Hawaiian Electric Company (HECO) is seeking state support for its contracts with renewable energy projects as it continues to recover from the devastating wildfires in Lahaina in 2023, which left at least 102 people dead and caused significant destruction. The utility aims to ensure that new renewable projects can be developed despite uncertainty in the financial markets surrounding HECO.
Rebecca Dayhuff Matsushima, vice president for resource procurement at HECO, stated that the company is still in the process of revising its proposed legislation. Although not finalized, she confirmed that key lawmakers are being briefed on the proposal ahead of the upcoming legislative session in January. “We’re still refining that draft and we hope to get close to a final version later this week,” she commented. The essence of the plan is to have the state step in should HECO default on payments owed to wind and solar farms.
According to Matsushima, the approval of this plan is crucial for HECO to facilitate the launch of large-scale renewable projects that are intended to replace outdated fossil fuel generators set for decommissioning in the coming years. “Utility scale projects are being put on hold left and right,” said Isaac Moriwake, managing attorney for Earthjustice’s regional office in Honolulu. “Right now, we’re completely stalled out.”
Hawaii lawmakers have expressed cautious optimism about HECO’s proposal. Representative Nicole Lowen, who chairs the House Energy and Environmental Protection Committee, agrees with the conceptual solution but cautioned, “the devil is always in the details.”
Hawaii’s energy strategy mandates that all electricity produced in the state must come from renewable sources by the year 2045. To meet this objective, HECO relies on independent power producers to construct large renewable projects, primarily involving wind and solar energy. These power producers enter long-term agreements with HECO to sell electricity at predetermined prices, which allows them to secure funding needed for their initiatives.
However, HECO’s creditworthiness has been severely impacted by a series of lawsuits following the August 2023 wildfire, which started from a downed power line. This turmoil caused HECO’s stock value to fall sharply and led to a downgrade of its credit rating to junk status, complicating its ability to finance energy projects. The company has stated that independent power producers are increasingly worried about the implications of HECO’s financial standing on their own ability to secure funding for renewable developments.
The challenge has persisted since last legislative session, when it became evident that the aftermath of the wildfires was hindering Hawaii’s renewable energy progress. During that session, lawmakers suggested a bill that would allow HECO to enhance its credit profile through the issuance of a new type of bond. These proposed bonds would be secured by fees paid directly by utility customers and were anticipated to carry lower risks and interest rates. However, some lawmakers felt this proposal was a concealed bailout for HECO, leading to significant amendments being sought.
The latest proposal represents a more focused plan to bolster HECO’s renewable energy contracts by using the state’s stronger credit profile. If the state were to assume HECO’s obligations, power producers might have a more favorable financing outlook. Representative Lowen noted that the arrangement would pose minimal risk to the state’s finances.
In this framework, payments from customers for energy would be funneled through the state rather than directly through HECO. However, Lowen believes it is unlikely the state will ultimately need to intervene on HECO’s behalf.
HECO’s situation could change significantly in the near future, especially as it and its parent company, Hawaiian Electric Industries, are part of a comprehensive $4 billion settlement offer intended to resolve wildfire claims. While an agreement has been reached with fire victims, the insurance industry remains a substantial obstacle, as they seek to hold HECO accountable for the fires. A ruling from the Hawaii Supreme Court, expected next month, will determine whether the settlement can proceed without insurer consent.
Meanwhile, Matsushima emphasized the importance of regaining the trust of power producers to encourage investment in Hawaii’s renewable energy landscape. The expiration of permits for existing fossil fuel generators in Maui and the Big Island is approaching, with some set to expire by 2028. Additionally, projects on Maui are nearing obsolescence, and while Oahu has more time, the demand for new projects remains. Matsushima pointed out the necessity of pushing forward with renewable projects to secure reliable access to clean energy at competitive rates for consumers.
“This definitely is something we should be looking at,” stated Moriwake from Earthjustice, underscoring the urgency of moving forward with these initiatives.
