reasonably estimable undiscounted cost for remediation of the Site and the Adjacent Parcel; however, final costs of remediation will depend on cleanup approach implemented.

Pearl Harbor sediment study. In July 2014, the U.S. Navy notified Hawaiian Electric of the Navy’s determination that Hawaiian Electric is a Potentially Responsible Party responsible for the costs of investigation and cleanup of PCBs contamination in sediment in the area offshore of the Waiau Power Plant as part of the Pearl Harbor Superfund Site. Hawaiian Electric was also required by the EPA to assess potential sources and extent of PCB contamination onshore at Waiau Power Plant.

As of December 31, 2019, the reserve account balance recorded by Hawaiian Electric to address the PCB contamination was $4.2 million. The reserve balance represents the probable and reasonably estimable undiscounted cost for the onshore investigation and the remediation of PCB contamination in the offshore sediment. The final remediation costs will depend on the potential onshore source control requirements and actual offshore cleanup costs.

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 legal obligations associated with the retirement of plant and equipment, including removal of asbestos and other hazardous materials.

The Utilities recorded AROs related to 1) the removal of retired generating units, certain types of transformers and underground storage tanks; 2) the abandonment of fuel pipelines, underground injection and supply wells; and 3) the removal of equipment and restoration of leased land used in connection with Utility-owned renewable and dispatchable generation facilities. 

Changes to the ARO liability included in “Other liabilities” on Hawaiian Electric’s balance sheet were as follows:

(in thousands)	2019			2018
Balance, January 1	$	8,426		$	6,035
Accretion expense	312			282
Liabilities incurred	1,594			1,058
Liabilities settled	(8		)	(74		)
Revisions in estimated cash flows	—			1,125
Balance, December 31	$	10,324		$	8,426

The Utilities have not recorded AROs for assets that are expected to operate indefinitely or where the Utilities cannot estimate a settlement date (or range of potential settlement dates). As such, ARO liabilities are not recorded for certain asset retirement activities, including various Utilities-owned generating facilities and certain electric transmission, distribution and telecommunications assets resulting from easements over property not owned by the Utilities.

Regulatory proceedings.

Decoupling. Decoupling is a regulatory model that is intended to provide the Utilities with financial stability and facilitate meeting the State of Hawaii’s goals to transition to a clean energy economy and achieve an aggressive renewable portfolio standard. The decoupling mechanism has the following major components: (1) monthly revenue balancing account (RBA) revenues or refunds for the difference between PUC-approved target revenues and recorded adjusted revenues, which delinks revenues from kilowatthour sales, (2) RAM revenues for escalation in certain O&M expenses and rate base changes, (3) MPIR component, (4) performance incentive mechanisms (PIMs), and (5) an earnings sharing mechanism, which would provide for a reduction of revenues between rate cases in the event the utility exceeds the return on average common equity (ROACE) allowed in its most recent rate case. 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. Each of the Utilities’ RAM revenues was below its respective RAM Cap in 2019. The 2019 RAM also incorporated additional amortization of the regulatory liability associated with certain excess deferred taxes resulting from the Tax Act decrease in tax rates. The reduction in the RAM revenues will be counterbalanced by the lower income tax expense and, therefore, will have no net income impact.

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 approved recovery of capital costs under the MPIR for Schofield Generating Station, which increased revenues in 2018 by $3.6 million and are being collected in customer bills since June 2019. In February 2019, Hawaiian Electric submitted an MPIR filing of $19.8 million for 2019 (which accrued effective January 1, 2019) that included the 2019 return on project amount (up to the capped amount) in rate base, depreciation and incremental O&M expenses, for collection from June 2020 through May 2021.

The PUC approved the Utilities’ requests for MPIR of the cost of the Grid Modernization Strategy Phase 1 project and West Loch PV project in March and December 2019, respectively. On February 7, 2020, the Utilities submitted an MPIR filing totaling $24.2 million for the Schofield Generation Station ($19.2 million), West Loch PV project ($4.5 million) and Grid Modernization Strategy Phase 1 project ($0.5 million for all three utilities) for the accrual of revenues effective January 1, 2020, that included the 2020 return on project amount (up to the capped amount) in rate base, depreciation and incremental O&M expenses, for collection from June 2021 through May 2022.

Performance incentive mechanisms. The PUC has established the following PIMs.

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

• Service Reliability Performance measured by System Average Interruption Duration and Frequency Indexes (penalties only). Target performance is based on each utility’s historical 10-year average performance with a deadband of one standard deviation. The maximum penalty for each performance index is 20 basis points applied to the common equity share of each respective utility’s approved rate base (or maximum penalties of approximately $6.7 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 reward is 8 basis points applied to the common equity share of

each respective utility’s approved rate base (or maximum penalties or rewards of approximately $1.3 million - in total for the three utilities).

• In December 2018, the Utilities accrued $2.1 million in estimated penalties for service reliability, net of call center performance rewards, for 2018. As a result of a PUC order denying the exclusion of the impact of a specific project on the service reliability performance, in May 2019, Hawaiian Electric accrued an additional $1.3 million in service reliability penalties related to 2018. The net service quality performance penalties related to 2018 were reflected in the 2019 annual decoupling filing and will reduce customer rates in the period June 1, 2019 through May 31, 2020.

• In December 2019, the Utilities accrued $0.3 million in estimated rewards for call center performance, net of service reliability penalties, for 2019. The net service quality performance rewards related to 2019 will be reflected in the 2020 annual decoupling filing and will increase customer rates in the period June 1, 2020 through May 31, 2021.

• 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. For PPAs filed by December 31, 2018 and subsequently approved by the PUC, the incentive is 20% of the savings, with a cap of $3.5 million for the three utilities in total. For PPAs filed in January, February, and March 2019 and subsequently approved by the PUC, scaled incentives are 15%, 10% and 5%, respectively, of the savings for PPAs, with a cap of $3 million for the three utilities in total. There are no penalties. On March 25, 2019, the PUC approved six contracts, which were filed by December 31, 2018 and qualified for incentives. A seventh contract, which was filed in February 2019 and approved in August 2019, also qualified for incentives. Half of the incentive is earned upon PUC approval of the contract and the other half is eligible to be earned in the year following the in-service date of the projects. The Utilities accrued $1.7 million in incentives in March 2019, which were reflected in the 2019 annual decoupling filing and will be recovered in rates in the period June 1, 2019 through May 31, 2020.

On October 9, 2019, the PUC issued an order establishing PIMs for the Utilities with regards to the Variable Renewable Dispatchable Generation and Energy Storage requests for proposals (RFPs) as well as the Delivery of Grid Services via Customer-sited Distributed Energy Resources RFPs, that were issued on August 22, 2019 for Oahu, Maui and Hawaii island. The order establishes pricing thresholds, timelines to complete contracting, and other performance criteria for the performance incentive eligibility. The PIMs provide incentives only without penalties. The earliest the Utilities would be eligible for a PIM pursuant to this order is upon PUC approval of executed contracts resulting from the Phase 2 RFPs. The order requires contracts under the Grid Service RFP be filed for approval by May 2020, and by September 2020 under the Renewable RFPs. There is no set time period for approval. The Utilities filed a motion for reconsideration and/or clarification regarding the order on October 21, 2019, relating to certain design aspects and eligibility criteria for the PIMs.

Annual decoupling filings. The net annual incremental amounts approved to be collected (refunded) from June 1, 2019 through May 31, 2020 are as follows:

(in millions)	Hawaiian Electric			Hawaii Electric Light			Maui Electric			Total
2019 Annual incremental RAM adjusted revenues,net of changes in Tax Act adjustment*	$	6.5		$	1.1		$	5.4		$	13.0
Annual change in accrued RBA balance as of December 31, 2018 (and associated revenue taxes) which incorporates MPIR recovery	(12.2		)	(2.0		)	0.8			(13.4		)
Performance Incentive Mechanisms (net)	(1.3		)	—			(0.4		)	(1.7		)
Net annual incremental amount to be collected (refunded) under the tariffs	$	(7.0	)	$	(0.9	)	$	5.8		$	(2.1	)

* The 2017 Tax Cuts and Jobs Act (the Tax Act) had two incremental impacts in 2019. First, the 2019 RAM calculation for all of the Utilities incorporated additional amortization of the regulatory liability associated with certain deferred taxes. Secondly, Maui Electric incorporated a $2.8 million adjustment in its 2018 annual decoupling filing related to the Tax Act which is not recurring in 2019.

Performance-based regulation proceeding. On April 18, 2018, the PUC issued an order, instituting a proceeding to investigate performance-based regulation (PBR). 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.

The proceeding has two phases. Phase 1 examined the current regulatory framework and identified those areas of utility performance that are deserving of further focus in Phase 2. In May 2019, the PUC issued an order concluding Phase 1, which established guiding principles, regulatory goals, and priority outcomes to guide the development of the PBR mechanisms in Phase 2. The PUC identified the following guiding principles, which will inform the development of the PBR framework: 1) a customer-centric approach, 2) administrative efficiency to reduce regulatory burdens; and 3) utility financial integrity to maintain the utility’s financial health. Priority goals (and priority outcomes) identified by the PUC were: enhance customer experience (affordability, reliability, interconnection experience, and customer engagement), improve utility performance (cost control, distributed energy resources (DER) asset effectiveness, and grid investment efficiency), and advance societal outcomes (capital formation, customer equity, GHG reduction, electrification of transportation, and resilience).

The order also outlined the PUC’s vision of a comprehensive PBR framework that would be further developed in Phase 2. The framework envisioned would include 1) a five-year multi-year rate plan with an index-driven annual revenue adjustment based on an inflation factor, an X-factor which would encompass productivity, a Z-factor to account for exceptional circumstances not in the utility’s control and a customer dividend, 2) a symmetric earnings sharing mechanism that would help ensure that utility earnings do not excessively benefit or suffer from external factors outside of utility control or unforeseen results of regulatory mechanisms, 3) off-ramp provisions, 4) continuation of the RBA, MPIR adjustment mechanism, the pension and OPEB tracking mechanism, and other recovery mechanisms, and 5) a portfolio of performance incentive mechanisms for customer engagement and DER asset effectiveness (rewards only), and interconnection experience (both rewards and penalties), in addition to scorecards to track progress against targeted performance levels, shared savings mechanisms to apportion savings to the utility and customers, and reported metrics.

The Phase 2 schedule includes working group meetings through the first half of 2020, followed by statements of positions, evidentiary hearing in October 2020 and anticipated decision in December 2020.

Most recent rate proceedings.

Hawaiian Electric 2020 test year rate case. On August 21, 2019, Hawaiian Electric filed an application for a general rate increase for its 2020 test year rate case, requesting an increase of $77.6 million over revenues at current effective rates (for a 4.1% increase in revenues), based on an 8.0% rate of return (which incorporates a ROACE of 10.5%). In September 2019, the PUC issued an order ruling that Hawaiian Electric’s application was complete as of the date of filing. It also ordered that an outside consultant, selected by the PUC, would independently conduct a management audit of Hawaiian Electric. The PUC expects the audit to conclude in May 2020.

Maui Electric consolidated 2015 and 2018 test year rate cases. On August 9, 2018, the PUC approved an interim rate increase based on a stipulated settlement, that included the effects of the 2017 Tax Act, between Maui Electric and the Consumer Advocate. On March 18, 2019, the PUC issued its D&O that approved, with certain modifications, the stipulated settlement, which addressed all issues in the rate case.

Revised tariffs reflecting a final increase of $12.2 million over revenues at current effective rates based on the approved 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 $454 million rate base became effective on June 1, 2019. Maui Electric’s ECRC tariff, resulting in the recovery of all fuel and purchased energy through the ECRC and the removal of the recovery of these costs from base rates, became effective on September 1, 2019. The ECRC reflects a 98%/2% fossil fuel generation cost risk-sharing split between ratepayers and Maui Electric, with an annual maximum increase or decrease to revenues to $0.6 million for the utility.

Hawaii Electric Light 2019 test year rate case. On December 14, 2018, Hawaii Electric Light filed an application for a general rate increase for its 2019 test year rate case, requesting an increase of $13.4 million over revenues at current effective rates (for a 3.4% increase in revenues), based on an 8.3% rate of return (which incorporates a ROACE of 10.5%).

On September 24, 2019, Hawaii Electric Light and the Consumer Advocate (Parties) filed a Stipulated Partial Settlement Letter (Partial Settlement) which documented agreements reached with the Consumer Advocate on all of the issues in the proceeding except for the ROACE, capital structure, amortization period for the state investment tax credit (ITC), and symmetric or asymmetric automatic annual target heat rate adjustment (collectively, remaining issues). On November 13, 2019, the PUC issued an interim decision maintaining Hawaii Electric Light’s revenues at current effective rates based on an interim revenue requirement of $387 million, average rate base of $534 million, and a 7.52% ROR on average rate base that incorporates a ROACE of 9.5% and 58.0% total equity ratio. On November 25, 2019, the Parties filed separate responses to the interim order, agreeing that: (1) they do not intend to withdraw from the Partial Settlement; (2) they waive their respective rights to an evidentiary hearing on the remaining contested issues; and (3) the remaining issues in the proceeding can be decided based on the evidence in the record and should be the subject of the filing of opening and reply briefs in February 2020. On December 13, 2019, the PUC issued an order approving the interim tariffs (effective January 1, 2020), removing the evidentiary hearing from

the procedural schedule, and scheduling the filing of supplemental evidence on January 17, 2020 and simultaneous opening and reply briefs on February 3, 2020 and February 24, 2020. There is no statutory deadline for the PUC to issue a final decision.

Consolidating financial information. Consolidating financial information for Hawaiian Electric and its subsidiaries are presented for the years ended December 31, 2019, 2018 and 2017, and as of December 31, 2019 and 2018.

Hawaiian Electric unconditionally guarantees Hawaii Electric Light’s and Maui Electric’s obligations (a) to the State of Hawaii for the repayment of principal and interest on Special Purpose Revenue Bonds issued for the benefit of Hawaii Electric Light and Maui Electric and (b) under their respective private placement note agreements and the Hawaii Electric Light notes and Maui Electric notes issued thereunder (see Hawaiian Electric and Subsidiaries’ Consolidated Statements of Capitalization). 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, 2019

(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments			Hawaiian Electric Consolidated
Revenues	$	1,803,698		364,590		378,202		—	(548	)	[1]	$	2,545,942
Expenses
Fuel oil	494,728			84,565		141,416		—	—			720,709
Purchased power	494,215			90,989		48,052		—	—			633,256
Other operation and maintenance	319,771			76,091		85,875		—	—			481,737
Depreciation	143,470			41,812		30,449		—	—			215,731
Taxes, other than income taxes	170,979			33,787		35,365		—	—			240,131
Total expenses	1,623,163			327,244		341,157		—	—			2,291,564
Operating income	180,535			37,346		37,045		—	(548	)		254,378
Allowance for equity funds used during construction	9,955			816		1,216		—	—			11,987
Equity in earnings of subsidiaries	43,167			—		—		—	(43,167	)	[2]	—
Retirement defined benefits expense—other than service costs	(2,287		)	(422	)	(127	)	—	—			(2,836		)
Interest expense and other charges, net	(51,199		)	(10,741	)	(9,450	)	—	548		[1]	(70,842		)
Allowance for borrowed funds used during construction	3,666			342		445		—	—			4,453
Income before income taxes	183,837			27,341		29,129		—	(43,167	)		197,140
Income taxes	25,917			5,990		6,398		—	—			38,305
Net income	157,920			21,351		22,731		—	(43,167	)		158,835
Preferred stock dividends of subsidiaries	—			534		381		—	—			915
Net income attributable to Hawaiian Electric	157,920			20,817		22,350		—	(43,167	)		157,920
Preferred stock dividends of Hawaiian Electric	1,080			—		—		—	—			1,080
Net income for common stock	$	156,840		20,817		22,350		—	(43,167	)		$	156,840

Consolidating statement of comprehensive income

Year ended December 31, 2019

(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments			Hawaiian Electric Consolidated
Net income for common stock	$	156,840		20,817		22,350		—	(43,167	)		$	156,840
Other comprehensive income (loss), net of taxes:
Retirement benefit plans:
Net gains (losses) arising during the period, net of taxes	5,249			373		(204	)	—	(169	)	[1]	5,249
Adjustment for amortization of prior service credit and net losses recognized during the period in net periodic benefit cost, net of tax benefits	9,550			1,455		1,182		—	(2,637	)	[1]	9,550
Reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of taxes	(16,177		)	(1,840	)	(1,152	)	—	2,992		[1]	(16,177		)
Other comprehensive loss, net of tax benefits	(1,378		)	(12	)	(174	)	—	186			(1,378		)
Comprehensive income attributable to common shareholder	$	155,462		20,805		22,176		—	(42,981	)		$	155,462

Consolidating statement of income

Year ended December 31, 2018

(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments			Hawaiian Electric Consolidated
Revenues	$	1,802,550		375,493		368,700		—	(218	)	[1]	$	2,546,525
Expenses
Fuel oil	523,706			90,792		146,030		—	—			760,528
Purchased power	494,450			95,838		49,019		—	—			639,307
Other operation and maintenance	313,346			70,396		77,749		—	—			461,491
Depreciation	137,410			40,235		25,981		—	—			203,626
Taxes, other than income taxes	170,363			34,850		34,699		—	—			239,912
Total expenses	1,639,275			332,111		333,478		—	—			2,304,864
Operating income	163,275			43,382		35,222		—	(218	)		241,661
Allowance for equity funds used    during construction	9,208			478		1,191		—	—			10,877
Equity in earnings of subsidiaries	45,393			—		—		—	(45,393	)	[2]	—
Retirement defined benefits expense—other than service costs	(2,649		)	(417	)	(565	)	—	—			(3,631		)
Interest expense and other charges, net	(52,180		)	(11,836	)	(9,550	)	—	218		[1]	(73,348		)
Allowance for borrowed funds used during construction	4,019			276		572		—	—			4,867
Income before income taxes	167,066			31,883		26,870		—	(45,393	)		180,426
Income taxes	22,333			6,868		5,577		—	—			34,778
Net income	144,733			25,015		21,293		—	(45,393	)		145,648
Preferred stock dividends of subsidiaries	—			534		381		—	—			915
Net income attributable to Hawaiian Electric	144,733			24,481		20,912		—	(45,393	)		144,733
Preferred stock dividends of Hawaiian Electric	1,080			—		—		—	—			1,080
Net income for common stock	$	143,653		24,481		20,912		—	(45,393	)		$	143,653

Consolidating statement of comprehensive income

Year ended December 31, 2018

(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments			Hawaiian Electric Consolidated
Net income for common stock	$	143,653		24,481		20,912		—	(45,393	)		$	143,653
Other comprehensive income (loss), net of taxes:
Retirement benefit plans:
Net losses arising during the period, net of tax benefits	(26,019		)	(6,090	)	(5,004	)	—	11,094		[1]	(26,019		)
Adjustment for amortization of prior service credit and net losses recognized during the period in net periodic benefit cost, net of tax benefits	19,012			2,819		2,423		—	(5,242	)	[1]	19,012
Reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of taxes	8,325			3,305		2,788		—	(6,093	)	[1]	8,325
Other comprehensive income, net of taxes	1,318			34		207		—	(241	)		1,318
Comprehensive income attributable to common shareholder	$	144,971		24,515		21,119		—	(45,634	)		$	144,971

Consolidating statement of income

Year ended December 31, 2017

(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments			Hawaiian Electric Consolidated
Revenues	$	1,598,504		333,467		325,678		—	(83	)	[1]	$	2,257,566
Expenses
Fuel oil	408,204			63,894		115,670		—	—			587,768
Purchased power	454,189			87,772		44,673		—	—			586,634
Other operation and maintenance	274,391			66,184		71,332		—	—			411,907
Depreciation	130,889			38,741		23,154		—	—			192,784
Taxes, other than income taxes	152,933			31,184		30,832		—	—			214,949
Total expenses	1,420,606			287,775		285,661		—	—			1,994,042
Operating income	177,898			45,692		40,017		—	(83	)		263,524
Allowance for equity funds used    during construction	10,896			554		1,033		—	—			12,483
Equity in earnings of subsidiaries	38,057			—		—		—	(38,057	)	[2]	—
Retirement defined benefits expense—other than service costs	(5,049		)	(93	)	(861	)	—	—			(6,003		)
Interest expense and other charges, net	(48,277		)	(11,799	)	(9,644	)	—	83		[1]	(69,637		)
Allowance for borrowed funds used during construction	4,089			238		451		—	—			4,778
Income before income taxes	177,614			34,592		30,996		—	(38,057	)		205,145
Income taxes	56,583			13,912		12,704		—	—			83,199
Net income	121,031			20,680		18,292		—	(38,057	)		121,946
Preferred stock dividends of subsidiaries	—			534		381		—	—			915
Net income attributable to Hawaiian Electric	121,031			20,146		17,911		—	(38,057	)		121,031
Preferred stock dividends of Hawaiian Electric	1,080			—		—		—	—			1,080
Net income for common stock	$	119,951		20,146		17,911		—	(38,057	)		$	119,951

Consolidating statement of comprehensive income

Year ended December 31, 2017

(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments			Hawaiian Electric Consolidated
Net income for common stock	$	119,951		20,146		17,911		—	(38,057	)		$	119,951
Other comprehensive income (loss), net of taxes:
Derivatives qualified as cash flow hedges:
Reclassification adjustment to net income, net of tax benefits	454			—		—		—	—			454
Retirement benefit plans:
Net gains arising during the period, net of taxes	63,105			3,093		7,329		—	(10,422	)	[1]	63,105
Adjustment for amortization of prior service credit and net losses recognized during the period in net periodic benefit cost, net of tax benefits	14,477			1,903		1,619		—	(3,522	)	[1]	14,477
Reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of taxes	(78,724		)	(4,994	)	(9,003	)	—	13,997		[1]	(78,724		)
Other comprehensive income (loss), net of taxes	(688		)	2		(55	)	—	53			(688		)
Comprehensive income attributable to common shareholder	$	119,263		20,148		17,856		—	(38,004	)		$	119,263

Consolidating balance sheet

December 31, 2019

(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	$	42,598		5,606		3,612		—	—			$	51,816
Plant and equipment	4,765,362			1,313,727		1,161,199		—	—			7,240,288
Less accumulated depreciation	(1,591,241		)	(574,615	)	(524,301	)	—	—			(2,690,157		)
Construction in progress	165,137			9,993		17,944		—	—			193,074
Utility property, plant and equipment, net	3,381,856			754,711		658,454		—	—			4,795,021
Nonutility property, plant and equipment, less accumulated depreciation	5,310			114		1,532		—	—			6,956
Total property, plant and equipment, net	3,387,166			754,825		659,986		—	—			4,801,977
Investment in wholly-owned subsidiaries, at equity	591,969			—		—		—	(591,969	)	[2]	—
Current assets
Cash and cash equivalents	2,239			6,885		1,797		101	—			11,022
Restricted cash	30,749			123		—		—	—			30,872
Advances to affiliates	27,700			8,000		—		—	(35,700	)	[1]	—
Customer accounts receivable, net	105,454			24,520		22,816		—	—			152,790
Accrued unbilled revenues, net	83,148			17,071		17,008		—	—			117,227
Other accounts receivable, net	18,396			1,907		1,960		—	(10,695	)	[1]	11,568
Fuel oil stock, at average cost	69,003			8,901		14,033		—	—			91,937
Materials and supplies, at average cost	34,876			8,313		17,513		—	—			60,702
Prepayments and other	88,334			3,725		24,921		—	—			116,980
Regulatory assets	27,689			1,641		1,380		—	—			30,710
Total current assets	487,588			81,086		101,428		101	(46,395	)		623,808
Other long-term assets
Operating lease right-of-use assets	174,886			1,537		386		—	—			176,809
Regulatory assets	476,390			109,163		98,817		—	—			684,370
Other	69,010			15,493		17,215		—	—			101,718
Total other long-term assets	720,286			126,193		116,418		—	—			962,897
Total assets	$	5,187,009		962,104		877,832		101	(638,364	)		$	6,388,682
Capitalization and liabilities
Capitalization
Common stock equity	$	2,047,352		298,998		292,870		101	(591,969	)	[2]	$	2,047,352
Cumulative preferred stock–not subject to mandatory redemption	22,293			7,000		5,000		—	—			34,293
Long-term debt, net	1,006,737			206,416		188,561		—	—			1,401,714
Total capitalization	3,076,382			512,414		486,431		101	(591,969	)		3,483,359
Current liabilities
Current portion of operating lease liabilities	63,582			94		31		—	—			63,707
Current portion of long-term debt, net	61,958			13,995		20,000		—	—			95,953
Short-term borrowings-non-affiliate	88,987			—		—		—	—			88,987
Short-term borrowings-affiliate	8,000			—		27,700		—	(35,700	)	[1]	—
Accounts payable	139,056			25,629		23,085		—	—			187,770
Interest and preferred dividends payable	14,759			3,115		2,900		—	(46	)	[1]	20,728
Taxes accrued	143,522			32,541		31,929		—	—			207,992
Regulatory liabilities	13,363			9,454		7,907		—	—			30,724
Other	51,295			11,362		15,297		—	(10,649	)	[1]	67,305
Total current liabilities	584,522			96,190		128,849		—	(46,395	)		763,166
Deferred credits and other liabilities
Operating lease liabilities	111,598			1,442		360		—	—			113,400
Deferred income taxes	265,864			53,534		57,752		—	—			377,150
Regulatory liabilities	664,894			178,474		98,218		—	—			941,586
Unamortized tax credits	86,852			16,196		14,820		—	—			117,868
Defined benefit pension and other postretirement benefit plans liability	339,471			69,928		69,364		—	—			478,763
Other	57,426			33,926		22,038		—	—			113,390
Total deferred credits and other liabilities	1,526,105			353,500		262,552		—	—			2,142,157
Total capitalization and liabilities	$	5,187,009		962,104		877,832		101	(638,364	)		$	6,388,682

Consolidating balance sheet

December 31, 2018

(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	$	40,449		5,606		3,612		—	—			$	49,667
Plant and equipment	4,456,090			1,259,553		1,094,028		—	—			6,809,671
Less accumulated depreciation	(1,523,861		)	(547,848	)	(505,633	)	—	—			(2,577,342		)
Construction in progress	193,677			8,781		30,687		—	—			233,145
Utility property, plant and equipment, net	3,166,355			726,092		622,694		—	—			4,515,141
Nonutility property, plant and equipment, less accumulated depreciation	5,314			115		1,532		—	—			6,961
Total property, plant and equipment, net	3,171,669			726,207		624,226		—	—			4,522,102
Investment in wholly-owned subsidiaries, at equity	576,838			—		—		—	(576,838	)	[2]	—
Current assets
Cash and cash equivalents	16,732			15,623		3,421		101	—			35,877
Customer accounts receivable, net	125,960			26,483		25,453		—	—			177,896
Accrued unbilled revenues, net	88,060			17,051		16,627		—	—			121,738
Other accounts receivable, net	21,962			3,131		3,033		—	(21,911	)	[1]	6,215
Fuel oil stock, at average cost	54,262			11,027		14,646		—	—			79,935
Materials and supplies, at average cost	30,291			7,155		17,758		—	—			55,204
Prepayments and other	23,214			5,212		3,692		—	—			32,118
Regulatory assets	60,093			3,177		7,746		—	—			71,016
Total current assets	420,574			88,859		92,376		101	(21,911	)		579,999
Other long-term assets
Regulatory assets	537,708			120,658		104,044		—	—			762,410
Other	69,749			15,944		17,299		—	—			102,992
Total other long-term assets	607,457			136,602		121,343		—	—			865,402
Total assets	$	4,776,538		951,668		837,945		101	(598,749	)		$	5,967,503
Capitalization and liabilities
Capitalization
Common stock equity	$	1,957,641		295,874		280,863		101	(576,838	)	[2]	$	1,957,641
Cumulative preferred stock–not subject to mandatory redemption	22,293			7,000		5,000		—	—			34,293
Long-term debt, net	1,000,137			217,749		200,916		—	—			1,418,802
Total capitalization	2,980,071			520,623		486,779		101	(576,838	)		3,410,736
Current liabilities
Short-term borrowings-non-affiliate	25,000			—		—		—	—			25,000
Accounts payable	126,384			20,045		25,362		—	—			171,791
Interest and preferred dividends payable	16,203			4,203		2,841		—	(32	)	[1]	23,215
Taxes accrued	164,747			34,128		34,458		—	—			233,333
Regulatory liabilities	7,699			4,872		5,406		—	—			17,977
Other	46,391			15,077		20,414		—	(21,879	)	[1]	60,003
Total current liabilities	386,424			78,325		88,481		—	(21,911	)		531,319
Deferred credits and other liabilities
Deferred income taxes	271,438			54,936		56,823		—	—			383,197
Regulatory liabilities	657,210			176,101		98,948		—	—			932,259
Unamortized tax credits	60,271			16,217		15,034		—	—			91,522
Defined benefit pension and other postretirement benefit plans liability	359,174			73,147		71,338		—	—			503,659
Other	61,950			32,319		20,542		—	—			114,811
Total deferred credits and other liabilities	1,410,043			352,720		262,685		—	—			2,025,448
Total capitalization and liabilities	$	4,776,538		951,668		837,945		101	(598,749	)		$	5,967,503

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, 2016	$	1,799,787		291,291		259,554		101	(550,946	)	$	1,799,787
Net income for common stock	119,951			20,146		17,911		—	(38,057	)	119,951
Other comprehensive income (loss), net of taxes	(688		)	2		(55	)	—	53		(688		)
Issuance of common stock, net of expenses	14,000			4		4,801		—	(4,805	)	14,000
Common stock dividends	(87,767		)	(24,796	)	(11,946	)	—	36,742		(87,767		)
Balance, December 31, 2017	1,845,283			286,647		270,265		101	(557,013	)	1,845,283
Net income for common stock	143,653			24,481		20,912		—	(45,393	)	143,653
Other comprehensive income, net of taxes	1,318			34		207		—	(241	)	1,318
Issuance of common stock, net of expenses	70,692			1		1,498		—	(1,499	)	70,692
Common stock dividends	(103,305		)	(15,289	)	(12,019	)	—	27,308		(103,305		)
Balance, December 31, 2018	1,957,641			295,874		280,863		101	(576,838	)	1,957,641
Net income for common stock	156,840			20,817		22,350		—	(43,167	)	156,840
Other comprehensive loss, net of tax benefits	(1,378		)	(12	)	(174	)	—	186		(1,378		)
Issuance of common stock, net of expenses	35,501			(1	)	4,899		—	(4,898	)	35,501
Common stock dividends	(101,252		)	(17,680	)	(15,068	)	—	32,748		(101,252		)
Balance, December 31, 2019	$	2,047,352		298,998		292,870		101	(591,969	)	$	2,047,352

Consolidating statement of cash flows

Year ended December 31, 2019

(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments			Hawaiian Electric Consolidated
Cash flows from operating activities
Net income	$	157,920		21,351		22,731		—	(43,167	)	[2]	$	158,835
Adjustments to reconcile net income to net cash provided by operating activities
Equity in earnings of subsidiaries	(43,204		)	—		—		—	43,167		[2]	(37		)
Common stock dividends received from subsidiaries	32,783			—		—		—	(32,748	)	[2]	35
Depreciation of property, plant and equipment	143,470			41,812		30,449		—	—			215,731
Other amortization	23,351			4,810		1,470		—	—			29,631
Deferred income taxes	(13,547		)	(2,383	)	(354	)	—	—			(16,284		)
Income tax credits, net	27,277			(13	)	(5	)	—	—			27,259
State refundable credit	(6,245		)	(559	)	(1,565	)	—	—			(8,369		)
Allowance for equity funds used during construction	(9,955		)	(816	)	(1,216	)	—	—			(11,987		)
Other	298			(48	)	(50	)	—	—			200
Changes in assets and liabilities:
Decrease in accounts receivable	25,376			3,326		3,469		—	(11,215	)	[1]	20,956
Decrease (increase) in accrued unbilled revenues	4,912			(20	)	(381	)	—	—			4,511
Decrease (increase) in fuel oil stock	(14,741		)	2,126		613		—	—			(12,002		)
Decrease (increase) in materials and supplies	(4,585		)	(1,158	)	245		—	—			(5,498		)
Decrease in regulatory assets	55,494			9,218		6,550		—	—			71,262
Increase (decrease) in regulatory liabilities	102			(1,558	)	3,409						1,953
Increase (decrease) in accounts payable	4,687			(3,160	)	(3,578	)	—	—			(2,051		)
Change in prepaid and accrued income taxes, tax credits and revenue taxes	(24,900		)	(893	)	(3,097	)	—	367		[1]	(28,523		)
Decrease in defined benefit pension and other postretirement benefit plans liability	(3,033		)	(762	)	(653	)	—	—			(4,448		)
Change in other assets and liabilities	(15,341		)	(6,152	)	(6,940	)	—	11,215		[1]	(17,218		)
Net cash provided by operating activities	340,119			65,121		51,097		—	(32,381	)		423,956
Cash flows from investing activities
Capital expenditures	(311,538		)	(49,811	)	(58,549	)	—	—			(419,898		)
Advances to affiliates	(27,700		)	(8,000	)	—		—	35,700		[1]	—
Other	5,241			297		1,303		—	4,533		[1],[2]	11,374
Net cash used in investing activities	(333,997		)	(57,514	)	(57,246	)	—	40,233			(408,524		)
Cash flows from financing activities
Common stock dividends	(101,252		)	(17,680	)	(15,068	)	—	32,748		[2]	(101,252		)
Preferred stock dividends of Hawaiian Electric and subsidiaries	(1,080		)	(534	)	(381	)	—	—			(1,995		)
Proceeds from issuance of common stock	35,500			—		4,900		—	(4,900	)	[2]	35,500
Proceeds from issuance of long-term debt	190,000			72,500		17,500		—	—			280,000
Repayment of long-term debt and funds transferred for repayment of long-term dent	(183,546		)	(70,000	)	(30,000	)	—	—			(283,546		)
Net increase in short-term borrowings from non-affiliates and affiliate with original maturities of three months or less	46,987			—		27,700		—	(35,700	)	[1]	38,987
Proceeds from issuance of short-term debt	75,000			—		—		—	—			75,000
Repayment of short-term debt	(50,000		)	—		—		—	—			(50,000		)
Other	(1,475		)	(508	)	(126	)	—	—			(2,109		)
Net cash provided by (used in) financing activities	10,134			(16,222	)	4,525		—	(7,852	)		(9,415		)
Net increase (decrease) in cash, cash equivalents and restricted cash	16,256			(8,615	)	(1,624	)	—	—			6,017
Cash, cash equivalents and restricted cash, January 1	16,732			15,623		3,421		101	—			35,877
Cash, cash equivalents and restricted cash, December 31	32,988			7,008		1,797		101	—			41,894
Less: Restricted cash	(30,749		)	(123	)	—		—	—			(30,872		)
Cash and cash equivalents, December 31	$	2,239		6,885		1,797		101	—			$	11,022

Consolidating statement of cash flows

Year ended December 31, 2018

(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments			Hawaiian Electric Consolidated
Cash flows from operating activities
Net income	$	144,733		25,015		21,293		—	(45,393	)	[2]	$	145,648
Adjustments to reconcile net income to net cash provided by operating activities
Equity in earnings of subsidiaries	(45,493		)	—		—		—	45,393		[2]	(100		)
Common stock dividends received from subsidiaries	27,408			—		—		—	(27,308	)	[2]	100
Depreciation of property, plant and equipment	137,410			40,235		25,981		—	—			203,626
Other amortization	20,956			5,069		577		—	—			26,602
Deferred income taxes	(9,806		)	(341	)	2,165		—	—			(7,982		)
Income tax credits, net	(83		)	(14	)	(2	)	—	—			(99		)
State refundable credit	(4,941		)	(547	)	(751	)	—	—			(6,239		)
Allowance for equity funds used during construction	(9,208		)	(478	)	(1,191	)	—	—			(10,877		)
Other	3,991			348		429		—	—			4,768
Changes in assets and liabilities:
Increase in accounts receivable	(51,656		)	(4,867	)	(8,614	)	—	14,220		[1]	(50,917		)
Increase in accrued unbilled revenues	(10,884		)	(1,111	)	(2,689	)	—	—			(14,684		)
Decrease (increase) in fuel oil stock	10,710			(2,329	)	(1,443	)	—	—			6,938
Decrease (increase) in materials and supplies	(1,966		)	886		273		—	—			(807		)
Decrease (increase) in regulatory assets	12,192			71		(3,011	)	—	—			9,252
Increase in regulatory liabilities	26,540			5,380		5,438		—	—			37,358
Increase in accounts payable	14,748			6,104		3,506		—	—			24,358
Change in prepaid and accrued income taxes, tax credits and revenue taxes	24,438			(2,118	)	3,047		—	(331	)	[1]	25,036
Increase (decrease) in defined benefit pension and other postretirement benefit plans liability	17,178			(760	)	2,328		—	—			18,746
Change in other assets and liabilities	(8,056		)	2,806		2,356		—	(14,220	)	[1]	(17,114		)
Net cash provided by operating activities	298,211			73,349		49,692		—	(27,639	)		393,613
Cash flows from investing activities
Capital expenditures	(305,703		)	(51,054	)	(58,507	)	—	—			(415,264		)
Advances from affiliates	—			—		12,000		—	(12,000	)	[1]	—
Other	3,226			1,182		3,843		—	1,831		[1],[2]	10,082
Net cash used in investing activities	(302,477		)	(49,872	)	(42,664	)	—	(10,169	)		(405,182		)
Cash flows from financing activities
Common stock dividends	(103,305		)	(15,289	)	(12,019	)	—	27,308		[2]	(103,305		)
Preferred stock dividends of Hawaiian Electric and subsidiaries	(1,080		)	(534	)	(381	)	—	—			(1,995		)
Proceeds from the issuance of common stock	70,700			—		1,500		—	(1,500	)	[2]	70,700
Proceeds from the issuance of long-term debt	75,000			15,000		10,000		—	—			100,000
Repayment of long-term debt	(30,000		)	(11,000	)	(9,000	)	—	—			(50,000		)
Net decrease in short-term borrowings from non-affiliates and affiliate with original maturities of three months or less	(16,999		)	—		—		—	12,000		[1]	(4,999		)
Proceeds from issuance of short-term debt	25,000			—		—		—	—			25,000
Other	(377		)	(56	)	(39	)	—	—			(472		)
Net cash provided by (used in) financing activities	18,939			(11,879	)	(9,939	)	—	37,808			34,929
Net increase (decrease) in cash and cash equivalents	14,673			11,598		(2,911	)	—	—			23,360
Cash and cash equivalents, January 1	2,059			4,025		6,332		101	—			12,517
Cash and cash equivalents, December 31	$	16,732		15,623		3,421		101	—			$	35,877

Consolidating statement of cash flows

Year ended December 31, 2017

(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments			Hawaiian Electric Consolidated
Cash flows from operating activities
Net income	$	121,031		20,680		18,292		—	(38,057	)	[2]	$	121,946
Adjustments to reconcile net income to net cash provided by operating activities
Equity in earnings of subsidiaries	(38,157		)	—		—		—	38,057		[2]	(100		)
Common stock dividends received from subsidiaries	36,867			—		—		—	(36,742	)	[2]	125
Depreciation of property, plant and equipment	130,889			38,741		23,154		—	—			192,784
Other amortization	2,398			3,225		2,875		—	—			8,498
Deferred income taxes	26,342			3,954		8,004		—	(263	)	[1]	38,037
Income tax credits, net	(35		)	(16	)	(1	)	—	—			(52		)
State refundable credit	(1,382		)	(528	)	(341	)	—	—			(2,251		)
Allowance for equity funds used during construction	(10,896		)	(554	)	(1,033	)	—	—			(12,483		)
Other	263			974		—		—	—			1,237
Changes in assets and liabilities:
Decrease (increase) in accounts receivable	1,817			(359	)	45		—	1,411		[1]	2,914
Increase in accrued unbilled revenues	(11,355		)	(2,376	)	(1,630	)	—	—			(15,361		)
Increase in fuel oil stock	(17,733		)	(469	)	(2,241	)	—	—			(20,443		)
Decrease (increase) in materials and supplies	1,603			(661	)	(1,660	)	—	—			(718		)
Increase in regulatory assets	(8,395		)	(4,007	)	(4,854	)	—	—			(17,256		)
Increase in regulatory liabilities	2,552			315		735		—	—			3,602
Increase (decrease) in accounts payable	23,519			(3,547	)	5,762		—	—			25,734
Change in prepaid and accrued income taxes, tax credits and revenue taxes	16,716			7,961		5,362		—	(177	)	[1]	29,862
Increase (decrease) in defined benefit pension and other postretirement benefit plans liability	709			52		(157	)	—	—			604
Change in other assets and liabilities	(18,765		)	(748	)	(569	)	—	(1,411	)	[1]	(21,493		)
Net cash provided by operating activities	257,988			62,637		51,743		—	(37,182	)		335,186
Cash flows from investing activities
Capital expenditures	(281,752		)	(47,784	)	(47,329	)	—	—			(376,865		)
Advances from (to) affiliates	—			3,500		(2,000	)	—	(1,500	)	[1]	—
Other	(1,711		)	649		400		—	5,240		[1],[2]	4,578
Net cash used in investing activities	(283,463		)	(43,635	)	(48,929	)	—	3,740			(372,287		)
Cash flows from financing activities
Common stock dividends	(87,767		)	(24,796	)	(11,946	)	—	36,742		[2]	(87,767		)
Preferred stock dividends of Hawaiian Electric and subsidiaries	(1,080		)	(534	)	(381	)	—	—			(1,995		)
Proceeds from the issuance of common stock	14,000			—		4,800		—	(4,800	)	[2]	14,000
Proceeds from the issuance of long-term debt	202,000			28,000		85,000		—	—			315,000
Repayment of long-term debt	(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	3,499			—		—		—	1,500		[1]	4,999
Other	(2,506		)	(396	)	(1,003	)	—	—			(3,905		)
Net cash provided by (used in) financing activities	(33,854		)	(25,726	)	1,470		—	33,442			(24,668		)
Net increase (decrease) in cash and cash equivalents	(59,329		)	(6,724	)	4,284		—	—			(61,769		)
Cash and cash equivalents, January 1	61,388			10,749		2,048		101	—			74,286
Cash and cash equivalents, December 31	$	2,059		4,025		6,332		101	—			$	12,517

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.