House Standing Committee on Consumer Protection & Commerce

Good morning everyone. We are convening the Joint Committee on Commerce, Consumer Protection and Commerce and the Committee on Judiciary and Hawaiian Affairs. It is Thursday, February 13th, 2025, 10am at Conference Room 329. We have one. I'm just gonna go right into it. We have one item on the agenda today, HB 982 HD1 relating to wildfires.

Before we get into it though, let me read a quick script. In order to allow as many people to testify as possible, there will be a two minute time limit per testifier. Because morning hearings must adjourn prior to floor session, not all testifiers may have the opportunity to testify testify.

In that event, please know that your written testimony will be considered by the committee. For those on Zoom, please keep yourself muted and your video off while waiting to testify. After your testimony is complete, the Zoom chat function will allow you to chat with the technical staff only.

Please use the chat for only for technical issues, especially if you disconnect. If you are disconnected unexpectedly, you may attempt to rejoin the meeting. If disconnected while presenting testimony, you may be allowed to continue if if time permits. Please note the house is not responsible for any bad Internet connections on the testifier's end.

In the event of a network failure, it may be necessary to reschedule the hearing or schedule a meeting for decision making. In that case, an appropriate notice will be posted. Please avoid using any trademarked or copyrighted images. Please refrain from profanity or uncivil behavior.

Such behavior may be grounds for removal from the hearing without the ability to rejoin. And also for testifiers. I know we like to send on our testimony sometimes. Please come up to the mic to stand on your testimony just so everyone on Zoom and YouTube can hear you.

All right, first up for HB 982 HD1, Department of Commerce and Consumer Affairs with comments.

Good morning chairs, vice chairs, members of the committees. I'm Nadine Ando. I'm the Director of the Department of Commerce and Consumer Affairs. We stand on our written testimony offering comments on this measure and will be available for questioning.

Thank you. Next up we have DCCA, Division of Consumer Advocacy with comments.

Morning Chair, Vice Chair, members of the committees. My name is Michael Angelo. I'm the Executive Director of Division of Consumer Advocacy. We stand on our testimony providing written comments available for questions. Thank you.

Thank you. Next up, we have the Public Utilities Commission with comments.

Chairs, Vice Chairs, members of the committee. Leo Asuncion, Chair of the PUC. We'll stand on our written testimony providing comments and we'll be available for any questions you have.

Thank you. Next up, Attorney General with comments.

Good morning. Deputy Attorney General Randall Nishiyama. We've submitted our written comments and are available for questions. Thank you.

Thank you. Next up, IBEW Local 1260 in support.

Morning, Chairs Matayoshi and Tarnas. Vice Chairs Chun and Poepoe. Committee Members. Kika Bukoski on behalf of Leroy Chincio and IBEW Local 1260. We just want to thank you folks for hearing this measure. We want to state for the record that this bill is very important to our membership.

This bill will have a direct impact on our local union as well as our membership. And we just want to reiterate that we understand that there's a lot of thought and a lot of work that's been going on going into this bill as it's moving forward.

But we would respectfully request that you consider amending section A3, subsection B1 and 2, and reinstate the language that was in the original draft of House Bill 982. Thank you.

Thank you. Next up, we have the Chamber of Commerce in support. Not present. Next up, Kauai Island Utility Cooperative in support. KIUC.

Yes, good morning. Chairs, vice chairs and members of the committee. Beth Amaro with KIUC. We do stand in support of this measure. We stand on our testimony and are requesting one amendment. And I'll be happy to answer any questions if needed. Thank you.

Thank you. Next up, we have Ulupono Initiative in support. It says in person, but are they on Zoom? No. Okay. Not present. Next, we have Clearway Energy Group in support.

Good morning. Laurie Lum on behalf of Clearway Energy Group. And we will stand on our testimony in support. Thank you very much.

Thank you. Next up, Hawaiian Electric in support.

Aloha. And good morning, chairs, vice chairs and members of the committees. Jason Ben, Senior Vice President for Hawaiian Electric, testifying in strong support of the original version of HB 982 and expressing concerns with the HD1 version as relates to additional required contribution by Hawaiian Electric. This bill is in the public interest.

It protects the people of Hawaii and our economy from the risk of future catastrophic wildfires. And despite immense and continuing efforts by many to reduce the risk of wildfire, including our own work, no one should assume the risk is zero and we must act now. I want to emphasize that the bill is forward looking.

I want to make clear our company's commitment to pay its share of the $2 billion to our $2 billion share of the global settlement with no contribution for our customers.

The HD1 requirement for an additional shareholder contribution of 500 million is is simply not feasible at this time and would delay or prevent the fund from operating, thereby negating its benefits, including providing the intended credit rating support that would lead to lower cost to customers.

Comparisons to California on this issue are out of context and not apples to apples for many reasons. In California, utility customers are paying for claims from past fires, claims from past and future fires, up to 1 billion in damages and contributing to the Wildfire Fund.

As designed, the original version of the bill creates a wildfire recovery fund that reasonably balances the interests of many stakeholders and achieves three key objectives. It protects property owners, renters and insurers and economy from future wildfires and it protects customers from cost increases caused by the utilities exposure to unlimited wildfire liability and it preserves accountability for wildfire risk mitigation.

The HD1amendment unbalances these objectives and is likely to prevent or delay its implementations. Utilities must serve despite risk factors that are not all within their control.

Simply put, unbounded wildfire liability risks results in bad credit high cost of capital, which in turn leads to higher cost to customers at a time when we need to make critical infrastructure investments for safety, reliability, resiliency and to meet the policy objectives of the state of Hawaii. Prior to August 8, Hawaiian Electric's credit rating was a minus.

Its current credit rating is investment grade, below investment grade, speculative and the lowest in the US amongst regulated utilities. This bill is critical to begin the process of returning to investment grade and reducing cost to customers and it includes a unique give back feature.

Request that you please pass HB 982 HD1 with modifications to restore the original language regarding shareholder contribution. Mahalo for allowing me to testify in support and I invite any questions you may have.

Thank you. Next up we have Par Hawaii in support.

Aloha Chair, Vice Chairs, members of the committee, My name is Eric Wright. I serve as President of Par Hawaii. We're in strong support of this bill. One of the underappreciated aspects of this legislation is the benefits that it would have on a lot of local companies, including ours. We're the fuel supplier to Hawaiian Electric.

It's a very capital intensive business. At any given time we have a lot of working capital tied up and to pay our employees and contractors we rely on timely payments from Hawaiian Electric. Likewise, there's a lot of independent power producers on the grid right next to our refinery.

There's Kaliloa Partners which is really critical to the power grid on Oahu. They're in a similar position where they rely on timely payments from Hawaiian Electric and there's a host of other independent power producers like that. And then of course, there's probably hundreds of different contractors and local businesses that do business directly with Hawaiian Electric.

And all those businesses also rely on a healthy Hawaiian Electric. So we think that this legislation is good for Hawaii, good for the people of Hawaii, everybody who works here and does business here and happy to answer any questions. Thank you for the opportunity to testify.

Thank you. Next up, we have Life of the Land in support.

Aloha chairs, vice chairs and committee members. Life of Land recognizes that this bill is a work in progress and that something needs to emerge to protect the utility and to guard against future catastrophic wildfires. We do note a couple points.

One, the bill says that a catastrophic wildfire is a wildfire that burns down a certain number of buildings as opposed to a wildfire that kills a certain number of people. So we would like the language changed to reflect that a wildfire that kills 100 people is catastrophic even if 500 buildings don't burn down.

Second, the bill talks about prudency review. And we note that while the bill is forward looking, the Public Utility Commission has not done a prudency review on a recent catastrophic wildfire. Mahalo.

Thank you. Next up, Charter Communications with comments.

Good afternoon or good morning, chairs, vice chairs, and members of the committee. My name is Rebecca Lieberman from Charter Communications. Thank you for the opportunity to provide comments. Charter understands the intent of this bill and the desire to quickly and efficiently resolve claims stemming from catastrophic wildfires.

But we can't support the bill without several important amendments which are detailed in our written testimony. But we think the most important amendment is one that will ensure the bill is not construed to waive third party indemnity obligations owed by participating, participating electric utilities.

As written, the bill would impair the contract rights of entities like Charter that attach broadband and communications infrastructure to electric utility property. If left in its current form, the bill may be rendered unconstitutional due to the abrogation of existing contract rights. Other requested amendments are related to joint and several liability, qualified damages, venue and administrative exhaustion.

And I'm available for questions. Thank you.

Thank you. Next up, Hawaii Association of Justice in opposition.

Aloha chairs, vice chairs, members of the committees. Evan Oue on behalf of the Hawaii Association for Justice. We do stand in opposition to this measure. And you know, you have a written testimony. I apologize that it was late.

But our primary points of concern are of course, the liability caps on, you know, the limitation on liability that for those who reject from the fund and you know, we've always held that liability caps are bad public policy from our point of view.

And, you know, the victims of these wildfires should be able to seek full remedy in these instances. You know, second, our second point of contention is going to be the ED that's created in this measure has substantial authority without clear parameters. For example, you know, there's no guidelines on how these offers will be made.

And then secondly, there's no, you know, express statute of limitations in there. So there. It does create concerns for those when those victims are going to be filing. And then the third primary point of concern that we have is unclear language regarding damages that exceed the cost that's obligated to the fund.

You know, there's no rules or requirements that substantial payments shall be required in these instances. So if the obligation goes, you know, the amounts go over what's obligated to the fund, it does create concerns on the, you know, victim's ability to seek recourse.

So, you know, for these reasons, we respectfully oppose this measure, and we'll be available for any questions.

Thank you. That's all the testifiers we have signed up to testify. Anyone else here to testify on this measure? Anyone on Zoom? All right, we'll do questions. Do you want my committee to start, or do you want to? Just both or? Up to you. Okay. Anyone have any questions? Okay, I guess it's just me.

Kiko, you can come. You can come, too, if you want. How did this $1 billion securitization amount number come to be?

Yeah, it's a great question. As I was trying to explain, we're trying to balance a lot of interests. We think that's a reasonable amount. The CATS Actuary Study puts the annual risk at 1.4 billion for the state across every hazard, including hurricanes, tsunamis, floods, lava flows, and wildfires.

We have our own independent analyst who said we've reduced the risk by 60%. It's consistent. What he thinks is the appropriate number. Yeah.

Okay, so it's not. The the point of this bill, although we are worried about wildfires and we appreciate you mitigating them, is to try to improve your credit rating. Has there been any indication from the credit credit rating agencies that $1 billion is an appropriate amount? Too much, Too little.

Have they given you any indication on that amount?

Thank you, Chair, for that question. Clearly, they'd like it to be as big as possible. We're trying to balance the interest here, which is why the combination of what we think is a fair and reasonable aggregate cap plus the $1.0 billion we believe is a critical first step to restoring our credit rating.

So, yes, they've indicated that the aggregate cap is important, but they'd like to see as large a fund as possible.

I mean, as large as possible is pretty vague, though. They haven't given you any indication. I mean, if this came at 10 million, would they still be saying that's not. I mean, clearly at certain points. Can you give us some kind of guardrails here?

We think this amount is the right.

Balance, but it's not based on any credit rating. Credit.

Credit rating agencies would prefer to see it be larger. But we're also. But they're also find the aggregate cap as the most important. We think it's the right level. Yeah. Okay, so. And they have provided guidance that having a fund like this would help. Having an aggregate cap would be even more important.

Okay, so if you did the aggregate cap with a $500 million securitization, you have had no indication from the credit rating agencies if, that, if they may consider that insufficient.

They would probably consider it insufficient, but their priority is the aggregate cap.

Okay, but how do we know they're not considering $1 billion insufficient too?

It's a fair question. You know, in our talks with them, they thought this was at least a reasonable level, but they are advocating for more. So. And they're always going to advocate for more. That's my point.

But my point is if we're at 500 million, they might be saying the same thing. This is a lot of money.

I would say that, yes, it is. It's a serious amount of money. Yes. I think they would say 500 is inadequate. I think we can get there at 1 billion with the aggregate cap as designed. I think it's the fairest reasonable balance. I think there's three things that have to happen for our credit rating.

To approve this bill with the aggregate cap and some level of backing to provide some insurance layer. We have to settle the, finalize the settlement of the claims and we have to continue to work with everybody to drive down wildfire risk. All, all three things have to happen.

When we saw our credit rating dive from a minus to junk, it happened overnight. It took us years to climb up and it's going to take steps. But this bill is one super important step to get there.

I understand, I understand. But my point is, if they're saying it's insufficient and needs to be higher at $1 billion, why are we, why are we putting it at $1 billion? It seems. Why are we even doing it if they're going to say?

I'm not sure they said it was insufficient. I don't believe that's what they said. I think they said they needed to see a fund.

They were coy about exactly how much they indicated they'd like to see a higher fund, but they said having a fund with an aggregate cap is the right step towards improvement.

Aggregate cap, but this, the $1 billion has nothing to do with aggregate cap. So the aggregate cap could be in place, but it could be a 500 million.

I think we need more clarity on the final amount and I think we need that to be based on some kind of opinion by the credit rating agency that we're trying to influence. Otherwise this is really just a shot in the dark. So that, that concerns me.

I mean, I know you're concerned about the $500 million split that the previous committee put in, but to me, should it even be $1 billion? I don't know. And it sounds like you don't know either. So I think we need. Anyway, I don't, I know you don't know.

You don't have an answer for us on the spot here. Before the next committee, I really think you guys need a better, better answer though on how that $1 billion came to be and whether it's actually going to be sufficient to move any mines.

Because I don't want to put this $1 billion in place here and then have it not do anything on the other end. That seems ridiculous to me and frankly, very destructive. Sorry, could you repeat your lesson? And very, very destructive to ratepayers. I mean, if it's not going to move the needle, why are we doing it?

So if you could get a better response by the next committee and if you get one before, please send it to me and we will do that.

We have some reports for them. I should have them with me and we will follow up exactly as you said.

Okay. As far as securitization goes too, do you need this bill in order to request securitization of this amount from the PUC?

If we went through a normal rate making process, we wouldn't be able to do a bankruptcy remote securitization. We need it legislatively and we've calculated the cost of doing it that way over a five year period or through an amortizing bond at two to three times the amount to customers.

So instead of four, it would be eight or 12.

So if we set up the Wildfire Recovery Fund and we did, limitations on liability, basically all the a portion of this bill, would the securitization itself though be able to be requested from PUC directly by eco.

We have to go to the PUC even after you approve this bill for a financing order? I believe. But yeah, legislatively we would need it approved here first.

Which kind of begs the question though if you need to go to them after this bill anyway, why are we doing this bill? I mean the second part of this bill I should say.

The securitization you're asking about, without legislation it's not impervious to a reach down in the event of a bankruptcy. It's not bankruptcy remote, which means we won't get AAA credit rating on the securitization without the legislation.

Which part of this bill guarantees that or secures that is it is the Wildfire Recovery Fund establishment itself.

Securitization through the legislature makes it a surcharge that is not. Is remote from bankruptcy. Low risk, a low risk investment. So creditors will loan us the 1 billion at a super high credit rating.

And PUC won't?

Their, their okay alone doesn't give us the.

The risk reduction that the credit that the people who had loan us the money would give us that financing at that low level.

Is that using the state's bond rating or is that?

No, I don't believe.

Is the PUC here? PUC can you, can you provide further explanation as to that the bankruptcy protections? I guess.

To be honest, I don't know everything about the bankruptcy and what that process may entail. But basically we would be doing the financing order. Right. The way I read the bill as is this is very different from last year's bill where we did have.

Right, the state's using the state's credit to try to get to borrow the money. This one is all on HECO. Right. So what I'm hearing is right, there's a number of factor of things that need to happen and at some point HECO becomes investment grade, might not be a. And at that point, right, that's where you're going.

They're going to have to borrow the money at that rate. It's basically to lift them out, lift them out of junk bond status and get them to a point of that they are investment grade and that would be the rate.

Sorry, I feel like we're getting off topic though for the bankruptcy portion though. You have no opinion on it?

We do not have an opinion on it. We do have bankruptcy counsel on retainer because we've been preparing for, you know, just the just in case part. We could try to get back to him and see and give you that give the committees that that information but.

Okay, let's see with Hiko. Do you have a follow up response?

Thank you sir. Just following up and hopefully providing clarity with the legislation. The credit, the credit rating is based on the fact that it's a dedicated revenue stream and making it risk free to people we would borrow the money from.

But we would do the borrowing so legislatively that $4 charge is isolated from all other creditors and therefore we can achieve the highest possible credit rating for that which reduces the cost of it.

And it secondarily and, I'll take a moment to point this out, it effectively provides us with a much cheaper alternative to insurance which is a normal cost of business that would be normally part of REITs but because it has this dedicated revenue stream we can borrow against it at a much lower credit rating. Does that make sense?

Some of it does. I feel like if you enter Chapter 11 the bankruptcy court could still reach the four dollars. I'm not sure how this is around that that unless you're taking it outside of your corporation.

Yeah. It would be my understanding is would be an, an isolated legal entity that has the. Similar to gems. Yeah, we can follow up for you chair on that. But I mean it's, it's isolated, it's revenue stream, dedicated revenue stream. It's isolated from our other revenues.

The revenue stream would go straight to the trust. Is that how it would work?

Revenue stream would. No, the revenue. Yes. The revenue stream would pay for. Pay for the financing of the fund. Pay for the financing of the fund. Certainly can clarify for you but it's been done in other states and it's been proven effective in many other states.

Has it been tested in bankruptcy court?

I don't know. I will follow up on that or can we make sure to follow up. We'll follow up on that for you.

Okay. That is a more compelling reason to grant this bill. That's why so yeah, if you could follow up. So if we kept with the current version of the bill and we did the 50/50 split which I know you folks are against, how would that affect the approximately $4 securitization fee?

I mean simple math. It would be. Would be half I would think. Yeah.

Okay. And where, where would I mean would I throw you softball here for the amount that the ratepayer would be paying on the other end. Aside from this fee though, would that go up significantly?

It would delay the improvement of our credit rating which would mean sustained high cost of capital which will drive all of our unit cost up across all our borrowings and every piece of work we do without some help to improve our credit rating. All we're doing is delaying.

The PC has said in their testimony it's not dispositive that the bill will cause an automatic return of our credit rating. It is true. I mentioned the three steps, but it is certainly dispositive that we won't get back there without the bill is really to the benefit of the customers.

The charge is offset once we restore credit rating by. By quite a bit. And in our testimony written, we give you the difference from our current and over the projected borrowings we have to do. And as the gentleman from Par said, we're in a very capital intensive business. So everything we will be borrowing at junk.

So you're saying that if we. Even though the $4 increase will be kind of line item on the ratepayers bill, the overall effect of the net that they're paying on the bill would probably be going down more than the $4 it's increasing.

That's what I'm saying. Once we restore our credit rating. That's what I'm saying. Yes. And we won't get there without this bill. Our ability. Sorry, please. I was just going to say, I mean we really have asked shareholders to contribute $2 billion without any claims. People are drawing this comparison to California. It doesn't work.

It's a completely different fund. And we just. It would be exceedingly difficult for us to make a significant contribution at this point, which is going to delay any improvement in credit rating for our customers.

That's actually kind of where I was going though that the California, as I understand the California Fund being set up, it was a 50/50 split. Yes. So it said that one of the differences is because the California electrical companies were dealing with past liability as well as future.

Which is sounds like exactly what you guys are dealing with. Right. I mean I'm not sure why it would be fair for California to do a 50/50 split, but not fair for it to be it to happen that way here.

Thank you for that question. And if you allow me, I'll attempt to explain. Okay. So in California they established a fund in 2019. All previous fires they're allowed to apply to their PUC to recover in rates.

And just two weeks ago, the California CPUC increased the bill for all SEC customers by $1 to cover the 2017 Thomas Fire. And they have a docket in front of them now to recover the Woolsey fire.

Damages in rates, it's about triple the size, about $5.6 billion from that fire that they're seeking to recover even as we go forward. The California Utility Wildfire Fund has a $1 billion attachment point. So PG&E is seeking relief for claims for fires below $1 billion. And then secondly, the Wildfire Recovery Fund in California serves one purpose.

Thank you.

It reimburses the utilities for their legal fees for settlements and judgments. It doesn't have an administrative process. People in the campfire from 2018 are still waiting to get paid. So it's a vastly different bill. In our case, you know, the vast majority of this is being paid through what we agreed. Let's help the community move forward.

Let's settle. We settled at $2 billion. We're paying for that out of shareholders. In this legislation, we forego our right to defend liability if the fire involves our equipment. So there is a balance of interest, chair, that we're trying to meet. Does that make sense to you?

Yes, that makes sense.

Rep. Lowen, did you have a question, too?

Well, when you're ready.

Yeah, if it's following up on this, please. Or is it something totally different?

It's related, but a little different.

No. Go ahead, go ahead.

No, I'm totally shifting gears.

That's fine. I'm done with that line of questioning.

The current bill, I mean, we're kind of. It's a little bit related. We're talking about the amounts, right. The split between shareholders and ratepayers. So the amount current. Well, I had kind of a two part question. Well, never mind. Okay, I'll stick. I'll try to be clear. If it stayed at the current amount, the 500 million contribution.

Well, 505 million from shareholders, or even if that, you know, shifts down or shifts up as this bill moves forward, I mean, what would Hawaiian Electric do to raise capital? Would you issue stocks? Look at selling off assets? Like, what would be the avenue you would move forward to do that?

Could you restate the front part? If you're saying if the contribution stayed the same?

Well, just assuming, I mean, your position is to go back to just the 5 million for administrative costs.

Yes.

If we pass something that requires the 505 million.

Right.

You know, or maybe it's 605 million, or maybe it's 405 million. I mean, what will you. What will Hawaiian Electric do to raise capital?

So thank you for the question, representative. And respectfully, we still have to raise another 1.5. We've divested many assets including American Savings Bank. Our market cap is, is just slightly above what we have to raise to finalize the settlement. We're confident we can do it.

We're also fairly confident we won't be able to raise more funds that are not returning to investors. So shareholders have lost three quarters of their investment already in the value of the stock. They've lost dividends for a year and a half and they're being asked to raise $2 billion which will have no return on equity to them.

We just don't think it's feasible to raise additional monies that are going to be a significant contribution at this point.

So what if you sold off? What if you sold Helco or Meco or something like that?

I don't think that's an option. I don't think it would help. The company that remains would still have the same liability risk and they'd be in front of you asking for the same bill and asking for it to come from customers. We'd just be selling the liability.

And how does the court settlement affect your credit rating?

I don't think the court settled.

The court's decision on the settlement.

So it doesn't finalize the settlement. The trial court still has to see it through the end. I think we saw a slight bump in the stock value. It's not doing anything for the credit rating.

We need all three elements to be proven, which is that the settlement is finalized, that there's some protection for creditors and for investors in the form of this Bill. And then we have to keep doing what we're doing.

We prioritized without raising rates $130 million last year to bring the wildfire risk down by 60% across our service territory. So we have to make these investments. I can't stress enough. The sooner we can get our credit bidding back, the cheaper it will be for customers and it will offset the $4.

I want to. Sorry, I want to get to Rep. Iwamoto, but I want to follow up on one of her questions first. Rep. Lowen made a good or an interesting point I thought. I guess good is relative to who's hearing it.

But selling off a part of Heco, Helco Maui Electric Company, I mean that's, you're right that that entity would still have that same kind of forward looking liability. But you would be cutting off liability from yourself too. And then the money being raised wouldn't necessarily come from ratepayers as you're saying.

It would be coming from an outside investor who would then theoretically have the funds to deal with that forward looking liability which they would consider in making that purchase.

Have you considered divesting yourself of certain pieces of Heco to co ops or otherwise to allow you to not only divest yourself of some of the liability risk but also to raise capital from a third party source?

May I answer in three ways? One, no, we have not gone through the hypothetical of selling them other than at a cursory level. We don't think it works. Two, any outside investor is going to price in the risk factor.

Oahu is by itself has wildfire risks we need to address and we've remained dedicated to addressing this problem for all of our customers across all the counties. With respect to co ops, we have great respect for KIUC. They do an awesome job. I think this fire has proven why you need an equity layer under.

I mean the fact that we're paying the $2 billion. In their own testimony they recognize that liability risk co ops would not be in a better position to deal with this liability, in my opinion.

But how do you know unless you tried? I mean.

They'd be in a better position to have access to low, lower cost capital though.

Yeah, I mean I defer to. In their testimony they, they in at least in the original version they clearly called out that they are, they could get FEMA funds to recover their equipment, but they're also exposed to the same liability risks.

And when you look at what's happening in California right now, you have two very tragic devastating wildfires. One is in Palisades is served by a Muni, not a co op called LADWP. And you have one in served by Southern California, which is an IOU. One is participating in the fund, one is not.

And we don't know how this will play out. And I'm not speculating who's liable, but in the hypothetical Southern California, an article just ran in the LA Times three days ago saying that the Fund has allowed them to avoid a fatal blow to their financials, it appears to me.

And if a muni or co op was held liable, that would fall straight down to their customers. They don't have the ability to get investors to provide $2 billion in dilution to pay for the claims. So I forget who asked the question.

Sorry, KIUC is on. Can KIUC weigh in on the co op question? Whether you think it would be viable? I feel like you guys are, you know, maybe the best person to ask.

Yes, thank you for the question. I think to Representative Lowen's point for KIUC, we would have, you know, insurance. We would have potentially FEMA reimbursements of up to 75% of losses.

We would also have, we also have insurance that would cover some and then we would also have to her point, access to low interest lending, potentially up to $100 million. You know, beyond that point, you know, it would become problematic to us.

I guess the question is what is the magnitude of the loss and then how would we, how would we address it? But we, you know, we do have various funding sources as a cooperative which are the, the FEMA reimbursements and the, the low cost lending from our US and other cooperative lenders that we would have access to.

So any potential investor or group of investors buying any of the neighbor island co ops would have that factored into their price as well. I'm assuming these kind of advantages of a more rural electrical co op, is that fair?

In general, yes. That's, that's one of the advantages of a co op is that they are, you know, a not for profit. They do have the ability to access FEMA funding and they do have the ability to access those low income or those low, low cost debt providers such as the rural utility services. Yes.

Thank you, Rep. Iwamoto.

So it's clear to me, I mean, I think you stated very clearly how we're going to raise the ratepayer funds, but in terms of the shareholder funds, even though Representative Lowen asked the question, I didn't hear a clear pathway to raising their share, whatever size their share is.

Yeah, thank you for the question. I'll try to be clear. We don't think it's feasible to raise additional funds over the 2 billion we have to raise to do with the settlement to contribute to the fund, which is why we find the amendment problematic.

It would certainly delay, if not prevent us from participating, which would negate its benefits to property owners, insurers, renters. It would negate its benefit to customers because we would be assured of not getting our credit rating restored. And it's, it's an issue. We have a lot of work to do to hit to address wildfire safety. Okay.

We just filed a huge application to do a lot more work to mitigate wildfire safety.

Thank you. Is there Attorney General here?

Yes, they are.

Hi.

Thank you. Chair, may, may I ask.

Yeah, please. I've actually got a question for you too.

Yeah, thank you. So regarding your concern specifically insufficiency of monies in the fund, you basically lay out the fact that the way that the HD one is currently drafted, that it that if there's an insufficient amount of funds, that the utilities get payments, but the claimants, if there is insufficient funds, they just don't even get a claim.

So they're putting into rate payers are putting in, but they won't be able to file a claim?

That's correct, as the bill is currently drafted.

Right. Okay, that's a problem. Yeah. Thank you.

Stick up there for a sec. On page 14, line 15, we are excluding government entities from making a claim. Page 14, line 15. What's the purpose of that? I mean, if a government public housing project burns down, shouldn't the government have be able to get reimbursed from this as well? We believe so. Okay, so you're, you're.

You would advocate for removing that exclusion?

That's correct.

Okay. And I've got a couple more questions for you since you're up there anyway. And this is just clarification, I'm pretty sure this is the case. But the limitation liability in this bill, it does not affect personal injury, is that correct? It's just property. Yes.

So if a person was injured in a fire and their house burned down, their economic recovery could come through this fund, but they could still sue in civil court for the personal injury.

That appears to be the case.

Okay. There is language in here restricting all claims coming from, if they fail to file a claim, all other claims in civil court. It seems like a little ambiguous whether that would encompass personal injury or not. Was the intent to not include personal injury at all in that failure to file a claim?

It is ambiguous and it does raise constitutional questions.

Okay, I agree. Sorry, last question for you. Section A3, subsection G. I don't have a page number for you. I'm sorry, but it allows retrospective payments after, specifically after a wildfire occurs. I gotta admit, I don't understand.

The purpose of that is that allowing a utility to make retrospective payments after the fact to jump into this wildfire recovery fund. A3G.

I'm not sure about that provision.

Okay, does anyone else here have any thoughts on that provision?

Sir, can you Repeat?

Yep. Section A3G of the bill, bottom of page 11.

Thank you.

I'll give you a second.

Thank you. Please. Sorry. Please. Thank.

Yeah, I think I understand the question. Okay. Part of the bill envisioned if we didn't get securitization, was there another path? We don't really think that's good. But what it was is we had to elect into the fund, and if a fire occurred before we fully funded it, that we could continue to replenish the Fund.

But I would verify that with you and follow up. But I believe this was a provision designed to cover us in the event that we got the fund without securitization. And I will validate further that with you offline.

So there was some notion that we might be agreeing to participate, commit to participate, but still be in the process of making our initial contribution. And this would have allowed us to act as if we were in the fund and start making those payments against the fund after a fire occurred. Okay, that just makes sense. Thank you.

Thank you.

Any other questions? Just really quick. Sorry. I'm sorry. Rep Todd has been waiting a while.

Thanks. I was actually. I'm looking to be educated a little bit. Is there a provision in the bill that would allow for inflationary adjustments to the size of the fund? And then if not, in the future, assuming this goes through, would you need additional legislation to adjust the cap, or would that be strictly through the PUC process?

So let me try to adjust that. Very good question. The intent is that the initial $1.0 billion would be funded immediately and that it would grow in interest. So, you know, if you use 5%, it would be worth 1.6. So that's the hedge against inflation. It's also a return to customers.

If we can do our job and reduce wildfire risk. And by, say, our job, not just utilities, but all across the state, bring down the risk in land use, land management, so it would return back.

There is a function of the bill that allows the Executive Director to say, we've looked at the risk and it's going the other way. You must make a supplemental contribution at that time. But, you know, it's our intent to continue to drive the risk down.

And that would not require additional legislation, at least theoretically.

Theoretically, no. It would be part of the administrative rules process. So thank you.

Rep. Lowen.

For Hawaiian Electric. Just going back to the amount. The split between shareholders and ratepayers. Yes. I mean, are you saying that if it's a. The. The 500 million that we have in there now, or really any amount above the 5 million that you first proposed, that you would rather have us not pass the legislation? Or, like, what.

What's your.

I'm not saying that. Oh, Sorry, let me let you finish.

No, no, no, go ahead.

Yeah, no, that's not what I'm saying. I think certainly we can go back and, and continue to look at it, but I'm telling you definitively that in my discussions internally, it would be exceedingly difficult to make any significant contribution on top of what we're already dealing with. So in our market, cap today is probably around 1.7. It's.

We cannot ask investors to go. There's a finite amount of money we can get from investors. You know, right now they've suffered less than 8% returns for the last five years and they're facing the. The possibility of losing it all.

So, you know, we just don't have the capacity, respectfully, we don't have the capacity to raise something that's going to make a real dent in what you folks are looking for. Yeah, but I. We do want it to pass. We want to continue the discussion and try to make our case. Yeah.

Okay. And like really quick question for consumer advocates. Just, Just noting and sorry, I should have caught this sooner, but KIUC was asking for an amendment requesting to put something in this bill to allow them to authorize the recovery of prudently incurred wildfire medication plan related costs by an electric co op.

Is that something we should do in this bill or is it?

I think that's something to be handled in the regulatory with POC.

Something they could, they could request.

Yeah, they could file a request with their wildfire mitigation plan.

All right, thank you.

Any other questions before I go on? Okay. Sorry, ags. I thought I had. If you could come up for one more question. This may not even be your question to answer. Section 8A1. What page is that on? 8A1. This limits the recovery amount to 50%. I'm wondering why it's 50% and not 100%.

And if this is more of a heal question. Just. You could just. This is a he question. Passing the ball.

Page 17. Thank you, Chair. There are two functions. Do you want to restate or. Please. Okay, so the cap is flexible. It's defined as the greater of. Right. So really the important part is that it's the average assessed value of the county times the structures destroyed. It is. It is still.

It is what we think is objective, fair and proportional. So it slides its scale up and down and that's probably the one that will kick in in a really catastrophic fire. The 50% is really. There is an odd circumstance where 50% of the Fund might be higher. So it's always to the benefit of the property owner.

It's a weird scenario that we played out that we wanted to make sure it was always the larger of the two, if that makes sense.

So that could be 70-80%. It wouldn't usually. Wouldn't matter is what you're saying.

Usually would not matter. There is a weird case where the number of structures, like it's an edge case where the number of structures destroyed times the average value in the county is actually the lower of these two numbers. So we're just trying to give the largest possible reasonable cap to customers.

But in that case, I mean, if we're talking about averages here, wouldn't that you're calculating averages based on. Well, I guess it's the county. It's the county. Take that back.

Yeah. So I. We could. We could run some scenarios for you.

We ran richer part of the county. Even though the county's aggregate value of the homes is here, the portion of the wildfire destroyed could be bigger.

So the fund's going to grow. Right. So let's say in nine years, it's 1.5 billion. You could find a situation where you want the greater of these two caps. That's all it's. That's all it's doing. Right. So if the Fund grows and we end up in a situation where there.

Even be a 50% cap, then in that case, I mean, do you. Do you really need one there?

Again, if we use just the other cap, the 50% could be greater. This is really designed to provide the greatest benefit to property owners. It's all.

Okay. Yeah, I mean. Okay, I see what you're saying. So that 50% could be moved up. I mean, how did you land at 50?

It has to do with, you know, we really just wanted the second function, but we didn't want to. We wanted to make sure that we were being as balanced as possible. But you guys must have run the numbers.

Cause you ran multiple.

We did. I don't have them on the top of my head right now.

Is that how you got to the 50, though, by running those numbers or.

Cause frankly, I think we just looked at it and said there's this weird condition where this might unbalance our objectives and not be as beneficial to property owners. So we wanted to make sure there was no condition where it was less than 50% of the funds for. In the. In the event of a fire. Yeah. Okay.

The point. The key point is it's the greater of the two. Right. So it's only to the benefit of the public that it's the greater of the two.

Okay, thank you. PUC. So for Section V2, subsection E, it sets considerations for approving the bond and the previous Committee put in a provision I like which is kind of a catch all provision.

My question is, for the other ones, for the non catch all provisions, are these similar to what you would normally consider when approving a bond or are these dramatically different? I just need some kind of benchmark here. Make sure I got the section you're looking at. B2, subsection E, page 39.

Thank you.

Yeah. It is the typical way for climb. But then the non catch. All. Right. Is what you're trying to get at.

Yeah. So the catch all is what you would normally consider, but then the non catch all provisions are additional to what you would normally consider. Correct. Will that sway because you have to.

If we kept the bill the way it is, because we put in those criteria that you'd have to consider, would that sway PUC one way or another when considering granting this bond or authorizing this bond?

No, I think for us, we would like to. We always like to see as much information as we can and we would try to balance that. Right. I mean, it doesn't really sway. I mean, it's more for information that we don't. We don't not get that information which then could come up with a decision. Right.

That you didn't look at everything.

Yeah. My concern would be that if you have to balance these factors and these are other factors being put in that you wouldn't normally have to balance, whether that would sway you.

But what you're saying is you're going to look at all of these just for consideration purposes and then make a determination anyway without any kind of weighted value.

Correct.

Okay, thank you. Is BNF here? Okay. This might be an AG question then. They do have a question, and I have no shame throwing this one to BNF, by the way. So if you can't answer, don't worry about it.

But on Section five on page 58, there was some concern in the testimony that this section would affect the state's bond capacity. And one of the testimonies was concerned that this would necessarily obligate all of the state's bond cap for the next years in the future to Fund this securitization.

I'm not sure I totally understand it, but do you have any insight onto that?

Yes. Presently as the bill is drafted, it requires or it authorizes the use of the state's private activity bond cap, the state's portion for this securitization process. Right now the Administration and the statute presently provides that the state's bond cap is to be used for rental housing, low income rental housing purposes.

So by authorizing this change, the Legislature is preempting that move. Instead of low cost housing rental housing, it would go to securitization.

So it would eat up the whole bond cap. But we have. So we would have no money under. In the bond cap for low, low cost rental housing.

That's correct.

How much are we talking here, you think? I don't know. That's fair. Yeah, please.

I thought that provision was the request of the. The AG to put in. Or as A. Sorry, am I mistaken? Like, I thought that that provision was just another alternative pathway to achieve the same, but to borrowing.

That would allow Hico to have access to like the cheapest options, but not that it was necessary to the rest of the Bill.

It was not an AG provision.

Okay, Hiko, sorry, really quickly. I'm sorry. Just put. That. Was that. No, but that was one of the amendments that was later. It wasn't added, but it was an amendment that you guys made towards the end. Okay, yeah, we.

We'll clarify. But Representative Lowen, we think you're correct. This was an alternative on 39. I mean, this is an alternative way to do it that was put in at. At. We'll clarify how it came in, but yeah, it's not the primary vehicle.

So it can come out. Okay.

We believe it can still come out. Yeah.

Okay.

I think we can figure it out then. I have a couple questions left for KIUC before I start though. Any. Anyone else have any questions? Okay. Kiuc, are you still there?

Yes.

In your testimony you requested an automatic tariff provision. Why can this be just requested from PUC in the normal course?

Why do you need to do it right now? The only way to do this would be through a General rate case, which is extremely expensive and takes quite a while to adjudicate with the PUC. So we do not have separate recovery mechanisms. HECO does have some. They have. They have decoupled rates.

So they have the ability to do this type of thing. We currently do not. So the thought was not. And the thought is not to bypass the PUC because the amendment would require the establishment of the mechanism to go through the Puc.

Okay. So does KIUC plan on participating in the Wildfire Recovery Program?

We, as far as the Fund, we appreciate having the option to participate, but I think we would need to better understand what our contribution might look like and whether that would be the best use of our funds.

So we do like having the option, but we would need to explore it further to decide whether or not we would participate in the Fund.

That's fair. Options are good in reading the Bill and maybe you could shed light on it or if you can't, then HECO could or someone else can. But it was not clear what the contribution from KIUC or another utility would be to this Fund.

We're laying it out for heco as like a 500 million or a billion or whatever number we put in there. But for other utilities buying into this thing, what would their obligation to the Fund be? Do you have any idea since you guys were considering it?

No. We understood the intent was for the Executive Director, I guess would work with other parties interested in participating on an appropriate level of capitalization of the Fund.

In that case, shouldn't HECO also fall under that? Shouldn't the Executive Director also make that determination for Heco?

That I can't say we didn't author this Bill, but I think that HECO had an idea for the framework and what their contribution should be. We again would not. It's not guaranteed that we would participate. So again, as we like the optionality, we would definitely need to explore it further.

Okay, thank you, Spectrum. Do you have any thought on that, on whether you guys are going to be participating in this Fund and what your contribution to it might be?

We've looked into it, but we don't think we should be participating in this fund. We're not a rate regulated utility.

Okay, thank you. ECO, do you have any thoughts? Thank you. Chair.

Yeah, Casey is correct. As it's currently designed, Hawaiian Electric's amount would set and then the ED would stand up a whole process to address some of these issues. We attempted last year to involve a number of parties. The feedback we got was make this simpler. And so that for a lot of reasons, that's why there's a.

It calls for the establishment that will Fund to stand up an Executive Director and to establish administrative rules and then offer opportunities based on other people's risk if they want to contribute. It also allows the ED to declare that there needs to be supplemental contributions.

So yes, last year we had a Bill that attempted to bring all the parties together and allow for contributions from government from other utilities. This year what we're saying is we want to leave the option open for them and make it part of the standup process with the ed.

Okay. My concern is that we're trusting the ED to make these determinations for other utilities, which I'm not against, but we're setting yours in stone. Would it be fair to allow the Executive Director to adjust your contributions as well if they determine it necessary?

Something we could consider. It's not what we contemplated. We think the amount is the right balance right now, and we think there's urgency to get it stood up. Yeah.

And putting it in statute now or putting it in the bill now for the initial amount, I think is fair, given the sense of urgency. But whether that can be adjusted later, especially putting, you know, that's what we're asking for all other utilities. Right.

That seems odd to allow the Executive Director to adjust everyone else, but not yours necessarily. It could be down, you know, I mean, I'm not saying to move it up.

Yeah, it's a great point. I think. I think it allows for it currently to make supplemental. So the ED could say supplemental or just the risk down. I think that's part of the process. And I think for the other utilities, it will remain optional. And we're open to working with Spectrum or KIUC on it.

But right now the bill calls for that process to occur. We stand up now. If the ED wants to adjust, you know, our ability to participate would. We'd have to make that decision. It would then become optional for us, too, if it was too severe. But yes, I think the bill and. And then we can verify.

But yes, it allows for it. Okay. If they adjust it down, what happens.

To the money return to customers? Okay, that's all my questions right now. Members, any other questions on this Bill? Give me one second. Let me just do a quick. Or you can sit down. Thank you, Chair.

Okay, so they're gonna have to come back after.

Okay. We'll recess until you come. Shoot.

Sorry, I have one more question for AG. There's a. We're going to move this thing or the deadline for this. But there is a deadline set for. I believe it would be established by the Executive Director, but a deadline set for when someone would have to file a claim.

My concern is that after a large wildfire incident like we had in Lahaina, residents may not be in a place to file claims in a more timely manner. I wanted to set a minimum amount of time to give them.

In discussing with Chair Tarnas, we were thinking to your statute of limitations for property, maybe double that, four years for them to file a claim. And, you know, if the statute passes, they may not be able to file in court anyway, but at least they'd be able to file a claim for it.

What would you think is A ballpark minimum deadline for filing a claim?

I couldn't say give. It would relate to the circumstances of the incident.

Okay, so do you think that the Executive Director should have the ability to kind of be more flexible on this or that?

I couldn't say. Okay. Okay. Thank you. And with respect to your previous question on the rental housing bonds, sections 4 and 5 have to be read together.

Which page are you on?

This is on page 57 and 58. This is for HECO decided to use special purpose revenue bonds. Special purpose revenue bonds would use the available private activity bond cap. So this would only kick in if special purpose revenue bonds are used for securitization purposes.

Okay. So it wouldn't eat up the bond cap necessarily if we read section five by itself. Section five in conjunction with Section four would limit section five to just the sperms issued by section under it. Under Section four, that's correct. Okay. Okay. That makes sense. No. Thank you for that.

Did anyone else have any thoughts or questions to follow up on that? They want to contribute before we recess for a sec? Okay. All right, we'll recess.

Reconvening for decision making on House Bill 982 HD1. Thank you to all the testifiers for testifying as well. We do appreciate you being here.

Chair's recommendation on this Bill is we've got a bunch of them, so buckle up. Interest earned on secured on the securitization amount must be refunded annually to ratepayers through credit on the ratepayers account.

We'd like to require that there be no less than a four year deadline for claims submitted to the Wildflower Recovery Fund from any incident to address the concern that a person failing to meet the deadline would be unable to pursue their claim in court in Section A5. We'd like to keep it with.

We're going to keep it with the PUC to determine whether the contributor acted prudently and for the amount of the order for the replenishment. But the $5 million set aside specifically for administrative costs should be used by the Executive Director of the Wildfire Recovery Fund to hire consultants for the PUC as needed.

To make this determination, we'd like to add language that the Wildfire Recovery Fund is a trust Fund per the AG's testimony, just to specify that. Specify that the Executive Director of the Wildfire Recovery Fund is responsible for establishing the fund's investment policies in section A3, subsection B, subsection 2.

I do want to break out the $5 million for administrative costs and specify that it is from that amount after 2035 that any remainder will go to the Fund. But just breaking that out from the 505 million, it'll now be 500 million and then the 5 million separate.

Just to be a little clearer, at the PUC's discretion when HECO comes in for securitization, we'd like to give PUC the discretion to also tack on that there will not be any increases in Executive salaries at HECO for a period of five years, but also PUC's discretion from the start of securitization, and that any bonuses earned by HECO Executive during that time would instead go to the Wildfire Recovery Fund.

Section A9, subsection B. We are going to add language excluding existing indemnity agreements from this provision. Page 18, line 5, which is section A8C. I do want to specify that this is for all civil claims for qualified damages. Right now it's a little bit unclear as to what this section applies to. Members, any comments? Yep.

Repuable Iwamoto.

Do you mind clarifying? Is the Fund now 500 million total? So is that what you said? I heard you say 500 million, but I couldn't.

The. The current split is not going to be changed. So it's 500 million. 500 million. But one of them was 505 million because the fees were added onto that. So we're separating out just that 5 million from the 505.

Thank you. Thanks. Yep.

Yep. Rep Belatti.

Clarification. You said you were going to clarify the civil damages to all civil damages related to property. You're not opening it up.

So the question was for the last one, right? You're talking about right now. It says civil claims. We're adding it to specified civil claims for qualified damages. And qualified damages is a defined term.

Qualified damages is limited property damage.

Yes.

Okay. Thank you.

Any other comments? Okay. If not Vice Chair for the vote.

Members voting on House Bill 982. House Draft 1. Chair's recommendation is to pass with amendments. [Roll Call] Chair, your recommendation is adopted.

Okay, thank you, Members. And I do want to thank the chair from the previous Committee too, for her hard work on this.

Moving on to Judiciary and Hawaiian Affairs. Same recommendation that we heard from the CPC Chair. HB 982, HD1 with amendments, questions or concerns. Members, if not Vice Chair for the vote.

Vote, voting on House Bill 982 HD1 with amendments. [Roll Call] Recommendation adopted.

Thank you.

Thank you. We are adjourned.