Hawaiian Electric plans to securitize costs associated with its Wildfire Mitigation Plan after receiving full approval from the Hawaii Public Utilities Commission for recovery of those expenditures, a financing strategy intended to support continued wildfire-risk investments while limiting the impact on customer affordability.
The regulatory approval represents an important step in Hawaiian Electric’s efforts to finance the investments required under its wildfire mitigation program. HEI said securitization is intended to help fund those costs while spreading the financial burden in a way designed to prioritize affordability for customers.
The development coincides with an improving credit trajectory for HEI. The company highlighted a recent S&P ratings upgrade that it said recognizes progress in implementing the Wildfire Mitigation Plan and reducing wildfire-risk exposure across Hawaiian Electric’s service territories.
Improving credit quality has a direct financial implication for the utility because stronger ratings can reduce borrowing costs. Management said lower financing costs ultimately support customer affordability while allowing Hawaiian Electric to continue making investments outlined in the wildfire mitigation program.
The wildfire-related financing strategy remains particularly important because Hawaiian Electric is operating through a period of elevated underlying expenses. The utility expects adjusted 2026 O&M excluding pension to significantly outpace inflation as insurance premiums, vegetation management expenses, generation and grid maintenance, cybersecurity investments, storm response costs, labor and benefits all weigh on expenses.
Hawaiian Electric is also pursuing a 2027 rate rebasing and proposed modifications to its performance-based regulation framework that are intended to address several of those higher operating costs, including increased insurance premiums. The utility is simultaneously reprioritizing work and managing expenses in an effort to offset some of those pressures.
Underlying results illustrate the financial pressure. Hawaiian Electric’s Core net income declined to $33 million in the second quarter from $42 million a year earlier, primarily because of higher interest expense and O&M. HEI’s consolidated Core net income fell to $22 million, or $0.13 per share, from $35 million, or $0.20 per share.
Reported results looked significantly stronger because of wildfire-related accounting effects. HEI reported second-quarter GAAP net income of $123 million compared with $26 million a year earlier. Hawaiian Electric itself reported net income of $138 million compared with $39 million, including a $154 million pre-tax benefit from remeasuring its remaining wildfire settlement liability to present value.
The remeasurement reduced the recorded settlement liability from approximately $1.44 billion to $1.30 billion. However, the accounting benefit will be offset over time by interest accretion as the liability grows toward the amounts ultimately due under the settlement.
HEI had already made its first wildfire settlement payment in April, which reduced the holding company’s cash balance and contributed to lower interest income during the second quarter. Against that backdrop, securitization of approved mitigation costs and improving access to lower-cost financing have become significant pieces of the company’s broader financial recovery strategy.
KEY QUOTES:
“We’ve also continued progressing our Wildfire Mitigation Plan implementation, with the PUC fully approving our Wildfire Mitigation Plan costs, which we plan to securitize as we prioritize customer affordability. Our positive credit ratings trajectory has continued as another rating agency upgraded us in recent months, acknowledging the progress we’ve made reducing wildfire risk in our service territories. Stronger credit ratings ultimately lower our cost of borrowing, which directly improves customer affordability. Moving forward, we’ll continue to focus on making the investments outlined in our Wildfire Mitigation Plan, while operating efficiently and maintaining financial strength.”
Scott Seu, President and CEO of Hawaiian Electric Industries
