HB 982: DCCA; Wildfire Recovery Fund; Working Group; Report

A BILL FOR AN ACT

RELATING TO WILDFIRES.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

     SECTION 1.  The legislature finds that as the risk of catastrophic wildfires in Hawaii has increased, so has the threat of property damage from these fires.  The legislature further finds that the public interest would be served by providing a rapid, efficient, and low-cost process for property owners, renters, businesses, and their insurers to obtain compensation if a regulated utility is alleged to have caused or contributed to the damage resulting from a catastrophic wildfire.  The legislature also finds that under existing law, individuals and businesses must pursue civil litigation, which is a lengthy, costly, and contentious process.

     The legislature further finds that litigation regarding wildfire damages can impose massive costs, and those costs can overwhelm utilities, undermining their ability to make investments that the State needs.  Establishing a fund, combined with limitations on liability, could help to address these challenges.

     Accordingly, the purpose of this Act is to:

     (1)  Convene a working group to analyze certain proposed legislation that would establish a wildfire recovery fund; and

     (2)  Require the working group to submit a report of its findings and any proposed legislation to the legislature prior to the convening of the 2026 regular session.

     SECTION 2.  (a)  There is established within the department of commerce and consumer affairs a working group to review, examine, and analyze the provisions related to the wildfire recovery fund as proposed in Senate Bill No. 897 and House Bill No. 982, introduced during the regular session of 2025, including:

     (1)  A determination of the size of the wildfire recovery fund, which may include commissioning an actuarial study;

     (2)  A study on the proper governance of the public corporation that would oversee the wildfire recovery fund;

     (3)  Consideration of the benefits of an administrative process to provide efficient and low-cost recovery for claimants, as well as the proper mechanism for the fund to provide the administrative process; and

     (4)  A comparison of similar funds in other states and how those funds have affected the credit ratings of other electric utilities in their respective states.

     (b)  The working group shall consist of:

     (1) The director of commerce and consumer affairs, or the director's designee, who shall serve as chairperson of the working group;

     (2)  A representative of the department of the attorney general;

     (3)  A representative of the public utilities commission;

     (4)  A representative of the division of consumer advocacy of the department of commerce and consumer affairs;

     (5)  A representative of the insurance division of the department of commerce and consumer affairs;

     (6)  A representative of Hawaiian Electric, who shall be invited by the chairperson of the working group;

     (7)  A representative of Kauai Island Utility Cooperative, who shall be invited by the chairperson of the working group;

     (8)  Representatives of property insurers that conduct business in the State, who shall be invited by the chairperson of the working group; and

     (9)  Any other individuals deemed necessary by the chairperson of the working group.

     SECTION 3.  The working group shall submit a report of its findings and recommendations, including any proposed legislation, to the legislature no later than ninety days prior to the convening of the regular session of 2026.  The report shall include findings concerning the establishment and implementation of a wildfire recovery fund to provide efficient compensation for damages resulting from a future catastrophic wildfire event allegedly caused or exacerbated by a public utility while also helping to protect the financial integrity of the State's regulated utilities.

     SECTION 4.  This Act shall take effect on July 1, 3000.

Report Title:

DCCA; Wildfire Recovery Fund; Working Group; Report

Description:

Establishes a working group within the Department of Commerce and Consumer Affairs to conduct a study concerning the creation of a Wildfire Recovery Fund.  Requires a report to the Legislature.  Effective 7/1/3000.  (SD1)

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.

A BILL FOR AN ACT

RELATING TO WILDFIRES.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

     SECTION 1.  The legislature finds that as the risk of catastrophic wildfires in Hawaii has increased, so has the threat of property damage from these fires.  The legislature further finds that the public interest is served by providing a rapid, efficient, and low-cost process for property owners, renters, businesses, and their insurers to obtain compensation if a regulated utility is alleged to have caused or contributed to the damage resulting from a catastrophic wildfire.  The legislature also finds that under existing law, individuals and businesses must pursue civil litigation, which is a lengthy, costly, and contentious process.

     This Act would help individuals and businesses recover by giving them the option to obtain payment quickly through an administrative claims process similar to the One Ohana Fund, also known as the Maui Wildfires Compensation Fund.  The administrative claims process will begin based on a preliminary determination that a utility was involved, without waiting for the conclusion of a comprehensive investigation of the origin and cause of a catastrophic wildfire.  Claimants are not required to prove that the regulated utility was negligent in order to receive payment through the administrative claims process.

     This Act:

     (1)  Preserves claimants' right to pursue litigation if they choose to reject the amount offered through the administrative claims process;

     (2)  Limits the total amount that can be paid for property damage through both the administrative claims process and litigation, balancing the interests of those affected by a catastrophic fire in obtaining compensation and the interests of the public utilities in mitigating the risk of financial instability that can result from unlimited liability;

     (3)  Requires the public utilities commission to review the conduct of the public utility and to order the utility to replenish the fund, up to a cap, if it finds that the utility acted imprudently; and

     (4)  Provides for the legislature to re-evaluate the risk of catastrophic wildfires in 2035 and to refund to customers the amounts they contributed, plus earnings on those funds, to the extent the legislature concludes that the size of the fund can be reduced based on actions taken to reduce risk.

     The legislature also finds that the public interest is served by establishing a compensation mechanism that does not expose regulated utilities to the financial instability that can result from the existing litigation process.  Regulated utilities alleged to have caused a catastrophic wildfire face massive costs from litigation.  Those costs can overwhelm those utilities, undermining their ability to make investments that the State needs.  Indeed, even the possibility of litigation regarding a future catastrophic wildfire can create a cloud of uncertainty that can impair a utility's ability to attract capital on reasonable terms.  These costs and uncertainties result in increased rates paid by customers and may reduce utilities' ability to make investments in wildfire prevention and resilience initiatives, among other priorities that may affect the health and safety of the State's residents.

     The legislature additionally finds that securitization may be the most efficient, least costly way for a utility to finance the contributions to the wildfire recovery fund.  Utility securitization transactions have an extensive track record of success.

     Therefore, the purpose of this Act is to serve the public interest by establishing a mechanism to provide efficient compensation for property damage resulting from a future catastrophic wildfire allegedly caused by a regulated utility, while also protecting the financial integrity of Hawaii's regulated utilities.

     SECTION 2.  The Hawaii Revised Statutes is amended by adding two new chapters to be appropriately designated and to read as follows:

"CHAPTER A

WILDFIRE RECOVERY FUND

     §A-1  Definitions.  As used in this chapter, unless the context otherwise requires:

     "Catastrophic wildfire" means a wildfire occurring in the State on or after the operation date that destroys more than five hundred commercial structures or residential structures designed for habitation, or, for an electric cooperative with less than fifty thousand residential members, meets a threshold dollar amount of potential claims to be determined by the executive director.

     "Commission" means the public utilities commission.

     "Contributor" means a public utility that satisfies all requirements to participate in the wildfire recovery fund.

     "Covered catastrophic wildfire" means a catastrophic wildfire that may have been caused, or whose severity may have been increased, by a contributor's facilities or actions.

     "Electric utility" means a public utility that exists for the furnishing of electrical power.

     "Executive director" means the executive director of the wildfire recovery fund.

     "Government entity" means any government agency, board, bureau, commission, component, department, division, office, subdivision, unit, or instrumentality of any kind, including federal, state, and municipal entities.

     "Investor-owned electric utility" means an electric utility that is owned by shareholders and overseen by a board of directors elected by shareholders.

     "Operation date" means the first date for contributors to elect to participate in the wildfire recovery fund under section A-3(a) and the rules adopted to implement the wildfire recovery fund.

     "Property insurer" means a person or entity that indemnifies another by a contract of insurance for loss of or damage to real or personal property in the State.

     "Property owner" means an owner of real property in the State.

     "Public utility" has the same meaning as in section 269-1.

     "Qualified claimant" means any property owner, property insurer, or tenant who alleges any qualifying damages.

     "Qualifying action" means a civil action by a qualified claimant to recover qualifying damages.

     "Qualifying damages" means economic damages arising out of the loss of or damage to real or personal property from a covered catastrophic wildfire.

     "Tenant" means a person or entity lawfully entitled to occupy real property that the person or entity does not own in the State.

     "Wildfire recovery fund" means the wildfire recovery fund established by section A-2.

     "Wildfire risk mitigation plan" means a plan, which may include a natural hazard mitigation report, in which a public utility addresses how it will mitigate the risk of its equipment in causing or exacerbating a wildfire.

     §A-2  Wildfire recovery fund; establishment; executive director.  (a)  There is established outside the state treasury a trust fund to be known as the wildfire recovery fund and any accounts thereunder to carry out the purposes of this chapter.  All moneys in the wildfire recovery fund shall be expended exclusively for the uses and purposes set forth in this chapter.  The wildfire recovery fund shall not be subject to chapter 431.  The moneys in the wildfire recovery fund not required for immediate use shall be invested by the executive director for the benefit of the wildfire recovery fund; provided that no assets of the wildfire recovery fund shall be transferred to the general fund of the State or to any other fund of the State or otherwise encumbered or used for any purpose other than those specified for the wildfire recovery fund.

     (b)  The wildfire recovery fund shall be placed within the department of commerce and consumer affairs for administrative purposes.  The fund shall be a public body corporate and politic.

     (c)  The governor shall appoint an executive director of the wildfire recovery fund, who shall be exempt from chapter 76, and shall fix the executive director's compensation.  The executive director may be removed only by the governor.

     (d)  The executive director shall be responsible for the day-to-day operations and management of the wildfire recovery fund and shall perform all functions necessary to implement this chapter, including entering into contracts and other obligations related to the operation, management, and administration of the wildfire recovery fund.

     (e)  The executive director may retain, employ, or contract with officers; experts; employees; accountants; actuaries; financial professionals; and other advisers, consultants, attorneys, and professionals, as may be necessary in the executive director's judgment, for the efficient operation, management, and administration of the wildfire recovery fund.

     (f)  The executive director shall have the power to issue revenue bonds, from time to time, in such principal amounts as the executive director may deem advisable for the purpose of this chapter, backed by future payments to the wildfire recovery fund that contributors have committed to make.  These bonds shall be issued pursuant to part III of chapter 39, except as provided in this chapter.

     (g)  The executive director may establish the investment policies of the wildfire recovery fund.

     (h)  The executive director shall adopt rules pursuant to chapter 91 to implement this chapter.

     §A-3  Wildfire recovery fund; eligibility for participation as a contributor; contributions.  (a)  To be eligible to participate as a contributor, a public utility shall:

     (1)  Have a wildfire risk mitigation plan that has been approved or accepted by the commission;

     (2)  Notify the executive director, in the year before the public utility becomes a contributor, that it intends to participate in the wildfire recovery fund;

     (3)  Agree to make an initial contribution, the payment of which is thereafter a binding commitment enforceable by the executive director; and

     (4)  Provide a comparison of costs for current commercial insurance coverage compared to wildfire property damage and loss.

     (b)  The initial contributions from investor-owned electric utilities collectively shall be:

     (1)  $          , which amount shall be recovered from its customers in nonbypassable rates; and

     (2)  $          , which amount shall be funded by shareholders of those investor-owned electric utilities, and of which $           shall be used exclusively for the payment of salaries of the executive director and of all other persons retained by the executive director to implement this chapter and the contracting of consultants to assist the public utilities commission in determining whether a contributor acted prudently under section A-5, with any funds remaining of the $           in 2035 to be transferred to the wildfire recovery fund.

     (c)  The investor-owned electric utilities may elect to make the initial contributions set forth in subsection (b)(1), to the degree not paid for through securitization pursuant to chapter B, over a period not to exceed five years; provided that interest shall be added to any amounts paid after the first year, at an interest rate equal to the investor-owned electric utilities' incremental cost of long-term debt, with such interest recovered from customers in rates.

     (d)  The executive director shall determine the initial contributions from other public utilities based on an actuarial assessment of the risk of potential payments by the wildfire recovery fund resulting from covered catastrophic wildfires created by such public utility.

     (e)  The executive director may propose supplemental contributions to the wildfire recovery fund by participating public utilities.

     (f)  Investment earnings associated with payments made to the wildfire recovery fund that were recovered in regulated rates from customers shall be refunded annually to the paying public utility to be refunded to those customers in the form of a credit on their ratepayer accounts.

     (g)  If a contributor fails to pay any part of an initial contribution or a supplemental contribution that it agreed to make, or elects not to agree to make a supplemental contribution, that contributor shall no longer be a contributor as of the date on which the payment was due, and the contributor shall not receive any refund of payments previously made; provided that a contributor that elects not to make a supplemental contribution shall be a contributor as to any catastrophic wildfire that occurs before the election date.  After failing to, or electing not to, make a payment, a public utility may rejoin the wildfire recovery fund as a contributor on a prospective basis if it makes owed payments with interest.

     (h)  The executive director shall adopt rules pursuant to chapter 91 regarding the timing of initial and supplemental contributions, which may include upfront, annual, and retrospective payments, specifically payments made after a wildfire occurs.

     §A-4  Determination of a covered catastrophic wildfire.  The executive director shall adopt rules pursuant to chapter 91 regarding how to determine whether a wildfire is a covered catastrophic wildfire.  These rules shall include a requirement that a wildfire shall be determined to be a covered catastrophic wildfire if a party makes non-frivolous allegations in a legal action that a contributor's facilities caused or contributed to the severity of a catastrophic wildfire.

     §A-5  Replenishment of the wildfire recovery fund.  (a)  If the wildfire recovery fund has made payments with respect to a covered catastrophic wildfire and after resolution of substantially all third-party liability claims that were brought or could be brought against contributors arising from that covered catastrophic wildfire, each contributor whose facilities were implicated in the covered catastrophic wildfire shall initiate a proceeding before the commission to review the prudence of the contributor's conduct leading to the catastrophic wildfire.

     (b)  The commission shall determine whether the contributor acted prudently:

     (1)  Considering only acts that may have caused the occurrence or contributed to the severity of the covered catastrophic wildfire; and

     (2)  Evaluating the contributor's actions in the context of its overall systems, processes, and programs, such that an error by a contributor's employee would not be a basis for a finding of imprudence, unless that error resulted from the failure of a system, process, or program to prevent the error.

     (c)  If the commission determines that imprudent conduct by the contributor caused the occurrence or contributed to the severity of a covered catastrophic wildfire, the commission shall determine whether to order the contributor to replenish the wildfire recovery fund in whole or in part for payments from the wildfire recovery fund in connection with the covered catastrophic wildfire.  In determining the amount of replenishment, if any, the commission shall consider the extent and severity of the contributor's imprudence and factors within and beyond the contributor's control that may have led to or exacerbated the costs from the covered catastrophic wildfire, including but not limited to humidity, temperature, winds, fuel, merged wildfires with independent ignitions, third-party actions that affected the spread of the wildfire, and fire suppression activities.

     (d)  Over any three-year period, the commission shall not order the contributor to reimburse the wildfire recovery fund in an amount that exceeds twenty per cent of the contributor's transmission and distribution equity rate base.

     (e)  A contributor shall not recover in regulated rates any amount that the commission orders it to pay to the wildfire recovery fund as a replenishment under this section.

     §A-6  Claims for payment by qualified claimants; presentment requirement.  (a)  The executive director shall adopt rules pursuant to chapter 91 to create a process through which a qualified claimant that is not a government entity may submit to the wildfire recovery fund a claim for payment of economic damages arising out of property damage resulting from a covered catastrophic wildfire.

     (b)  A qualified claimant shall file a claim for payment for economic damages arising out of the loss of or damage to real or personal property from a covered catastrophic wildfire pursuant to this section.  The claim of a qualified claimant that is not a property insurer shall be limited to uninsured economic damages.  A qualified claimant shall not file or maintain a civil action against a contributor unless and until the qualified claimant rejects an offer of settlement from the wildfire recovery fund.  A qualified claimant who fails to file a claim within four years of the covered catastrophic wildfire shall be ineligible to receive payment from the wildfire recovery fund and shall be barred from instituting or maintaining any qualifying action against a contributor; provided that the executive director may establish a deadline beyond the four-year period by rule and until which time the claimant shall still be eligible to receive payment and shall not be barred from instituting or maintaining any qualifying action.

     (c)  The executive director shall make an offer to settle each claim submitted, which the claimant may accept or reject.  In determining the amount of each offer, the executive director shall consider, at a minimum:

     (1)  The economic damages sought by all qualified claimants in the aggregate;

     (2)  The amount available to the wildfire recovery fund relative to the amount under paragraph (1);

     (3)  The strength of any evidence of contributor liability; and

     (4)  The strength of any evidence of involvement of non-contributor third-parties.

     (d)  If the amount available to the wildfire recovery fund, including assets held by the wildfire recovery fund and all payments contributors are obligated to make to the wildfire recovery fund, is less than fifty per cent of the aggregate liability limit as calculated in section A-8, the wildfire recovery fund shall make payment only to contributors pursuant to section A-7.

     §A-7  Claims for payment by contributors.  The executive director shall adopt rules pursuant to chapter 91 to create a process through which a contributor may obtain payment from the wildfire recovery fund to satisfy settled or finally adjudicated claims for recovery of qualifying damages after exhausting the contributor's available insurance.  The rules shall establish the standard for approving any settlement.  To the extent that the wildfire recovery fund lacks sufficient funds to make a payment to a contributor when sought, the wildfire recovery fund shall make such payment upon receipt of contributions that contributors are obligated to make to the wildfire recovery fund under payment schedules.

     §A-8  Limitation on aggregate liability.  (a)  The aggregate liability of all contributors for qualifying damages arising from a covered catastrophic wildfire, including economic and non-economic damages, shall not exceed the greater of:

     (1)  Fifty per cent of the amount available to the wildfire recovery fund at the time of the covered catastrophic wildfire, including amounts in and obligated to the wildfire recovery fund; or

     (2)  The average assessed value of commercial structures and residential structures designed for habitation in the county in which the covered catastrophic wildfire ignited, multiplied by the number of commercial structures or residential structures designed for habitation that were destroyed.

     (b)  The following amounts shall be added to determine whether the aggregate liability limit has been reached:

     (1)  Payments from the wildfire recovery fund under section A-6; and

     (2)  Payments by a contributor in connection with any settlement or judgment on a claim for qualifying damages.

     (c)  All civil actions arising out of a catastrophic wildfire shall be brought in the judicial circuit in which the catastrophic wildfire occurred.  The court shall adopt procedures to equitably apply the limit set forth in subsection (a) to all civil claims for qualifying damages that are filed.  All settlements or judgments for claims for qualifying damages shall be subject to approval by the court.  The court shall not approve any settlement or judgment that would cause the aggregate liability of contributors to exceed the aggregate liability limit.

     (d)  A court shall consolidate cases arising from a covered catastrophic wildfire.  Any circuit court that is not the consolidating court shall transfer any civil case to facilitate such consolidation.

     §A-9  Limitations on claims.  (a)  No qualifying action shall be instituted or maintained by a qualified claimant against contributors or their affiliates, employees, agents, or insurers if the qualified claimant accepts an offer under section A-6; provided that the rights of a property insurer to sue as a subrogee of its policyholder shall not be affected by a property owner's or tenant's acceptance of an offer under section A-6 and the subrogation rights shall be affected only if the property insurer elects to accept an offer under section A-6.

     (b)  No suit, claim, arbitration, or other civil legal action for indemnity or contribution for amounts paid, or that may be paid, as a result of a covered catastrophic wildfire, may be instituted or maintained by any persons or entities against contributors or their affiliates, employees, agents, or insurers for qualifying damages; provided that this subsection shall not apply to any agreements entered into before the operation date.

     §A-10  Several liability.  Any law to the contrary notwithstanding, joint and several liability is abolished for any qualifying damages.  Any person or entity that is sued for qualifying damages may argue for apportionment of fault to any other person or entity regardless of whether that person or entity is a party to the action.

     §A-11  Reporting; refunds authorized by the legislature.  (a)  The executive director shall submit to the legislature and commission an annual report regarding the wildfire recovery fund no later than ninety days prior to the beginning of each regular session until 2034.  The annual report submitted by the executive director shall include an update on the activities of the wildfire recovery fund.

     (b)  No later than ninety days prior to the regular session of 2035, the executive director shall submit a report regarding the financial status and resources of the wildfire recovery fund relative to the then-current assessment of actuarial risk of a catastrophic wildfire.

     (c)  Based on the report in subsection (b), the legislature may determine that the wildfire recovery fund is overfunded and direct the executive director to return contributions, in whole or in part, with associated investment earnings, to contributors.  Any payments made to the wildfire recovery fund that were recovered in regulated rates from customers, and any investment earnings associated with those payments, shall, in the event that the legislature orders a refund, be returned to those customers.

     §A-12  Inadmissible evidence.  Any findings made or evidence submitted for purposes of proceedings under sections A-4, A-6, and A-7 shall be subject to the limits on admissibility under rule 408, Hawaii rules of evidence, as set forth in section 626-1.

CHAPTER B

SECURITIZATION

     §B-1  Definitions.  As used in this chapter, unless the context otherwise requires:

     "Ancillary agreement" means a bond insurance policy, letter of credit, reserve account, surety bond, swap arrangement, hedging arrangement, liquidity or credit support arrangement, or other similar agreement or arrangement entered into in connection with the issuance of bonds that is designed to promote the credit quality and marketability of the bonds or to mitigate the risk of an increase in interest rates.

     "Assignee" means a legally recognized entity to which an electric utility assigns, sells, or transfers, other than as security, all or a portion of the electric utility's interest in or right to wildfire recovery property.  "Assignee" includes a corporation, limited liability company, general partnership or limited partnership, public authority, trust, financing entity, or any other legal entity to which an assignee assigns, sells, or transfers, other than as security, its interest in or right to wildfire recovery property.

     "Bond" means any bond, note, certificate of participation or beneficial interest, or other evidence of indebtedness or ownership that is issued by the financing entity under a financing order, the proceeds of which are used directly or indirectly to recover, finance, or refinance financing costs of any wildfire recovery costs, and that are directly or indirectly secured by or payable from wildfire recovery property.

     "Commission" means the public utilities commission.

     "Consumer" means any individual, governmental body, trust, business entity, or nonprofit organization that consumes electricity that has been transmitted or distributed by means of electric transmission or distribution facilities, whether those electric transmission or distribution facilities are owned by the consumer, the electric utility, or any other party.

     "Electric cooperative" means an electric utility that satisfies the requirements under section 269-31(c).

     "Electric cooperative wildfire claims costs" means costs incurred by an electric cooperative to resolve third-party liability claims arising from any wildfire occurring in the State that are not covered by insurance and that the commission finds to be just and reasonable.  "Electric cooperative wildfire claims costs" does not include costs incurred by an investor-owned electric utility.

     "Electric utility" means a public utility that exists for the furnishing of electrical power.

     "Financing costs" means the reasonable costs to issue, service, repay, or refinance bonds, whether incurred or paid upon issuance of the bonds or over the life of the bonds, if they are approved for recovery by the commission in a financing order.  "Financing costs" includes any of the following:

     (1)  Principal, interest, and redemption premiums that are payable on bonds;

     (2)  A payment required under an ancillary agreement;

     (3)  An amount required to fund or replenish reserve accounts or other accounts established under an indenture, ancillary agreement, or other financing document related to the bonds;

     (4)  Taxes, franchise fees, or license fees imposed on a financing entity as a result of the issuance of the financing order; the assignment, sale, or transfer of any wildfire recovery property; or the sale of the bonds, or imposed on the wildfire recovery charges, or otherwise resulting from the collection of the wildfire recovery charge, in any such case whether paid, payable, or accrued;

     (5)  Costs related to issuing and servicing bonds or the application for a financing order, including without limitation servicing fees and expenses, trustee fees and expenses, legal fees and expenses, accounting fees, administrative fees, underwriting and placement fees, financial advisory fees, original issue discount, capitalized interest, rating agency fees, and any other related costs that are approved for recovery in the financing order;

     (6)  Costs related to the engagement of services of a financial advisor by the commission pursuant to section B-3(h); and

     (7)  Other costs as specifically authorized by a financing order.

     "Financing entity" means an electric utility or an entity to which an electric utility or an affiliate of an electric utility sells, assigns, or pledges all or a portion of the electric utility's interest in wildfire recovery property, including an affiliate of the electric utility or any unaffiliated entity, in each case as approved by the commission in a financing order.

     Subject to section B-6(c), an entity to which an electric utility sells, assigns, or pledges all or a portion of the electric utility's interest in wildfire recovery property may include any governmental entity that is able to issue bonds that are exempt from federal tax pursuant to section 103 of the Internal Revenue Code of 1986, as amended, including the State or a political subdivision thereof or any department, agency, or instrumentality of the State or political subdivision; provided that the bonds issued shall not constitute a general obligation of the State or any political subdivision thereof or any department, agency, or instrumentality of the State or political subdivision and shall not constitute a pledge of the full faith and credit of the entity or of the State or any political subdivision thereof, but shall be payable solely from the funds provided under this chapter.

     "Financing order" means an order of the commission under this chapter that has become final and no longer subject to appeal as provided by law and that authorizes the issuance of bonds and the imposition, adjustment from time to time, and collection of wildfire recovery charges, and that shall include a procedure to require the expeditious approval by the commission of periodic adjustments to wildfire recovery charges and to any associated fixed recovery tax amounts included in that financing order to ensure recovery of all wildfire recovery costs and the costs associated with the proposed recovery, financing, or refinancing thereof, including the costs of servicing and retiring the bonds contemplated by the financing order.

     "Financing party" means any holder of the bonds; any party to or beneficiary of an ancillary agreement; and any trustee, collateral agent, or other person acting for the benefit of any of the foregoing.

     "Fixed recovery tax amounts" means those nonbypassable rates and other charges, including but not limited to distribution, connection, disconnection, and termination rates and charges, that are needed to recover federal and state taxes associated with wildfire recovery charges authorized by the commission in a financing order, but are not approved as financing costs financed from proceeds of bonds.

     "Investor-owned electric utility" means an electric utility that is owned by shareholders and overseen by a board of directors elected by shareholders.

     "Public utility" has the same meaning as in section 269-1.

     "True-up adjustment" means a formulaic adjustment to the wildfire recovery charges as they appear on consumer bills that is necessary to correct for any overcollection or undercollection of the wildfire recovery charges authorized by a financing order and to otherwise ensure the timely and complete payment and recovery of wildfire recovery costs over the authorized repayment term.

     "Wildfire recovery charges" means the nonbypassable charges, including but not limited to distribution, connection, disconnection, and termination rates and charges, that are authorized by section B-2 and in a financing order authorized under this chapter to be imposed on and collected from all existing and future consumers of a financing entity or any successor to recover principal, interest, and other financing costs relating to the bonds.

     "Wildfire recovery costs" means an investor-owned electric utility's initial and supplemental contributions to the wildfire recovery fund, as set forth in section A-3, and electric cooperative wildfire claims costs.

     "Wildfire recovery fund" means the wildfire recovery fund established by section A-2.

     "Wildfire recovery property" means the property right created pursuant to this chapter, including without limitation the right, title, and interest of the electric utility, financing entity, or its assignee:

     (1)  In and to the wildfire recovery charge established pursuant to a financing order, including the right to impose, bill, collect, and receive such wildfire recovery charges under the financing order and all rights to obtain adjustments to the wildfire recovery charge in accordance with section B-3 and the financing order; and

     (2)  To be paid the amount that is determined in a financing order to be the amount that the electric utility or its assignee is lawfully entitled to receive pursuant to this chapter and the proceeds thereof, and in and to all revenues, collections, claims, payments, moneys, or proceeds of, or arising from, the wildfire recovery charge that is the subject of a financing order.

"Wildfire recovery property" does not include a right to be paid fixed recovery tax amounts.  "Wildfire recovery property" shall constitute a current property right, notwithstanding the fact that the value of the property right will depend on consumers using electricity or, in those instances where consumers are customers of the electric utility, the electric utility performing certain services.

     §B-2   Applications to issue bonds and authorize wildfire recovery charges.  (a)  An electric utility may apply to the commission for one or more financing orders to issue bonds to recover any wildfire recovery costs, each of which authorizes the following:

     (1)  The imposition, charging, and collection of a wildfire recovery charge, to become effective upon the issuance of the bonds, and an adjustment of any such wildfire recovery charge in accordance with a true-up adjustment mechanism under this chapter in amounts sufficient to pay the principal and interest on the bonds and all other associated financing costs on a timely basis;

     (2)  The creation of wildfire recovery property under the financing order; and

     (3)  The imposition, charging, and collection of fixed recovery tax amounts to recover any portion of the electric utility's federal and state taxes associated with those wildfire recovery charges and not financed from the proceeds of bonds.

     (b)  The application shall include all of the following:

     (1)  The wildfire recovery costs to be financed through the issuance of bonds;

     (2)  The principal amount of the bonds proposed to be issued and the selection of a financing entity;

     (3)  An estimate of the date on which each series of bonds is expected to be issued;

     (4)  The scheduled final payment date, which shall not exceed thirty years, and a legal final maturity date, which may be longer, subject to rating agency and market considerations, during which term the wildfire recovery charge associated with the issuance of each series of bonds is expected to be imposed and collected;

     (5)  An estimate of the financing costs associated with the issuance of each series of bonds;

     (6)  An estimate of the amount of the wildfire recovery charge revenues necessary to pay principal and interest on the bonds and all other associated financing costs as set forth in the application and the calculation for that estimate;

     (7)  A proposed design of the wildfire recovery charge and a proposed methodology for allocating the wildfire recovery charge among customer classes within the electric utility's service territory;

     (8)  A description of the financing entity selected by the electric utility;

     (9)  A description of a proposed true-up adjustment mechanism for the adjustment of the wildfire recovery charge to correct for any overcollection or undercollection of the wildfire recovery charge, and to otherwise ensure the timely payment of principal and interest on the bonds and all other associated financing costs; and

    (10)  Any other information required by the commission.

     (c)  An electric utility may file an application for a financing order, including as a joint application with one or more affiliate electric utilities, to issue bonds to recover wildfire recovery costs.  The application shall include a description of how the wildfire recovery costs will be allocated among consumers of the applicant electric utilities.

     In the alternative, an electric utility may apply for a financing order to issue bonds to recover wildfire recovery costs, including wildfire recovery costs incurred, or to be incurred, by the applicant and one or more of its affiliate electric utilities.  In connection with the issuance of a financing order pursuant to this subsection, the commission shall issue a concurrent order to the affiliate electric utility or electric utilities directing such affiliate electric utility or electric utilities to impose rates on its or their consumers designed to generate revenue sufficient to pay credits over the life of the bonds to the applicant electric utility in such amount as the commission determines is equitable, just, and reasonable.  Such an application shall describe the allocation method and true-up adjustment mechanism for the affiliate electric utility credit payments proposed to be subject to the concurrent commission order.

     (d)  The commission shall issue an approval or denial of any application for a financing order filed pursuant to this section within ninety days of the last filing in the applicable docket.

     (e)  In exercising its duties under this section, the commission shall consider:

     (1)  Whether the issuance of the bonds, and the imposition and collection of wildfire recovery charges are consistent with the public interest;

     (2)  Whether the structuring, marketing, and pricing of the bonds are expected to result in the lowest wildfire recovery charges consistent with market conditions at the time at which the bonds are priced and the terms of the financing order;

     (3)  Whether the terms and conditions of any bonds to be issued are just and reasonable;

     (4)  With respect to an application by an investor-owned electric utility, whether the recovery of wildfire recovery costs through the designation of the wildfire recovery charges and any associated fixed recovery tax amounts, and the issuance of bonds in connection with the wildfire recovery charges, would result in net savings or mitigate rate impacts to consumers, as compared to rate recovery without securitization; and

     (5)  Any other factors that the commission deems reasonable and in the public interest.

If the commission makes the determination specified in this section, the commission shall establish, as part of the financing order, a procedure for the electric utility to submit applications from time to time to request the issuance of additional financing orders designating wildfire recovery charges and any associated fixed recovery tax amounts as recoverable.  The commission, as a condition of the financing order, may prohibit any increase in compensation, including any bonuses, for the electric utility's officers for a period of time determined by the commission; provided that any increase of an officer's compensation that is in violation of such condition shall be seized and deposited into the wildfire recovery fund.

     At the option of the electric utility, the electric utility may include in its application for a financing order a request for authorization to sell, transfer, assign, or pledge wildfire recovery property to a governmental entity if the electric utility expects bonds issued by a governmental entity would result in a more cost-efficient means, taking into account all financing costs related to the bonds, than using another financing entity to issue bonds to finance the same wildfire recovery costs, taking into account the costs of issuing the other financing entity's bonds.

     (f)  Wildfire recovery charges and any associated fixed recovery tax amounts shall be imposed only on existing and future consumers in the utility service territory of the electric utility that is subject to such financing order.  Consumers within the utility service territory of the electric utility that is subject to the financing order shall continue to pay wildfire recovery charges and any associated fixed recovery tax amounts until the bonds and associated financing costs are paid in full by the financing entity.

     §B-3  Wildfire recovery financing order.  (a)  A financing order shall remain in effect until the bonds issued under the financing order and all financing costs related to the bonds have been paid in full or defeased by their terms.

     A financing order shall remain in effect and unabated notwithstanding the bankruptcy, reorganization, or insolvency of the electric utility or the commencement of any judicial or nonjudicial proceeding on the financing order.

     (b)  Notwithstanding any other law to the contrary, with respect to wildfire recovery property that has been made the basis for the issuance of bonds and with respect to any associated fixed recovery tax amounts, the financing order, the wildfire recovery charges, and any associated fixed recovery tax amounts shall be irrevocable.  The State and its agencies, including the commission, pledge and agree with bondholders, the owners and assignees of the wildfire recovery property, and other financing parties, that the State and its agencies shall not take any action listed in this subsection.  This subsection shall not preclude an action if such action would not adversely affect the interests of the electric utility, of assignees of the wildfire recovery property, and of bondholders.  The prohibited actions shall be the following:

     (1)  Alter the provisions of this chapter, which authorize the commission to create an irrevocable contract right or choice in action by the issuance of a financing order, to create wildfire recovery property and make the wildfire recovery charges imposed by a financing order irrevocable, binding, nonbypassable charges for all existing and future consumers;

     (2)  Take or permit any action that impairs or would impair the value of wildfire recovery property or the security for the bonds or revise the wildfire recovery costs for which recovery is authorized;

     (3)  In any way impair the rights and remedies of the bondholders, assignees, and other financing parties; and

     (4)  Except for changes made pursuant to the formula-based true-up adjustment mechanism authorized under subsection (d), reduce, alter, or impair wildfire recovery charges that are to be imposed, billed, charged, collected, and remitted for the benefit of the bondholders, any assignee, and any other financing parties until any and all principal, interest, premium, financing costs, and other fees, expenses, or charges incurred, and any contracts to be performed, in connection with the related bonds have been paid and performed in full.

     The financing entity is authorized to include this pledge in the bonds.

     (c)  Under a financing order, the electric utility shall retain sole discretion to select the financing entity and to cause bonds to be issued, including the right to defer or postpone the issuance, assignment, sale, or transfer of wildfire recovery property.

     (d)  The commission may create, pursuant to an application from an electric utility, a nonbypassable charge referred to as a wildfire recovery charge, which shall be applied to recover principal, interest, and other financing costs relating to the bonds.  The wildfire recovery charge shall be a dedicated, discrete tariff rider.

     The commission shall, in any financing order, establish a procedure for periodic true-up adjustments to wildfire recovery charges, which shall be made at least annually and may be made more frequently.  The periodic true-up adjustment to wildfire recovery charges shall also consider interest on ratepayer investments into the fund.  Within thirty days after receiving an electric utility's filing of a true-up adjustment, the commission's review of the filing shall be limited to mathematical or clerical errors as determined in accordance with any true-up adjustment formulas set forth in the applicable financing order.

     The commission shall either approve the filing or inform the electric utility of any mathematical or clerical errors in its calculation.  If the commission informs the electric utility of mathematical or clerical errors in its calculation, the electric utility shall correct its error and refile its true-up adjustment.  The timeframes previously described in this subsection shall apply to a refiled true-up adjustment.

     (e)  Neither financing orders nor bonds issued under this chapter shall constitute a general obligation of the State or any of its political subdivisions, nor shall they constitute a pledge of the full faith and credit of the State or any of its political subdivisions, but shall be payable solely from the wildfire recovery property provided under this chapter.

     All bonds shall contain on the face thereof a statement to the following effect:  "Neither the full faith and credit nor the taxing power of the State of Hawaii is pledged to the payment of the principal of, or interest and premium on, this bond.".

     The issuance of bonds under this chapter shall not directly, indirectly, or contingently obligate the State or any of its political subdivisions to levy or pledge any form of taxation or to make any appropriation for their payment.

     (f)  Wildfire recovery charges are wildfire recovery property when, and to the extent that, a financing order authorizing the wildfire recovery charges has become effective in accordance with this chapter, and the wildfire recovery property shall thereafter continuously exist as property for all purposes, and all of the rights and privileges relating to that property shall continuously exist for the period and to the extent provided in the financing order, but in any event until the bonds, including all principal; premiums, if any; interest with respect to the bonds; and all other financing costs are paid in full.  A financing order may provide that the creation of wildfire recovery property shall be simultaneous with the sale of the wildfire recovery property to an assignee as provided in the application of the pledge of the wildfire recovery property to secure the bonds.

     (g)  Any successor to a financing entity shall be bound by the requirements of this chapter and shall perform and satisfy all obligations of and have the same rights under a financing order as, and to the same extent as, the financing entity.

     (h)  The commission, in its discretion, may engage the services of a financial adviser for the purposes of assisting the commission in its consideration of an application for a financing order and a subsequent issuance of bonds pursuant to a financing order.

     §B-4  Bonds; issuance; wildfire recovery property interests.  (a)  The electric utility may sell and assign all or portions of its interest in wildfire recovery property to one or more financing entities that make that wildfire recovery property the basis for issuance of bonds, to the extent approved in a financing order.  The electric utility or financing entity may pledge wildfire recovery property as collateral, directly or indirectly, for bonds to the extent approved in the pertinent financing orders providing for a security interest in the wildfire recovery property, in the manner set forth in this section.  In addition, wildfire recovery property may be sold or assigned by either of the following:

     (1)  The financing entity or a trustee for the holders of bonds or the holders of an ancillary agreement in connection with the exercise of remedies upon a default under the terms of the bonds; or

     (2)  Any person acquiring the wildfire recovery property after a sale or assignment pursuant to this chapter.

     (b)  To the extent that any interest in wildfire recovery property is sold, assigned, or is pledged as collateral pursuant to subsection (a), the commission may authorize the electric utility to contract with the financing entity or its assignees that the electric utility will:

     (1)  Continue to operate its system to provide service to consumers within its service territory;

     (2)  Collect amounts in respect of the wildfire recovery charges for the benefit and account of the financing entity or its assignees; and

     (3)  Account for and remit these amounts to or for the account of the financing entity or its assignees.

Contracting with the financing entity or its assignees in accordance with that authorization shall not impair or negate the characterization of the sale, assignment, or pledge as an absolute transfer, a true sale, or a security interest, as applicable.  To the extent that billing, collection, and other related services with respect to the provision of the electric utility's services are provided to a consumer by any person or entity other than the electric utility in whose service territory the consumer is located, that person or entity shall collect the wildfire recovery charges and any associated fixed recovery tax amounts from the consumer for the benefit and account of the electric utility, financing entity, or assignees with the associated revenues remitted solely for such person's benefit as a condition to the provision of electric service to that consumer.

     Each financing order shall impose terms and conditions, consistent with the purposes and objectives of this chapter, on any person or entity responsible for billing, collection, and other related services, including without limitation collection of the wildfire recovery charges and any associated fixed recovery tax amounts, that are the subject of the financing order.

     (c)  The financing entity may issue bonds upon approval by the commission in a financing order.  Bonds shall be nonrecourse to the credit or any assets of the electric utility, other than the wildfire recovery property as specified in that financing order.

     (d)  Wildfire recovery property that is specified in a financing order shall constitute an existing, present property right, notwithstanding the fact that the imposition and collection of wildfire recovery charges depend on the electric utility's continuing to provide services or continuing to perform its servicing functions relating to the collection of wildfire recovery charges or on the level of future service consumption, such as electricity consumption.  Wildfire recovery property shall exist whether or not the wildfire recovery charges have been billed, have accrued, or have been collected and notwithstanding the fact that the value for a security interest in the wildfire recovery property, or amount of the wildfire recovery property, is dependent on the future provision of service to consumers.  All wildfire recovery property specified in a financing order shall continue to exist until the bonds issued pursuant to a financing order and all associated financing costs are paid in full.

     (e)  Wildfire recovery property; wildfire recovery charges; and the interests of an assignee, bondholder, or financing entity, or any pledgee in wildfire recovery property and wildfire recovery charges shall not be subject to setoff, counterclaim, surcharge, recoupment, or defense by the electric utility or any other person or in connection with the bankruptcy, reorganization, or other insolvency proceeding of the electric utility, any affiliate of the electric utility, or any other entity.

     (f)  Notwithstanding any law to the contrary, any requirement under this chapter or a financing order that the commission take action with respect to the subject matter of a financing order shall be binding upon the commission, as it may be constituted from time to time, and any successor agency exercising functions similar to the commission, and the commission shall have no authority to rescind, alter, or amend that requirement in a financing order.

     §B-5  Wildfire recovery charge.  (a)  The wildfire recovery charge created pursuant to a financing order approved pursuant to section B-2 shall be a nonbypassable charge of a financing entity that shall be applied to the repayment of bonds and related financing costs as described in this chapter.  The wildfire recovery charge and any associated fixed recovery tax amounts may be a usage-based charge, a flat user charge, or a charge based upon customer revenues as determined by the commission for each consumer class in any financing order.

     (b)  As long as any bonds are outstanding and any financing costs have not been paid in full, any wildfire recovery charge and any associated fixed recovery tax amounts authorized under a financing order shall be nonbypassable.  Subject to any exceptions provided in a financing order, a wildfire recovery charge and any associated fixed recovery tax amounts shall be paid by all existing and future consumers within the utility service territory.

     (c)  The wildfire recovery charge shall be collected by an electric utility or its successors, in accordance with section B-8(a), in full through a charge that is separate and apart from the electric utility's rates.

     (d)  An electric utility may exercise the same rights and remedies under its tariff and applicable law and rules based on a consumer's nonpayment of the wildfire recovery charge as it could for a consumer's failure to pay any other charge payable to that electric utility.

     §B-6  Security interests in wildfire recovery property; financing statements.  (a)  A security interest in wildfire recovery property is valid and enforceable against the pledgor and third parties, subject to the rights of any third parties holding security interests in the wildfire recovery property perfected in the manner described in this section, and attaches when all of the following have occurred:

     (1)  The commission has issued a financing order authorizing the wildfire recovery charge to be included in the wildfire recovery property;

     (2)  Value has been given by the pledgees of the wildfire recovery property; and

     (3)  The pledgor has signed a security agreement covering the wildfire recovery property.

     (b)  A valid and enforceable security interest in wildfire recovery property is perfected when it has attached and when a financing statement has been filed with the bureau of conveyances of the State of Hawaii naming the pledgor of the wildfire recovery property as "debtor" and identifying the wildfire recovery property.

     Any description of the wildfire recovery property shall be sufficient if it refers to the financing order creating the wildfire recovery property.  A copy of the financing statement shall be filed with the commission by the electric utility that is the pledgor or transferor of the wildfire recovery property, and the commission may require the electric utility to make other filings with respect to the security interest in accordance with procedures that the commission may establish; provided that the filings shall not affect the perfection of the security interest.

     (c)  A perfected security interest in wildfire recovery property shall be a continuously perfected security interest in all wildfire recovery property revenues and proceeds arising with respect thereto, whether or not the revenues or proceeds have accrued.  Conflicting security interests shall rank according to priority in time of perfection.  Wildfire recovery property shall constitute property for all purposes, including for contracts securing bonds, whether or not the wildfire recovery property revenues and proceeds have accrued.

     (d)  Subject to the terms of the security agreement covering the wildfire recovery property and the rights of any third parties holding security interests in the wildfire recovery property, perfected in the manner described in this section, the validity and relative priority of a security interest created under this section shall not be defeated or adversely affected by the commingling of revenues arising with respect to the wildfire recovery property with other funds of the electric utility that is the pledgor or transferor of the wildfire recovery property, or by any security interest in a deposit account of that electric utility perfected under article 9 of chapter 490, into which the revenues are deposited.

     Subject to the terms of the security agreement, upon compliance with the requirements of section 490:9-312(b)(1), the pledgees of the wildfire recovery property shall have a perfected security interest in all cash and deposit accounts of the electric utility in which wildfire recovery property revenues have been commingled with other funds.

     (e)  If default occurs under the security agreement covering the wildfire recovery property, the pledgees of the wildfire recovery property, subject to the terms of the security agreement, shall have all rights and remedies of a secured party upon default under article 9 of chapter 490 and shall be entitled to foreclose or otherwise enforce their security interest in the wildfire recovery property, subject to the rights of any third parties holding prior security interests in the wildfire recovery property perfected in the manner provided in this section.

     In addition, the commission may require in the financing order creating the wildfire recovery property that in the event of default by the electric utility in payment of wildfire recovery property revenues, the commission and any successor thereto, upon the application by the pledgees or assignees, including assignees under section B-5 of the wildfire recovery property, and without limiting any other remedies available to the pledgees or assignees by reason of the default, shall order the sequestration and payment to the pledgees or assignees of wildfire recovery property revenues.  Any financing order shall remain in full force and effect notwithstanding any bankruptcy, reorganization, or other insolvency proceedings with respect to the debtor, pledgor, or transferor of the wildfire recovery property.  Any surplus in excess of amounts necessary to pay principal; premiums, if any; interest, costs, and arrearages on the bonds; and associated financing costs arising under the security agreement, shall be remitted to the debtor, pledgor, or transferor, for the purpose of remitting such amounts to customers by means of the electric utility.

     (f)  Sections 490:9-204 and 490:9-205 shall apply to a pledge of wildfire recovery property by the electric utility, an affiliate of the electric utility, or a financing entity.

     §B-7  Transfers of wildfire recovery property.  (a)  A transfer or assignment of wildfire recovery property by the electric utility to an assignee or to a financing entity, or by an assignee of the electric utility or a financing entity to another financing entity, which the parties in the governing documentation have expressly stated to be a sale or other absolute transfer, in a transaction approved in a financing order, shall be treated as an absolute transfer of all of the transferor's right, title, and interest, as in a true sale, and not as a pledge or other financing, of the wildfire recovery property, other than for federal and state income and franchise tax purposes.

     (b)  The characterization of the sale, assignment, or transfer as an absolute transfer and true sale and the corresponding characterization of the property interest of the assignee shall not be affected or impaired by, among other things, the occurrence of any of the following:

     (1)  Commingling of wildfire recovery charge revenues with other amounts;

     (2)  The retention by the seller of either of the following:

          (A)  A partial or residual interest, including an equity interest, in the financing entity or the wildfire recovery property, whether direct or indirect, subordinate or otherwise; or

          (B)  The right to recover costs associated with taxes, franchise fees, or license fees imposed on the collection of wildfire recovery charge;

     (3)  Any recourse that an assignee may have against the seller;

     (4)  Any indemnification rights, obligations, or repurchase rights made or provided by the seller;

     (5)  The obligation of the seller to collect wildfire recovery charges on behalf of an assignee;

     (6)  The treatment of the sale, assignment, or transfer for tax, financial reporting, or other purpose; or

     (7)  Any true-up adjustment of the wildfire recovery charge as provided in the financing order.

     (c)  A transfer of wildfire recovery property shall be deemed perfected against third parties when both of the following occur:

     (1)  The commission issues the financing order authorizing the wildfire recovery charge included in the wildfire recovery property; and

     (2)  An assignment of the wildfire recovery property in writing has been executed and delivered to the assignee.

     (d)  As between bona fide assignees of the same right for value without notice, the assignee first filing a financing statement with the bureau of conveyances of the State of Hawaii in accordance with part 5 of article 9 of chapter 490, naming the assignor of the wildfire recovery property as debtor and identifying the wildfire recovery property, shall have priority.  Any description of the wildfire recovery property shall be sufficient if it refers to the financing order creating the wildfire recovery property.  A copy of the financing statement shall be filed by the assignee with the commission, and the commission may require the assignor or the assignee to make other filings with respect to the transfer in accordance with procedures the commission may establish, but these filings shall not affect the perfection of the transfer.

     §B-8  Financing entity successor requirements; default of financing entity.  (a)  Any successor to an electric utility subject to a financing order, whether pursuant to any bankruptcy, reorganization, or other insolvency proceeding, or pursuant to any merger, sale, or transfer, by operation of law, or otherwise, shall be bound by the requirements of this chapter.  The successor of the electric utility shall perform and satisfy all obligations of the electric utility under the financing order, in the same manner and to the same extent as the electric utility, including the obligation to collect and pay the wildfire recovery charge to any financing party as required by a financing order or any assignee.  Any successor to the electric utility shall be entitled to receive any fixed recovery tax amounts otherwise payable to the electric utility.

     (b)  The commission may require in a financing order that if a default by the electric utility in remittance of the wildfire recovery charge collected arising with respect to wildfire recovery property occurs, the commission, without limiting any other remedies available to any financing party by reason of the default, shall order the sequestration and payment to the beneficiaries of the wildfire recovery charge collected arising with respect to the wildfire recovery property.  Any order shall remain in full force and effect notwithstanding any bankruptcy, reorganization, or other insolvency proceedings with respect to the electric utility.

     §B-9  Severability.  If any provision of this chapter is held to be invalid or is superseded, replaced, repealed, or expires for any reason:

     (1)  That occurrence shall not affect any action allowed under this chapter that is taken prior to that occurrence by the commission, a financing entity, a bondholder, or any financing party, and any such action shall remain in full force and effect; and

     (2)  The validity and enforceability of the rest of this chapter shall remain unaffected."

     SECTION 3.  Section 269-17, Hawaii Revised Statutes, is amended to read as follows:

     "§269-17  Issuance of securities.  A public utility corporation may, on securing the prior approval of the public utilities commission, and not otherwise, except as provided in section B-4, issue stocks and stock certificates, bonds, notes, and other evidences of indebtedness, payable at periods of more than twelve months after the date thereof, for the following purposes and no other, namely:  for the acquisition of property or for the construction, completion, extension, or improvement of or addition to its facilities or service, or for the discharge or lawful refunding of its obligations or for the reimbursement of moneys actually expended from income or from any other moneys in its treasury not secured by or obtained from the issue of its stocks or stock certificates, or bonds, notes, or other evidences of indebtedness, for any of the aforesaid purposes except maintenance of service, replacements, and substitutions not constituting capital expenditure in cases where the corporation has kept its accounts for [such] expenditures in [such] a manner [as to enable] that enables the commission to ascertain the amount of moneys so expended and the purposes for which the expenditures were made, and the sources of the funds in its treasury applied to the expenditures.  As used [herein,] in this section, "property" and "facilities"[,] mean property and facilities used in all operations of a public utility corporation whether or not included in its public utility operations or rate base.  A public utility corporation may not issue securities to acquire property or to construct, complete, extend or improve or add to its facilities or service if the commission determines that the proposed purpose will have a material adverse effect on its public utility operations.

     All stock and every stock certificate, and every bond, note, or other evidence of indebtedness of a public utility corporation not payable within twelve months, issued without an order of the commission authorizing the same, then in effect, shall be void."

     SECTION 4.  This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun before its effective date.

     SECTION 5.  In codifying the new sections added by section 2 of this Act, the revisor of statutes shall substitute appropriate section numbers for the letters used in designating the new sections in this Act.

     SECTION 6.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 7.  This Act shall take effect on July 1, 3000.

Report Title:

Wildfire Recovery Fund; Securitization; Public Utilities Commission

Description:

Establishes the Wildfire Recovery Fund.  Allows securitization for electric utilities.  Effective 7/1/3000.  (HD3)

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.

A BILL FOR AN ACT

RELATING TO WILDFIRES.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

     SECTION 1.  The legislature finds that as the risk of catastrophic wildfires in Hawaii has increased, so has the threat of property damage from these fires.  The legislature further finds that the public interest is served by providing a rapid, efficient, and low-cost process for property owners, renters, businesses, and their insurers to obtain compensation if a regulated utility is alleged to have caused or contributed to the damage resulting from a catastrophic wildfire.  The legislature also finds that under existing law, individuals and businesses must pursue civil litigation, which is a lengthy, costly, and contentious process.

     This Act would help individuals and businesses recover by giving them the option to obtain payment quickly through an administrative claims process similar to the One Ohana Fund, also known as the Maui Wildfires Compensation Fund.  The administrative claims process will begin based on a preliminary determination that a utility was involved, without waiting for the conclusion of a comprehensive investigation of the origin and cause of a catastrophic wildfire.  Claimants are not required to prove that the regulated utility was negligent in order to receive payment through the administrative claims process.

     This Act:

     (1)  Preserves claimants' right to pursue litigation if they choose to reject the amount offered through the administrative claims process;

     (2)  Limits the total amount that can be paid for property damage through both the administrative claims process and litigation, balancing the interests of those affected by a catastrophic fire in obtaining compensation and the interests of the public utilities in mitigating the risk of financial instability that can result from unlimited liability;

     (3)  Requires the public utilities commission to review the conduct of the public utility and to order the utility to replenish the fund, up to a cap, if it finds that the utility acted imprudently; and

     (4)  Provides for the legislature to re-evaluate the risk of catastrophic wildfires in 2035 and to refund to customers the amounts they contributed, plus earnings on those funds, to the extent the legislature concludes that the size of the fund can be reduced based on actions taken to reduce risk.

     The legislature also finds that the public interest is served by establishing a compensation mechanism that does not expose regulated utilities to the financial instability that can result from the existing litigation process.  Regulated utilities alleged to have caused a catastrophic wildfire face massive costs from litigation.  Those costs can overwhelm those utilities, undermining their ability to make investments that the State needs.  Indeed, even the possibility of litigation regarding a future catastrophic wildfire can create a cloud of uncertainty that can impair a utility's ability to attract capital on reasonable terms.  These costs and uncertainties result in increased rates paid by customers and may reduce utilities' ability to make investments in wildfire prevention and resilience initiatives, among other priorities that may affect the health and safety of the State's residents.

     The legislature additionally finds that securitization may be the most efficient, least costly way for a utility to finance the contributions to the wildfire recovery fund.  Utility securitization transactions have an extensive track record of success.

     Therefore, the purpose of this Act is to serve the public interest by establishing a mechanism to provide efficient compensation for property damage resulting from a future catastrophic wildfire allegedly caused by a regulated utility, while also protecting the financial integrity of Hawaii's regulated utilities.

     SECTION 2.  The Hawaii Revised Statutes is amended by adding two new chapters to be appropriately designated and to read as follows:

"CHAPTER A

WILDFIRE RECOVERY FUND

     §A-1  Definitions.  As used in this chapter, unless the context otherwise requires:

     "Catastrophic wildfire" means a wildfire occurring in the State on or after the operation date that destroys more than five hundred commercial structures or residential structures designed for habitation, or, for an electric cooperative with less than fifty thousand residential members, meets a threshold dollar amount of potential claims to be determined by the executive director.

     "Commission" means the public utilities commission.

     "Contributor" means a public utility that satisfies all requirements to participate in the wildfire recovery fund.

     "Covered catastrophic wildfire" means a catastrophic wildfire that may have been caused, or whose severity may have been increased, by a contributor's facilities or actions.

     "Electric utility" means a public utility that exists for the furnishing of electrical power.

     "Executive director" means the executive director of the wildfire recovery fund.

     "Government entity" means any government agency, board, bureau, commission, component, department, division, office, subdivision, unit, or instrumentality of any kind, including federal, state, and municipal entities.

     "Investor-owned electric utility" means an electric utility that is owned by shareholders and overseen by a board of directors elected by shareholders.

     "Operation date" means the first date for contributors to elect to participate in the wildfire recovery fund under section A-3(a) and the rules adopted to implement the wildfire recovery fund.

     "Property insurer" means a person or entity that indemnifies another by a contract of insurance for loss of or damage to real or personal property in the State.

     "Property owner" means an owner of real property in the State.

     "Public utility" has the same meaning as in section 269-1.

     "Qualified claimant" means any property owner, property insurer, or tenant who alleges any qualifying damages.

     "Qualifying action" means a civil action by a qualified claimant to recover qualifying damages.

     "Qualifying damages" means economic damages arising out of the loss of or damage to real or personal property from a covered catastrophic wildfire.

     "Tenant" means a person or entity lawfully entitled to occupy real property that the person or entity does not own in the State.

     "Wildfire recovery fund" means the wildfire recovery fund established by section A-2.

     "Wildfire risk mitigation plan" means a plan, which may include a natural hazard mitigation report, in which a public utility addresses how it will mitigate the risk of its equipment in causing or exacerbating a wildfire.

     §A-2  Wildfire recovery fund; establishment; executive director.  (a)  There is established outside the state treasury a trust fund to be known as the wildfire recovery fund and any accounts thereunder to carry out the purposes of this chapter.  All moneys in the wildfire recovery fund shall be expended exclusively for the uses and purposes set forth in this chapter.  The wildfire recovery fund shall not be subject to chapter 431.  The moneys in the wildfire recovery fund not required for immediate use shall be invested by the executive director for the benefit of the wildfire recovery fund; provided that no assets of the wildfire recovery fund shall be transferred to the general fund of the State or to any other fund of the State or otherwise encumbered or used for any purpose other than those specified for the wildfire recovery fund.

     (b)  The wildfire recovery fund shall be placed within the department of commerce and consumer affairs for administrative purposes.  The fund shall be a public body corporate and politic.

     (c)  The governor shall appoint an executive director of the wildfire recovery fund, who shall be exempt from chapter 76, and shall fix the executive director's compensation.  The executive director may be removed only by the governor.

     (d)  The executive director shall be responsible for the day-to-day operations and management of the wildfire recovery fund and shall perform all functions necessary to implement this chapter, including entering into contracts and other obligations related to the operation, management, and administration of the wildfire recovery fund.

     (e)  The executive director may retain, employ, or contract with officers; experts; employees; accountants; actuaries; financial professionals; and other advisers, consultants, attorneys, and professionals, as may be necessary in the executive director's judgment, for the efficient operation, management, and administration of the wildfire recovery fund.

     (f)  The executive director shall have the power to issue revenue bonds, from time to time, in such principal amounts as the executive director may deem advisable for the purpose of this chapter, backed by future payments to the wildfire recovery fund that contributors have committed to make.  These bonds shall be issued pursuant to part III of chapter 39, except as provided in this chapter.

     (g)  The executive director may establish the investment policies of the wildfire recovery fund.

     (h)  The executive director shall adopt rules pursuant to chapter 91 to implement this chapter.

     §A-3  Wildfire recovery fund; eligibility for participation as a contributor; contributions.  (a)  To be eligible to participate as a contributor, a public utility shall:

     (1)  Have a wildfire risk mitigation plan that has been approved or accepted by the commission;

     (2)  Notify the executive director, in the year before the public utility becomes a contributor, that it intends to participate in the wildfire recovery fund;

     (3)  Agree to make an initial contribution, the payment of which is thereafter a binding commitment enforceable by the executive director; and

     (4)  Provide a comparison of costs for current commercial insurance coverage compared to wildfire property damage and loss.

     (b)  The initial contributions from investor-owned electric utilities collectively shall be:

     (1)  $500,000,000, which amount shall be recovered from its customers in nonbypassable rates; and

     (2)  $505,000,000, which amount shall be funded by shareholders of those investor-owned electric utilities, and of which $5,000,000 shall be used exclusively for the payment of salaries of the executive director and of all other persons retained by the executive director to implement this chapter and the contracting of consultants to assist the public utilities commission in determining whether a contributor acted prudently under section A-5, with any funds remaining of the $5,000,000 in 2035 to be transferred to the wildfire recovery fund.

     (c)  The investor-owned electric utilities may elect to make the initial contributions set forth in subsection (b)(1), to the degree not paid for through securitization pursuant to chapter B, over a period not to exceed five years; provided that interest shall be added to any amounts paid after the first year, at an interest rate equal to the investor-owned electric utilities' incremental cost of long-term debt, with such interest recovered from customers in rates.

     (d)  The executive director shall determine the initial contributions from other public utilities based on an actuarial assessment of the risk of potential payments by the wildfire recovery fund resulting from covered catastrophic wildfires created by such public utility.

     (e)  The executive director may propose supplemental contributions to the wildfire recovery fund by participating public utilities.

     (f)  Investment earnings associated with payments made to the wildfire recovery fund that were recovered in regulated rates from customers shall be refunded annually to the paying public utility to be refunded to those customers in the form of a credit on their ratepayer accounts.

     (g)  If a contributor fails to pay any part of an initial contribution or a supplemental contribution that it agreed to make, or elects not to agree to make a supplemental contribution, that contributor shall no longer be a contributor as of the date on which the payment was due, and the contributor shall not receive any refund of payments previously made; provided that a contributor that elects not to make a supplemental contribution shall be a contributor as to any catastrophic wildfire that occurs before the election date.  After failing to, or electing not to, make a payment, a public utility may rejoin the wildfire recovery fund as a contributor on a prospective basis if it makes owed payments with interest.

     (h)  The executive director shall adopt rules pursuant to chapter 91 regarding the timing of initial and supplemental contributions, which may include upfront, annual, and retrospective payments, specifically payments made after a wildfire occurs.

     §A-4  Determination of a covered catastrophic wildfire.  The executive director shall adopt rules pursuant to chapter 91 regarding how to determine whether a wildfire is a covered catastrophic wildfire.  These rules shall include a requirement that a wildfire shall be determined to be a covered catastrophic wildfire if a party makes non-frivolous allegations in a legal action that a contributor's facilities caused or contributed to the severity of a catastrophic wildfire.

     §A-5  Replenishment of the wildfire recovery fund.  (a)  If the wildfire recovery fund has made payments with respect to a covered catastrophic wildfire and after resolution of substantially all third-party liability claims that were brought or could be brought against contributors arising from that covered catastrophic wildfire, each contributor whose facilities were implicated in the covered catastrophic wildfire shall initiate a proceeding before the commission to review the prudence of the contributor's conduct leading to the catastrophic wildfire.

     (b)  The commission shall determine whether the contributor acted prudently:

     (1)  Considering only acts that may have caused the occurrence or contributed to the severity of the covered catastrophic wildfire; and

     (2)  Evaluating the contributor's actions in the context of its overall systems, processes, and programs, such that an error by a contributor's employee would not be a basis for a finding of imprudence, unless that error resulted from the failure of a system, process, or program to prevent the error.

     (c)  If the commission determines that imprudent conduct by the contributor caused the occurrence or contributed to the severity of a covered catastrophic wildfire, the commission shall determine whether to order the contributor to replenish the wildfire recovery fund in whole or in part for payments from the wildfire recovery fund in connection with the covered catastrophic wildfire.  In determining the amount of replenishment, if any, the commission shall consider the extent and severity of the contributor's imprudence and factors within and beyond the contributor's control that may have led to or exacerbated the costs from the covered catastrophic wildfire, including but not limited to humidity, temperature, winds, fuel, merged wildfires with independent ignitions, third-party actions that affected the spread of the wildfire, and fire suppression activities.

     (d)  Over any three-year period, the commission shall not order the contributor to reimburse the wildfire recovery fund in an amount that exceeds twenty per cent of the contributor's transmission and distribution equity rate base.

     (e)  A contributor shall not recover in regulated rates any amount that the commission orders it to pay to the wildfire recovery fund as a replenishment under this section.

     §A-6  Claims for payment by qualified claimants; presentment requirement.  (a)  The executive director shall adopt rules pursuant to chapter 91 to create a process through which a qualified claimant that is not a government entity may submit to the wildfire recovery fund a claim for payment of economic damages arising out of property damage resulting from a covered catastrophic wildfire.

     (b)  A qualified claimant shall file a claim for payment for economic damages arising out of the loss of or damage to real or personal property from a covered catastrophic wildfire pursuant to this section.  The claim of a qualified claimant that is not a property insurer shall be limited to uninsured economic damages.  A qualified claimant shall not file or maintain a civil action against a contributor unless and until the qualified claimant rejects an offer of settlement from the wildfire recovery fund.  A qualified claimant who fails to file a claim within four years of the covered catastrophic wildfire shall be ineligible to receive payment from the wildfire recovery fund and shall be barred from instituting or maintaining any qualifying action against a contributor; provided that the executive director may establish a deadline beyond the four-year period by rule and until which time the claimant shall still be eligible to receive payment and shall not be barred from instituting or maintaining any qualifying action.

     (c)  The executive director shall make an offer to settle each claim submitted, which the claimant may accept or reject.  In determining the amount of each offer, the executive director shall consider, at a minimum:

     (1)  The economic damages sought by all qualified claimants in the aggregate;

     (2)  The amount available to the wildfire recovery fund relative to the amount under paragraph (1);

     (3)  The strength of any evidence of contributor liability; and

     (4)  The strength of any evidence of involvement of non-contributor third-parties.

     (d)  If the amount available to the wildfire recovery fund, including assets held by the wildfire recovery fund and all payments contributors are obligated to make to the wildfire recovery fund, is less than fifty per cent of the aggregate liability limit as calculated in section A-8, the wildfire recovery fund shall make payment only to contributors pursuant to section A-7.

     §A-7  Claims for payment by contributors.  The executive director shall adopt rules pursuant to chapter 91 to create a process through which a contributor may obtain payment from the wildfire recovery fund to satisfy settled or finally adjudicated claims for recovery of qualifying damages after exhausting the contributor's available insurance.  The rules shall establish the standard for approving any settlement.  To the extent that the wildfire recovery fund lacks sufficient funds to make a payment to a contributor when sought, the wildfire recovery fund shall make such payment upon receipt of contributions that contributors are obligated to make to the wildfire recovery fund under payment schedules.

     §A-8  Limitation on aggregate liability.  (a)  The aggregate liability of all contributors for qualifying damages arising from a covered catastrophic wildfire, including economic and non-economic damages, shall not exceed the greater of:

     (1)  Fifty per cent of the amount available to the wildfire recovery fund at the time of the covered catastrophic wildfire, including amounts in and obligated to the wildfire recovery fund; or

     (2)  The average assessed value of commercial structures and residential structures designed for habitation in the county in which the covered catastrophic wildfire ignited, multiplied by the number of commercial structures or residential structures designed for habitation that were destroyed.

     (b)  The following amounts shall be added to determine whether the aggregate liability limit has been reached:

     (1)  Payments from the wildfire recovery fund under section A-6; and

     (2)  Payments by a contributor in connection with any settlement or judgment on a claim for qualifying damages.

     (c)  All civil actions arising out of a catastrophic wildfire shall be brought in the judicial circuit in which the catastrophic wildfire occurred.  The court shall adopt procedures to equitably apply the limit set forth in subsection (a) to all civil claims for qualifying damages that are filed.  All settlements or judgments for claims for qualifying damages shall be subject to approval by the court.  The court shall not approve any settlement or judgment that would cause the aggregate liability of contributors to exceed the aggregate liability limit.

     (d)  A court shall consolidate cases arising from a covered catastrophic wildfire.  Any circuit court that is not the consolidating court shall transfer any civil case to facilitate such consolidation.

     §A-9  Limitations on claims.  (a)  No qualifying action shall be instituted or maintained by a qualified claimant against contributors or their affiliates, employees, agents, or insurers if the qualified claimant accepts an offer under section A-6; provided that the rights of a property insurer to sue as a subrogee of its policyholder shall not be affected by a property owner's or tenant's acceptance of an offer under section A-6 and the subrogation rights shall be affected only if the property insurer elects to accept an offer under section A-6.

     (b)  No suit, claim, arbitration, or other civil legal action for indemnity or contribution for amounts paid, or that may be paid, as a result of a covered catastrophic wildfire, may be instituted or maintained by any persons or entities against contributors or their affiliates, employees, agents, or insurers for qualifying damages; provided that this subsection shall not apply to any agreements entered into before the operation date.

     §A-10  Several liability.  Any law to the contrary notwithstanding, joint and several liability is abolished for any qualifying damages.  Any person or entity that is sued for qualifying damages may argue for apportionment of fault to any other person or entity regardless of whether that person or entity is a party to the action.

     §A-11  Reporting; refunds authorized by the legislature.  (a)  The executive director shall submit to the legislature and commission an annual report regarding the wildfire recovery fund no later than ninety days prior to the beginning of each regular session until 2034.  The annual report submitted by the executive director shall include an update on the activities of the wildfire recovery fund.

     (b)  No later than ninety days prior to the regular session of 2035, the executive director shall submit a report regarding the financial status and resources of the wildfire recovery fund relative to the then-current assessment of actuarial risk of a catastrophic wildfire.

     (c)  Based on the report in subsection (b), the legislature may determine that the wildfire recovery fund is overfunded and direct the executive director to return contributions, in whole or in part, with associated investment earnings, to contributors.  Any payments made to the wildfire recovery fund that were recovered in regulated rates from customers, and any investment earnings associated with those payments, shall, in the event that the legislature orders a refund, be returned to those customers.

     §A-12  Inadmissible evidence.  Any findings made or evidence submitted for purposes of proceedings under sections A-4, A-6, and A-7 shall be subject to the limits on admissibility under rule 408, Hawaii rules of evidence, as set forth in section 626-1.

CHAPTER B

SECURITIZATION

     §B-1  Definitions.  As used in this chapter, unless the context otherwise requires:

     "Ancillary agreement" means a bond insurance policy, letter of credit, reserve account, surety bond, swap arrangement, hedging arrangement, liquidity or credit support arrangement, or other similar agreement or arrangement entered into in connection with the issuance of bonds that is designed to promote the credit quality and marketability of the bonds or to mitigate the risk of an increase in interest rates.

     "Assignee" means a legally recognized entity to which an electric utility assigns, sells, or transfers, other than as security, all or a portion of the electric utility's interest in or right to wildfire recovery property.  "Assignee" includes a corporation, limited liability company, general partnership or limited partnership, public authority, trust, financing entity, or any other legal entity to which an assignee assigns, sells, or transfers, other than as security, its interest in or right to wildfire recovery property.

     "Bond" means any bond, note, certificate of participation or beneficial interest, or other evidence of indebtedness or ownership that is issued by the financing entity under a financing order, the proceeds of which are used directly or indirectly to recover, finance, or refinance financing costs of any wildfire recovery costs, and that are directly or indirectly secured by or payable from wildfire recovery property.

     "Commission" means the public utilities commission.

     "Consumer" means any individual, governmental body, trust, business entity, or nonprofit organization that consumes electricity that has been transmitted or distributed by means of electric transmission or distribution facilities, whether those electric transmission or distribution facilities are owned by the consumer, the electric utility, or any other party.

     "Electric cooperative" means an electric utility that satisfies the requirements under section 269-31(c).

     "Electric cooperative wildfire claims costs" means costs incurred by an electric cooperative to resolve third-party liability claims arising from any wildfire occurring in the State that are not covered by insurance and that the commission finds to be just and reasonable.  "Electric cooperative wildfire claims costs" does not include costs incurred by an investor-owned electric utility.

     "Electric utility" means a public utility that exists for the furnishing of electrical power.

     "Financing costs" means the reasonable costs to issue, service, repay, or refinance bonds, whether incurred or paid upon issuance of the bonds or over the life of the bonds, if they are approved for recovery by the commission in a financing order.  "Financing costs" includes any of the following:

     (1)  Principal, interest, and redemption premiums that are payable on bonds;

     (2)  A payment required under an ancillary agreement;

     (3)  An amount required to fund or replenish reserve accounts or other accounts established under an indenture, ancillary agreement, or other financing document related to the bonds;

     (4)  Taxes, franchise fees, or license fees imposed on a financing entity as a result of the issuance of the financing order; the assignment, sale, or transfer of any wildfire recovery property; or the sale of the bonds, or imposed on the wildfire recovery charges, or otherwise resulting from the collection of the wildfire recovery charge, in any such case whether paid, payable, or accrued;

     (5)  Costs related to issuing and servicing bonds or the application for a financing order, including without limitation servicing fees and expenses, trustee fees and expenses, legal fees and expenses, accounting fees, administrative fees, underwriting and placement fees, financial advisory fees, original issue discount, capitalized interest, rating agency fees, and any other related costs that are approved for recovery in the financing order;

     (6)  Costs related to the engagement of services of a financial advisor by the commission pursuant to section B-3(h); and

     (7)  Other costs as specifically authorized by a financing order.

     "Financing entity" means an electric utility or an entity to which an electric utility or an affiliate of an electric utility sells, assigns, or pledges all or a portion of the electric utility's interest in wildfire recovery property, including an affiliate of the electric utility or any unaffiliated entity, in each case as approved by the commission in a financing order.

     Subject to section B-6(c), an entity to which an electric utility sells, assigns, or pledges all or a portion of the electric utility's interest in wildfire recovery property may include any governmental entity that is able to issue bonds that are exempt from federal tax pursuant to section 103 of the Internal Revenue Code of 1986, as amended, including the State or a political subdivision thereof or any department, agency, or instrumentality of the State or political subdivision; provided that the bonds issued shall not constitute a general obligation of the State or any political subdivision thereof or any department, agency, or instrumentality of the State or political subdivision and shall not constitute a pledge of the full faith and credit of the entity or of the State or any political subdivision thereof, but shall be payable solely from the funds provided under this chapter.

     "Financing order" means an order of the commission under this chapter that has become final and no longer subject to appeal as provided by law and that authorizes the issuance of bonds and the imposition, adjustment from time to time, and collection of wildfire recovery charges, and that shall include a procedure to require the expeditious approval by the commission of periodic adjustments to wildfire recovery charges and to any associated fixed recovery tax amounts included in that financing order to ensure recovery of all wildfire recovery costs and the costs associated with the proposed recovery, financing, or refinancing thereof, including the costs of servicing and retiring the bonds contemplated by the financing order.

     "Financing party" means any holder of the bonds; any party to or beneficiary of an ancillary agreement; and any trustee, collateral agent, or other person acting for the benefit of any of the foregoing.

     "Fixed recovery tax amounts" means those nonbypassable rates and other charges, including but not limited to distribution, connection, disconnection, and termination rates and charges, that are needed to recover federal and state taxes associated with wildfire recovery charges authorized by the commission in a financing order, but are not approved as financing costs financed from proceeds of bonds.

     "Investor-owned electric utility" means an electric utility that is owned by shareholders and overseen by a board of directors elected by shareholders.

     "Public utility" has the same meaning as in section 269-1.

     "True-up adjustment" means a formulaic adjustment to the wildfire recovery charges as they appear on consumer bills that is necessary to correct for any overcollection or undercollection of the wildfire recovery charges authorized by a financing order and to otherwise ensure the timely and complete payment and recovery of wildfire recovery costs over the authorized repayment term.

     "Wildfire recovery charges" means the nonbypassable charges, including but not limited to distribution, connection, disconnection, and termination rates and charges, that are authorized by section B-2 and in a financing order authorized under this chapter to be imposed on and collected from all existing and future consumers of a financing entity or any successor to recover principal, interest, and other financing costs relating to the bonds.

     "Wildfire recovery costs" means an investor-owned electric utility's initial and supplemental contributions to the wildfire recovery fund, as set forth in section A-3, and electric cooperative wildfire claims costs.

     "Wildfire recovery fund" means the wildfire recovery fund established by section A-2.

     "Wildfire recovery property" means the property right created pursuant to this chapter, including without limitation the right, title, and interest of the electric utility, financing entity, or its assignee:

     (1)  In and to the wildfire recovery charge established pursuant to a financing order, including the right to impose, bill, collect, and receive such wildfire recovery charges under the financing order and all rights to obtain adjustments to the wildfire recovery charge in accordance with section B-3 and the financing order; and

     (2)  To be paid the amount that is determined in a financing order to be the amount that the electric utility or its assignee is lawfully entitled to receive pursuant to this chapter and the proceeds thereof, and in and to all revenues, collections, claims, payments, moneys, or proceeds of, or arising from, the wildfire recovery charge that is the subject of a financing order.

"Wildfire recovery property" does not include a right to be paid fixed recovery tax amounts.  "Wildfire recovery property" shall constitute a current property right, notwithstanding the fact that the value of the property right will depend on consumers using electricity or, in those instances where consumers are customers of the electric utility, the electric utility performing certain services.

     §B-2   Applications to issue bonds and authorize wildfire recovery charges.  (a)  An electric utility may apply to the commission for one or more financing orders to issue bonds to recover any wildfire recovery costs, each of which authorizes the following:

     (1)  The imposition, charging, and collection of a wildfire recovery charge, to become effective upon the issuance of the bonds, and an adjustment of any such wildfire recovery charge in accordance with a true-up adjustment mechanism under this chapter in amounts sufficient to pay the principal and interest on the bonds and all other associated financing costs on a timely basis;

     (2)  The creation of wildfire recovery property under the financing order; and

     (3)  The imposition, charging, and collection of fixed recovery tax amounts to recover any portion of the electric utility's federal and state taxes associated with those wildfire recovery charges and not financed from the proceeds of bonds.

     (b)  The application shall include all of the following:

     (1)  The wildfire recovery costs to be financed through the issuance of bonds;

     (2)  The principal amount of the bonds proposed to be issued and the selection of a financing entity;

     (3)  An estimate of the date on which each series of bonds is expected to be issued;

     (4)  The scheduled final payment date, which shall not exceed thirty years, and a legal final maturity date, which may be longer, subject to rating agency and market considerations, during which term the wildfire recovery charge associated with the issuance of each series of bonds is expected to be imposed and collected;

     (5)  An estimate of the financing costs associated with the issuance of each series of bonds;

     (6)  An estimate of the amount of the wildfire recovery charge revenues necessary to pay principal and interest on the bonds and all other associated financing costs as set forth in the application and the calculation for that estimate;

     (7)  A proposed design of the wildfire recovery charge and a proposed methodology for allocating the wildfire recovery charge among customer classes within the electric utility's service territory;

     (8)  A description of the financing entity selected by the electric utility;

     (9)  A description of a proposed true-up adjustment mechanism for the adjustment of the wildfire recovery charge to correct for any overcollection or undercollection of the wildfire recovery charge, and to otherwise ensure the timely payment of principal and interest on the bonds and all other associated financing costs; and

    (10)  Any other information required by the commission.

     (c)  An electric utility may file an application for a financing order, including as a joint application with one or more affiliate electric utilities, to issue bonds to recover wildfire recovery costs.  The application shall include a description of how the wildfire recovery costs will be allocated among consumers of the applicant electric utilities.

     In the alternative, an electric utility may apply for a financing order to issue bonds to recover wildfire recovery costs, including wildfire recovery costs incurred, or to be incurred, by the applicant and one or more of its affiliate electric utilities.  In connection with the issuance of a financing order pursuant to this subsection, the commission shall issue a concurrent order to the affiliate electric utility or electric utilities directing such affiliate electric utility or electric utilities to impose rates on its or their consumers designed to generate revenue sufficient to pay credits over the life of the bonds to the applicant electric utility in such amount as the commission determines is equitable, just, and reasonable.  Such an application shall describe the allocation method and true-up adjustment mechanism for the affiliate electric utility credit payments proposed to be subject to the concurrent commission order.

     (d)  The commission shall issue an approval or denial of any application for a financing order filed pursuant to this section within ninety days of the last filing in the applicable docket.

     (e)  In exercising its duties under this section, the commission shall consider:

     (1)  Whether the issuance of the bonds, and the imposition and collection of wildfire recovery charges are consistent with the public interest;

     (2)  Whether the structuring, marketing, and pricing of the bonds are expected to result in the lowest wildfire recovery charges consistent with market conditions at the time at which the bonds are priced and the terms of the financing order;

     (3)  Whether the terms and conditions of any bonds to be issued are just and reasonable;

     (4)  With respect to an application by an investor-owned electric utility, whether the recovery of wildfire recovery costs through the designation of the wildfire recovery charges and any associated fixed recovery tax amounts, and the issuance of bonds in connection with the wildfire recovery charges, would result in net savings or mitigate rate impacts to consumers, as compared to rate recovery without securitization; and

     (5)  Any other factors that the commission deems reasonable and in the public interest.

If the commission makes the determination specified in this section, the commission shall establish, as part of the financing order, a procedure for the electric utility to submit applications from time to time to request the issuance of additional financing orders designating wildfire recovery charges and any associated fixed recovery tax amounts as recoverable.  The commission, as a condition of the financing order, may prohibit any increase in compensation, including any bonuses, for the electric utility's officers for a period of time determined by the commission; provided that any increase of an officer's compensation that is in violation of such condition shall be seized and deposited into the wildfire recovery fund.

     At the option of the electric utility, the electric utility may include in its application for a financing order a request for authorization to sell, transfer, assign, or pledge wildfire recovery property to a governmental entity if the electric utility expects bonds issued by a governmental entity would result in a more cost-efficient means, taking into account all financing costs related to the bonds, than using another financing entity to issue bonds to finance the same wildfire recovery costs, taking into account the costs of issuing the other financing entity's bonds.

     (f)  Wildfire recovery charges and any associated fixed recovery tax amounts shall be imposed only on existing and future consumers in the utility service territory of the electric utility that is subject to such financing order.  Consumers within the utility service territory of the electric utility that is subject to the financing order shall continue to pay wildfire recovery charges and any associated fixed recovery tax amounts until the bonds and associated financing costs are paid in full by the financing entity.

     §B-3  Wildfire recovery financing order.  (a)  A financing order shall remain in effect until the bonds issued under the financing order and all financing costs related to the bonds have been paid in full or defeased by their terms.

     A financing order shall remain in effect and unabated notwithstanding the bankruptcy, reorganization, or insolvency of the electric utility or the commencement of any judicial or nonjudicial proceeding on the financing order.

     (b)  Notwithstanding any other law to the contrary, with respect to wildfire recovery property that has been made the basis for the issuance of bonds and with respect to any associated fixed recovery tax amounts, the financing order, the wildfire recovery charges, and any associated fixed recovery tax amounts shall be irrevocable.  The State and its agencies, including the commission, pledge and agree with bondholders, the owners and assignees of the wildfire recovery property, and other financing parties, that the State and its agencies shall not take any action listed in this subsection.  This subsection shall not preclude an action if such action would not adversely affect the interests of the electric utility, of assignees of the wildfire recovery property, and of bondholders.  The prohibited actions shall be the following:

     (1)  Alter the provisions of this chapter, which authorize the commission to create an irrevocable contract right or choice in action by the issuance of a financing order, to create wildfire recovery property and make the wildfire recovery charges imposed by a financing order irrevocable, binding, nonbypassable charges for all existing and future consumers;

     (2)  Take or permit any action that impairs or would impair the value of wildfire recovery property or the security for the bonds or revise the wildfire recovery costs for which recovery is authorized;

     (3)  In any way impair the rights and remedies of the bondholders, assignees, and other financing parties; and

     (4)  Except for changes made pursuant to the formula-based true-up adjustment mechanism authorized under subsection (d), reduce, alter, or impair wildfire recovery charges that are to be imposed, billed, charged, collected, and remitted for the benefit of the bondholders, any assignee, and any other financing parties until any and all principal, interest, premium, financing costs, and other fees, expenses, or charges incurred, and any contracts to be performed, in connection with the related bonds have been paid and performed in full.

     The financing entity is authorized to include this pledge in the bonds.

     (c)  Under a financing order, the electric utility shall retain sole discretion to select the financing entity and to cause bonds to be issued, including the right to defer or postpone the issuance, assignment, sale, or transfer of wildfire recovery property.

     (d)  The commission may create, pursuant to an application from an electric utility, a nonbypassable charge referred to as a wildfire recovery charge, which shall be applied to recover principal, interest, and other financing costs relating to the bonds.  The wildfire recovery charge shall be a dedicated, discrete tariff rider.

     The commission shall, in any financing order, establish a procedure for periodic true-up adjustments to wildfire recovery charges, which shall be made at least annually and may be made more frequently.  The periodic true-up adjustment to wildfire recovery charges shall also consider interest on ratepayer investments into the fund.  Within thirty days after receiving an electric utility's filing of a true-up adjustment, the commission's review of the filing shall be limited to mathematical or clerical errors as determined in accordance with any true-up adjustment formulas set forth in the applicable financing order.

     The commission shall either approve the filing or inform the electric utility of any mathematical or clerical errors in its calculation.  If the commission informs the electric utility of mathematical or clerical errors in its calculation, the electric utility shall correct its error and refile its true-up adjustment.  The timeframes previously described in this subsection shall apply to a refiled true-up adjustment.

     (e)  Neither financing orders nor bonds issued under this chapter shall constitute a general obligation of the State or any of its political subdivisions, nor shall they constitute a pledge of the full faith and credit of the State or any of its political subdivisions, but shall be payable solely from the wildfire recovery property provided under this chapter.

     All bonds shall contain on the face thereof a statement to the following effect:  "Neither the full faith and credit nor the taxing power of the State of Hawaii is pledged to the payment of the principal of, or interest and premium on, this bond.".

     The issuance of bonds under this chapter shall not directly, indirectly, or contingently obligate the State or any of its political subdivisions to levy or pledge any form of taxation or to make any appropriation for their payment.

     (f)  Wildfire recovery charges are wildfire recovery property when, and to the extent that, a financing order authorizing the wildfire recovery charges has become effective in accordance with this chapter, and the wildfire recovery property shall thereafter continuously exist as property for all purposes, and all of the rights and privileges relating to that property shall continuously exist for the period and to the extent provided in the financing order, but in any event until the bonds, including all principal; premiums, if any; interest with respect to the bonds; and all other financing costs are paid in full.  A financing order may provide that the creation of wildfire recovery property shall be simultaneous with the sale of the wildfire recovery property to an assignee as provided in the application of the pledge of the wildfire recovery property to secure the bonds.

     (g)  Any successor to a financing entity shall be bound by the requirements of this chapter and shall perform and satisfy all obligations of and have the same rights under a financing order as, and to the same extent as, the financing entity.

     (h)  The commission, in its discretion, may engage the services of a financial adviser for the purposes of assisting the commission in its consideration of an application for a financing order and a subsequent issuance of bonds pursuant to a financing order.

     §B-4  Bonds; issuance; wildfire recovery property interests.  (a)  The electric utility may sell and assign all or portions of its interest in wildfire recovery property to one or more financing entities that make that wildfire recovery property the basis for issuance of bonds, to the extent approved in a financing order.  The electric utility or financing entity may pledge wildfire recovery property as collateral, directly or indirectly, for bonds to the extent approved in the pertinent financing orders providing for a security interest in the wildfire recovery property, in the manner set forth in this section.  In addition, wildfire recovery property may be sold or assigned by either of the following:

     (1)  The financing entity or a trustee for the holders of bonds or the holders of an ancillary agreement in connection with the exercise of remedies upon a default under the terms of the bonds; or

     (2)  Any person acquiring the wildfire recovery property after a sale or assignment pursuant to this chapter.

     (b)  To the extent that any interest in wildfire recovery property is sold, assigned, or is pledged as collateral pursuant to subsection (a), the commission may authorize the electric utility to contract with the financing entity or its assignees that the electric utility will:

     (1)  Continue to operate its system to provide service to consumers within its service territory;

     (2)  Collect amounts in respect of the wildfire recovery charges for the benefit and account of the financing entity or its assignees; and

     (3)  Account for and remit these amounts to or for the account of the financing entity or its assignees.

Contracting with the financing entity or its assignees in accordance with that authorization shall not impair or negate the characterization of the sale, assignment, or pledge as an absolute transfer, a true sale, or a security interest, as applicable.  To the extent that billing, collection, and other related services with respect to the provision of the electric utility's services are provided to a consumer by any person or entity other than the electric utility in whose service territory the consumer is located, that person or entity shall collect the wildfire recovery charges and any associated fixed recovery tax amounts from the consumer for the benefit and account of the electric utility, financing entity, or assignees with the associated revenues remitted solely for such person's benefit as a condition to the provision of electric service to that consumer.

     Each financing order shall impose terms and conditions, consistent with the purposes and objectives of this chapter, on any person or entity responsible for billing, collection, and other related services, including without limitation collection of the wildfire recovery charges and any associated fixed recovery tax amounts, that are the subject of the financing order.

     (c)  The financing entity may issue bonds upon approval by the commission in a financing order.  Bonds shall be nonrecourse to the credit or any assets of the electric utility, other than the wildfire recovery property as specified in that financing order.

     (d)  Wildfire recovery property that is specified in a financing order shall constitute an existing, present property right, notwithstanding the fact that the imposition and collection of wildfire recovery charges depend on the electric utility's continuing to provide services or continuing to perform its servicing functions relating to the collection of wildfire recovery charges or on the level of future service consumption, such as electricity consumption.  Wildfire recovery property shall exist whether or not the wildfire recovery charges have been billed, have accrued, or have been collected and notwithstanding the fact that the value for a security interest in the wildfire recovery property, or amount of the wildfire recovery property, is dependent on the future provision of service to consumers.  All wildfire recovery property specified in a financing order shall continue to exist until the bonds issued pursuant to a financing order and all associated financing costs are paid in full.

     (e)  Wildfire recovery property; wildfire recovery charges; and the interests of an assignee, bondholder, or financing entity, or any pledgee in wildfire recovery property and wildfire recovery charges shall not be subject to setoff, counterclaim, surcharge, recoupment, or defense by the electric utility or any other person or in connection with the bankruptcy, reorganization, or other insolvency proceeding of the electric utility, any affiliate of the electric utility, or any other entity.

     (f)  Notwithstanding any law to the contrary, any requirement under this chapter or a financing order that the commission take action with respect to the subject matter of a financing order shall be binding upon the commission, as it may be constituted from time to time, and any successor agency exercising functions similar to the commission, and the commission shall have no authority to rescind, alter, or amend that requirement in a financing order.

     §B-5  Wildfire recovery charge.  (a)  The wildfire recovery charge created pursuant to a financing order approved pursuant to section B-2 shall be a nonbypassable charge of a financing entity that shall be applied to the repayment of bonds and related financing costs as described in this chapter.  The wildfire recovery charge and any associated fixed recovery tax amounts may be a usage-based charge, a flat user charge, or a charge based upon customer revenues as determined by the commission for each consumer class in any financing order.

     (b)  As long as any bonds are outstanding and any financing costs have not been paid in full, any wildfire recovery charge and any associated fixed recovery tax amounts authorized under a financing order shall be nonbypassable.  Subject to any exceptions provided in a financing order, a wildfire recovery charge and any associated fixed recovery tax amounts shall be paid by all existing and future consumers within the utility service territory.

     (c)  The wildfire recovery charge shall be collected by an electric utility or its successors, in accordance with section B-8(a), in full through a charge that is separate and apart from the electric utility's rates.

     (d)  An electric utility may exercise the same rights and remedies under its tariff and applicable law and rules based on a consumer's nonpayment of the wildfire recovery charge as it could for a consumer's failure to pay any other charge payable to that electric utility.

     §B-6  Security interests in wildfire recovery property; financing statements.  (a)  A security interest in wildfire recovery property is valid and enforceable against the pledgor and third parties, subject to the rights of any third parties holding security interests in the wildfire recovery property perfected in the manner described in this section, and attaches when all of the following have occurred:

     (1)  The commission has issued a financing order authorizing the wildfire recovery charge to be included in the wildfire recovery property;

     (2)  Value has been given by the pledgees of the wildfire recovery property; and

     (3)  The pledgor has signed a security agreement covering the wildfire recovery property.

     (b)  A valid and enforceable security interest in wildfire recovery property is perfected when it has attached and when a financing statement has been filed with the bureau of conveyances of the State of Hawaii naming the pledgor of the wildfire recovery property as "debtor" and identifying the wildfire recovery property.

     Any description of the wildfire recovery property shall be sufficient if it refers to the financing order creating the wildfire recovery property.  A copy of the financing statement shall be filed with the commission by the electric utility that is the pledgor or transferor of the wildfire recovery property, and the commission may require the electric utility to make other filings with respect to the security interest in accordance with procedures that the commission may establish; provided that the filings shall not affect the perfection of the security interest.

     (c)  A perfected security interest in wildfire recovery property shall be a continuously perfected security interest in all wildfire recovery property revenues and proceeds arising with respect thereto, whether or not the revenues or proceeds have accrued.  Conflicting security interests shall rank according to priority in time of perfection.  Wildfire recovery property shall constitute property for all purposes, including for contracts securing bonds, whether or not the wildfire recovery property revenues and proceeds have accrued.

     (d)  Subject to the terms of the security agreement covering the wildfire recovery property and the rights of any third parties holding security interests in the wildfire recovery property, perfected in the manner described in this section, the validity and relative priority of a security interest created under this section shall not be defeated or adversely affected by the commingling of revenues arising with respect to the wildfire recovery property with other funds of the electric utility that is the pledgor or transferor of the wildfire recovery property, or by any security interest in a deposit account of that electric utility perfected under article 9 of chapter 490, into which the revenues are deposited.

     Subject to the terms of the security agreement, upon compliance with the requirements of section 490:9-312(b)(1), the pledgees of the wildfire recovery property shall have a perfected security interest in all cash and deposit accounts of the electric utility in which wildfire recovery property revenues have been commingled with other funds.

     (e)  If default occurs under the security agreement covering the wildfire recovery property, the pledgees of the wildfire recovery property, subject to the terms of the security agreement, shall have all rights and remedies of a secured party upon default under article 9 of chapter 490 and shall be entitled to foreclose or otherwise enforce their security interest in the wildfire recovery property, subject to the rights of any third parties holding prior security interests in the wildfire recovery property perfected in the manner provided in this section.

     In addition, the commission may require in the financing order creating the wildfire recovery property that in the event of default by the electric utility in payment of wildfire recovery property revenues, the commission and any successor thereto, upon the application by the pledgees or assignees, including assignees under section B-5 of the wildfire recovery property, and without limiting any other remedies available to the pledgees or assignees by reason of the default, shall order the sequestration and payment to the pledgees or assignees of wildfire recovery property revenues.  Any financing order shall remain in full force and effect notwithstanding any bankruptcy, reorganization, or other insolvency proceedings with respect to the debtor, pledgor, or transferor of the wildfire recovery property.  Any surplus in excess of amounts necessary to pay principal; premiums, if any; interest, costs, and arrearages on the bonds; and associated financing costs arising under the security agreement, shall be remitted to the debtor, pledgor, or transferor, for the purpose of remitting such amounts to customers by means of the electric utility.

     (f)  Sections 490:9-204 and 490:9-205 shall apply to a pledge of wildfire recovery property by the electric utility, an affiliate of the electric utility, or a financing entity.

     §B-7  Transfers of wildfire recovery property.  (a)  A transfer or assignment of wildfire recovery property by the electric utility to an assignee or to a financing entity, or by an assignee of the electric utility or a financing entity to another financing entity, which the parties in the governing documentation have expressly stated to be a sale or other absolute transfer, in a transaction approved in a financing order, shall be treated as an absolute transfer of all of the transferor's right, title, and interest, as in a true sale, and not as a pledge or other financing, of the wildfire recovery property, other than for federal and state income and franchise tax purposes.

     (b)  The characterization of the sale, assignment, or transfer as an absolute transfer and true sale and the corresponding characterization of the property interest of the assignee shall not be affected or impaired by, among other things, the occurrence of any of the following:

     (1)  Commingling of wildfire recovery charge revenues with other amounts;

     (2)  The retention by the seller of either of the following:

          (A)  A partial or residual interest, including an equity interest, in the financing entity or the wildfire recovery property, whether direct or indirect, subordinate or otherwise; or

          (B)  The right to recover costs associated with taxes, franchise fees, or license fees imposed on the collection of wildfire recovery charge;

     (3)  Any recourse that an assignee may have against the seller;

     (4)  Any indemnification rights, obligations, or repurchase rights made or provided by the seller;

     (5)  The obligation of the seller to collect wildfire recovery charges on behalf of an assignee;

     (6)  The treatment of the sale, assignment, or transfer for tax, financial reporting, or other purpose; or

     (7)  Any true-up adjustment of the wildfire recovery charge as provided in the financing order.

     (c)  A transfer of wildfire recovery property shall be deemed perfected against third parties when both of the following occur:

     (1)  The commission issues the financing order authorizing the wildfire recovery charge included in the wildfire recovery property; and

     (2)  An assignment of the wildfire recovery property in writing has been executed and delivered to the assignee.

     (d)  As between bona fide assignees of the same right for value without notice, the assignee first filing a financing statement with the bureau of conveyances of the State of Hawaii in accordance with part 5 of article 9 of chapter 490, naming the assignor of the wildfire recovery property as debtor and identifying the wildfire recovery property, shall have priority.  Any description of the wildfire recovery property shall be sufficient if it refers to the financing order creating the wildfire recovery property.  A copy of the financing statement shall be filed by the assignee with the commission, and the commission may require the assignor or the assignee to make other filings with respect to the transfer in accordance with procedures the commission may establish, but these filings shall not affect the perfection of the transfer.

     §B-8  Financing entity successor requirements; default of financing entity.  (a)  Any successor to an electric utility subject to a financing order, whether pursuant to any bankruptcy, reorganization, or other insolvency proceeding, or pursuant to any merger, sale, or transfer, by operation of law, or otherwise, shall be bound by the requirements of this chapter.  The successor of the electric utility shall perform and satisfy all obligations of the electric utility under the financing order, in the same manner and to the same extent as the electric utility, including the obligation to collect and pay the wildfire recovery charge to any financing party as required by a financing order or any assignee.  Any successor to the electric utility shall be entitled to receive any fixed recovery tax amounts otherwise payable to the electric utility.

     (b)  The commission may require in a financing order that if a default by the electric utility in remittance of the wildfire recovery charge collected arising with respect to wildfire recovery property occurs, the commission, without limiting any other remedies available to any financing party by reason of the default, shall order the sequestration and payment to the beneficiaries of the wildfire recovery charge collected arising with respect to the wildfire recovery property.  Any order shall remain in full force and effect notwithstanding any bankruptcy, reorganization, or other insolvency proceedings with respect to the electric utility.

     §B-9  Severability.  If any provision of this chapter is held to be invalid or is superseded, replaced, repealed, or expires for any reason:

     (1)  That occurrence shall not affect any action allowed under this chapter that is taken prior to that occurrence by the commission, a financing entity, a bondholder, or any financing party, and any such action shall remain in full force and effect; and

     (2)  The validity and enforceability of the rest of this chapter shall remain unaffected."

     SECTION 3.  Section 269-17, Hawaii Revised Statutes, is amended to read as follows:

     "§269-17  Issuance of securities.  A public utility corporation may, on securing the prior approval of the public utilities commission, and not otherwise, except as provided in section B-4, issue stocks and stock certificates, bonds, notes, and other evidences of indebtedness, payable at periods of more than twelve months after the date thereof, for the following purposes and no other, namely:  for the acquisition of property or for the construction, completion, extension, or improvement of or addition to its facilities or service, or for the discharge or lawful refunding of its obligations or for the reimbursement of moneys actually expended from income or from any other moneys in its treasury not secured by or obtained from the issue of its stocks or stock certificates, or bonds, notes, or other evidences of indebtedness, for any of the aforesaid purposes except maintenance of service, replacements, and substitutions not constituting capital expenditure in cases where the corporation has kept its accounts for [such] expenditures in [such] a manner [as to enable] that enables the commission to ascertain the amount of moneys so expended and the purposes for which the expenditures were made, and the sources of the funds in its treasury applied to the expenditures.  As used [herein,] in this section, "property" and "facilities"[,] mean property and facilities used in all operations of a public utility corporation whether or not included in its public utility operations or rate base.  A public utility corporation may not issue securities to acquire property or to construct, complete, extend or improve or add to its facilities or service if the commission determines that the proposed purpose will have a material adverse effect on its public utility operations.

     All stock and every stock certificate, and every bond, note, or other evidence of indebtedness of a public utility corporation not payable within twelve months, issued without an order of the commission authorizing the same, then in effect, shall be void."

     SECTION 4.  Notwithstanding the provisions of section 39A-191, Hawaii Revised Statutes, and the provisions of Act 182, Session Laws of Hawaii 2022, as amended by Act 262, Session Laws of Hawaii 2023, the legislature authorizes the issuance of special purpose revenue bonds for costs that require an allocation of the annual state ceiling under section 39B-2, Hawaii Revised Statutes, for the period of July 1, 2024, through December 31, 2028.  Notwithstanding section 39A-195, Hawaii Revised Statutes, a project agreement entered into in connection with the issuance of special purpose revenue bonds to finance costs may include a project agreement with an affiliate of an electric or gas utility and may contain provisions limiting the obligation to pay, and the security for the payment of, debt service and related deposits and costs in respect of such bonds or loans funded by such bonds to recovery charges and recovery property.

     SECTION 5.  The legislature authorizes the allocation of the annual state ceiling under section 39B-2, Hawaii Revised Statutes, to the issuance of bonds issued pursuant to section 2 of this Act that require such allocation in order for interest on the bonds to be tax-exempt for federal income tax purposes.

     SECTION 6.  This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun before its effective date.

     SECTION 7.  In codifying the new sections added by section 2 of this Act, the revisor of statutes shall substitute appropriate section numbers for the letters used in designating the new sections in this Act.

     SECTION 8.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 9.  This Act shall take effect on July 1, 3000.

Report Title:

Wildfire Recovery Fund; Securitization; Public Utilities Commission

Description:

Establishes the Wildfire Recovery Fund.  Allows securitization for electric utilities.  Effective 7/1/3000.  (HD2)

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.

A BILL FOR AN ACT

RELATING TO WILDFIRES.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

     SECTION 1.  The legislature finds that as the risk of catastrophic wildfires in Hawaii has increased, so has the threat of property damage from these fires.  The legislature further finds that the public interest is served by providing a rapid, efficient, and low-cost process for property owners, renters, businesses, and their insurers to obtain compensation if a regulated utility is alleged to have caused or contributed to the damage resulting from a catastrophic wildfire.  The legislature also finds that under existing law, individuals and businesses must pursue civil litigation, which is a lengthy, costly, and contentious process.

     This Act would help individuals and businesses recover by giving them the option to obtain payment quickly through an administrative claims process similar to the One Ohana Fund, also known as the Maui Wildfires Compensation Fund.  The administrative claims process will begin based on a preliminary determination that a utility was involved, without waiting for the conclusion of a comprehensive investigation of the origin and cause of a catastrophic wildfire.  Claimants are not required to prove that the regulated utility was negligent in order to receive payment through the administrative claims process.

     This Act:

     (1)  Preserves claimants' right to pursue litigation if they choose to reject the amount offered through the administrative claims process;

     (2)  Limits the total amount that can be paid for property damage through both the administrative claims process and litigation, balancing the interests of those affected by a catastrophic fire in obtaining compensation and the interests of the public utilities in mitigating the risk of financial instability that can result from unlimited liability;

     (3)  Requires the public utilities commission to review the conduct of the public utility and to order the utility to replenish the fund, up to a cap, if it finds that the utility acted imprudently; and

     (4)  Provides for the legislature to re-evaluate the risk of catastrophic wildfires in 2035 and to refund to customers the amounts they contributed, plus earnings on those funds, to the extent the legislature concludes that the size of the fund can be reduced based on actions taken to reduce risk.

     The legislature also finds that the public interest is served by establishing a compensation mechanism that does not expose regulated utilities to the financial instability that can result from the existing litigation process.  Regulated utilities alleged to have caused a catastrophic wildfire face massive costs from litigation.  Those costs can overwhelm those utilities, undermining their ability to make investments that the State needs.  Indeed, even the possibility of litigation regarding a future catastrophic wildfire can create a cloud of uncertainty that can impair a utility's ability to attract capital on reasonable terms.  These costs and uncertainties result in increased rates paid by customers and may reduce utilities' ability to make investments in wildfire prevention and resilience initiatives, among other priorities that may affect the health and safety of the State's residents.

     The legislature additionally finds that securitization may be the most efficient, least costly way for a utility to finance the contributions to the wildfire recovery fund.  Utility securitization transactions have an extensive track record of success.

     Therefore, the purpose of this Act is to serve the public interest by establishing a mechanism to provide efficient compensation for property damage resulting from a future catastrophic wildfire allegedly caused by a regulated utility, while also protecting the financial integrity of Hawaii's regulated utilities.

     SECTION 2.  The Hawaii Revised Statutes is amended by adding two new chapters to be appropriately designated and to read as follows:

"CHAPTER A

WILDFIRE RECOVERY FUND

     §A-1  Definitions.  As used in this chapter, unless the context otherwise requires:

     "Catastrophic wildfire" means a wildfire occurring in the State on or after the operation date that destroys more than five hundred commercial structures or residential structures designed for habitation, or, for an electric cooperative with less than fifty thousand residential members, meets a threshold dollar amount of potential claims to be determined by the executive director.

     "Commission" means the public utilities commission.

     "Contributor" means a public utility that satisfies all requirements to participate in the wildfire recovery fund.

     "Covered catastrophic wildfire" means a catastrophic wildfire that may have been caused, or whose severity may have been increased, by a contributor's facilities or actions.

     "Electric utility" means a public utility that exists for the furnishing of electrical power.

     "Executive director" means the executive director of the wildfire recovery fund.

     "Government entity" means any government agency, department, division, subdivision, unit, component, bureau, commission, office, board, or instrumentality of any kind, including federal, state, and municipal entities.

     "Investor-owned utility" means a public utility that is owned by shareholders and overseen by a board of directors elected by shareholders.

     "Operation date" means the first date for contributors to elect to participate in the wildfire recovery fund under section A-3(a) and the rules adopted to implement it.

     "Property insurer" means a person or entity that indemnifies another by a contract of insurance for loss of or damage to real or personal property in the State.

     "Property owner" means an owner of real property in the State.

     "Public utility" has the same meaning as in section 269-1.

     "Qualified action" means a civil action by a qualified claimant to recover qualifying damages.

     "Qualified claimant" means any property owner, property insurer, or tenant who alleges any qualifying damages.

     "Qualified damages" means economic damages arising out of the loss of or damage to real or personal property from a covered catastrophic wildfire.

     "Tenant" means a person or entity lawfully entitled to occupy real property that the person or entity does not own in the State.

     "Wildfire recovery fund" means the wildfire recovery fund established by section A-2.

     "Wildfire risk mitigation plan" means a plan, which may include a natural hazard mitigation report, in which a public utility addresses how it will mitigate the risk of its equipment in causing or exacerbating a wildfire.

     §A-2  Wildfire recovery fund; establishment; executive director.  (a)  There is established outside the state treasury a wildfire recovery fund and any accounts thereunder to carry out the purposes of this chapter.  All moneys in the wildfire recovery fund shall be expended exclusively for the uses and purposes set forth in this chapter.  The wildfire recovery fund shall not be subject to chapter 431.  The moneys in the wildfire recovery fund not required for immediate use shall be invested by the executive director for the benefit of the wildfire recovery fund; provided that no assets of the program shall be transferred to the general fund of the State or to any other fund of the State or otherwise encumbered or used for any purpose other than those specified for the wildfire recovery fund.

     (b)  The wildfire recovery fund shall be placed within the department of commerce and consumer affairs for administrative purposes.  The fund shall be a public body corporate and politic.

     (c)  The governor shall appoint an executive director of the wildfire recovery fund, who shall be exempt from chapter 76, and shall fix the executive director's compensation.  The executive director may be removed only by the governor.

     (d)  The executive director shall be responsible for the day-to-day operations and management of the wildfire recovery fund and shall perform all functions necessary to implement this chapter, including entering into contracts and other obligations related to the operation, management, and administration of the wildfire recovery fund.

     (e)  The executive director may retain, employ, or contract with officers; experts; employees; accountants; actuaries; financial professionals; and other advisers, consultants, attorneys, and professionals, as may be necessary in the executive director's judgment, for the efficient operation, management, and administration of the wildfire recovery fund.

     (f)  The executive director shall have the power to issue revenue bonds, from time to time, in such principal amounts as the executive director may deem advisable for the purpose of this chapter, backed by future payments to the wildfire recovery fund that contributors have committed to make.  These bonds shall be issued pursuant to part III of chapter 39, except as provided in this chapter.

     (g)  The executive director shall adopt rules pursuant to chapter 91 to implement this chapter.

     §A-3  Wildfire recovery fund; eligibility for participation as a contributor; contributions.  (a)  To be eligible to participate as a contributor, a person or entity shall:

     (1)  Be a public utility that has a wildfire risk mitigation plan that has been approved or accepted by the commission;

     (2)  Notify the executive director, in the year before the person or entity becomes a contributor, that it intends to participate in the wildfire recovery fund;

     (3)  Agree to make an initial contribution, the payment of which is thereafter a binding commitment enforceable by the executive director; and

     (4)  Provide a comparison of costs for current commercial insurance coverage compared to wildfire property damage and loss.

     (b)  The initial contributions from investor-owned electric utilities collectively shall be:

     (1)  $500,000,000, which amount shall be recovered from its customers in nonbypassable rates; and

     (2)  $505,000,000, which amount shall be funded by shareholders of those investor-owned electric utilities and used exclusively for the payment of salaries of the executive director and of all other persons retained by the executive director to implement this chapter, with any funds remaining in 2035 to be transferred to the wildfire recovery fund.

     (c)  The investor-owned electric utilities may elect to make the initial contributions set forth in subsection (b)(1), to the degree not paid for through securitization pursuant to chapter B, over a period not to exceed five years; provided that interest shall be added to any amounts paid after the first year, at an interest rate equal to the investor-owned electric utilities' incremental cost of long-term debt, with such interest recovered from customers in rates.

     (d)  The executive director shall determine the initial contributions from other public utilities based on an actuarial assessment of the risk of potential payments by the wildfire recovery fund resulting from covered catastrophic wildfires created by such public utility.

     (e)  The executive director may propose supplemental contributions to the wildfire recovery fund by participating public utilities.

     (f)  If a contributor fails to pay any part of an initial contribution or a supplemental contribution that it agreed to make, or elects not to agree to make a supplemental contribution, that contributor shall no longer be a contributor as of the date on which the payment was due, and the contributor shall not receive any refund of payments previously made; provided that a contributor that elects not to make a supplemental contribution shall be a contributor as to any catastrophic wildfire that occurs before the election date.  After failing to, or electing not to, make a payment, a public utility may rejoin the wildfire recovery fund as a contributor on a prospective basis if it makes owed payments with interest.

     (g)  The executive director shall adopt rules pursuant to chapter 91 regarding the timing of initial and supplemental contributions, which may include upfront, annual, and retrospective payments, specifically payments made after a wildfire occurs.

     §A-4  Determination of a covered catastrophic wildfire.  The executive director shall adopt rules pursuant to chapter 91 regarding how to determine whether a wildfire is a covered catastrophic wildfire.  These rules shall include a requirement that a wildfire shall be determined to be a covered catastrophic wildfire if a party makes non-frivolous allegations in a legal action that a contributor's facilities caused or contributed to the severity of a catastrophic wildfire.

     §A-5  Replenishment of the wildfire recovery fund.  (a)  If the wildfire recovery fund has made payments with respect to a covered catastrophic wildfire and after resolution of substantially all third-party liability claims that were brought or could be brought against contributors arising from that covered catastrophic wildfire, each contributor whose facilities were implicated in the covered catastrophic wildfire shall initiate a proceeding before the commission to review the prudence of the public utility's conduct leading to the catastrophic wildfire.

     (b)  The commission shall determine whether the contributor acted prudently:

     (1)  Considering only acts that may have caused the occurrence or contributed to the severity of the covered catastrophic wildfire; and

     (2)  Evaluating the contributor's actions in the context of its overall systems, processes, and programs, such that an error by a contributor's employee would not be a basis for a finding of imprudence, unless that error resulted from the failure of a system, process, or program to prevent the error.

     (c)  If the commission determines that imprudent conduct by the contributor caused the occurrence or contributed to the severity of a covered catastrophic wildfire, the commission shall determine whether to order the contributor to replenish the wildfire recovery fund in whole or in part for payments from the wildfire recovery fund in connection with the catastrophic wildfire.  In determining the amount of replenishment, if any, the commission shall consider the extent and severity of the contributor's imprudence and factors within and beyond the contributor's control that may have led to or exacerbated the costs from the covered catastrophic wildfire, including but not limited to humidity, temperature, winds, fuel, merged wildfires with independent ignitions, third-party actions that affected the spread of the wildfire, and fire suppression activities.

     (d)  Over any three-year period, the commission shall not order the contributor to reimburse the wildfire recovery fund in an amount that exceeds twenty per cent of the contributor's transmission and distribution equity rate base.

     (e)  A contributor shall not recover in regulated rates any amount that the commission orders it to pay to the wildfire recovery fund as a replenishment under this section.

     §A-6  Claims for payment by qualified claimants; presentment requirement.  (a)  The executive director shall adopt rules pursuant to chapter 91 to create a process through which a qualified claimant that is not a government entity may submit to the wildfire recovery fund a claim for payment of economic damages arising out of property damage resulting from a covered catastrophic wildfire, including a deadline to submit claims.

     (b)  A qualified claimant shall file a claim for payment for economic damages arising out of the loss of or damage to real or personal property from a covered catastrophic wildfire pursuant to this section.  The claim of a qualified claimant that is not a property insurer shall be limited to uninsured economic damages.  A qualified claimant shall not file or maintain a civil action against a contributor unless and until it rejects an offer of settlement from the wildfire recovery fund.   A qualified claimant who fails to file a claim by the deadline established by the executive director pursuant to rule shall be ineligible to receive payment from the wildfire recovery fund and shall be barred from instituting or maintaining any qualifying action against a contributor.

     (c)  The executive director shall make an offer to settle each claim submitted, which the claimant may accept or reject.  In determining the amount of each offer, the executive director shall consider, at a minimum:

     (1)  The economic damages sought by all qualified claimants in the aggregate;

     (2)  The amount available to the wildfire recovery fund relative to the amount under paragraph (1);

     (3)  The strength of any evidence of contributor liability; and

     (4)  The strength of any evidence of involvement of non-contributor third-parties.

     (d)  If the amount available to the wildfire recovery fund, including assets held by the wildfire recovery fund and all payments contributors are obligated to make to the wildfire recovery fund, is less than fifty per cent of the aggregate liability limit as calculated in section A-8, the wildfire recovery fund shall make payment only to contributors pursuant to section A-7.

     §A-7  Claims for payment by contributors.  The executive director shall adopt rules pursuant to chapter 91 to create a process through which a contributor may obtain payment from the wildfire recovery fund to satisfy settled or finally adjudicated claims for recovery of qualifying damages after exhausting the contributor's available insurance.  The rules shall establish the standard for approving any settlement.  To the extent that the wildfire recovery fund lacks sufficient funds to make a payment to a contributor when sought, the wildfire recovery fund shall make such payment upon receipt of contributions that contributors are obligated to make to the wildfire recovery fund under payment schedules.

     §A-8  Limitation on aggregate liability.  (a)  The aggregate liability of all contributors for qualifying damages arising from a covered catastrophic wildfire, including economic and non-economic damages, shall not exceed the greater of:

     (1)  Fifty per cent of the amount available to the wildfire recovery fund at the time of the covered catastrophic wildfire, including amounts in and obligated to the wildfire recovery fund; or

     (2)  The average assessed value of commercial structures and residential structures designed for habitation in the county in which the covered catastrophic wildfire ignited, multiplied by the number of commercial structures or residential structures designed for habitation that were destroyed.

     (b)  The following amounts shall be added to determine whether the aggregate liability limit has been reached:

     (1)  Payments from the wildfire recovery fund under section A-6; and

     (2)  Payments by a contributor in connection with any settlement or judgment on a claim for qualifying damages.

     (c)  All civil actions arising out of a catastrophic wildfire shall be brought in the circuit in which the catastrophic wildfire occurred.  The court shall adopt procedures to equitably apply the limit set forth in subsection (a) to all civil claims that are filed.  All settlements or judgments for claims for qualifying damages shall be subject to approval by the court.  The court shall not approve any settlement or judgment that would cause the aggregate liability of contributors to exceed the aggregate liability limit.

     (d)  A court shall consolidate cases arising from a covered catastrophic wildfire.  Any circuit court that is not the consolidating court shall transfer any civil case to facilitate such consolidation.

     §A-9  Limitations on claims.  (a)  No qualifying action may be instituted or maintained by a qualified claimant against contributors or their affiliates, employees, agents, or insurers if the qualified claimant accepts an offer under section A-6; provided that the rights of a property insurer to sue as a subrogee of its policyholder shall not be affected by a property owner's or tenant's acceptance of an offer under section A-6 and the subrogation rights shall be affected only if the property insurer elects to accept an offer under section A-6.

     (b)  No suit, claim, arbitration, or other civil legal action for indemnity or contribution for amounts paid, or that may be paid, as a result of a covered catastrophic wildfire, may be instituted or maintained by any persons or entities against contributors or their affiliates, employees, agents, or insurers for qualifying damages.

     §A-10  Several liability.  Any law to the contrary notwithstanding, joint and several liability is abolished for any qualifying damages.  Any person or entity that is sued for qualifying damages may argue for apportionment of fault to any other person or entity regardless of whether that person or entity is a party to the action.

     §A-11  Reporting; refunds authorized by the legislature.  (a)  The executive director shall submit to the legislature and commission an annual report regarding the wildfire recovery fund no later than ninety days prior to the beginning of each regular session until 2034.  The annual plan submitted by the executive director shall include an update on the activities of the wildfire recovery fund.

     (b)  No later than ninety days prior to the regular session of 2035, the executive director shall submit a report regarding the financial status and resources of the wildfire recovery fund relative to the then-current assessment of actuarial risk of a catastrophic wildfire.

     (c)  Based on the report in subsection (b), the legislature may determine that the wildfire recovery fund is overfunded and direct the executive director to return contributions, in whole or in part, with associated investment earnings, to contributors.  Any payments made to the wildfire recovery fund that were recovered in regulated rates from customers, and any investment earnings associated with those payments, shall, in the event that the legislature orders a refund, be returned to those customers.

     §A-12  Inadmissible evidence.  Any findings made or evidence submitted for purposes of proceedings under sections A-4, A-6, and A-7 shall be subject to the limits on admissibility under rule 408, Hawaii rules of evidence, as set forth in section 626-1.

CHAPTER B

SECURITIZATION

     §B-1  Definitions.  As used in this chapter, unless the context otherwise requires:

     "Ancillary agreement" means a bond insurance policy, letter of credit, reserve account, surety bond, swap arrangement, hedging arrangement, liquidity or credit support arrangement, or other similar agreement or arrangement entered into in connection with the issuance of bonds that is designed to promote the credit quality and marketability of the bonds or to mitigate the risk of an increase in interest rates.

     "Assignee" means a legally recognized entity to which an electric utility assigns, sells, or transfers, other than as security, all or a portion of the electric utility's interest in or right to wildfire recovery property.  "Assignee" includes a corporation, limited liability company, general partnership or limited partnership, public authority, trust, financing entity, or any other legal entity to which an assignee assigns, sells, or transfers, other than as security, its interest in or right to wildfire recovery property.

     "Bond" means any bond, note, certificate of participation or beneficial interest, or other evidence of indebtedness or ownership that is issued by the financing entity under a financing order, the proceeds of which are used directly or indirectly to recover, finance, or refinance financing costs of any wildfire recovery costs, and that are directly or indirectly secured by or payable from wildfire recovery property.

     "Commission" means the public utilities commission.

     "Consumer" means any individual, governmental body, trust, business entity, or nonprofit organization that consumes electricity that has been transmitted or distributed by means of electric transmission or distribution facilities, whether those electric transmission or distribution facilities are owned by the consumer, the electric utility, or any other party.

     "Electric cooperative" means an electric utility that satisfies the requirements under section 269-31(c).

     "Electric cooperative wildfire claims costs" means costs incurred by an electric cooperative to resolve third-party liability claims arising from any wildfire occurring in the State that are not covered by insurance and that the commission finds to be just and reasonable.  Electric cooperative wildfire claims costs do not include costs incurred by an investor-owned electric utility.

     "Electric utility" means a public utility that exists for the furnishing of electrical power.

     "Financing costs" means the reasonable costs to issue, service, repay, or refinance bonds, whether incurred or paid upon issuance of the bonds or over the life of the bonds, if they are approved for recovery by the commission in a financing order.  "Financing costs" includes any of the following:

     (1)  Principal, interest, and redemption premiums that are payable on bonds;

     (2)  A payment required under an ancillary agreement;

     (3)  An amount required to fund or replenish reserve accounts or other accounts established under an indenture, ancillary agreement, or other financing document related to the bonds;

     (4)  Taxes, franchise fees, or license fees imposed on a financing entity as a result of the issuance of the financing order; the assignment, sale, or transfer of any wildfire recovery property; or the sale of the bonds, or imposed on the wildfire recovery charges, or otherwise resulting from the collection of the wildfire recovery charge, in any such case whether paid, payable, or accrued;

     (5)  Costs related to issuing and servicing bonds or the application for a financing order, including without limitation servicing fees and expenses, trustee fees and expenses, legal fees and expenses, accounting fees, administrative fees, underwriting and placement fees, financial advisory fees, original issue discount, capitalized interest, rating agency fees, and any other related costs that are approved for recovery in the financing order;

     (6)  Costs related to the engagement of services of a financial advisor by the commission pursuant to section B-3(h); and

     (7)  Other costs as specifically authorized by a financing order.

     "Financing entity" means an electric utility or an entity to which an electric utility or an affiliate of an electric utility sells, assigns, or pledges all or a portion of the electric utility's interest in wildfire recovery property, including an affiliate of the electric utility or any unaffiliated entity, in each case as approved by the commission in a financing order.

     Subject to section B-6(c), an entity to which an electric utility sells, assigns, or pledges all or a portion of the electric utility's interest in wildfire recovery property may include any governmental entity that is able to issue bonds that are exempt from federal tax pursuant to section 103 of the Internal Revenue Code of 1986, as amended, including the State or a political subdivision thereof or any department, agency, or instrumentality of the State or political subdivision; provided that the bonds issued shall not constitute a general obligation of the State or any political subdivision thereof or any department, agency, or instrumentality of the State or political subdivision and shall not constitute a pledge of the full faith and credit of the entity or of the State or any political subdivision thereof, but shall be payable solely from the funds provided under this chapter.

     "Financing order" means an order of the commission under this chapter that has become final and no longer subject to appeal as provided by law and that authorizes the issuance of bonds and the imposition, adjustment from time to time, and collection of wildfire recovery charges, and that shall include a procedure to require the expeditious approval by the commission of periodic adjustments to wildfire recovery charges and to any associated fixed recovery tax amounts included in that financing order to ensure recovery of all wildfire recovery costs and the costs associated with the proposed recovery, financing, or refinancing thereof, including the costs of servicing and retiring the bonds contemplated by the financing order.

     "Financing party" means any holder of the bonds; any party to or beneficiary of an ancillary agreement; and any trustee, collateral agent, or other person acting for the benefit of any of the foregoing.

     "Fixed recovery tax amounts" means those nonbypassable rates and other charges, including but not limited to distribution, connection, disconnection, and termination rates and charges, that are needed to recover federal and state taxes associated with wildfire recovery charges authorized by the commission in a financing order, but are not approved as financing costs financed from proceeds of bonds.

     "Investor-owned utility" means a public utility that is owned by shareholders and overseen by a board of directors elected by shareholders.

     "Public utility" has the same meaning as in section 269-1.

     "True-up adjustment" means a formulaic adjustment to the wildfire recovery charges as they appear on consumer bills that is necessary to correct for any overcollection or undercollection of the wildfire recovery charges authorized by a financing order and to otherwise ensure the timely and complete payment and recovery of wildfire recovery costs over the authorized repayment term.

     "Wildfire recovery charges" means the nonbypassable charges, including but not limited to distribution, connection, disconnection, and termination rates and charges, that are authorized by section B-2 and in a financing order authorized under this chapter to be imposed on and collected from all existing and future consumers of a financing entity or any successor to recover principal, interest, and other financing costs relating to the bonds.

     "Wildfire recovery costs" means an investor-owned electric utility's initial and supplemental contributions to the wildfire recovery fund, as set forth in section A-3, and electric cooperative wildfire claims costs.

     "Wildfire recovery fund" means the wildfire recovery fund established by chapter A.

     "Wildfire recovery property" means the property right created pursuant to this chapter, including without limitation the right, title, and interest of the electric utility, financing entity, or its assignee:

     (1)  In and to the wildfire recovery charge established pursuant to a financing order, including the right to impose, bill, collect, and receive such wildfire recovery charges under the financing order and all rights to obtain adjustments to the wildfire recovery charge in accordance with section B-3 and the financing order; and

     (2)  To be paid the amount that is determined in a financing order to be the amount that the electric utility or its assignee is lawfully entitled to receive pursuant to this chapter and the proceeds thereof, and in and to all revenues, collections, claims, payments, moneys, or proceeds of, or arising from, the wildfire recovery charge that is the subject of a financing order.

"Wildfire recovery property" does not include a right to be paid fixed recovery tax amounts.  "Wildfire recovery property" shall constitute a current property right, notwithstanding the fact that the value of the property right will depend on consumers using electricity or, in those instances where consumers are customers of the electric utility, the electric utility performing certain services.

     §B-2   Applications to issue bonds and authorize wildfire recovery charges.  (a)  An electric utility may apply to the commission for one or more financing orders to issue bonds to recover any wildfire recovery costs, each of which authorizes the following:

     (1)  The imposition, charging, and collection of a wildfire recovery charge, to become effective upon the issuance of the bonds, and an adjustment of any such wildfire recovery charge in accordance with a true-up adjustment mechanism under this chapter in amounts sufficient to pay the principal and interest on the bonds and all other associated financing costs on a timely basis;

     (2)  The creation of wildfire recovery property under the financing order; and

     (3)  The imposition, charging, and collection of fixed recovery tax amounts to recover any portion of the electric utility's federal and state taxes associated with those wildfire recovery charges and not financed from the proceeds of bonds.

     (b)  The application shall include all of the following:

     (1)  The wildfire recovery costs to be financed through the issuance of bonds;

     (2)  The principal amount of the bonds proposed to be issued and the selection of a financing entity;

     (3)  An estimate of the date on which each series of bonds is expected to be issued;

     (4)  The scheduled final payment date, which shall not exceed thirty years, and a legal final maturity date, which may be longer, subject to rating agency and market considerations, during which term the wildfire recovery charge associated with the issuance of each series of bonds is expected to be imposed and collected;

     (5)  An estimate of the financing costs associated with the issuance of each series of bonds;

     (6)  An estimate of the amount of the wildfire recovery charge revenues necessary to pay principal and interest on the bonds and all other associated financing costs as set forth in the application and the calculation for that estimate;

     (7)  A proposed design of the wildfire recovery charge and a proposed methodology for allocating the wildfire recovery charge among customer classes within the electric utility's service territory;

     (8)  A description of the financing entity selected by the electric utility;

     (9)  A description of a proposed true-up adjustment mechanism for the adjustment of the wildfire recovery charge to correct for any overcollection or undercollection of the wildfire recovery charge, and to otherwise ensure the timely payment of principal and interest on the bonds and all other associated financing costs; and

    (10)  Any other information required by the commission.

     (c)  An electric utility may file an application for a financing order, including as a joint application with one or more affiliate electric utilities, to issue bonds to recover wildfire recovery costs.  The application shall include a description of how the wildfire recovery costs will be allocated among consumers of the applicant electric utilities.

     In the alternative, an electric utility may apply for a financing order to issue bonds to recover wildfire recovery costs, including wildfire recovery costs incurred, or to be incurred, by the applicant and one or more of its affiliate electric utilities.  In connection with the issuance of a financing order pursuant to this subsection, the commission shall issue a concurrent order to the affiliate electric utility or electric utilities directing such affiliate electric utility or electric utilities to impose rates on its or their consumers designed to generate revenue sufficient to pay credits over the life of the bonds to the applicant electric utility in such amount as the commission determines is equitable, just, and reasonable.  Such an application shall describe the allocation method and adjustment mechanism for the affiliate electric utility credit payments proposed to be subject to the concurrent commission order.

     (d)  The commission shall issue an approval or denial of any application for a financing order filed pursuant to this section within ninety days of the last filing in the applicable docket.

     (e)  In exercising its duties under this section, the commission shall consider:

     (1)  Whether the issuance of the bonds, and the imposition and collection of wildfire recovery charges are consistent with the public interest;

     (2)  Whether the structuring, marketing, and pricing of the bonds are expected to result in the lowest wildfire recovery charges consistent with market conditions at the time at which the bonds are priced and the terms of the financing order;

     (3)  Whether the terms and conditions of any bonds to be issued are just and reasonable;

     (4)  With respect to an application by an investor-owned utility, whether the recovery of wildfire recovery costs through the designation of the wildfire recovery charges and any associated fixed recovery tax amounts, and the issuance of bonds in connection with the wildfire recovery charges, would result in net savings or mitigate rate impacts to consumers, as compared to rate recovery without securitization; and

     (5)  Any other factors that the commission deems reasonable and in the public interest.

If the commission makes the determination specified in this section, the commission shall establish, as part of the financing order, a procedure for the electric utility to submit applications from time to time to request the issuance of additional financing orders designating wildfire recovery charges and any associated fixed recovery tax amounts as recoverable.

     At the option of the electric utility, the electric utility may include in its application for a financing order a request for authorization to sell, transfer, assign, or pledge wildfire recovery property to a governmental entity if the electric utility expects bonds issued by a governmental entity would result in a more cost-efficient means, taking into account all financing costs related to the bonds, than using another financing entity to issue bonds to finance the same wildfire recovery costs, taking into account the costs of issuing the other financing entity's bonds.

     (f)  Wildfire recovery charges and any associated fixed recovery tax amounts shall be imposed only on existing and future consumers in the utility service territory of the electric utility that is subject to such financing order.  Consumers within the utility service territory of the electric utility that is subject to the financing order shall continue to pay wildfire recovery charges and any associated fixed recovery tax amounts until the bonds and associated financing costs are paid in full by the financing entity.

     §B-3  Wildfire recovery financing order.  (a)  A financing order shall remain in effect until the bonds issued under the financing order and all financing costs related to the bonds have been paid in full or defeased by their terms.

     A financing order shall remain in effect and unabated notwithstanding the bankruptcy, reorganization, or insolvency of the electric utility or the commencement of any judicial or nonjudicial proceeding on the financing order.

     (b)  Notwithstanding any other law to the contrary, with respect to wildfire recovery property that has been made the basis for the issuance of bonds and with respect to any associated fixed recovery tax amounts, the financing order, the wildfire recovery charges, and any associated fixed recovery tax amounts shall be irrevocable.  The State and its agencies, including the commission, pledge and agree with bondholders, the owners and assignees of the wildfire recovery property, and other financing parties, that the State and its agencies shall not take any action listed in this subsection.  This subsection shall not preclude an action if such action would not adversely affect the interests of the electric utility, of assignees of the wildfire recovery property, and of bondholders.  The prohibited actions shall be the following:

     (1)  Alter the provisions of this chapter, which authorize the commission to create an irrevocable contract right or choice in action by the issuance of a financing order, to create wildfire recovery property and make the wildfire recovery charges imposed by a financing order irrevocable, binding, nonbypassable charges for all existing and future consumers;

     (2)  Take or permit any action that impairs or would impair the value of wildfire recovery property or the security for the bonds or revise the wildfire recovery costs for which recovery is authorized;

     (3)  In any way impair the rights and remedies of the bondholders, assignees, and other financing parties; and

     (4)  Except for changes made pursuant to the formula-based true-up mechanism authorized under subsection (d), reduce, alter, or impair wildfire recovery charges that are to be imposed, billed, charged, collected, and remitted for the benefit of the bondholders, any assignee, and any other financing parties until any and all principal, interest, premium, financing costs, and other fees, expenses, or charges incurred, and any contracts to be performed, in connection with the related bonds have been paid and performed in full.

     The financing entity is authorized to include this pledge in the bonds.

     (c)  Under a financing order, the electric utility shall retain sole discretion to select the financing entity and to cause bonds to be issued, including the right to defer or postpone the issuance, assignment, sale, or transfer of wildfire recovery property.

     (d)  The commission may create, pursuant to an application from an electric utility, a nonbypassable charge referred to as a wildfire recovery charge, which shall be applied to recover principal, interest, and other financing costs relating to the bonds.  The wildfire recovery charge shall be a dedicated, discrete tariff rider.

     The commission shall, in any financing order, establish a procedure for periodic true-up adjustments to wildfire recovery charges, which shall be made at least annually and may be made more frequently.  The periodic true-up adjustment to wildfire recovery charges shall also consider interest on ratepayer investments into the fund.  Within thirty days after receiving an electric utility's filing of a true-up adjustment, the commission's review of the filing shall be limited to mathematical or clerical errors as determined in accordance with any true-up adjustment formulas set forth in the applicable financing order.

     The commission shall either approve the filing or inform the electric utility of any mathematical or clerical errors in its calculation.  If the commission informs the electric utility of mathematical or clerical errors in its calculation, the electric utility shall correct its error and refile its true-up adjustment.  The timeframes previously described in this subsection shall apply to a refiled true-up adjustment.

     (e)  Neither financing orders nor bonds issued under this chapter shall constitute a general obligation of the State or any of its political subdivisions, nor shall they constitute a pledge of the full faith and credit of the State or any of its political subdivisions, but shall be payable solely from the wildfire recovery property provided under this chapter.

     All bonds shall contain on the face thereof a statement to the following effect:  "Neither the full faith and credit nor the taxing power of the State of Hawaii is pledged to the payment of the principal of, or interest and premium on, this bond."

     The issuance of bonds under this chapter shall not directly, indirectly, or contingently obligate the State or any of its political subdivisions to levy or pledge any form of taxation or to make any appropriation for their payment.

     (f)  Wildfire recovery charges are wildfire recovery property when, and to the extent that, a financing order authorizing the wildfire recovery charges has become effective in accordance with this chapter, and the wildfire recovery property shall thereafter continuously exist as property for all purposes, and all of the rights and privileges relating to that property shall continuously exist for the period and to the extent provided in the financing order, but in any event until the bonds, including all principal; premiums, if any; interest with respect to the bonds; and all other financing costs are paid in full.  A financing order may provide that the creation of wildfire recovery property shall be simultaneous with the sale of the wildfire recovery property to an assignee as provided in the application of the pledge of the wildfire recovery property to secure the bonds.

     (g)  Any successor to a financing entity shall be bound by the requirements of this chapter and shall perform and satisfy all obligations of and have the same rights under a financing order as, and to the same extent as, the financing entity.

     (h)  The commission, in its discretion, may engage the services of a financial adviser for the purposes of assisting the commission in its consideration of an application for a financing order and a subsequent issuance of bonds pursuant to a financing order.

     §B-4  Bonds; issuance; wildfire recovery property interests.  (a)  The electric utility may sell and assign all or portions of its interest in wildfire recovery property to one or more financing entities that make that wildfire recovery property the basis for issuance of bonds, to the extent approved in a financing order.  The electric utility or financing entity may pledge wildfire recovery property as collateral, directly or indirectly, for bonds to the extent approved in the pertinent financing orders providing for a security interest in the wildfire recovery property, in the manner set forth in this section.  In addition, wildfire recovery property may be sold or assigned by either of the following:

     (1)  The financing entity or a trustee for the holders of bonds or the holders of an ancillary agreement in connection with the exercise of remedies upon a default under the terms of the bonds; or

     (2)  Any person acquiring the wildfire recovery property after a sale or assignment pursuant to this chapter.

     (b)  To the extent that any interest in wildfire recovery property is sold, assigned, or is pledged as collateral pursuant to subsection (a), the commission may authorize the electric utility to contract with the financing entity or its assignees that the electric utility will:

     (1)  Continue to operate its system to provide service to consumers within its service territory;

     (2)  Collect amounts in respect of the wildfire recovery charges for the benefit and account of the financing entity or its assignees; and

     (3)  Account for and remit these amounts to or for the account of the financing entity or its assignees.

Contracting with the financing entity or its assignees in accordance with that authorization shall not impair or negate the characterization of the sale, assignment, or pledge as an absolute transfer, a true sale, or a security interest, as applicable.  To the extent that billing, collection, and other related services with respect to the provision of the electric utility's services are provided to a consumer by any person or entity other than the electric utility in whose service territory the consumer is located, that person or entity shall collect the wildfire recovery charges and any associated fixed recovery tax amounts from the consumer for the benefit and account of the electric utility, financing entity, or assignees with the associated revenues remitted solely for such person's benefit as a condition to the provision of electric service to that consumer.

     Each financing order shall impose terms and conditions, consistent with the purposes and objectives of this chapter, on any person or entity responsible for billing, collection, and other related services, including without limitation collection of the wildfire recovery charges and any associated fixed recovery tax amounts, that are the subject of the financing order.

     (c)  The financing entity may issue bonds upon approval by the commission in a financing order.  Bonds shall be nonrecourse to the credit or any assets of the electric utility, other than the wildfire recovery property as specified in that financing order.

     (d)  Wildfire recovery property that is specified in a financing order shall constitute an existing, present property right, notwithstanding the fact that the imposition and collection of wildfire recovery charges depend on the electric utility's continuing to provide services or continuing to perform its servicing functions relating to the collection of wildfire recovery charges or on the level of future service consumption, such as electricity consumption.  Wildfire recovery property shall exist whether or not the wildfire recovery charges have been billed, have accrued, or have been collected and notwithstanding the fact that the value for a security interest in the wildfire recovery property, or amount of the wildfire recovery property, is dependent on the future provision of service to consumers.  All wildfire recovery property specified in a financing order shall continue to exist until the bonds issued pursuant to a financing order and all associated financing costs are paid in full.

     (e)  Wildfire recovery property; wildfire recovery charges; and the interests of an assignee, bondholder, or financing entity, or any pledgee in wildfire recovery property and wildfire recovery charges shall not be subject to setoff, counterclaim, surcharge, recoupment, or defense by the electric utility or any other person or in connection with the bankruptcy, reorganization, or other insolvency proceeding of the electric utility, any affiliate of the electric utility, or any other entity.

     (f)  Notwithstanding any law to the contrary, any requirement under this chapter or a financing order that the commission take action with respect to the subject matter of a financing order shall be binding upon the commission, as it may be constituted from time to time, and any successor agency exercising functions similar to the commission, and the commission shall have no authority to rescind, alter, or amend that requirement in a financing order.

     §B-5  Wildfire recovery charge.  (a)  The wildfire recovery charge created pursuant to a financing order approved pursuant to section B-2 shall be a nonbypassable charge of a financing entity that shall be applied to the repayment of bonds and related financing costs as described in this chapter.  The wildfire recovery charge and any associated fixed recovery tax amounts may be a usage-based charge, a flat user charge, or a charge based upon customer revenues as determined by the commission for each consumer class in any financing order.

     (b)  As long as any bonds are outstanding and any financing costs have not been paid in full, any wildfire recovery charge and any associated fixed recovery tax amounts authorized under a financing order shall be nonbypassable.  Subject to any exceptions provided in a financing order, a wildfire recovery charge and any associated fixed recovery tax amounts shall be paid by all existing and future consumers within the utility service territory.

     (c)  The wildfire recovery charge shall be collected by an electric utility or its successors, in accordance with section B-8(a), in full through a charge that is separate and apart from the electric utility's rates.

     (d)  An electric utility may exercise the same rights and remedies under its tariff and applicable law and regulation based on a consumer's nonpayment of the wildfire recovery charge as it could for a consumer's failure to pay any other charge payable to that electric utility.

     §B-6  Security interests in wildfire recovery property; financing statements.  (a)  A security interest in wildfire recovery property is valid and enforceable against the pledgor and third parties, subject to the rights of any third parties holding security interests in the wildfire recovery property perfected in the manner described in this section, and attaches when all of the following have occurred:

     (1)  The commission has issued a financing order authorizing the wildfire recovery charge to be included in the wildfire recovery property;

     (2)  Value has been given by the pledgees of the wildfire recovery property; and

     (3)  The pledgor has signed a security agreement covering the wildfire recovery property.

     (b)  A valid and enforceable security interest in wildfire recovery property is perfected when it has attached and when a financing statement has been filed with the bureau of conveyances of the State of Hawaii naming the pledgor of the wildfire recovery property as "debtor" and identifying the wildfire recovery property.

     Any description of the wildfire recovery property shall be sufficient if it refers to the financing order creating the wildfire recovery property.  A copy of the financing statement shall be filed with the commission by the electric utility that is the pledgor or transferor of the wildfire recovery property, and the commission may require the electric utility to make other filings with respect to the security interest in accordance with procedures that the commission may establish; provided that the filings shall not affect the perfection of the security interest.

     (c)  A perfected security interest in wildfire recovery property shall be a continuously perfected security interest in all wildfire recovery property revenues and proceeds arising with respect thereto, whether or not the revenues or proceeds have accrued.  Conflicting security interests shall rank according to priority in time of perfection.  Wildfire recovery property shall constitute property for all purposes, including for contracts securing bonds, whether or not the wildfire recovery property revenues and proceeds have accrued.

     (d)  Subject to the terms of the security agreement covering the wildfire recovery property and the rights of any third parties holding security interests in the wildfire recovery property, perfected in the manner described in this section, the validity and relative priority of a security interest created under this section shall not be defeated or adversely affected by the commingling of revenues arising with respect to the wildfire recovery property with other funds of the electric utility that is the pledgor or transferor of the wildfire recovery property, or by any security interest in a deposit account of that electric utility perfected under article 9 of chapter 490, into which the revenues are deposited.

     Subject to the terms of the security agreement, upon compliance with the requirements of section 490:9-312(b)(1), the pledgees of the wildfire recovery property shall have a perfected security interest in all cash and deposit accounts of the electric utility in which wildfire recovery property revenues have been commingled with other funds.

     (e)  If default occurs under the security agreement covering the wildfire recovery property, the pledgees of the wildfire recovery property, subject to the terms of the security agreement, shall have all rights and remedies of a secured party upon default under article 9 of chapter 490 and shall be entitled to foreclose or otherwise enforce their security interest in the wildfire recovery property, subject to the rights of any third parties holding prior security interests in the wildfire recovery property perfected in the manner provided in this section.

     In addition, the commission may require in the financing order creating the wildfire recovery property that in the event of default by the electric utility in payment of wildfire recovery property revenues, the commission and any successor thereto, upon the application by the pledgees or assignees, including assignees under section B-5 of the wildfire recovery property, and without limiting any other remedies available to the pledgees or assignees by reason of the default, shall order the sequestration and payment to the pledgees or assignees of wildfire recovery property revenues.  Any financing order shall remain in full force and effect notwithstanding any bankruptcy, reorganization, or other insolvency proceedings with respect to the debtor, pledgor, or transferor of the wildfire recovery property.  Any surplus in excess of amounts necessary to pay principal; premiums, if any; interest, costs, and arrearages on the bonds; and associated financing costs arising under the security agreement, shall be remitted to the debtor, pledgor, or transferor, for the purpose of remitting such amounts to customers via the electric utility.

     (f)  Sections 490:9-204 and 490:9-205 shall apply to a pledge of wildfire recovery property by the electric utility, an affiliate of the electric utility, or a financing entity.

     §B-7  Transfers of wildfire recovery property.  (a)  A transfer or assignment of wildfire recovery property by the electric utility to an assignee or to a financing entity, or by an assignee of the electric utility or a financing entity to another financing entity, which the parties in the governing documentation have expressly stated to be a sale or other absolute transfer, in a transaction approved in a financing order, shall be treated as an absolute transfer of all of the transferor's right, title, and interest, as in a true sale, and not as a pledge or other financing, of the wildfire recovery property, other than for federal and state income and franchise tax purposes.

     (b)  The characterization of the sale, assignment, or transfer as an absolute transfer and true sale and the corresponding characterization of the property interest of the assignee shall not be affected or impaired by, among other things, the occurrence of any of the following:

     (1)  Commingling of wildfire recovery charge revenues with other amounts;

     (2)  The retention by the seller of either of the following:

          (A)  A partial or residual interest, including an equity interest, in the financing entity or the wildfire recovery property, whether direct or indirect, subordinate or otherwise; or

          (B)  The right to recover costs associated with taxes, franchise fees, or license fees imposed on the collection of wildfire recovery charge;

     (3)  Any recourse that an assignee may have against the seller;

     (4)  Any indemnification rights, obligations, or repurchase rights made or provided by the seller;

     (5)  The obligation of the seller to collect wildfire recovery charges on behalf of an assignee;

     (6)  The treatment of the sale, assignment, or transfer for tax, financial reporting, or other purpose; or

     (7)  Any true-up adjustment of the wildfire recovery charge as provided in the financing order.

     (c)  A transfer of wildfire recovery property shall be deemed perfected against third parties when both of the following occur:

     (1)  The commission issues the financing order authorizing the wildfire recovery charge included in the wildfire recovery property; and

     (2)  An assignment of the wildfire recovery property in writing has been executed and delivered to the assignee.

     (d)  As between bona fide assignees of the same right for value without notice, the assignee first filing a financing statement with the bureau of conveyances of the State of Hawaii in accordance with part 5 of article 9 of chapter 490, naming the assignor of the wildfire recovery property as debtor and identifying the wildfire recovery property, shall have priority.  Any description of the wildfire recovery property shall be sufficient if it refers to the financing order creating the wildfire recovery property.  A copy of the financing statement shall be filed by the assignee with the commission, and the commission may require the assignor or the assignee to make other filings with respect to the transfer in accordance with procedures the commission may establish, but these filings shall not affect the perfection of the transfer.

     §B-8  Financing entity successor requirements; default of financing entity.  (a)  Any successor to an electric utility subject to a financing order, whether pursuant to any bankruptcy, reorganization, or other insolvency proceeding, or pursuant to any merger, sale, or transfer, by operation of law, or otherwise, shall be bound by the requirements of this chapter.  The successor of the electric utility shall perform and satisfy all obligations of the electric utility under the financing order, in the same manner and to the same extent as the electric utility, including the obligation to collect and pay the wildfire recovery charge to any financing party as required by a financing order or any assignee.  Any successor to the electric utility shall be entitled to receive any fixed recovery tax amounts otherwise payable to the electric utility.

     (b)  The commission may require in a financing order that if a default by the electric utility in remittance of the wildfire recovery charge collected arising with respect to wildfire recovery property occurs, the commission, without limiting any other remedies available to any financing party by reason of the default, shall order the sequestration and payment to the beneficiaries of the wildfire recovery charge collected arising with respect to the wildfire recovery property.  Any order shall remain in full force and effect notwithstanding any bankruptcy, reorganization, or other insolvency proceedings with respect to the electric utility.

     §B-9  Severability.  If any provision of this chapter is held to be invalid or is superseded, replaced, repealed, or expires for any reason:

     (1)  That occurrence shall not affect any action allowed under this chapter that is taken prior to that occurrence by the commission, a financing entity, a bondholder, or any financing party, and any such action shall remain in full force and effect; and

     (2)  The validity and enforceability of the rest of this chapter shall remain unaffected."

     SECTION 3.  Section 269-17, Hawaii Revised Statutes, is amended to read as follows:

     "§269-17  Issuance of securities.  A public utility corporation may, on securing the prior approval of the public utilities commission, and not otherwise, except as provided in section B-4, issue stocks and stock certificates, bonds, notes, and other evidences of indebtedness, payable at periods of more than twelve months after the date thereof, for the following purposes and no other, namely:  for the acquisition of property or for the construction, completion, extension, or improvement of or addition to its facilities or service, or for the discharge or lawful refunding of its obligations or for the reimbursement of moneys actually expended from income or from any other moneys in its treasury not secured by or obtained from the issue of its stocks or stock certificates, or bonds, notes, or other evidences of indebtedness, for any of the aforesaid purposes except maintenance of service, replacements, and substitutions not constituting capital expenditure in cases where the corporation has kept its accounts for [such] expenditures in [such] a manner [as to enable] that enables the commission to ascertain the amount of moneys so expended and the purposes for which the expenditures were made, and the sources of the funds in its treasury applied to the expenditures.  As used [herein,] in this section, "property" and "facilities"[,] mean property and facilities used in all operations of a public utility corporation whether or not included in its public utility operations or rate base.  A public utility corporation may not issue securities to acquire property or to construct, complete, extend or improve or add to its facilities or service if the commission determines that the proposed purpose will have a material adverse effect on its public utility operations.

     All stock and every stock certificate, and every bond, note, or other evidence of indebtedness of a public utility corporation not payable within twelve months, issued without an order of the commission authorizing the same, then in effect, shall be void."

     SECTION 4.  Notwithstanding the provisions of section 39A-191, Hawaii Revised Statutes, and the provisions of Act 182 Session Laws of Hawaii 2022, as amended by Act 262, Session Laws of Hawaii 2023, the legislature authorizes the issuance of special purpose revenue bonds for costs that require an allocation of the annual state ceiling under section 39B-2, Hawaii Revised Statutes, for the period of July 1, 2024, through December 31, 2028.  Notwithstanding section 39A-195, Hawaii Revised Statutes, a project agreement entered into in connection with the issuance of special purpose revenue bonds to finance costs may include a project agreement with an affiliate of an electric or gas utility and may contain provisions limiting the obligation to pay, and the security for the payment of, debt service and related deposits and costs in respect of such bonds or loans funded by such bonds to recovery charges and recovery property.

     SECTION 5.  The legislature authorizes the allocation of the annual state ceiling under section 39B-2, Hawaii Revised Statutes, to the issuance of bonds issued pursuant to section 2 of this Act that require such allocation in order for interest on the bonds to be tax-exempt for federal income tax purposes.

     SECTION 6.  This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun before its effective date.

     SECTION 7.  In codifying the new sections added by section 2 of this Act, the revisor of statutes shall substitute appropriate section numbers for the letters used in designating the new sections in this Act.

     SECTION 8.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 9.  This Act shall take effect on July 1, 3000.

Report Title:

Wildfire Recovery Fund; Securitization

Description:

Establishes the Wildfire Recovery Fund.  Allows securitization for electric utilities.  Effective 7/1/3000.  (HD1)

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.

A BILL FOR AN ACT

relating to wildfires.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

     SECTION 1.  The legislature finds that as the risk of catastrophic wildfires in Hawaii has increased, so has the threat of property damage from these fires.  The legislature further finds that the public interest is served by providing a rapid, efficient, and low-cost process for property owners, renters, businesses, and their insurers to obtain compensation if a regulated utility is alleged to have caused or contributed to the damage resulting from a catastrophic wildfire.  The legislature also finds that under existing law, individuals and businesses must pursue civil litigation, which is a lengthy, costly, and contentious process.

     This Act would help individuals and businesses recover by giving them the option to obtain payment quickly through an administrative claims process similar to the One Ohana Fund, also known as the Maui Wildfires Compensation Fund.  The administrative claims process will begin based on a preliminary determination that a utility was involved, without waiting for the conclusion of a comprehensive investigation of the origin and cause of a catastrophic wildfire.  Claimants are not required to prove that the regulated utility was negligent in order to receive payment through the administrative claims process.

     This Act:

     (1)  Preserves claimants' right to pursue litigation if they choose to reject the amount offered through the administrative claims process;

     (2)  Limits the total amount that can be paid for property damage through both the administrative claims process and litigation, balancing the interests of those affected by a catastrophic fire in obtaining compensation and the interests of the public utilities in mitigating the risk of financial instability that can result from unlimited liability;

     (3)  Requires the public utilities commission to review the conduct of the public utility and to order the utility to replenish the fund, up to a cap, if it finds that the utility acted imprudently; and

     (4)  Provides for the legislature to re-evaluate the risk of catastrophic wildfires in 2035 and to refund to customers the amounts they contributed, plus earnings on those funds, to the extent the legislature concludes that the size of the fund can be reduced based on actions taken to reduce risk.

     The legislature also finds that the public interest is served by establishing a compensation mechanism that does not expose regulated utilities to the financial instability that can result from the existing litigation process.  Regulated utilities that may be alleged to have caused a catastrophic wildfire face massive costs from litigation.  Those costs can overwhelm those utilities, undermining their ability to make investments that the State needs.  Indeed, even the possibility of litigation regarding a future catastrophic wildfire can create a cloud of uncertainty that can impair a utility's ability to attract capital on reasonable terms.  These costs and uncertainties result in increased rates paid by customers and may reduce the utilities' ability to make investments in wildfire prevention and resilience initiatives, among other priorities that may affect the health and safety of the State's residents.

     The legislature additionally finds that securitization may be the most efficient, least costly way for a utility to finance the contributions to the wildfire recovery fund.  Utility securitization transactions have an extensive track record of success.

     Therefore, the purpose of this Act is to serve the public interest by establishing a mechanism to provide efficient compensation for property damage resulting from a future catastrophic wildfire allegedly caused by a regulated utility, while also protecting the financial integrity of Hawaii's regulated utilities.

     SECTION 2.  The Hawaii Revised Statutes is amended by adding two new chapters to be appropriately designated and to read as follows:

"CHAPTER A

WILDFIRE RECOVERY FUND

     §A-1  Definitions.  As used in this chapter, unless the context otherwise requires:

     "Catastrophic wildfire" means a wildfire occurring in the State on or after the operation date that destroys more than five hundred commercial structures or residential structures designed for habitation.

     "Commission" means the public utilities commission.

     "Contributor" means a public utility that satisfies all requirements to participate in the wildfire recovery fund.

     "Covered catastrophic wildfire" means a catastrophic wildfire that may have been caused, or whose severity may have been increased, by a contributor's facilities or actions.

     "Electric utility" means a public utility that exists for the furnishing of electrical power.

     "Executive director" means the executive director of the wildfire recovery fund.

     "Government entity" means any government agency, department, division, subdivision, unit, component, bureau, commission, office, board, or instrumentality of any kind, including federal, state, and municipal entities.

     "Investor-owned utility" means a public utility that is owned by shareholders and overseen by a board of directors elected by shareholders.

     "Operation date" means the first date for contributors to elect to participate in the wildfire recovery fund under section A-3(a) and the rules adopted to implement it.

     "Property insurer" means a person or entity that indemnifies another by a contract of insurance for loss of or damage to real or personal property in the State.

     "Property owner" means an owner of real property in the State.

     "Public utility" has the same meaning as in section 269-1.

     "Qualifying action" means a civil action by a qualifying claimant to recover qualifying damages.

     "Qualified claimant" means any property owner, property insurer, or tenant who alleges any qualifying damages.

     "Qualifying damages" means damages arising out of the loss of or damage to real or personal property from a covered catastrophic wildfire.

     "Tenant" means a person or entity lawfully entitled to occupy real property that the person or entity does not own in the State.

     "Wildfire recovery fund" means the wildfire recovery fund established by section A-2.

     "Wildfire risk mitigation plan" means a plan, which may include a natural hazard mitigation report, in which a public utility addresses how it will mitigate the risk of its equipment in causing or exacerbating a wildfire.

     §A-2  Wildfire recovery fund; establishment; executive director.  (a) There is established outside the state treasury a wildfire recovery fund and any accounts thereunder to carry out the purposes of this chapter.  All moneys in the wildfire recovery fund shall be expended exclusively for the uses and purposes set forth in this chapter.  The wildfire recovery fund shall not be subject to chapter 431.  The moneys in the wildfire recovery fund not required for immediate use shall be invested by the executive director for the benefit of the wildfire recovery fund; provided that no assets of the program shall be transferred to the general fund of the State or to any other fund of the State or otherwise encumbered or used for any purpose other than those specified for the wildfire recovery fund.

     (b)  The wildfire recovery fund shall be placed within the department of commerce and consumer affairs for administrative purposes.  The fund shall be a public body corporate and politic.

     (c)  The governor shall appoint an executive director of the wildfire recovery fund, who shall be exempt from chapter 76, and shall fix the executive director's compensation.  The executive director may be removed only by the governor.

     (d)  The executive director shall be responsible for the day-to-day operations and management of the wildfire recovery fund and shall perform all functions necessary to implement this chapter, including entering into contracts and other obligations related to the operation, management, and administration of the wildfire recovery fund.

     (e)  The executive director may retain, employ, or contract with officers; experts; employees; accountants; actuaries; financial professionals; and other advisers, consultants, attorneys, and professionals, as may be necessary in the executive director's judgment, for the efficient operation, management, and administration of the wildfire recovery fund.

     (f)  The executive director shall have the power to issue revenue bonds, from time to time, in such principal amounts as the executive director may deem advisable for the purpose of this chapter, backed by future payments to the wildfire recovery fund that contributors have committed to make.  These bonds shall be issued pursuant to part III of chapter 39, except as provided in this chapter.

     (g)  The executive director shall adopt rules pursuant to chapter 91 to implement this chapter.

     §A-3  Wildfire recovery fund; eligibility for participation as a contributor; contributions.  (a)  To be eligible to participate as a contributor, a person or entity shall:

     (1)  Be a public utility that has a wildfire risk mitigation plan that has been approved or accepted by the commission;

     (2)  Notify the executive director, in the year before the person or entity becomes a contributor, that it intends to participate in the wildfire recovery fund; and

     (3)  Agree to make an initial contribution, the payment of which is thereafter a binding commitment enforceable by the executive director.

     (b)  The initial contributions from investor-owned electric utilities collectively shall be:

     (1)  $1,000,000,000 plus interest as provided in subsection (c) for amounts not securitized, which amounts shall be recovered from its customers in nonbypassable rates; and

     (2)  $5,000,000, which amount shall be funded by shareholders of those investor-owned electric utilities and used exclusively for the payment of salaries of the executive director and of all other persons retained by the executive director to implement this chapter, with any funds remaining in 2035 to be transferred to the wildfire recovery fund.

     (c)  The investor-owned electric utilities may elect to make the initial contributions set forth in subsection (b)(1), to the degree not paid for through securitization pursuant to chapter B, over a period not to exceed five years; provided that interest shall be added to any amounts paid after the first year, at an interest rate equal to the investor-owned electric utilities' incremental cost of long-term debt, with such interest recovered from customers in rates.

     (d)  The executive director shall determine the initial contributions from other public utilities based on an actuarial assessment of the risk of potential payments by the wildfire recovery fund resulting from covered catastrophic wildfires created by such public utility.

     (e)  The executive director may propose supplemental contributions to the wildfire recovery fund by participating public utilities.

     (f)  If a contributor fails to pay any part of an initial contribution or a supplemental contribution that it agreed to make, or elects not to agree to make a supplemental contribution, that contributor will no longer be a contributor as of the date on which the payment was due, and the contributor shall not receive any refund of payments previously made; provided that a contributor that elects not to make a supplemental contribution shall be a contributor as to any catastrophic wildfire that occurs prior to the election date.  After failing to, or electing not to, make a payment, a public utility may rejoin the wildfire recovery fund as a contributor on a prospective basis if it makes owed payments with interest.

     (g)  The executive director shall adopt rules pursuant to chapter 91 regarding the timing of initial and supplemental contributions, which may include upfront, annual, and retrospective payments (i.e., payments made after a wildfire occurs).

     (h)  Initial and supplemental contributions of investor-owned electric utilities shall constitute "wildfire recovery costs" as defined in section B-1.

     §A-4  Determination of a covered catastrophic wildfire.  The executive director shall adopt rules pursuant to chapter 91 regarding how to determine whether a wildfire is a covered catastrophic wildfire.  These rules shall include a requirement that a wildfire shall be determined to be a covered catastrophic wildfire if a party makes non-frivolous allegations in a legal action that a contributor's facilities caused or contributed to the severity of a catastrophic wildfire.

     §A-5  Replenishment of the wildfire recovery fund.  (a) If the wildfire recovery fund has made payments with respect to a covered catastrophic wildfire and after resolution of substantially all third-party liability claims that were brought or could be brought against contributors arising from that covered catastrophic wildfire, each contributor whose facilities were implicated in the covered catastrophic wildfire shall initiate a proceeding before the commission to review the prudence of the public utility's conduct leading to the catastrophic wildfire.

     (b)  The commission shall determine whether the contributor acted prudently:

     (1)  Considering only acts that may have caused the occurrence or contributed to the severity of the covered catastrophic wildfire; and

     (2)  Evaluating the contributor's actions in the context of its overall systems, processes, and programs, such that an error by a contributor's employee would not be a basis for a finding of imprudence, unless that error resulted from an imprudent system, process, or program.

     (c)  If the commission determines that imprudent conduct by the contributor caused the occurrence or contributed to the severity of a covered catastrophic wildfire, the commission shall determine whether to order the contributor to replenish the wildfire recovery fund in whole or in part for payments from the wildfire recovery fund in connection with the catastrophic wildfire.  In determining the amount of replenishment, if any, the commission shall consider the extent and severity of the contributor's imprudence and factors within and beyond the contributor's control that may have led to or exacerbated the costs from the covered catastrophic wildfire, including but not limited to humidity, temperature, winds, fuel, merged wildfires with independent ignitions, third-party actions that affected the spread of the wildfire, and fire suppression activities.

     (d)  Over any three-year period, the commission shall not order the contributor to reimburse the wildfire recovery fund in an amount that exceeds twenty per cent of the contributor's transmission and distribution equity rate base.

     (e)  A contributor shall not recover in regulated rates any amount that the commission orders it to pay to the wildfire recovery fund as a replenishment under this section.

     §A-6  Claims for payment by qualified claimants; presentment requirement.  (a)  The executive director shall adopt rules pursuant to chapter 91 to create a process through which a qualified claimant that is not a government entity may submit to the wildfire recovery fund a claim for payment of economic damages arising out of property damage resulting from a covered catastrophic wildfire, including a deadline to submit claims.

     (b)  A qualified claimant shall file a claim for payment for economic damages arising out of the loss of or damage to real or personal property from a covered catastrophic wildfire pursuant to this section.  The claim of a qualified claimant that is not a property insurer shall be limited to uninsured economic damages.  A qualified claimant shall not file or maintain a civil action against a contributor unless and until it rejects an offer of settlement from the wildfire recovery fund.   A qualified claimant who fails to file a claim by the deadline established by the executive director pursuant to rule shall be ineligible to receive payment from the wildfire recovery fund and shall be barred from instituting or maintaining any qualifying action against a contributor.

     (c)  The executive director shall make an offer to settle each claim submitted, which the claimant may accept or reject.  In determining the amount of each offer, the executive director shall consider, at a minimum:

     (1)  The economic damages sought by all qualified claimants in the aggregate;

     (2)  The amount available to the wildfire recovery fund relative to the amount under paragraph (1);

     (3)  The strength of any evidence of contributor liability; and

     (4)  The strength of any evidence of involvement of non-contributor third-parties.

     (d)  If the amount available to the wildfire recovery fund, including assets held by the wildfire recovery fund and all payments contributors are obligated to make to the wildfire recovery fund, is less than fifty per cent of the aggregate liability limit as calculated in section A-8, the wildfire recovery fund shall make payment only to contributors pursuant to section A-7.

     §A-7  Claims for payment by contributors.  The executive director shall adopt rules pursuant to chapter 91 to create a process through which a contributor may obtain payment from the wildfire recovery fund to satisfy settled or finally adjudicated claims for recovery of qualifying damages after exhausting the contributor's available insurance.  The rules shall establish the standard for approving any settlement.  To the extent that the wildfire recovery fund lacks sufficient funds to make a payment to a participating utility when sought, the wildfire recovery fund shall make such payment upon receipt of contributions that contributors are obligated to make to the wildfire recovery fund under payment schedules.

     §A-8  Limitation on aggregate liability.  (a)  The aggregate liability of all contributors for qualifying damages arising from a covered catastrophic wildfire, including economic and non-economic damages, shall not exceed the greater of:

     (1)  Fifty per cent of the amount available to the wildfire recovery fund at the time of the covered catastrophic wildfire, including amounts in and obligated to the wildfire recovery fund; or

     (2)  The average assessed value of commercial structures and residential structures designed for habitation in the county in which the covered catastrophic wildfire ignited, multiplied by the number of commercial structures or residential structures designed for habitation that were destroyed.

     (b)  The following amounts shall be added to determine whether the aggregate liability limit has been reached:

     (1)  Payments from the wildfire recovery fund under section A-6; and

     (2)  Payments by a contributor in connection with any settlement or judgment on a claim for qualifying damages.

     (c)  All civil actions arising out of a catastrophic wildfire shall be brought in the circuit in which the catastrophic wildfire occurred.  The court shall adopt procedures to equitably apply the limit set forth in subsection (a) to all civil claims that are filed.  All settlements or judgments for claims for qualifying damages shall be subject to approval by the court.  The court shall not approve any settlement or judgment that would cause the aggregate liability of contributors to exceed the aggregate liability limit.

     (d)  A court shall consolidate cases arising from a covered catastrophic wildfire.  Any circuit court that is not the consolidating court shall transfer any civil case to facilitate such consolidation.

     §A-9  Limitations on claims.  (a)  No qualifying action may be instituted or maintained by a qualified claimant against contributors or their affiliates, employees, agents, or insurers if the qualified claimant accepts an offer under section A-6; provided that the rights of a property insurer to sue as a subrogee of its policyholder shall not be affected by a property owner's or tenant's acceptance of an offer under section A-6 and the subrogation rights shall be affected only if the property insurer elects to accept an offer under section A-6.

     (b)  No suit, claim, arbitration, or other civil legal action for indemnity or contribution for amounts paid, or that may be paid, as a result of a covered catastrophic wildfire, may be instituted or maintained by any persons or entities against contributors or their affiliates, employees, agents, or insurers for qualifying damages.

     §A-10  Several liability.  Any law to the contrary notwithstanding, joint and several liability is abolished for any qualifying damages.  Any person or entity that is sued for qualifying damages may argue for apportionment of fault to any other person or entity regardless of whether that person or entity is a party to the action.

     §A-11  Reporting; refunds authorized by legislature.  (a)  The executive director shall submit to the legislature an annual report regarding the wildfire recovery fund no later than ninety days prior to the beginning of each regular session until 2034.  The annual plan submitted by the executive director shall include an update on the activities of the wildfire recovery fund.

     (b)  No later than ninety days prior to the regular session of 2035, the executive director shall submit a report regarding the financial status and resources of the wildfire recovery fund relative to the then-current assessment of actuarial risk of a catastrophic wildfire.

     (c)  Based on the report in subsection (b), the legislature may determine that the wildfire recovery fund is overfunded and direct the executive director to return contributions, in whole or in part, with associated investment earnings, to contributors.  Any payments made to the wildfire recovery fund that were recovered in regulated rates from customers, and any investment earnings associated with those payments, shall, in the event that the legislature orders a refund, be returned to those customers.

     §A-12  Inadmissible evidence.  Any findings made or evidence submitted for purposes of proceedings under sections A-4, A-6, and A-7 shall be subject to the limits on admissibility under rule 408, section 626-1.

CHAPTER B

SECURITIZATION

     §B-1  Definitions.  As used in this chapter, unless the context otherwise requires:

     "Ancillary agreement" means a bond insurance policy, letter of credit, reserve account, surety bond, swap arrangement, hedging arrangement, liquidity or credit support arrangement, or other similar agreement or arrangement entered into in connection with the issuance of bonds that is designed to promote the credit quality and marketability of the bonds or to mitigate the risk of an increase in interest rates.

     "Assignee" means a legally recognized entity to which an electric utility assigns, sells, or transfers, other than as security, all or a portion of the electric utility's interest in or right to wildfire recovery property.  "Assignee" includes a corporation, limited liability company, general partnership or limited partnership, public authority, trust, financing entity, or any other legal entity to which an assignee assigns, sells, or transfers, other than as security, its interest in or right to wildfire recovery property.

     "Bond" means any bond, note, certificate of participation or beneficial interest, or other evidence of indebtedness or ownership that is issued by the financing entity under a financing order, the proceeds of which are used directly or indirectly to recover, finance, or refinance financing costs of any wildfire recovery costs, and that are directly or indirectly secured by or payable from wildfire recovery property.

     "Commission" means the public utilities commission.

     "Consumer" means any individual, governmental body, trust, business entity, or nonprofit organization that consumes electricity that has been transmitted or distributed by means of electric transmission or distribution facilities, whether those electric transmission or distribution facilities are owned by the consumer, the electric utility, or any other party.

     "Electric cooperative" means an electric utility that meets the requirements under section 269-31(c).

     "Electric cooperative wildfire claims costs" means costs incurred by an electric cooperative to resolve third-party liability claims arising from any wildfire occurring in the State that are not covered by insurance and that the commission finds to be just and reasonable.  Electric cooperative wildfire claims costs do not include costs incurred by an investor-owned electric utility.

     "Electric utility" means a public utility that exists for the furnishing of electrical power.

     "Financing costs" means the costs to issue, service, repay, or refinance bonds, whether incurred or paid upon issuance of the bonds or over the life of the bonds, if they are approved for recovery by the commission in a financing order.  "Financing costs" may include any of the following:

     (1)  Principal, interest, and redemption premiums that are payable on bonds;

     (2)  A payment required under an ancillary agreement;

     (3)  An amount required to fund or replenish reserve accounts or other accounts established under an indenture, ancillary agreement, or other financing document related to the bonds;

     (4)  Taxes, franchise fees, or license fees imposed on a financing entity as a result of the issuance of the financing order; the assignment, sale, or transfer of any wildfire recovery property; or the sale of the bonds, or imposed on the wildfire recovery charges, or otherwise resulting from the collection of the wildfire recovery charge, in any such case whether paid, payable, or accrued;

     (5)  Costs related to issuing and servicing bonds or the application for a financing order, including without limitation servicing fees and expenses, trustee fees and expenses, legal fees and expenses, accounting fees, administrative fees, underwriting and placement fees, financial advisory fees, original issue discount, capitalized interest, rating agency fees, and any other related costs that are approved for recovery in the financing order; and

     (6)  Other costs as specifically authorized by a financing order.

     "Financing entity" means an electric utility or an entity to which an electric utility or an affiliate of an electric utility sells, assigns, or pledges all or a portion of the electric utility's interest in wildfire recovery property, including an affiliate of the electric utility or any unaffiliated entity, in each case as approved by the commission in a financing order.

     Subject to section B-6(c), an entity to which an electric utility sells, assigns, or pledges all or a portion of the electric utility's interest in wildfire recovery property may include any governmental entity that is able to issue bonds that are exempt from federal tax pursuant to section 103 of the Internal Revenue Code of 1986, as amended, including the State or a political subdivision thereof or any department, agency, or instrumentality of the State or political subdivision; provided that the bonds issued shall not constitute a general obligation of the State or any political subdivision thereof or any department, agency, or instrumentality of the State or political subdivision and shall not constitute a pledge of the full faith and credit of the entity or of the State or any political subdivision thereof, but shall be payable solely from the funds provided under this chapter.

     "Financing order" means an order of the commission under this chapter that has become final and no longer subject to appeal as provided by law and that authorizes the issuance of bonds and the imposition, adjustment from time to time, and collection of wildfire recovery charges, and that shall include a procedure to require the expeditious approval by the commission of periodic adjustments to wildfire recovery charges and to any associated fixed recovery tax amounts included in that financing order to ensure recovery of all wildfire recovery costs and the costs associated with the proposed recovery, financing, or refinancing thereof, including the costs of servicing and retiring the bonds contemplated by the financing order.

     "Financing party" means any holder of the bonds; any party to or beneficiary of an ancillary agreement; and any trustee, collateral agent, or other person acting for the benefit of any of the foregoing.

     "Fixed recovery tax amounts" means those nonbypassable rates and other charges, including but not limited to distribution, connection, disconnection, and termination rates and charges, that are needed to recover federal and state taxes associated with wildfire recovery charges authorized by the commission in a financing order, but are not approved as financing costs financed from proceeds of bonds.

     "Investor-owned utility" means a public utility that is owned by shareholders and overseen by a board of directors elected by shareholders.

     "Public utility" has the same meaning as in section 269-1.

     "True-up adjustment" means a formulaic adjustment to the wildfire recovery charges as they appear on consumer bills that is necessary to correct for any overcollection or undercollection of the wildfire recovery charges authorized by a financing order and to otherwise ensure the timely and complete payment and recovery of wildfire recovery costs over the authorized repayment term.

     "Wildfire recovery charges" means the nonbypassable charges, including but not limited to distribution, connection, disconnection, and termination rates and charges, that are authorized by section B-2 and in a financing order authorized under this chapter to be imposed on and collected from all existing and future consumers of a financing entity or any successor to recover principal, interest, and other financing costs relating to the bonds.

     "Wildfire recovery costs" means an investor-owned electric utility's contributions to the wildfire recovery fund, as set forth in section A-3, and electric cooperative wildfire claims costs.  Wildfire recovery costs shall also include professional fees, consultant fees, redemption premiums, tender premiums, and other costs incurred by the electric utility in using proceeds of bonds to acquire outstanding securities of the electric utility that the commission has determined were or will be prudently incurred.

     "Wildfire recovery fund" means the wildfire recovery fund established by chapter A.

     "Wildfire recovery property" means the property right created pursuant to this chapter, including without limitation the right, title, and interest of the electric utility, financing entity, or its assignee:

     (1)  In and to the wildfire recovery charge established pursuant to a financing order, including the right to impose, bill, collect, and receive such wildfire recovery charges under the financing order and all rights to obtain adjustments to the wildfire recovery charge in accordance with section B-3 and the financing order; and

     (2)  To be paid the amount that is determined in a financing order to be the amount that the electric utility or its assignee is lawfully entitled to receive pursuant to this chapter and the proceeds thereof, and in and to all revenues, collections, claims, payments, moneys, or proceeds of, or arising from, the wildfire recovery charge that is the subject of a financing order.

"Wildfire recovery property" does not include a right to be paid fixed recovery tax amounts.  "Wildfire recovery property" shall constitute a current property right, notwithstanding the fact that the value of the property right will depend on consumers using electricity or, in those instances where consumers are customers of the electric utility, the electric utility performing certain services.

     §B-2   Applications to issue bonds and authorize wildfire recovery charges.  (a)  An electric utility may apply to the commission for one or more financing orders to issue bonds to recover any wildfire recovery costs, each of which authorizes the following:

     (1)  The imposition, charging, and collection of a wildfire recovery charge, to become effective upon the issuance of the bonds, and an adjustment of any such wildfire recovery charge in accordance with a true-up adjustment mechanism under this chapter in amounts sufficient to pay the principal and interest on the bonds and all other associated financing costs on a timely basis;

     (2)  The creation of wildfire recovery property under the financing order; and

     (3)  The imposition, charging, and collection of fixed recovery tax amounts to recover any portion of the electric utility's federal and state taxes associated with those wildfire recovery charges and not financed from the proceeds of bonds.

     (b)  The application shall include all of the following:

     (1)  The wildfire recovery costs to be financed through the issuance of bonds;

     (2)  The principal amount of the bonds proposed to be issued and the selection of a financing entity;

     (3)  An estimate of the date on which each series of bonds is expected to be issued;

     (4)  The scheduled final payment date, which shall not exceed thirty years, and a legal final maturity date, which may be longer, subject to rating agency and market considerations, during which term the wildfire recovery charge associated with the issuance of each series of bonds is expected to be imposed and collected;

     (5)  An estimate of the financing costs associated with the issuance of each series of bonds;

     (6)  An estimate of the amount of the wildfire recovery charge revenues necessary to pay principal and interest on the bonds and all other associated financing costs as set forth in the application and the calculation for that estimate;

     (7)  A proposed design of the wildfire recovery charge and a proposed methodology for allocating the wildfire recovery charge among customer classes within the electric utility's service territory;

     (8)  A description of the financing entity selected by the electric utility;

     (9)  A description of a proposed true-up adjustment mechanism for the adjustment of the wildfire recovery charge to correct for any overcollection or undercollection of the wildfire recovery charge, and to otherwise ensure the timely payment of principal and interest on the bonds and all other associated financing costs; and

    (10)  Any other information required by the commission.

     (c)  An electric utility may file an application for a financing order, including as a joint application with one or more affiliate electric utilities, to issue bonds to recover wildfire recovery costs.  The application shall include a description of:

     (1)  How the wildfire recovery charges will be allocated among the applicant electric utilities in a manner that is equitable and that need not correspond to the incurrence of wildfire recovery costs by each electric utility; and

     (2)  Whether and how the consumers of any of the applicant electric utilities will be responsible for the payment of wildfire recovery charges allocated to consumers of affiliate electric utilities.

     In the alternative, an electric utility may apply for a financing order to issue bonds to recover wildfire recovery costs, including wildfire recovery costs incurred, or to be incurred, by the applicant and one or more of its affiliate electric utilities.  In connection with the issuance of a financing order pursuant to this subsection, the commission shall issue a concurrent order to the affiliate electric utility or electric utilities directing such affiliate electric utility or electric utilities to impose rates on its or their consumers designed to generate revenue sufficient to pay credits over the life of the bonds to the applicant electric utility in such amount as the commission determines is equitable, just, and reasonable.  Such an application shall describe the allocation method and adjustment mechanism for the affiliate electric utility credit payments proposed to be subject to the concurrent commission order.

     (d)  The commission shall issue an approval or denial of any application for a financing order filed pursuant to this section within ninety days of the last filing in the applicable docket but no later than one year after the application is filed.

     (e)  In exercising its duties under this section, the commission shall consider:

     (1)  Whether the recovery of such costs is consistent with the public interest;

     (2)  Whether the structuring, marketing, and pricing of the bonds are expected to result in the lowest wildfire recovery charges consistent with market conditions at the time at which the bonds are priced and the terms of the financing order;

     (3)  Whether the terms and conditions of any bonds to be issued are just and reasonable;

     (4)  With respect to an application by an investor-owned utility, whether the recovery of wildfire recovery costs through the designation of the wildfire recovery charges and any associated fixed recovery tax amounts, and the issuance of bonds in connection with the wildfire recovery charges, would result in net savings or mitigate rate impacts to consumers, as compared to rate recovery without securitization; and

     (5)  Any other factors that the commission deems reasonable and in the public interest.

If the commission makes the determination specified in this section, the commission shall establish, as part of the financing order, a procedure for the electric utility to submit applications from time to time to request the issuance of additional financing orders designating wildfire recovery charges and any associated fixed recovery tax amounts as recoverable.

     At the option of the electric utility, the electric utility may include in its application for a financing order a request for authorization to sell, transfer, assign, or pledge wildfire recovery property to a governmental entity if the electric utility expects bonds issued by a governmental entity would result in a more cost-efficient means, taking into account all financing costs related to the bonds, than using another financing entity to issue bonds to finance the same wildfire recovery costs, taking into account the costs of issuing the other financing entity's bonds.

     (f)  Wildfire recovery charges and any associated fixed recovery tax amounts shall be imposed only on existing and future consumers in the utility service territory.  Consumers within the utility service territory of the electric utility that are subject to the financing order shall continue to pay wildfire recovery charges and any associated fixed recovery tax amounts until the bonds and associated financing costs are paid in full by the financing entity.

     §B-3  Wildfire recovery financing order.  (a)  A financing order shall remain in effect until the bonds issued under the financing order and all financing costs related to the bonds have been paid in full or defeased by their terms.

     A financing order shall remain in effect and unabated notwithstanding the bankruptcy, reorganization, or insolvency of the electric utility or the commencement of any judicial or nonjudicial proceeding on the financing order.

     (b)  Notwithstanding any other law to the contrary, with respect to wildfire recovery property that has been made the basis for the issuance of bonds and with respect to any associated fixed recovery tax amounts, the financing order, the wildfire recovery charges, and any associated fixed recovery tax amounts shall be irrevocable.  The State and its agencies, including the commission, pledge and agree with bondholders, the owners and assignees of the wildfire recovery property, and other financing parties that the State and its agencies shall not take any action listed in this subsection.  This subsection shall not preclude an action if such action would not adversely affect the interests of the electric utility and of assignees of the wildfire recovery property.  The prohibited actions shall be the following:

     (1)  Alter the provisions of this chapter, which authorize the commission to create an irrevocable contract right or choice in action by the issuance of a financing order, to create wildfire recovery property and make the wildfire recovery charges imposed by a financing order irrevocable, binding, nonbypassable charges for all existing and future consumers;

     (2)  Take or permit any action that impairs or would impair the value of wildfire recovery property or the security for the bonds or revise the wildfire recovery costs for which recovery is authorized;

     (3)  In any way impair the rights and remedies of the bondholders, assignees, and other financing parties;

     (4)  Except for changes made pursuant to the formula-based true-up mechanism authorized under subsection (d), reduce, alter, or impair wildfire recovery charges that are to be imposed, billed, charged, collected, and remitted for the benefit of the bondholders, any assignee, and any other financing parties until any and all principal, interest, premium, financing costs, and other fees, expenses, or charges incurred, and any contracts to be performed, in connection with the related bonds have been paid and performed in full.

     The financing entity is authorized to include this pledge in the bonds.

     (c)  Under a financing order, the electric utility shall retain sole discretion to select the financing entity and to cause bonds to be issued, including the right to defer or postpone the issuance, assignment, sale, or transfer of wildfire recovery property.

     (d)  The commission may create, pursuant to an application from an electric utility, a nonbypassable charge referred to as a wildfire recovery charge, which shall be applied to recover principal, interest, and other financing costs relating to the bonds.  The wildfire recovery charge shall be a dedicated, discrete tariff rider.

     The commission shall, in any financing order, establish a procedure for periodic true-up adjustments to wildfire recovery charges, which shall be made at least annually and may be made more frequently.  Within thirty days after receiving an electric utility's filing of a true-up adjustment, the commission's review of the filing shall be limited to mathematical or clerical errors as determined in accordance with any true-up adjustment formulas set forth in the applicable financing order.

     The commission shall either approve the filing or inform the electric utility of any mathematical or clerical errors in its calculation.  If the commission informs the electric utility of mathematical or clerical errors in its calculation, the electric utility shall correct its error and refile its true-up adjustment.  The timeframes previously described in this subsection shall apply to a refiled true-up adjustment.

     (e)  Neither financing orders nor bonds issued under this chapter shall constitute a general obligation of the State or any of its political subdivisions, nor shall they constitute a pledge of the full faith and credit of the State or any of its political subdivisions, but shall be payable solely from the wildfire recovery property provided under this chapter.

     All bonds shall contain on the face thereof a statement to the following effect:  "Neither the full faith and credit nor the taxing power of the State of Hawaii is pledged to the payment of the principal of, or interest and premium on, this bond."

     The issuance of bonds under this chapter shall not directly, indirectly, or contingently obligate the State or any of its political subdivisions to levy or pledge any form of taxation or to make any appropriation for their payment.

     (f)  Wildfire recovery charges are wildfire recovery property when, and to the extent that, a financing order authorizing the wildfire recovery charges has become effective in accordance with this chapter, and the wildfire recovery property shall thereafter continuously exist as property for all purposes, and all of the rights and privileges relating to that property shall continuously exist for the period and to the extent provided in the financing order, but in any event until the bonds, including all principal; premiums, if any; interest with respect to the bonds; and all other financing costs are paid in full.  A financing order may provide that the creation of wildfire recovery property shall be simultaneous with the sale of the wildfire recovery property to an assignee as provided in the application of the pledge of the wildfire recovery property to secure the bonds.

     (g)  Any successor to a financing entity shall be bound by the requirements of this chapter and shall perform and satisfy all obligations of and have the same rights under a financing order as, and to the same extent as, the financing entity.

     §B-4 Bonds; issuance; wildfire recovery property interests.  (a)  The electric utility may sell and assign all or portions of its interest in wildfire recovery property to one or more financing entities that make that wildfire recovery property the basis for issuance of bonds, to the extent approved in a financing order.  The electric utility or financing entity may pledge wildfire recovery property as collateral, directly or indirectly, for bonds to the extent approved in the pertinent financing orders providing for a security interest in the wildfire recovery property, in the manner set forth in this section.  In addition, wildfire recovery property may be sold or assigned by either of the following:

     (1)  The financing entity or a trustee for the holders of bonds or the holders of an ancillary agreement in connection with the exercise of remedies upon a default under the terms of the bonds; or

     (2)  Any person acquiring the wildfire recovery property after a sale or assignment pursuant to this chapter.

     (b)  To the extent that any interest in wildfire recovery property is sold, assigned, or is pledged as collateral pursuant to subsection (a), the commission may authorize the electric utility to contract with the financing entity or its assignees that the electric utility will:

     (1)  Continue to operate its system to provide service to consumers within its service territory;

     (2)  Collect amounts in respect of the wildfire recovery charges for the benefit and account of the financing entity or its assignees; and

     (3)  Account for and remit these amounts to or for the account of the financing entity or its assignees.

Contracting with the financing entity or its assignees in accordance with that authorization shall not impair or negate the characterization of the sale, assignment, or pledge as an absolute transfer, a true sale, or a security interest, as applicable.  To the extent that billing, collection, and other related services with respect to the provision of the electric utility's services are provided to a consumer by any person or entity other than the electric utility in whose service territory the consumer is located, that person or entity shall collect the wildfire recovery charges and any associated fixed recovery tax amounts from the consumer for the benefit and account of the electric utility, financing entity, or assignees with the associated revenues remitted solely for such person's benefit as a condition to the provision of electric service to that consumer.

     Each financing order shall impose terms and conditions, consistent with the purposes and objectives of this chapter, on any person or entity responsible for billing, collection, and other related services, including without limitation collection of the wildfire recovery charges and any associated fixed recovery tax amounts, that are the subject of the financing order.

     (c)  The financing entity may issue bonds upon approval by the commission in a financing order.  Bonds shall be nonrecourse to the credit or any assets of the electric utility, other than the wildfire recovery property as specified in that financing order.

     (d)  Wildfire recovery property that is specified in a financing order shall constitute an existing, present property right, notwithstanding the fact that the imposition and collection of wildfire recovery charges depend on the electric utility's continuing to provide services or continuing to perform its servicing functions relating to the collection of wildfire recovery charges or on the level of future service consumption (e.g., electricity consumption).  Wildfire recovery property shall exist whether or not the wildfire recovery charges have been billed, have accrued, or have been collected and notwithstanding the fact that the value for a security interest in the wildfire recovery property, or amount of the wildfire recovery property, is dependent on the future provision of service to consumers.  All wildfire recovery property specified in a financing order shall continue to exist until the bonds issued pursuant to a financing order and all associated financing costs are paid in full.

     (e)  Wildfire recovery property; wildfire recovery charges; and the interests of an assignee, bondholder, or financing entity, or any pledgee in wildfire recovery property and wildfire recovery charges shall not be subject to setoff, counterclaim, surcharge, recoupment, or defense by the electric utility or any other person or in connection with the bankruptcy, reorganization, or other insolvency proceeding of the electric utility, any affiliate of the electric utility, or any other entity.

     (f)  Notwithstanding any law to the contrary, any requirement under this chapter or a financing order that the commission take action with respect to the subject matter of a financing order shall be binding upon the commission, as it may be constituted from time to time, and any successor agency exercising functions similar to the commission, and the commission shall have no authority to rescind, alter, or amend that requirement in a financing order.

     §B-5  Wildfire recovery charge.  (a)  The wildfire recovery charge created pursuant to a financing order approved pursuant to section B-2 shall be a nonbypassable charge of a financing entity that shall be applied to the repayment of bonds and related financing costs as described in this chapter.  The wildfire recovery charge and any associated fixed recovery tax amounts may be a usage-based charge, a flat user charge, or a charge based upon customer revenues as determined by the commission for each consumer class in any financing order.

     (b)  As long as any bonds are outstanding and any financing costs have not been paid in full, any wildfire recovery charge and any associated fixed recovery tax amounts authorized under a financing order shall be nonbypassable.  Subject to any exceptions provided in a financing order, a wildfire recovery charge and any associated fixed recovery tax amounts shall be paid by all existing and future consumers within the utility service territory.

     (c)  The wildfire recovery charge shall be collected by an electric utility or its successors, in accordance with section B-8(a), in full through a charge that is separate and apart from the electric utility's rates.

     (d)  An electric utility may exercise the same rights and remedies under its tariff and applicable law and regulation based on a consumer's nonpayment of the wildfire recovery charge as it could for a consumer's failure to pay any other charge payable to that electric utility.

     §B-6  Security interests in wildfire recovery property; financing statements.  (a)  A security interest in wildfire recovery property is valid and enforceable against the pledgor and third parties, subject to the rights of any third parties holding security interests in the wildfire recovery property perfected in the manner described in this section, and attaches when all of the following have occurred:

     (1)  The commission has issued a financing order authorizing the wildfire recovery charge to be included in the wildfire recovery property;

     (2)  Value has been given by the pledgees of the wildfire recovery property; and

     (3)  The pledgor has signed a security agreement covering the wildfire recovery property.

     (b)  A valid and enforceable security interest in wildfire recovery property is perfected when it has attached and when a financing statement has been filed with the bureau of conveyances of the State of Hawaii naming the pledgor of the wildfire recovery property as "debtor" and identifying the wildfire recovery property.

     Any description of the wildfire recovery property shall be sufficient if it refers to the financing order creating the wildfire recovery property.  A copy of the financing statement shall be filed with the commission by the electric utility that is the pledgor or transferor of the wildfire recovery property, and the commission may require the electric utility to make other filings with respect to the security interest in accordance with procedures that the commission may establish; provided that the filings shall not affect the perfection of the security interest.

     (c)  A perfected security interest in wildfire recovery property shall be a continuously perfected security interest in all wildfire recovery property revenues and proceeds arising with respect thereto, whether or not the revenues or proceeds have accrued.  Conflicting security interests shall rank according to priority in time of perfection.  Wildfire recovery property shall constitute property for all purposes, including for contracts securing bonds, whether or not the wildfire recovery property revenues and proceeds have accrued.

     (d)  Subject to the terms of the security agreement covering the wildfire recovery property and the rights of any third parties holding security interests in the wildfire recovery property, perfected in the manner described in this section, the validity and relative priority of a security interest created under this section shall not be defeated or adversely affected by the commingling of revenues arising with respect to the wildfire recovery property with other funds of the electric utility that is the pledgor or transferor of the wildfire recovery property, or by any security interest in a deposit account of that electric utility perfected under article 9 of chapter 490, into which the revenues are deposited.

     Subject to the terms of the security agreement, upon compliance with the requirements of section 490:9-312(b)(1), the pledgees of the wildfire recovery property shall have a perfected security interest in all cash and deposit accounts of the electric utility in which wildfire recovery property revenues have been commingled with other funds.

     (e)  If default occurs under the security agreement covering the wildfire recovery property, the pledgees of the wildfire recovery property, subject to the terms of the security agreement, shall have all rights and remedies of a secured party upon default under article 9 of chapter 490 and shall be entitled to foreclose or otherwise enforce their security interest in the wildfire recovery property, subject to the rights of any third parties holding prior security interests in the wildfire recovery property perfected in the manner provided in this section.

     In addition, the commission may require in the financing order creating the wildfire recovery property that in the event of default by the electric utility in payment of wildfire recovery property revenues, the commission and any successor thereto, upon the application by the pledgees or assignees, including assignees under section B-5 of the wildfire recovery property, and without limiting any other remedies available to the pledgees or assignees by reason of the default, shall order the sequestration and payment to the pledgees or assignees of wildfire recovery property revenues.  Any financing order shall remain in full force and effect notwithstanding any bankruptcy, reorganization, or other insolvency proceedings with respect to the debtor, pledgor, or transferor of the wildfire recovery property.  Any surplus in excess of amounts necessary to pay principal; premiums, if any; interest, costs, and arrearages on the bonds; and associated financing costs arising under the security agreement, shall be remitted to the debtor, pledgor, or transferor, for the purpose of remitting such amounts to customers via the electric utility.

     (f)  Sections 490:9-204 and 490:9-205 shall apply to a pledge of wildfire recovery property by the electric utility, an affiliate of the electric utility, or a financing entity.

     §B-7  Transfers of wildfire recovery property.  (a)  A transfer or assignment of wildfire recovery property by the electric utility to an assignee or to a financing entity, or by an assignee of the electric utility or a financing entity to another financing entity, which the parties in the governing documentation have expressly stated to be a sale or other absolute transfer, in a transaction approved in a financing order, shall be treated as an absolute transfer of all of the transferor's right, title, and interest, as in a true sale, and not as a pledge or other financing, of the wildfire recovery property, other than for federal and state income and franchise tax purposes.

     (b)  The characterization of the sale, assignment, or transfer as an absolute transfer and true sale and the corresponding characterization of the property interest of the assignee shall not be affected or impaired by, among other things, the occurrence of any of the following:

     (1)  Commingling of wildfire recovery charge revenues with other amounts;

     (2)  The retention by the seller of either of the following:

          (A)  A partial or residual interest, including an equity interest, in the financing entity or the wildfire recovery property, whether direct or indirect, subordinate or otherwise; or

          (B)  The right to recover costs associated with taxes, franchise fees, or license fees imposed on the collection of wildfire recovery charge;

     (3)  Any recourse that an assignee may have against the seller;

     (4)  Any indemnification rights, obligations, or repurchase rights made or provided by the seller;

     (5)  The obligation of the seller to collect wildfire recovery charges on behalf of an assignee;

     (6)  The treatment of the sale, assignment, or transfer for tax, financial reporting, or other purpose; or

     (7)  Any true-up adjustment of the wildfire recovery charge as provided in the financing order.

     (c)  A transfer of wildfire recovery property shall be deemed perfected against third parties when both of the following occur:

     (1)  The commission issues the financing order authorizing the wildfire recovery charge included in the wildfire recovery property; and

     (2)  An assignment of the wildfire recovery property in writing has been executed and delivered to the assignee.

     (d)  As between bona fide assignees of the same right for value without notice, the assignee first filing a financing statement with the bureau of conveyances of the State of Hawaii in accordance with part 5 of article 9 of chapter 490, naming the assignor of the wildfire recovery property as debtor and identifying the wildfire recovery property, shall have priority.  Any description of the wildfire recovery property shall be sufficient if it refers to the financing order creating the wildfire recovery property.  A copy of the financing statement shall be filed by the assignee with the commission, and the commission may require the assignor or the assignee to make other filings with respect to the transfer in accordance with procedures the commission may establish, but these filings shall not affect the perfection of the transfer.

     §B-8  Financing entity successor requirements; default of financing entity.  (a)  Any successor to an electric utility subject to a financing order, whether pursuant to any bankruptcy, reorganization, or other insolvency proceeding, or pursuant to any merger, sale, or transfer, by operation of law, or otherwise, shall be bound by the requirements of this chapter.  The successor of the electric utility shall perform and satisfy all obligations of the electric utility under the financing order, in the same manner and to the same extent as the electric utility, including the obligation to collect and pay the wildfire recovery charge to any financing party as required by a financing order or any assignee.  Any successor to the electric utility shall be entitled to receive any fixed recovery tax amounts otherwise payable to the electric utility.

     (b)  The commission may require in a financing order that if a default by the electric utility in remittance of the wildfire recovery charge collected arising with respect to wildfire recovery property occurs, the commission, without limiting any other remedies available to any financing party by reason of the default, shall order the sequestration and payment to the beneficiaries of the wildfire recovery charge collected arising with respect to the wildfire recovery property.  Any order shall remain in full force and effect notwithstanding any bankruptcy, reorganization, or other insolvency proceedings with respect to the electric utility.

     §B-9  Severability.  If any provision of this chapter is held to be invalid or is superseded, replaced, repealed, or expires for any reason:

     (1)  That occurrence shall not affect any action allowed under this chapter that is taken prior to that occurrence by the commission, a financing entity, a bondholder, or any financing party, and any such action shall remain in full force and effect; and

     (2)  The validity and enforceability of the rest of this chapter shall remain unaffected."

     SECTION 3.  Section 269-17, Hawaii Revised Statutes, is amended to read as follows:

     "§269-17  Issuance of securities.  A public utility corporation may, on securing the prior approval of the public utilities commission, and not otherwise, except as provided in section B-4, issue stocks and stock certificates, bonds, notes, and other evidences of indebtedness, payable at periods of more than twelve months after the date thereof, for the following purposes and no other, namely:  for the acquisition of property or for the construction, completion, extension, or improvement of or addition to its facilities or service, or for the discharge or lawful refunding of its obligations or for the reimbursement of moneys actually expended from income or from any other moneys in its treasury not secured by or obtained from the issue of its stocks or stock certificates, or bonds, notes, or other evidences of indebtedness, for any of the aforesaid purposes except maintenance of service, replacements, and substitutions not constituting capital expenditure in cases where the corporation has kept its accounts for [such] expenditures in [such] a manner [as to enable] that enables the commission to ascertain the amount of moneys so expended and the purposes for which the expenditures were made, and the sources of the funds in its treasury applied to the expenditures.  As used [herein,] in this section, "property" and "facilities"[,] mean property and facilities used in all operations of a public utility corporation whether or not included in its public utility operations or rate base.  A public utility corporation may not issue securities to acquire property or to construct, complete, extend or improve or add to its facilities or service if the commission determines that the proposed purpose will have a material adverse effect on its public utility operations.

     All stock and every stock certificate, and every bond, note, or other evidence of indebtedness of a public utility corporation not payable within twelve months, issued without an order of the commission authorizing the same, then in effect, shall be void."

     SECTION 4.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 5.  This Act shall take effect on July 1, 2025.

Report Title:

Wildfire Recovery Fund; Securitization

Description:

Establishes the Wildfire Recovery Fund.  Allows securitization for electric utilities.

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.

STAND. COM. REP. NO. 1343

Honolulu, Hawaii

RE:    H.B. No. 982

       H.D. 3

       S.D. 1

Honorable Ronald D. Kouchi

President of the Senate

Thirty-Third State Legislature

Regular Session of 2025

State of Hawaii

Sir:

     Your Committees on Commerce and Consumer Protection and Energy and Intergovernmental Affairs, to which was referred H.B. No. 982, H.D. 3, entitled:

"A BILL FOR AN ACT RELATING TO WILDFIRES,"

beg leave to report as follows:

     The purpose and intent of this measure is to:

     (1)  Establish the Wildfire Recovery Fund; and

     (2)  Allow securitization for electric utilities.

     Your Committees received testimony in support of this measure from Hawaiian Electric; IBEW Local 1260; Clearway Energy Group; Kapolei Chamber of Commerce; Par Hawaii; Retail Merchants of Hawaii; Plus Power; Mālama Learning Center; Sustainable Energy Hawaiʻi; Ulupono Initiative; Hawaii Iron Workers Stabilization Fund; North Kohala Community Resource Center; Hawaiʻi Island Chamber of Commerce; Hawaii Teamsters & Allied Workers Local 996; International Union of Painters and Allied Trades, District Council 50; International Association of Heat & Frost Insulators & Allied Workers Local 132; Hawaiʻi Farm Bureau; Chamber of Commerce Hawaii; United Union of Roofers, Waterproofers and Allied Workers, Local 221; Kauaʻi Island Utility Cooperative; Hawaii Building & Construction Trades Council; Plumbers & Fitters Local 675; Hawaii Fire Fighters Association Local 1463, ALF-CIO; Land Use Research Foundation of Hawaii; and numerous individuals.

     Your Committees received testimony in opposition to this measure from the Hawaii Regional Council of Carpenters, Hawaii Association for Justice, National Association of Mutual Insurance Companies, and one individual.

     Your Committees received comments on this measure from the Department of Commerce and Consumer Affairs, Department of the Attorney General, Division of Consumer Advocacy of the Department of Commerce and Consumer Affairs, Public Utilities Commission, Hawaii Insurers Council, Charter Communications, and Pacific Resource Partnership.

     Your Committees find that the devastating 2023 Maui wildfires were collectively one of the most devastating catastrophic disasters in state history and a tragic reminder of the increased risks of catastrophic wildfire and the tremendous harm they can inflict upon the State.  These risks not only impact the public, but also the State's public utilities and infrastructure, further increasing the need to plan and develop solutions to reduce and proactively respond to the risk of catastrophic wildfires in the State.  Your Committees further find that developing any solution must involve fairly balancing the interests of the public, the public utilities, and the benefits and costs associated with lowering the risk of catastrophic wildfires.  Accordingly, this measure would allow victims of a future catastrophic wildfire to receive quick compensation for any damages, while helping participating utilities reduce their risk of financial instability resulting from a catastrophic disaster.

     Your Committees note that this measure, in its current form, allocates the costs associated with lowering the risk of catastrophic wildfires between participating utilities and their ratepayers but does not specify the dollar amounts for the allocations between ratepayers and shareholders for those initial contributions from electric utilities into the Wildfire Recovery Fund.  Given that ratepayers in Hawaii are already burdened with some of the highest electricity rates, the securitization proposed in this measure would only add costs to these already high rates.  At the same time, however, shifting this burden onto the shareholders may leave the electric utility unable to raise the capital needed to make their initial contributions to the Wildfire Recovery Fund.

     Your Committees further find that while a few states have also considered implementing funds similar to the Wildfire Recovery Fund to address the increased risk of catastrophic wildfires in their jurisdiction, these funds vary with respect to how the costs are allocated between ratepayers and electric utilities.

     Ultimately, your Committees acknowledge that this is a significant measure for the State's largest investor-owned electric utility, ratepayers, and the State as a whole.  According to the testimony of Hawaiian Electric, the first $350 million phase of the Wildfire Mitigation Plan has already been financed and itemized, but later phases of the plan are currently being reviewed and have not yet been approved by the Public Utilities Commission.  This measure in its current form, however, is not intended to focus on the first important phase of the plan, but rather, is focused on how to help electric utilities with implementing later phases of the plan, including credit enhancement and a risk reduction plan that is intended to help the State in later years.  Immediate help is in the form of the State's contribution of an $800 million general fund appropriation for the global settlement, which helps to address the current, most pressing issue, namely, the settlement of certain claims concerning liability relating to the 2023 Maui wildfires.  Because this measure proposes long-term, future solutions in the event of another catastrophic wildfire, your Committees find that more time is needed to determine the appropriateness of the proposed approaches and the impacts of this measure.

     Accordingly, your Committees have amended this measure by:

     (1)  Deleting its contents and inserting language to:

          (A)  Convene a working group within the Department of Commerce and Consumer Affairs to analyze the provisions of certain measures introduced during the Regular Session of 2025 regarding the establishment of a Wildfire Recovery Fund; and

          (B)  Require the working group to submit a report to the Legislature no later than ninety days prior to the convening of the Regular Session of 2026;

     (2)  Amending section 1 to reflect its amended purpose; and

     (3)  Making technical, nonsubstantive amendments for the purposes of clarity and consistency.

     As affirmed by the records of votes of the members of your Committees on Commerce and Consumer Protection and Energy and Intergovernmental Affairs that are attached to this report, your Committees are in accord with the intent and purpose of H.B. No. 982, H.D. 3, as amended herein, and recommend that it pass Second Reading in the form attached hereto as H.B. No. 982, H.D. 3, S.D. 1, and be referred to your Committee on Ways and Means.

Respectfully submitted on behalf of the members of the Committees on Commerce and Consumer Protection and Energy and Intergovernmental Affairs,

STAND. COM. REP. NO.  1015

Honolulu, Hawaii

                , 2025

RE:   H.B. No. 982

      H.D. 3

Honorable Nadine K. Nakamura

Speaker, House of Representatives

Thirty-Third State Legislature

Regular Session of 2025

State of Hawaii

Madame:

     Your Committee on Finance, to which was referred H.B. No. 982, H.D. 2, entitled:

"A BILL FOR AN ACT RELATING TO WILDFIRES,"

begs leave to report as follows:

     The purpose of this measure is to:

     (1)  Establish the Wildfire Recovery Fund; and

     (2)  Authorize electric utilities to recover their contributions through securitization.

     Your Committee received testimony in support of this measure from the International Union of Painters and Allied Trades, District Council 50; Chamber of Commerce Hawaii; Par Hawaii; AES Hawaiʻi; Kaʻala Farm; Clearway Energy Group; Retail Merchants of Hawaii; Mālama Learning Center; Plumbers and Fitters Local 675; Hawaii Leeward Planning Conference; Kona-Kohala Chamber of Commerce; Hawaii Island Economic Development Board; Kalaeloa Partners, LP; Japanese Chamber of Commerce & Industry of Hawaiʻi; Kapolei Chamber of Commerce; and two individuals.  Your Committee received testimony in opposition to this measure from the National Association of Mutual Insurance Companies and Hawaii Association for Justice.  Your Committee received comments on this measure from the Office of the Governor; Department of Commerce and Consumer Affairs; Department of the Attorney General; Department of Commerce and Consumer Affairs Division of Consumer Advocacy; Hawaii Public Housing Authority; Hawaii Housing Finance and Development Corporation; Public Utilities Commission; Hawaiʻi Climate Advisory Team; International Association of Heat & Frost Insulators & Allied Workers Local 132; International Union of Elevator Constructors, Local 126; Hawaii Building & Construction Trades Council; Hawaiʻi Island Chamber of Commerce; Pacific Resource Partnership; Hawaiʻi Farm Bureau; Hawaii Teamsters & Allied Workers Local 996; Hawaii Fire Fighters Association, Local 1463, IAFF, AFL-CIO; Kauaʻi Island Utility Cooperative; Iron Workers Stabilization Fund; Plus Power; Sustainable Energy Hawaiʻi; Ulupono Initiative; Land Use Research Foundation of Hawaii; Charter Communications; Hawaiian Electric; Life of the Land; International Brotherhood of Electrical Workers Local 1260; Hawaiian Telcom; and numerous individuals.

     Your Committee has amended this measure by:

     (1)  Changing the financial contributions from the investor-owned electric utilities and shareholders of the investor-owned utilities to capitalize the Wildfire Recovery Fund to unspecified amounts;

     (2)  Removing the provisions that authorize the issuance of special purpose revenue bonds and direct the allocation of the annual state ceiling of private activity bonds volume cap to be used for the securitization bonds; and

     (3)  Making technical, nonsubstantive amendments for the purposes of clarity, consistency, and style.

     As affirmed by the record of votes of the members of your Committee on Finance that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 982, H.D. 2, as amended herein, and recommends that it pass Third Reading in the form attached hereto as H.B. No. 982, H.D. 3.

Respectfully submitted on behalf of the members of the Committee on Finance,

STAND. COM. REP. NO.  776

Honolulu, Hawaii

                , 2025

RE:   H.B. No. 982

      H.D. 2

Honorable Nadine K. Nakamura

Speaker, House of Representatives

Thirty-Third State Legislature

Regular Session of 2025

State of Hawaii

Madame:

     Your Committees on Consumer Protection & Commerce and Judiciary & Hawaiian Affairs, to which was referred H.B. No. 982, H.D. 1, entitled:

"A BILL FOR AN ACT RELATING TO WILDFIRES,"

beg leave to report as follows:

     The purpose of this measure is to:

     (1)  Establish the Wildfire Recovery Fund, body politic tasked with administratively settling claims for economic damages resulting from catastrophic wildfires and allow public utilities to make contributions to the Wildfire Recovery Fund; and

     (2)  Authorize electric utilities to recover their contributions through securitization.

     Your Committees received testimony in support of this measure from the International Brotherhood of Electrical Workers Local 1260; Land Use Research Foundation of Hawaii; Sustainable Energy Hawaiʻi; Chamber of Commerce Hawaii; Kauaʻi Island Utility Cooperative; Ulupono Initiative; Hawaiʻi Island Chamber of Commerce; Kapolei Chamber of Commerce; Hawaiʻi Climate Advisory Team; Hawaii Cattlemen's Council, Inc.; Clearway Energy Group; Plus Power; Par Hawaii; Japanese Chamber of Commerce & Industry of Hawaiʻi; Life of the Land; AES Hawaiʻi; Retail Merchants of Hawaii; International Union of Painters and Allied Trades, District Council 50; Plumbers & Fitters UA Local 675; International Association of Heat & Frost Insulators & Allied Workers Local 132; Hawaii Teamsters Local 996; and three individuals.  Your Committees received testimony in opposition to this measure from the National Association of Mutual Insurance Companies; Hawaii Association for Justice; Hawaii Regional Council of Carpenters; and one individual.  Your Committees received comments on this measure from the Office of the Governor; Department of Commerce and Consumer Affairs; Department of the Attorney General; Division of Consumer Advocacy of the Department of Commerce and Consumer Affairs; Public Utilities Commission; Hawaiʻi Farm Bureau; Mālama Learning Center; Kaala Farm; Hawaiian Electric; Charter Communications; Pacific Resource Partnership; Hawaii Building & Construction Trades Council; and numerous individuals.

     Your Committees find that as wildfire risk has increased in a warming climate, it would be prudent to develop a streamlined process to quickly offer settlement payments for property damages after a catastrophic wildfire, without the need for a lengthy and uncertain litigation process.  This measure establishes the Wildfire Recovery Fund, which is modeled after the One Ohana Fund, to ensure the timely compensation for persons who suffered property damage come a catastrophic wildfire.  While the measure provides a timely process for compensation, claimants retain the option of rejecting an offer and pursuing their own compensation.

     Your Committees further find that securitization could help reduce debt related to wildfire exposures.  Securitization allows for the issuance of debt secured by a non-by-passable charge to the customer's bill, which allows the electric utility to fully recover its costs at a lower interest rate for customers.  This measure will serve the public interest by establishing a mechanism to provide efficient compensation for property damage resulting from a future catastrophic wildfire allegedly caused by a regulated utility, while also protecting the financial integrity of Hawaii's regulated utilities.

     Your Committees have amended this measure by:

     (1)  Specifying that the Wildfire Recovery Fund is a trust fund;

     (2)  Specifying that the Executive Director of the Wildfire Recovery Fund may establish the investment policies of the fund;

     (3)  Clarifying that, of the $505,000,000 in initial contributions funded by shareholders of investor-owned electric utilities, $5,000,000 is to be used for:

          (A)  Funding the salaries of the Executive Director and other personnel within the Wildfire Recovery Fund; and

          (B)  Contracting consultants to assist the Public Utilities Commission with determining whether a contributor acted prudently,

          and that any remaining balance of the $5,000,000 in 2035 is to be transferred to the Wildfire Recovery Fund;

     (4)  Specifying that investment earnings associated with payments made to the Wildfire Recovery Fund that were recovered in regulated rates from customers shall be annually refunded to the customers in the form of a credit on their ratepayer accounts;

     (5)  Specifying that claimants have no less than four years from the covered catastrophic wildfire to file a claim, and the Executive Director may establish a deadline beyond the four year-period for filing a claim;

     (6)  Clarifying that the circuit court's authority to equitably apply the aggregate liability limit applies to all civil claims for qualifying damages;

     (7)  Specifying that the limitation on claims relating to indemnity or contribution only applies to agreements entered into on or after the operation date;

     (8)  Authorizing the Public Utilities Commission, as a condition of a financing order, to prohibit any increase in compensation, including any bonuses, for the electric utility's officers for a period of time determined by the Commission, with any increase in violation of that condition to be seized and deposited into the Wildfire Recovery Fund; and

     (9)  Making technical, nonsubstantive amendments for the purposes of clarity, consistency, and style.

     As affirmed by the records of votes of the members of your Committees on Consumer Protection & Commerce and Judiciary & Hawaiian Affairs that are attached to this report, your Committees are in accord with the intent and purpose of H.B. No. 982, H.D. 1,  as amended herein, and recommend that it be referred to your Committee on Finance, in the form attached hereto as H.B. No. 982, H.D. 2.

Respectfully submitted on behalf of the members of the Committees on Consumer Protection & Commerce and Judiciary & Hawaiian Affairs,

STAND. COM. REP. NO.  230

Honolulu, Hawaii

                , 2025

RE:   H.B. No. 982

      H.D. 1

Honorable Nadine K. Nakamura

Speaker, House of Representatives

Thirty-Third State Legislature

Regular Session of 2025

State of Hawaii

Madame:

     Your Committee on Energy & Environmental Protection, to which was referred H.B. No. 982 entitled:

"A BILL FOR AN ACT RELATING TO WILDFIRES,"

begs leave to report as follows:

     The purpose of this measure is to:

     (1)  Establish the Wildfire Recovery Fund; and

     (2)  Allow for securitization for electric utilities.

     Your Committee received testimony in support of this measure from the Hawaiʻi Climate Advisory Team; Kalaeloa Partners LP; Plus Power; Ulupono Initiative; International Brotherhood of Electrical Workers Local Union 1260; Hawaii Cattlemen's Council, Inc.; Sustainable Energy Hawaiʻi; Par Hawaii; Kauaiʻi Island Utility Cooperative; Hawaiian Electric; Retail Merchants of Hawaii; Hawaiʻi Farm Bureau; Chamber of Commerce Hawaii; Ameresco; Land Use Research Foundation of Hawaii; Hawaiʻi Island Chamber of Commerce; Clearway Energy Group; AES Hawaiʻi; Kapolei Chamber of Commerce; North Kohala Community Resource Center; Kona-Kohala Chamber of Commerce; Hawaii Fire Fighters Association; Maui Chamber of Commerce; and numerous individuals.  Your Committee received testimony in opposition to this measure from Hawaii Insurers Council; Hawaii Regional Council of Carpenters; Pacific Resource Partnership; and Hawaii Association for Justice.  Your Committee received comments on this measure from the Office of the Governor; Department of the Attorney General; Department of Commerce and Consumer Affairs; Division of Consumer Advocacy of the Department of Commerce and Consumer Affairs; Public Utilities Commission; and Life of the Land.

     Your Committee finds that the increasing risk of catastrophic wildfires in Hawaii has heightened the threat of property damage, and the litigation process for compensation is costly and inefficient.  To address this, an administrative claims process will provide a faster, low-cost alternative for claimants while preserving their right to litigation and ensuring the financial stability of regulated utilities.  This measure also supports securitization as an efficient funding mechanism, balancing wildfire recovery efforts with the long-term resilience of Hawaii's utility infrastructure.

     Your Committee has amended this measure by:

     (1)  Expanding the definition of "catastrophic wildfire" to include wildfires that, for an electric cooperative with less than fifty thousand residential members, cause a certain dollar amount of potential claims to be determined by Executive Director of the Wildfire Recovery Fund;

     (2)  Clarifying that the definition of "qualified damages" means economic damages;

     (3)  Requiring a person or entity to provide a comparison of costs for current commercial insurance coverage compared to wildfire property damage and loss, in order to be eligible to participate as a contributor;

     (4)  Changing the initial contributions from investor-owned electric utilities to be $500,000,000, to be recovered from customers, and $505,000,000 to be funded by shareholders;

     (5)  Clarifying that an error resulting from the failure of a system, process, or program to prevent the error could qualify as a basis for a finding of imprudence;

     (6)  Requiring the Executive Director of the Wildfire Recovery Fund to submit an annual report regarding the Wildfire Recovery Fund to the Public Utilities Commission in addition to the Legislature;

     (7)  Amending the definition of "financing costs" to mean reasonable costs to issue, service, repay, or refinance bonds and include costs related to the engagement of services of a financial advisor by the Public Utilities Commission;

     (8)  Removing professional fees, consultant fees, redemption premiums, tender premiums, and other costs incurred by the electric utility in using proceeds of bonds to acquire outstanding securities from the definition of "wildfire recovery costs";

     (9)  Clarifying that an application for a financing order shall include only a description of how wildfire recovery costs will be allocated among consumers;

     (10) Requiring the Public Utilities Commission to issue approval or denial of any application for a financing order within ninety days of the last filing in the applicable docket;

     (11) Requiring the Public Utilities Commission to consider whether the issuance of bonds and imposition and collection of wildfire recovery charges are consistent with the public interest;

     (12) Clarifying that wildfire recovery charges and any associated fixed recovery tax amounts will be imposed only on existing and future customers in the utility service territory of the electric utility subject to such financing order;

     (13) Clarifying that section B-3(b), Hawaii Revised Statutes, relating to wildfire recovery financing order, shall not preclude actions that would not adversely affect the interests of the electric utility, assignees of wildfire recovery property, and bondholders;

     (14) Requiring periodic true-up adjustments to wildfire recovery charges to consider interest on ratepayer investments into the Wildfire Recovery Fund;

     (15) Authorizing the Public Utilities Commission to engage the services of a financial advisor to assist in its consideration of an application for a financing order;

     (16) Clarifying that the Legislature authorizes the issuance of special revenue bonds for costs that require an allocation of the annual state ceiling for private activity bonds;

     (17) Authorizing project agreements entered into in connection with the issuance of special purpose revenue bonds to finance costs to include a project agreement with an affiliate of an electric or gas utility;

     (18) Clarifying that the Legislature authorizes the allocation of the annual state ceiling to the issuance of bonds that require allocation in order for the interest on the bonds to be tax-exempt;

     (19) Changing the effective date to July 1, 3000, to encourage further discussion; and

     (20) Making technical, nonsubstantive amendments for the purposes of clarity, consistency, and style.

     Your Committee notes the concerns raised in the testimony submitted by the Department of Commerce and Consumer Affairs regarding the need for Hawaiian Electric to issue further evidence and quantitative analysis regarding how it reached the $1.005 billion initial contribution amount.

     Your Committee recognizes that there is a need to determine when it is appropriate for the Wildfire Recovery Fund to end, should the insurance market and the public utility's credit rating stabilize, and how, upon the Fund ending, ratepayers would get refunded.

     As affirmed by the record of votes of the members of your Committee on Energy & Environmental Protection that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 982, as amended herein, and recommends that it pass Second Reading in the form attached hereto as H.B. No. 982, H.D. 1, and be referred to your Committees on Consumer Protection & Commerce and Judiciary & Hawaiian Affairs.

Respectfully submitted on behalf of the members of the Committee on Energy & Environmental Protection,