I was in a suburb of New York City to spend time with my father during his final week of life. Early on the morning of August 9, in the space of two minutes, I learned of his death and of the Maui fires. Two emotionally intense events.
It is critical that the fire victims are compensated, that Lahaina is rebuilt for its residents, and that nothing like this ever happens again. It is extremely important that all community are involved in preventing future disasters and all views are considered.
The Maui fire of 2023 was much like the Camp Fire that burned Paradise California and killed dozens of people in 2018.
There was a myriad of immediate issues in both fires including a breakdown in communications at every level, airborne embers, gale force winds, intense heat, blinding smoke, flying debris, toxic gas, downed power poles, trapped vehicles, lack of escape routes, locked gates, and people jumping into the water.
The aftermath of both fires was similar, addressing what happened, why did it happen, how to deal with an extreme shortage of temporary housing for fire victims, and unreasonable jacking up of rental prices.
Many options exist for repairing the loss of property, for compensating victims, and for preventing future disasters. Fire issues, like utility issues in general, cut across a wide range of health, justice, social, community, cultural, political, technical, financial, accounting, regulatory and legislative realms.
Many county, state, and federal entities will be engaged in addressing fires. A significant portion of the regulatory action will occur at the Hawai`i Public Utilities Commission, the regulatory entity that regulates all aspects of all non-governmental utilities.
Life of the Land
It is critical that informed community voices participate in regulatory processes that will shape our future. Perhaps because of the highly technical issues, few public interest non-profits, overseen by non-corporate controlled board of directors, intervene in Hawai`i Public Utilities Commission proceedings. Among these public interest intervenors, Life of the Land has intervened in more than ten times as many proceedings as the number two public interest group and has been in seven times as many Hawaii Supreme Court appeals of Commission rulings. This is the intense reality; we are often the only public interest group in PUC regulatory proceedings advocating for environmental, cultural, equity, and community issues. Understanding the technical nuances is critical.
Life of the Land has been in several transmission and grid proceedings, reviewed numerous Hawai`i reliability reports, served on the Public Utilities Commission`s Reliability Standards Working Group, and is a member of HECO`s Resilience Working Group.
Life of the Land engaged in numerous efforts since the fires, including responding to national and local reporters, participating in a Public Utilities Commission grid hardening docket, intervening in a Public Utilities Commission docket on a new HECO financing mechanism, advocating at the Legislature on proposed bills addressing utility financing, wildfire plans, and wildfire mitigation, and virtually attending Maui county council hearings.
Life of the Land requested that the Public Utilities Commission immediately open a fire investigation as required by state law. The Commission did not do so and has not provided a way for concerned stakeholders to get involved. Life of the Land insisted on the right to ask Information Requests in a proceeding that we are in, and after threatening to file a legal appeal, was granted that right. HECO filed detailed responses to our questions.
Since August, I have prioritized learning about the multitude of complex issues surrounding fire and fire mitigation. It is critical to present credible evidence in regulatory proceedings. There is a wealth of documentation about fires in Hawai`i, across the country, and around the world. What is recent are the intense hot windswept wildfires that start in the wildlands and sweep across urban communities.
Life of the Land`s reading material included “How Infrastructure Works: Inside the Systems That Shape Our World” (2023) by Deb Chachra, “California Burning: The Fall of Pacific Gas and Electric–and What It Means for America’s Power Grid” (2022) by Wall Street Journal Reporter Katherine Blunt, “Paradise: One Town`s Struggle to Survive an American Wildfire” (2021) by San Francisco Chronicle Reporter Lizzie Johnson, “Wildfire Mitigation Plans” filed with California regulators last year by Pacific Gas and Electric Company (1677 pages), Southern California Edison (939 pages), PacificCorp (419 pages), “Bushfire Shelter Options – Position Paper (2015) published by Emergency Management Victoria, Australia, and Marshall Fire Investigative Summary and Review.
Popular Issues & Controversies
Several issues are frequently raised by the public. One is the need to de-energize electric lines when high winds cause sparks that ignite fires causing death and destruction. There has been no corresponding public outcry for the 5-10 days per year when the National Weather Service issued Red Flag Events for half of the state and no fires erupted. Blacking out half of the state for multiple days would create its own serious backlash, as demonstrated by O`ahu and Big Island residents who were angry with the short rolling blackouts that have occurred since January. Any de-energization needs to be short-term, localized, and with full public awareness and engagement. As in California, de-energizing lines have a far greater negative impact on environmental justice and economically challenged communities. California utility`s Wildfire Mitigation Plans and the California Public Utilities Commission have extensive analysis on the benefits and the risks of de-energization.
There are two popular concepts that push and pull in opposite directions — undergrounding of electric lines and lowering high electric bill rates. Some people have suggested – without any references or citations — that the current cost of undergrounding is gold-plated, that cheaper methods and alternatives exist. HECO responded to Life of the Land`s Information Request, noting that the cost to bury all distribution lines on Maui would cost $7 billion, and to bury transmission lines in high-fire zone would cost another $2 billion.
Some people suggest that the cost to harden the Maui grid should be paid not just by Maui residents but by all residents in the state. However, the need to harden electric lines and all other utility infrastructure (water, wastewater, and telecom) exists on all islands. The potential threats to these systems will get worse as global greenhouse gas concentrations in the atmosphere continue to rise. There will be more intense rains that increase vegetative growth in wet seasons, followed by dense dead grass fuel in the dry season and during droughts.
Short-term solutions are costly if we do not address data gaps to narrow down what needs to be done quickly. Otherwise, the short-term options to decrease the fuel content of one million acres of invasive grasses is not great: extensive moving, removal of plants and their roots, and herbicides.
There is a huge amount of missing localized data that could alleviate the need for island-wide de-energization events during geographically broad red flag events. The localized data gap extends to the location of dead grasses, temporal variations in vegetative moisture levels, the limited egresses of many communities, variations of wind and rain as one transverse between neighboring communities, the availability of water and recycled wastewater to fight fires, and the available of fire fighters and their equipment.
Resilience
Hawai`i has been hit by a variety of extreme events, all of which have damaged property and infrastructure, and some of them have killed Hawaii residents. These include hurricanes, rain bombs, violent thunderstorms, flooding, tsunamis, earthquakes, physical attacks, cyberattacks, wildfires, volcanic eruptions, and sea level rise. Resilience refers to how quickly recovery can occur when these events occur, and how to harden systems to withstand these events in the first place. All solutions cost money.
HECO established a Resilience Working Group that met during 2019-21. Life of the Land participated in the meetings. HECO felt that all threats were real and posed risks, but that the major threat was a devastating hurricane that could cause debris to block airports, harbors, and major roads. Clearing key areas would pose its own problems as there would no place to move the debris to.
A resilient system isn’t efficient. As redundancies increase, costs increase. There needs to be redundancy built into electric, water, wastewater, and telecommunication systems to meet customer needs during fire events. Redundancies allow the system to bypass problems while maintaining service to customers. Hardening systems needs to be done in an equitable way that involves greater community awareness, participation, and meaningful two-way dialogue. It is critical that water pressure in pipes exists during fires to combat the fire and telecom systems survive fires to provide for communication alerts during fires.
Utility Financing
Utility financing is complex. The discussion of financial issues has been hampered by a confusion of terms and ideas. The victims of the fire must be compensated for the loss of life and the destruction of property. Rebuilding will cost money. Those liable should pay by the causers of the fires and not by ratepayers. This is what the litigation is all about. It may also be reasonable to give discounted electric rates to those impacted by the fire.
Hawaiian Electric Industries (HEI) owns Hawaiian Electric Company (HECO), American Savings Bank (ASB), and Pacific Current. HECO owns Maui Electric Company (MECO) and Hawaii Electric Light Company (HELCO). Options to increase funds for HECO operations include selling the bank, selling unused assets, and delaying some planned capital expenditures.
Some people have asked why the shareholders – the owners of Hawaiian Electric Industries – should not pay some of the costs needed to transform the utility. They have paid and are paying. The shareholders have seen an 80% drop in the value of their shares. Each quarter, HEI gives about $40,000,000 of its profits to its owners in the form of dividends. The dividend payments have been suspended. The profit can be used to fund utility operations or to compensate victims.
All ongoing businesses need to recover expenditures to continue to exist. As has always been done, a utility files an application for a project, program, or to sell bonds with the Public Utilities Commission. The Commission approves, conditionally approves, or rejects the application. After spending the money on projects and programs, the utility must show that the funds used were prudent and in the public interest. The utility can then recover the money from ratepayers.
The Maui wildfires downgraded the Hawaiian Electric Companies credit ratings to “junk” – or non-investment grade – status. This effectively prevents the HECO, HELCO, and MECO Companies from accessing capital markets to obtain financing needed for core operations and investments.
Borrowing funds through the issuance of asset-based bonds could be available to the utility if the Legislature approves the concept. The lower the interest rate in borrowing funds, the lower the impact on ratepayers. The lowest rate today is through securitization. The money can only be considered a bailout if it pays for gross errors committed by the utility such as payments for utility-caused fires. Some of the cost data is confidential, available only to intervenors who sign confidentiality agreements.
Following the fire, HECO drew down $200 million on its senior syndicated credit facility to ensure adequate liquidity to pay for current and future capital expenditures, including capital expenditures related to the fire and to reimburse the corporation for capital expenditures previously made.
The Companies top near-term legislative priority was securitization, a fancy word for issuing bonds backed by assets, in this case, by a portion of future electric bills paid by ratepayers.
The Companies top near-term regulatory priority is selling their accounts receivables (A/R) to secure short- and long-term financing to handle day-to-day operations. The Public Utilities Commission granted Life of the Land participant status in the regulatory proceeding. No other group filed a motion to intervene.
HECO is reassessing the need for all proposed projects. HECO proposed suspending the regulatory process requesting approval of the Keāhole Battery Energy Storage System on Hawaii Island. HECO will continue to seek federal funding for the project.
Legislation
Hawaiian Electric wanted Senate Bill SB 2922 to pass to fund wildfire related expenses. The bill failed because too many controversial issues were crammed into one bill. It didn`t help that HECO and HELCO further damaged their reputation when they initiated rolling blackouts in 2024.
SB 2922 would require utilities to file wildfire mitigation plans with the Public Utilities Commission. The Commission testified that they could do so without legislation and will open a proceeding at some point in the future. The bill would allow the Commission to authorize utilities to issue securitization (asset-based) bonds up to up to $2.5B.
The securitized funds could be used for two good purposes: developing utility fire mitigation plans, and after the Commission conditionally approved the plans in 2025, the bill would allow the utility to spend the funds on fire mitigation. The section of law addressing commission investigations would be significantly strengthened to require investigation of any accident that results in loss of life and any wildfire that “may have been caused by a public utility… destroyed a significant amount of public utility equipment; or… resulted in the loss of life.”
The funds could be used for two bad purposes: to pay for 2023 wildfire liabilities and to provide funds for a catastrophic fire fund. Money could be paid out of the catastrophic fire fund only if at least 500 buildings burn in a future fire. The payout of ratepayer funds would occur even if it was proved that the utility did not ignite the future fire. The bill would also provide limited immunity to the utility and the state for future fire related actions. The section was widely objected to by legislators and the public.
The bill would require a super-fast expedited process that would violate the due process rights of intervening stakeholders. Most versions of the bill would allow the Commission to do so in a non-docket where intervention is forbidden.
Wildfire Safety Symposium
In April 2024, HECO held an invitation-only Wildfire Safety Symposium at the ʻImiloa Astronomy Center in Hilo. The event featured local fire experts Elizabeth Pickett, Co-Executive Director of Hawaii Wildfire Management Organization, Dr. Clay Trauernicht, Wildland Fire Science & Management, University of Hawaii at Manoa, senior fire and meteorology experts from three major California utilities — Southern California Edison (SCE), San Diego Gas & Electric (SDG&E), Pacific Gas & Electric (PG&E), and experts from Australia and Puerto Rico.
Attendees included Life of the Land, staff members and Commissioners from the Public Utilities Commission, staff members representing the Office of the Consumer Advocate, Kauai Island Utility Co-op, Hawaii Telcom, T-Mobile, AT&T, Honolulu Board of Water Supply, International Brotherhood of Electrical Workers (IBEW), National Weather Service, National Park Service, U.S. Department of Homeland, U.S. Department of Defense, Hawai’i Department of Defense, Hawai’i Emergency Management Agency (HiEMA), Hawaii Air National Guard, Office of Hawaiian Affairs (OHA), Hawai’i Department of Land and Natural Resources (DLNR), Kohala Ranch, Kamehameha Schools, Queen Emma Land Company, Kohala Coast Resort Association, Hawaii State Energy Office (HSEO), Hawaii Green Growth, Waianae Mountains Watershed Partnership, county and private water and wastewater companies, and county agencies dealing with fire, public works, and emergency management.
Bankruptcy
There has been talk that the HECO Companies may need to enter bankruptcy court where those with HECO assets (stocks) and debit (bonds) fight over financial resources with ratepayers, insurance company, and fire victims.
Life of the Land asserts that the needs of the residents of Lahaina must be of paramount importance. Life of the Land further asserts that any discussion of utility bankruptcy must consider the role played by non-utilities; that a 2018 Lahaina fire almost burned down Lahaina, but did not, because of an abrupt change in the wind direction and intensity. Over the five years between 2018 and 2023, the county and the landowners did nothing to remove or address the supply of fuel (dead vegetation) during dry periods.
As noted by former Governor Waihee in an April 26, 2024, commentary published by Civil Beat. “In a forced bankruptcy, the people who win are outside-of-Hawaii investors looking to make quick money by picking up Hawaiian Electric stocks and bonds at bargain-basement prices and at the expense of the state, customers, employees, retirees and other stakeholders, as they did with Pacific Gas and Electric Company in California.”
Wall Street Journalist Katherine Blunt wrote about the PG&E bankruptcy in California, “The insurance group had initially demanded about $20 billion. They agreed to a lower amount under one condition: it wanted all cash, up front… The largest among them was Baupost Group, the hedge fund that had bought insurance claims at a discount on the secondary market, some for as little as fifty cents on the dollar. It was, at that point, on its way to amassing about $6 billion in claims, more than doubling the $2.5 billion it had purchased at the outset. The two settlements with public agencies and insurers together drained the company of $12 billion in cash. What little the company had left was far less than what it owed to fire victims.”
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