Electric utility subsidiary

6 Months Ended

Jun. 30, 2014

Electric utility subsidiary [Abstract]

Electric utility segment

Electric utility segment

Revenue taxes. The Utilities’ revenues include amounts for the recovery of various Hawaii state revenue taxes. Revenue taxes are generally recorded as an expense in the period the related revenues are recognized. However, the Utilities’ revenue tax payments to the taxing authorities in the period are based on the prior year’s billed revenues (in the case of public service company taxes and PUC fees) or on the current year’s cash collections from electric sales (in the case of franchise taxes). The Utilities included in the second quarters of 2014 and 2013 and the six months ended June 30, 2014 and 2013 approximately $64 million, $65 million, $129 million and $129 million, respectively, of revenue taxes in "revenues" and in "taxes, other than income taxes" expense.

Recent tax developments. In September 2013, the Internal Revenue Service (IRS) issued final regulations addressing the acquisition, production and improvement of tangible property, which were effective January 1, 2014. Management does not expect the impact of these new regulations will be material to the Utilities' financial statements since specific guidance on network (i.e., transmission and distribution) assets and generation property had already been received. The IRS also proposed regulations addressing the disposition of property.

The Utilities adopted the safe harbor guidelines with respect to network assets in 2011 and in June 2013, the IRS released a revenue procedure relating to deductions for repairs of generation property, which provides some guidance (that is elective) for taxpayers that own steam or electric generation property. This guidance defines the relevant components of generation property to be used in determining whether such component expenditures should be deducted as repairs or capitalized and depreciated by taxpayers. The revenue procedure also provides an extrapolation methodology that could be used by taxpayers in determining deductions for prior years’ repairs without going back to the specific documentation of those years. The guidance does not provide specific methods for determining the repairs amount. Management intends to adopt this guidance through an election in its 2014 tax return, which is expected to result in slightly improved cash flows.

In March 2014, HEI filed with the IRS an application, which requested a change in the method of accounting for revenues recorded to the Utilities’ revenue balancing accounts (RBAs) (from an accrual basis to a billed basis) for income tax purposes. On April 28, 2014, the Utilities received approval for this change from the IRS, effective January 1, 2014. HEI will include the effects of this change in its estimated income tax payments for 2014. This change will result in improved cash flows by deferring the payment of income taxes on the RBA revenues recognized until the revenues are billed but will reduce the interest to be accrued on the RBA balance as proposed by the Consumer Advocate.

Unconsolidated variable interest entities.

HECO Capital Trust III.  HECO Capital Trust III (Trust III) was created and exists for the exclusive purposes of (i) issuing in March 2004 2,000,0006.50% Cumulative Quarterly Income Preferred Securities, Series 2004 (2004 Trust Preferred Securities) ($50 million aggregate liquidation preference) to the public and trust common securities ($1.5 million aggregate liquidation preference) to Hawaiian Electric, (ii) investing the proceeds of these trust securities in 2004 Debentures issued by Hawaiian Electric in the principal amount of $31.5 million and issued by Hawaii Electric Light and Maui Electric each in the principal amount of $10 million, (iii) making distributions on these trust securities and (iv) engaging in only those other activities necessary or incidental thereto. The 2004 Trust Preferred Securities are mandatorily redeemable at the maturity of the underlying debt on March 18, 2034, which maturity may be extended to no later than March 18, 2053; and are currently redeemable at the issuer’s option without premium. The 2004 Debentures, together with the obligations of the Utilities under an expense agreement and Hawaiian Electric’s obligations under its trust guarantee and its guarantee of the obligations of Hawaii Electric Light and Maui Electric under their respective debentures, are the sole assets of Trust III. Taken together, Hawaiian Electric’s obligations under the Hawaiian Electric debentures, the Hawaiian Electric indenture, the subsidiary guarantees, the trust agreement, the expense agreement and trust guarantee provide, in the aggregate, a full, irrevocable and unconditional guarantee of payments of amounts due on the Trust Preferred Securities. Trust III has at all times been an unconsolidated subsidiary of Hawaiian Electric. Since Hawaiian Electric, as the holder of 100% of the trust common securities, does not absorb the majority of the variability of Trust III, Hawaiian Electric is not the primary beneficiary and does not consolidate Trust III in accordance with accounting rules on the consolidation of VIEs. Trust III’s balance sheets as of June 30, 2014 and December 31, 2013 each consisted of $51.5 million of 2004 Debentures; $50.0 million of 2004 Trust Preferred Securities; and $1.5 million of trust common securities. Trust III’s income statements for the six months ended June 30, 2014 and 2013 each consisted of $1.7 million of interest income received from the 2004 Debentures; $1.6 million of distributions to holders of the Trust Preferred Securities; and $0.1 million of common dividends on the trust common securities to Hawaiian Electric. As long as the 2004 Trust Preferred Securities are outstanding, Hawaiian Electric is not entitled to receive any funds from Trust III other than pro-rata distributions, subject to certain subordination provisions, on the trust common securities. In the event of a default by Hawaiian Electric in the performance of its obligations under the 2004 Debentures or under its Guarantees, or in the event any of the Utilities elect to defer payment of interest on any of their respective 2004 Debentures, then Hawaiian Electric will be subject to a number of restrictions, including a prohibition on the payment of dividends on its common stock.

Power purchase agreements.  As of June 30, 2014, the Utilities had six PPAs for firm capacity and several other PPAs with variable generation independent power producers (IPPs) and Schedule Q providers (i.e., customers with cogeneration and/or small power production facilities with a capacity of 100 kilowatts (kWs) or less who buy power from or sell power to the Utilities), none of which are currently required to be consolidated as VIEs. The PPAs with AES Hawaii, Inc. (AES Hawaii), Kalaeloa Partners, L.P. (Kalaeloa), Hamakua Energy Partners, L.P. (HEP) and HPOWER comprise approximately 90% of IPP contractual firm capacity available to the Utilities. Purchases from all IPPs were as follows:

	Three months ended June 30				Six months ended June 30
(in millions)	2014		2013		2014		2013
AES Hawaii	$	36	$	37	$	69	$	60
Kalaeloa	74		79		141		143
HEP	8		9		20		20
HPOWER	16		12		32		27
Other IPPs	54		41		91		82
Total IPPs	$	188	$	178	$	353	$	332

Some of the IPPs provided sufficient information for Hawaiian Electric to determine that the IPP was not a VIE, or was either a “business” or “governmental organization,” and thus excluded from the scope of accounting standards for VIEs. Other IPPs, including the three largest, declined to provide the information necessary for Hawaiian Electric to determine the applicability of accounting standards for VIEs.

Since 2004, Hawaiian Electric has continued its efforts to obtain from the IPPs the information necessary to make the determinations required under accounting standards for VIEs. In each year from 2005 to 2013, the Utilities sent letters to the identified IPPs requesting the required information. All of these IPPs declined to provide the necessary information, except that Kalaeloa later agreed to provide the information pursuant to the amendments to its PPA (see below) and an entity owning a wind farm provided information as required under its PPA. Management has concluded that the consolidation of two entities owning wind farms was not required as Hawaii Electric Light and Maui Electric do not have variable interests in the entities because the PPAs do not require them to absorb any variability of the entities. If the requested information is ultimately received from the remaining IPPs, a possible outcome of future analyses of such information is the consolidation of one or more of such IPPs in the Consolidated Financial Statements. The consolidation of any significant IPP could have a material effect on the Consolidated Financial Statements, including the recognition of a significant amount of assets and liabilities and, if such a consolidated IPP were operating at a loss and had insufficient equity, the potential recognition of such losses. If the Utilities determine they are required to consolidate the financial statements of such an IPP and the consolidation has a material effect, the Utilities would retrospectively apply accounting standards for VIEs.

Kalaeloa Partners, L.P.  In October 1988, Hawaiian Electric entered into a PPA with Kalaeloa, subsequently approved by the PUC, which provided that Hawaiian Electric would purchase 180 megawatts (MW) of firm capacity for a period of 25 years beginning in May 1991. In October 2004, Hawaiian Electric and Kalaeloa entered into amendments to the PPA, subsequently approved by the PUC, which together effectively increased the firm capacity from 180 MW to 208 MW. The energy payments that Hawaiian Electric makes to Kalaeloa include: (1) a fuel component, with a fuel price adjustment based on the cost of low sulfur fuel oil, (2) a fuel additive component, with an adjustment based on changes in the Gross National Product Implicit Price Deflator, and (3) a non-fuel component, with an adjustment based on changes in the Gross National Product Implicit Price Deflator. The capacity payments that Hawaiian Electric makes to Kalaeloa are fixed in accordance with the PPA. Kalaeloa also has a steam delivery cogeneration contract with another customer, the term of which coincides with the PPA. The facility has been certified by the Federal Energy Regulatory Commission as a Qualifying Facility under the Public Utility Regulatory Policies Act of 1978.

Pursuant to the current accounting standards for VIEs, Hawaiian Electric is deemed to have a variable interest in Kalaeloa by reason of the provisions of Hawaiian Electric’s PPA with Kalaeloa. However, management has concluded that Hawaiian Electric is not the primary beneficiary of Kalaeloa because Hawaiian Electric does not have the power to direct the activities that most significantly impact Kalaeloa’s economic performance nor the obligation to absorb Kalaeloa’s expected losses, if any, that could potentially be significant to Kalaeloa. Thus, Hawaiian Electric has not consolidated Kalaeloa in its consolidated financial statements. A significant factor affecting the level of expected losses Hawaiian Electric could potentially absorb is the fact that Hawaiian Electric’s exposure to fuel price variability is limited to the remaining term of the PPA as compared to the facility’s remaining useful life. Although Hawaiian Electric absorbs fuel price variability for the remaining term of the PPA, the PPA does not currently expose Hawaiian Electric to losses as the fuel and fuel related energy payments under the PPA have been approved by the PUC for recovery from customers through base electric rates and through Hawaiian Electric’s ECAC to the extent the fuel and fuel related energy payments are not included in base energy rates. As of June 30, 2014, Hawaiian Electric’s accounts payable to Kalaeloa amounted to $23 million.

Commitments and contingencies.

Environmental regulation.  The Utilities are subject to environmental laws and regulations that regulate the operation of existing facilities, the construction and operation of new facilities and the proper cleanup and disposal of hazardous waste and toxic substances. In recent years, legislative, regulatory and governmental activities related to the environment, including proposals and rulemaking under the Clean Air Act and Clean Water Act (CWA), have increased significantly and management anticipates that such activity will continue.

On May 19, 2014 the Environmental Protection Agency (EPA) released the final regulations required by section 316(b) of the CWA designed to protect aquatic organisms from adverse impacts associated with existing power plant cooling water intake structures. The regulations will be effective 60 days after they are published in the Federal Register. They will apply to the cooling water systems for the steam generating units at Hawaiian Electric’s power plants on the island of Oahu. The regulations prescribe a process, including a number of required site-specific studies, for states to develop facility-specific entrainment and impingement controls to be incorporated in the facility’s National Pollutant Discharge Elimination System permit. In the case of Hawaiian Electric's power plants, there are a number of studies that have yet to be completed before Hawaiian Electric and the Department of Health of the State of Hawaii (DOH) can determine what entrainment or impingement controls, if any, might be appropriate.

On February 16, 2012, the Federal Register published the EPA’s final rule establishing the EPA’s National Emission Standards for Hazardous Air Pollutants for fossil-fuel fired steam electrical generating units (EGUs). The final rule, known as the Mercury and Air Toxics Standards (MATS), applies to the 14 EGUs at Hawaiian Electric’s power plants. MATS establishes the Maximum Achievable Control Technology standards for the control of hazardous air pollutants emissions from new and existing EGUs. Based on a review of the final rule and the benefits and costs of alternative compliance strategies, Hawaiian Electric has selected a MATS compliance strategy based on switching to lower emission fuels. The use of lower emission fuels will provide for MATS compliance at lower overall costs and avoid the reduction in operational flexibility imposed by emissions control equipment. Hawaiian Electric requested and received a one-year extension, resulting in a MATS compliance date of April 16, 2016. Hawaiian Electric also has pending with the EPA a Petition for Reconsideration and Stay dated April 16, 2012, and a Request for Expedited Consideration dated August 14, 2013. The submittals ask the EPA to revise an emissions standard for non-continental oil-fired EGUs on the grounds that the promulgated standard was incorrectly derived. The Petition and Request submittals to the EPA included additional data to demonstrate that the existing standard is erroneous. Hawaiian Electric has been in contact with the EPA regarding the status of its Petition and does not expect a decision before the end of 2014.

On February 6, 2013, the EPA issued a guidance document titled “Next Steps for Area Designations and Implementation of the Sulfur Dioxide National Ambient Air Quality Standard,” which outlines a process that will provide the states additional flexibility and time for their development of one-hour sulfur dioxide (SO₂) National Ambient Air Quality Standard (NAAQS) implementation plans. In May 2014, the EPA published a proposed data requirements rule for states to characterize their air quality in relation to the one-hour SO₂ NAAQS. Under the proposed rule, the EPA expects to designate areas as attaining, or not attaining, the one-hour SO₂ NAAQS in December 2017 or December 2020, depending on whether the area was characterized through modeling or monitoring. Hawaiian Electric will work with the DOH in implementing the one-hour SO₂ NAAQS and in developing cost-effective strategies for NAAQS compliance, if needed.

Depending upon the specific measures required for compliance with the CWA 316(b) regulations and MATS, and the rules and guidance developed for compliance with the more stringent NAAQS, the Utilities may be required to incur material capital expenditures and other compliance costs, but such amounts and their timing are not determinable at this time. Additionally, the combined effects of these regulatory initiatives may result in a decision to retire or deactivate certain generating units earlier than anticipated.

Hawaiian Electric, Hawaii Electric Light and Maui Electric, like other utilities, periodically encounter petroleum or other chemical releases into the environment associated with current or previous operations and report and take action on these releases when and as required by applicable law and regulations. The Utilities believe the costs of responding to such releases identified to date will not have a material adverse effect, individually or in the aggregate, on Hawaiian Electric’s consolidated results of operations, financial condition or liquidity.

Potential Clean Air Act Enforcement. On July 1, 2013, Hawaii Electric Light and Maui Electric received a letter from the U.S. Department of Justice (DOJ) asserting potential violations of the Prevention of Significant Deterioration (PSD)

and Title V requirements of the Clean Air Act involving the Hill and Kahului Power Plants. The EPA referred the matter to the DOJ for enforcement based on Hawaii Electric Light’s and Maui Electric’s responses to information requests in 2010 and 2012. The letter expresses an interest in resolving the matter without the issuance of a notice of violation. The parties had preliminary discussions in February 2014, and plan to continue working toward resolving the matter. Hawaii Electric Light and Maui Electric cannot currently estimate the amount or effect of a settlement, if any.

Former Molokai Electric Company generation site.  In 1989, Maui Electric acquired by merger Molokai Electric Company. Molokai Electric Company had sold its former generation site (Site) in 1983, but continued to operate at the Site under a lease until 1985. The EPA has since performed Brownfield assessments of the Site that identified environmental impacts in the subsurface. Although Maui Electric never operated at the Site and operations there had stopped four years before the merger, in discussions with the EPA and the DOH, Maui Electric agreed to undertake additional investigations at the Site and an adjacent parcel that Molokai Electric Company had used for equipment storage (the Adjacent Parcel) to determine the extent of impacts of subsurface contaminants. A 2011 assessment by a Maui Electric contractor of the Adjacent Parcel identified environmental impacts, including elevated polychlorinated biphenyls (PCBs) in the subsurface soils. In cooperation with the DOH and EPA, Maui Electric is further investigating the Site and the Adjacent Parcel to determine the extent of impacts of PCBs, fuel oils, and other subsurface contaminants. In March 2012, Maui Electric accrued an additional $3.1 million (reserve balance of $3.6 million as of June 30, 2014) for the additional investigation and estimated cleanup costs at the Site and the Adjacent Parcel; however, final costs of remediation will depend on the results of continued investigation. Maui Electric received DOH and EPA comments on a draft site investigation plan for site characterization in the fourth quarter of 2013. Management concluded that these comments did not require a change to the reserve balance. Maui Electric provided written responses to the agencies’ comments in March 2014, and is currently awaiting approval of those responses by both agencies prior to revising the draft site investigation plan accordingly.

Pearl Harbor sediment study. The Navy is conducting a feasibility study for the remediation of contaminated sediment in Pearl Harbor. In the course of its study, the Navy has identified elevated levels of PCBs in the sediment offshore from the Waiau Power Plant. The results of the Navy’s study to date, including sampling data and possible remediation approaches, are undergoing further federal review. Hawaiian Electric is also reviewing the study in order to determine the scope of investigation needed to identify the potential source of contamination and develop appropriate remedial actions. 

The Navy recently notified Hawaiian Electric of the Navy’s determination that Hawaiian Electric is responsible for clean up of the area offshore of the Waiau Power Plant, and the costs incurred by the Navy to investigate the area. The Navy is asking Hawaiian Electric to engage in negotiations regarding the financing and undertaking of future response actions. The extent of the contamination, the appropriate remedial measures to address it, and Hawaiian Electric’s potential responsibility for any associated costs have not yet been determined.

Global climate change and greenhouse gas emissions reduction.  National and international concern about climate change and the contribution of greenhouse gas (GHG) emissions (including carbon dioxide emissions from the combustion of fossil fuels) to climate change have led to action by the State and to federal legislative and regulatory proposals to reduce GHG emissions.

In July 2007, Act 234, which requires a statewide reduction of GHG emissions by January 1, 2020 to levels at or below the statewide GHG emission levels in 1990, became law in Hawaii. On June 20, 2014, the Governor signed the final regulations required to implement Act 234 and the regulations went into effect on June 30, 2014. In general, the regulations will require affected sources that have the potential to emit GHGs in excess of established thresholds to reduce GHG emissions by 16% below 2010 emission levels by 2020. The regulations will also assess affected sources an annual fee based on tons per year of GHG emissions commencing on the effective date of the regulations, estimated to be approximately $0.4 million annually for the Utilities. The DOH GHG regulations also track the federal “Prevention of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule” (GHG Tailoring Rule, see below) and would create new thresholds for GHG emissions from new and existing stationary source facilities.

Several approaches (e.g., “cap and trade”) to GHG emission reduction have been either introduced or discussed in the U.S. Congress; however, no federal legislation has yet been enacted.

On September 22, 2009, the EPA issued its Final Mandatory Reporting of Greenhouse Gases Rule, which requires that sources emitting GHGs above certain threshold levels monitor and report GHG emissions. The Utilities have submitted the required reports for 2010 through 2013 to the EPA. In December 2009, the EPA made the finding that motor vehicle GHG emissions endanger public health or welfare. Since then, the EPA has also issued rules that begin to address GHG emissions from stationary sources, like the Utilities’ EGUs.

In June 2010, the EPA issued its GHG Tailoring Rule covering the permitting of new or modified stationary sources that have the potential to emit GHGs in greater quantities than the thresholds set forth in the rule, under the Prevention of Significant Deterioration program. On June 23, 2014, the U.S. Supreme Court issued a decision that invalidated the GHG Tailoring Rule, to the extent it regulated sources based solely on their GHG emissions. It also invalidated the GHG emissions threshold for regulation. The current status of the GHG Tailoring Rule, and any further regulatory action the EPA may take in light of this recent decision, are uncertain.

On January 8, 2014, the EPA published in the Federal Register its new proposal for New Source Performance Standards for GHG from new generating units. The proposed rule on GHG from new EGUs does not apply to oil- fired combustion turbines or diesel engine generators, and is not otherwise expected to have significant impacts on the Utilities.

On June 18, 2014, the EPA published in the Federal Register its proposed rule for GHG emissions from existing power plants. The rule sets interim and final state-wide, state-specific emission performance goals, expressed as lb CO₂/MWh, that would apply to the state’s affected sources. The interim goal would apply as an average over the period 2020 through 2029, with the final goal to be met by 2030. On the same date, the EPA also published a separate rule for modified and reconstructed power plants. The EPA’s plan is to issue the final rules no later than June 1, 2015. Hawaiian Electric is still evaluating the proposed rules for GHG emissions from existing, modified, and reconstructed sources, and how they might relate to the recently issued State GHG rules. Hawaiian Electric will participate in the federal GHG rulemaking process, and in the implementation of the State GHG rules, to try to reconcile federal GHG regulation, state GHG regulation, and any action the EPA may take as a result of the recent U.S. Supreme Court opinion, to facilitate clear and cost-effective compliance. The Utilities will continue to evaluate the impact of proposed GHG rules and regulations as they develop. Final regulations may impose significant compliance costs, and may require reductions in fossil fuel use and the addition of renewable energy resources in excess of the requirements of the RPS law.

While the timing, extent and ultimate effects of climate change cannot be determined with any certainty, climate change is predicted to result in sea level rise, which could potentially impact coastal and other low-lying areas (where much of the Utilities’ electric infrastructure is sited), and could cause erosion of beaches, saltwater intrusion into aquifers and surface ecosystems, higher water tables and increased flooding and storm damage due to heavy rainfall. The effects of climate change on the weather (for example, floods or hurricanes), sea levels, and water availability and quality have the potential to materially adversely affect the results of operations, financial condition and liquidity of the Utilities. For example, severe weather could cause significant harm to the Utilities’ physical facilities.

The Utilities have taken, and continue to identify opportunities to take, direct action to reduce GHG emissions from their operations, including, but not limited to, supporting DSM programs that foster energy efficiency, using renewable resources for energy production and purchasing power from IPPs generated by renewable resources, burning renewable biodiesel in Hawaiian Electric’s CIP CT-1, using biodiesel for startup and shutdown of selected Maui Electric generating units, and testing biofuel blends in other Hawaiian Electric and Maui Electric generating units. The Utilities are also working with the State of Hawaii and other entities to pursue the use of liquefied natural gas as a cleaner and lower cost fuel to replace, at least in part, the petroleum oil that would otherwise be used. Management is unable to evaluate the ultimate impact on the Utilities’ operations of eventual comprehensive GHG regulation. However, management believes that the various initiatives it is undertaking will provide a sound basis for managing the Utilities’ carbon footprint and meeting GHG reduction goals that will ultimately emerge.

Asset retirement obligations.  Asset retirement obligations (AROs) represent legal obligations associated with the retirement of certain tangible long-lived assets, are measured as the present value of the projected costs for the future retirement of specific assets and are recognized in the period in which the liability is incurred if a reasonable estimate of fair value can be made. The Utilities' recognition of AROs have no impact on their earnings. The cost of the AROs is recovered over the life of the asset through depreciation. AROs recognized by the Utilities relate to obligations to retire plant and equipment, including removal of asbestos and other hazardous materials.

Changes to the ARO liability included in “Other liabilities” on Hawaiian Electric’s balance sheet were as follows:

	Six months ended June 30
(in thousands)	2014			2013
Balance, beginning of period	$	43,106		$	48,431
Accretion expense	643			363
Liabilities incurred	—			—
Liabilities settled	(6,052		)	(1,506		)
Revisions in estimated cash flows	—			(916		)
Balance, end of period	$	37,697		$	46,372

Decoupling.In 2010, the PUC issued an order approving decoupling, which was implemented by Hawaiian Electric on March 1, 2011, by Hawaii Electric Light on April 9, 2012 and by Maui Electric on May 4, 2012. Decoupling is a regulatory model that is intended to facilitate meeting the State of Hawaii’s goals to transition to a clean energy economy and achieve an aggressive renewable portfolio standard. The decoupling model implemented in Hawaii delinks revenues from sales and includes annual revenue adjustments for certain O&M expenses and rate base changes. The decoupling mechanism has three components: (1) a sales decoupling component via a revenue balancing account (RBA), (2) a revenue escalation component via a revenue adjustment mechanism (RAM) and (3) an earnings sharing mechanism, which would provide for a reduction of revenues between rate cases in the event the utility exceeds the ROACE allowed in its most recent rate case. Decoupling provides for more timely cost recovery and earning on investments. The implementation of decoupling has resulted in an improvement in the Utilities’ under-earning situation that has existed over the last several years. Prior to and during the transition to decoupling, however, the Utilities’ returns have been below PUC-allowed returns.

On May 31, 2013, as provided for in its original order issued in 2010 approving decoupling and citing three years of implementation experience for Hawaiian Electric, the PUC opened an investigative docket to review whether the decoupling mechanisms are functioning as intended, are fair to the Utilities and their ratepayers, and are in the public interest. The PUC affirmed its support for the continuation of the sales decoupling (RBA) mechanism and stated its interest in evaluating the RAM to ensure it provides the appropriate balance of risks, costs, incentives and performance requirements, as well as administrative efficiency, and whether the current interest rate applied to the outstanding RBA balance is reasonable. The Utilities and the Consumer Advocate were named as parties to this proceeding and filed a joint statement of position that any material changes to the current decoupling mechanism should be made prospectively after 2016, unless the Utilities and the Consumer Advocate mutually agree to the change in this proceeding. The PUC granted several parties’ motions to intervene. In October 2013, the PUC issued orders that bifurcated the proceeding (Schedule A and Schedule B) and identified issues and procedural schedules for both Schedules.

Schedule A issues include:

• for the RBA, the reasonableness of the interest rate related to the carrying charge of the outstanding RBA balance and whether there should be a risk sharing adjustment to the RBA;

• for the RAM, whether it is reasonable to true up all actual prior year baseline projects, which are those capital projects less than $2.5 million, at year end or implement alternative methods to calculate the RAM rate base;

• whether a risk sharing mechanism should be incorporated into the RBA;

• whether performance metrics should be determined and reported; and

• whether other factors should be considered if potential changes to existing RBA and RAM provisions are required.

Schedule B issues include:

• whether performance metrics and incentives (rewards or penalties) should be implemented to control costs and encourage the Utilities to make necessary or appropriate changes to strategic and action plans;

• whether the allocation of risk as a result of the decoupling mechanism is fairly reflected in the cost of capital allowed in rates;

• changes or alternatives to the existing RAM; and

• changes to ratemaking procedures to improve efficiency and/or effectiveness.

Oral arguments on Schedule A issues were held in January 2014. On February 7, 2014, the PUC issued a D&O on the Schedule A issues, which made certain modifications to the decoupling mechanism. Specifically, the D&O requires:

• An adjustment to the Rate Base RAM Adjustment to include 90% of the amount of the current RAM Period Rate Base RAM Adjustment that exceeds the Rate Base RAM Adjustment from the prior year, to be effective with the Utilities’ 2014 decoupling filing.

• Effective March 1, 2014, the interest rate to be applied on the outstanding RBA balances to be the short term debt rate used in each Utilities last rate case (ranging from 1.25% to 3.25%), instead of the 6% that had been previously approved.

The D&O required the Utilities to immediately investigate the possibility of deferring the payment of income taxes on the accrued amounts of decoupling revenue, and to report the results with recommendations to the PUC. The PUC reserved the right to determine in the next decoupling and rate case filings whether each Utilities’ allowed income taxes should be adjusted for this change. The Utilities updated the PUC on their progress in investigating the tax treatment of the revenues included in the RBA balances and provided information to the PUC concerning the application to the IRS for an accounting methods change to recognize RBA revenues for tax purposes when amounts are billed. On April 28, 2014, the Utilities received approval for this change from the IRS, effective January 1, 2014. This change will reduce the amount of interest to be accrued on the RBA balance as proposed by the Consumer Advocate (see "Recent tax developments" above).

As required, the Utilities developed websites to present certain Schedule A performance metrics and proposed additional performance metrics. These metrics are all currently being reviewed by the PUC and, if approved, will be available to the public.

The Schedule A issues on whether it is reasonable to automatically include all actual prior year capital expenditures on baseline projects in the Rate Base RAM and whether a risk sharing mechanism should be incorporated into the RBA, particularly with respect to the PUC’s concerns regarding maintaining and enhancing the Utilities' incentives to control costs and appropriately allocating risk and compensation for risk, will be addressed in the Schedule B proceedings.

On May 20, 2014, the Utilities and other parties filed their respective initial statements of position for the Schedule B issues in this proceeding. Specifically, the Utilities concluded that (1) the existing RAM provision can be modified to address concerns stated by the PUC regarding the review of baseline capital projects and the growth in plant additions, and (2) targeted incentives can be crafted to incentivize the activities identified by the PUC.

The Utilities and other parties are scheduled to file their respective reply statements of position for Schedule B issues in September 2014. The second part of this proceeding will continue with panel hearings scheduled for October 2014.

Management cannot predict the outcome of the proceedings or the ultimate impact of the proceedings on the results of operation of the Utilities.

April 2014 regulatory orders. In April 2014, the PUC issued four orders that collectively address certain key policy, resource planning and operational issues for the Utilities. The four orders are as follows:

Integrated Resource Planning. The PUC did not accept the Utilities’ Integrated Resource Plan and Action Plans submission, and, in lieu of an approved plan, has commenced other initiatives to enable resource planning. The PUC also terminated the Utilities' integrated resource planning (IRP) cycle, including the filing of a mid-cycle evaluation report, and formally concluded the IRP advisory group. The PUC directed each of Hawaiian Electric and Maui Electric to file within 120 days its respective Power Supply Improvement Plans (PSIPs). The PSIPs will be reviewed by the PUC in a new docket. The PUC also directed the Utilities to file within 90 days an integrated Demand Response Portfolio Plan. The Utilities’ Plan was filed in July 2014. The PUC also provided its inclinations on the future of Hawaii’s electric utilities in an exhibit to the order. The exhibit provides the PUC’s perspectives on the vision, business strategies and regulatory policy changes required to align the Utilities' business model with customers’ interests and the state’s public policy goals.

Reliability Standards Working Group. The PUC ordered the Utilities (and in some cases the Kauai Island Utility Cooperative (KIUC)) to take timely actions intended to lower energy costs, improve system reliability and address emerging challenges to integrate additional renewable energy. In addition to the PSIPs mentioned above, the PUC ordered certain filing requirements which include the following:

• Distributed Generation Interconnection Plan to be filed within 120 days.

• Plan to implement an on-going distribution circuit monitoring program to measure real-time voltage and other power quality parameters to be filed within 60 days. The plan shall achieve full implementation of the distribution circuit monitoring program within 180 days. The Utilities' Plan was filed in June 2014.

• Action Plan for improving efficiencies in the interconnection requirements studies to be filed within 30 days. The Utilities' Plan was filed in May 2014.

• The Utilities are to file monthly reports providing details about interconnection requirements studies.

• Proposal to implement an integrated interconnection queue for each distribution circuit for each island grid to be filed within 120 days.

The PUC also stated it would be opening new dockets to address (1) reliability standards, (2) the technical, economic and policy issues associated with distributed energy resources and (3) the Hawaii electricity reliability administrator, which is a third party position which the legislature has authorized the PUC to create by contract to provide support for the PUC in developing and periodically updating local grid reliability standards and procedures and interconnection requirements and overseeing grid access and operation.

Policy Statement and Order Regarding Demand Response Programs. The PUC provided guidance concerning the objectives and goals for demand response programs, and ordered the Utilities to develop within 90 days an integrated Demand Response Portfolio Plan that will enhance system operations and reduce costs to customers. The Utilities’ Plan was filed in July 2014.

Maui Electric Company 2012 Test Year Rate Case. The PUC acknowledged the extensive analyses provided by Maui Electric in its System Improvement and Curtailment Reduction Plan filed in September 2013. The PUC stated that it is encouraged by the changes in Maui Electric’s operations that have led to a significant reduction in the curtailment of renewables, but stated that Maui Electric has not set forth a clearly defined path that addresses integration and curtailment of additional renewables. The PUC directed Maui Electric to present a PSIP within 120 days to address present and future system operations so as to not only reduce curtailment, but to optimize the operation of its system for its customers’ benefit.

Collectively, these orders confirm the energy policy and operational priorities that will guide the Utilities' strategies and plans going forward.

Subsequent event. In August 2014, Hawaiian Electric entered into a 15-year agreement with Fortis BC Energy Inc. (Fortis) for liquefaction capacity for liquefied natural gas (LNG) under tariffed rates approved by the British Columbia Utilities Commission. The agreement, which is subject to Hawaii PUC approval, other regulatory approvals and permits, and other conditions precedent before it becomes effective, provides for LNG liquefaction capacity purchases of 800,000 tonnes per year for the first five years, 700,000 tonnes per year for the next five years, and 600,000 tonnes per year for the last five years. Fortis must also obtain regulatory and other approvals for the agreement to become effective. The Fortis agreement is assignable and can be assigned to the selected bidder in the Utilities’ RFP for the supply of containerized LNG and will help ensure that liquefaction capacity is available at pricing that management believes will lower customer bills.

Consolidating financial information. Hawaiian Electric is not required to provide separate financial statements or other disclosures concerning Hawaii Electric Light and Maui Electric to holders of the 2004 Debentures issued by Hawaii Electric Light and Maui Electric to Trust III since all of their voting capital stock is owned, and their obligations with respect to these securities have been fully and unconditionally guaranteed, on a subordinated basis, by Hawaiian Electric. Consolidating information is provided below for Hawaiian Electric and each of its subsidiaries for the periods ended and as of the dates indicated.

Hawaiian Electric also unconditionally guarantees Hawaii Electric Light’s and Maui Electric’s obligations (a) to the State of Hawaii for the repayment of principal and interest on Special Purpose Revenue Bonds issued for the benefit of Hawaii Electric Light and Maui Electric, (b) under their respective private placement note agreements and the Hawaii Electric Light notes and Maui Electric notes issued thereunder and (c) relating to the trust preferred securities of Trust III. Hawaiian Electric is also obligated, after the satisfaction of its obligations on its own preferred stock, to make dividend, redemption and liquidation payments on Hawaii Electric Light’s and Maui Electric’s preferred stock if the respective subsidiary is unable to make such payments.

Hawaiian Electric Company, Inc. and Subsidiaries

Consolidating Statement of Income (unaudited)

Three months ended June 30, 2014

(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments		Hawaiian Electric Consolidated
Revenues	$	530,991		103,544		103,916		—	(22	)	$	738,429
Expenses
Fuel oil	195,549			31,179		43,529		—	—		270,257
Purchased power	140,805			28,170		19,348		—	—		188,323
Other operation and maintenance	68,992			14,817		14,755		—	—		98,564
Depreciation	27,300			8,976		5,317		—	—		41,593
Taxes, other than income taxes	49,949			9,757		9,918		—	—		69,624
Total expenses	482,595			92,899		92,867		—	—		668,361
Operating income	48,396			10,645		11,049		—	(22	)	70,068
Allowance for equity funds used during construction	1,417			121		(151	)	—	—		1,387
Equity in earnings of subsidiaries	9,859			—		—		—	(9,859	)	—
Interest expense and other charges, net	(11,553		)	(2,852	)	(2,469	)	—	22		(16,852		)
Allowance for borrowed funds used during construction	535			47		(59	)	—	—		523
Income before income taxes	48,654			7,961		8,370		—	(9,859	)	55,126
Income taxes	14,154			2,982		3,261		—	—		20,397
Net income	34,500			4,979		5,109		—	(9,859	)	34,729
Preferred stock dividends of subsidiaries	—			133		96		—	—		229
Net income attributable to Hawaiian Electric	34,500			4,846		5,013		—	(9,859	)	34,500
Preferred stock dividends of Hawaiian Electric	270			—		—		—	—		270
Net income for common stock	$	34,230		4,846		5,013		—	(9,859	)	$	34,230

Hawaiian Electric Company, Inc. and Subsidiaries

Consolidating Statement of Comprehensive Income (unaudited)

Three months ended June 30, 2014

(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments		Hawaiian Electric Consolidated
Net income for common stock	$	34,230		4,846		5,013		—	(9,859	)	$	34,230
Other comprehensive income, net of taxes:
Retirement benefit plans:
Less: amortization of transition obligation, prior service credit and net losses recognized during the period in net periodic benefit cost, net of tax benefits	2,588			292		292		—	(584	)	2,588
Less: reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of taxes	(2,575		)	(292	)	(292	)	—	584		(2,575		)
Other comprehensive income, net of taxes	13			—		—		—	—		13
Comprehensive income attributable to common shareholder	$	34,243		4,846		5,013		—	(9,859	)	$	34,243

Hawaiian Electric Company, Inc. and Subsidiaries

Consolidating Statement of Income (unaudited)

Three months ended June 30, 2013

(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries		Consolidating adjustments		Hawaiian Electric Consolidated
Revenues	$	521,576		106,361		100,627		—		(39	)	$	728,525
Expenses
Fuel oil	203,379			33,569		52,330		—		—		289,278
Purchased power	135,271			29,278		13,895		—		—		178,444
Other operation and maintenance	68,558			14,477		11,361		1		—		94,397
Depreciation	25,001			8,547		5,042		—		—		38,590
Taxes, other than income taxes	49,357			9,965		9,519		—		—		68,841
Total expenses	481,566			95,836		92,147		1		—		669,550
Operating income (loss)	40,010			10,525		8,480		(1	)	(39	)	58,975
Allowance for equity funds used during construction	1,247			192		121		—		—		1,560
Equity in earnings of subsidiaries	8,667			—		—		—		(8,667	)	—
Interest expense and other charges, net	(9,250		)	(2,791	)	(2,406	)	—		39		(14,408		)
Allowance for borrowed funds used during construction	342			43		13		—		—		398
Income (loss) before income taxes	41,016			7,969		6,208		(1	)	(8,667	)	46,525
Income taxes	12,053			2,956		2,324		—		—		17,333
Net income (loss)	28,963			5,013		3,884		(1	)	(8,667	)	29,192
Preferred stock dividends of subsidiaries	—			133		96		—		—		229
Net income (loss) attributable to Hawaiian Electric	28,963			4,880		3,788		(1	)	(8,667	)	28,963
Preferred stock dividends of Hawaiian Electric	270			—		—		—		—		270
Net income (loss) for common stock	$	28,693		4,880		3,788		(1	)	(8,667	)	$	28,693

Hawaiian Electric Company, Inc. and Subsidiaries

Consolidating Statement of Comprehensive Income (Loss) (unaudited)

Three months ended June 30, 2013

(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries		Consolidating adjustments		Hawaiian Electric Consolidated
Net income (loss) for common stock	$	28,693		4,880		3,788		(1	)	(8,667	)	$	28,693
Other comprehensive income (loss), net of taxes:
Retirement benefit plans:
Less: amortization of transition obligation, prior service credit and net losses recognized during the period in net periodic benefit cost, net of tax benefits	5,016			681		622		—		(1,303	)	5,016
Less: reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of taxes	(4,999		)	(680	)	(623	)	—		1,303		(4,999		)
Other comprehensive income (loss), net of taxes	17			1		(1	)	—		—		17
Comprehensive income (loss) attributable to common shareholder	$	28,710		4,881		3,787		(1	)	(8,667	)	$	28,710

Hawaiian Electric Company, Inc. and Subsidiaries

Consolidating Statement of Income (unaudited)

Six months ended June 30, 2014

(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments		Hawaiian Electric Consolidated
Revenues	$	1,043,446		208,475		206,609		—	(39	)	$	1,458,491
Expenses
Fuel oil	399,096			62,679		94,782		—	—		556,557
Purchased power	264,774			57,661		30,804		—	—		353,239
Other operation and maintenance	127,507			28,864		30,799		—	—		187,170
Depreciation	54,601			17,951		10,644		—	—		83,196
Taxes, other than income taxes	98,133			19,520		19,942		—	—		137,595
Total expenses	944,111			186,675		186,971		—	—		1,317,757
Operating income	99,335			21,800		19,638		—	(39	)	140,734
Allowance for equity funds used during construction	2,889			186		(79	)	—	—		2,996
Equity in earnings of subsidiaries	18,776			—		—		—	(18,776	)	—
Interest expense and other charges, net	(22,040		)	(5,600	)	(4,974	)	—	39		(32,575		)
Allowance for borrowed funds used during construction	1,094			72		(29	)	—	—		1,137
Income before income taxes	100,054			16,458		14,556		—	(18,776	)	112,292
Income taxes	29,864			6,184		5,596		—	—		41,644
Net income	70,190			10,274		8,960		—	(18,776	)	70,648
Preferred stock dividends of subsidiaries	—			267		191		—	—		458
Net income attributable to Hawaiian Electric	70,190			10,007		8,769		—	(18,776	)	70,190
Preferred stock dividends of Hawaiian Electric	540			—		—		—	—		540
Net income for common stock	$	69,650		10,007		8,769		—	(18,776	)	$	69,650

Hawaiian Electric Company, Inc. and Subsidiaries

Consolidating Statement of Comprehensive Income (unaudited)

Six months ended June 30, 2014

(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments		Hawaiian Electric Consolidated
Net income for common stock	$	69,650		10,007		8,769		—	(18,776	)	$	69,650
Other comprehensive income, net of taxes:
Retirement benefit plans:
Less: amortization of transition obligation, prior service credit and net losses recognized during the period in net periodic benefit cost, net of tax benefits	5,107			636		545		—	(1,181	)	5,107
Less: reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of taxes	(5,085		)	(636	)	(545	)	—	1,181		(5,085		)
Other comprehensive income, net of taxes	22			—		—		—	—		22
Comprehensive income attributable to common shareholder	$	69,672		10,007		8,769		—	(18,776	)	$	69,672

Hawaiian Electric Company, Inc. and Subsidiaries

Consolidating Statement of Income (unaudited)

Six months ended June 30, 2013

(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries		Consolidating adjustments		Hawaiian Electric Consolidated
Revenues	$	1,028,634		212,373		205,026		—		(67	)	$	1,445,966
Expenses
Fuel oil	425,346			66,505		102,527		—		—		594,378
Purchased power	246,426			59,400		25,982		—		—		331,808
Other operation and maintenance	140,976			29,365		25,868		1		—		196,210
Depreciation	49,708			17,094		10,068		—		—		76,870
Taxes, other than income taxes	97,501			19,656		19,447		—		—		136,604
Total expenses	959,957			192,020		183,892		1		—		1,335,870
Operating income (loss)	68,677			20,353		21,134		(1	)	(67	)	110,096
Allowance for equity funds used during construction	2,230			330		215		—		—		2,775
Equity in earnings of subsidiaries	19,652			—		—		—		(19,652	)	—
Interest expense and other charges, net	(18,840		)	(5,646	)	(4,508	)	—		67		(28,927		)
Allowance for borrowed funds used during construction	910			135		83		—		—		1,128
Income (loss) before income taxes	72,629			15,172		16,924		(1	)	(19,652	)	85,072
Income taxes	18,967			5,605		6,380		—		—		30,952
Net income (loss)	53,662			9,567		10,544		(1	)	(19,652	)	54,120
Preferred stock dividends of subsidiaries	—			267		191		—		—		458
Net income (loss) attributable to Hawaiian Electric	53,662			9,300		10,353		(1	)	(19,652	)	53,662
Preferred stock dividends of Hawaiian Electric	540			—		—		—		—		540
Net income (loss) for common stock	$	53,122		9,300		10,353		(1	)	(19,652	)	$	53,122

Hawaiian Electric Company, Inc. and Subsidiaries

Consolidating Statement of Comprehensive Income (Loss) (unaudited)

Six months ended June 30, 2013

(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries		Consolidating adjustments		Hawaiian Electric Consolidated
Net income (loss)for common stock	$	53,122		9,300		10,353		(1	)	(19,652	)	$	53,122
Other comprehensive income (loss), net of taxes:
Retirement benefit plans:
Less: amortization of transition obligation, prior service credit and net losses recognized during the period in net periodic benefit cost, net of tax benefits	10,347			1,440		1,279		—		(2,719	)	10,347
Less: reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of taxes	(10,312		)	(1,441	)	(1,279	)	—		2,720		(10,312		)
Other comprehensive income (loss), net of taxes	35			(1	)	—		—		1		35
Comprehensive income (loss) attributable to common shareholder	$	53,157		9,299		10,353		(1	)	(19,651	)	$	53,157

Hawaiian Electric Company, Inc. and Subsidiaries

Consolidating Balance Sheet (unaudited)

June 30, 2014

(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consoli- dating adjustments		Hawaiian Electric Consolidated
Assets
Property, plant and equipment
Utility property, plant and equipment
Land	$	43,530		5,464		3,016		—	—		$	52,010
Plant and equipment	3,655,958			1,147,841		1,026,924		—	—		5,830,723
Less accumulated depreciation	(1,239,994		)	(465,966	)	(444,953	)	—	—		(2,150,913		)
Construction in progress	139,149			14,669		14,462		—	—		168,280
Utility property, plant and equipment, net	2,598,643			702,008		599,449		—	—		3,900,100
Nonutility property, plant and equipment, less accumulated depreciation	4,951			82		1,531		—	—		6,564
Total property, plant and equipment, net	2,603,594			702,090		600,980		—	—		3,906,664
Investment in wholly owned subsidiaries, at equity	529,461			—		—		—	(529,461	)	—
Current assets
Cash and cash equivalents	8,106			1,754		2,759		101	—		12,720
Advances to affiliates	23,600			—		—		—	(23,600	)	—
Customer accounts receivable, net	122,400			27,465		25,769		—	—		175,634
Accrued unbilled revenues, net	106,694			17,452		17,723		—	—		141,869
Other accounts receivable, net	20,095			6,415		2,052		—	(9,647	)	18,915
Fuel oil stock, at average cost	123,070			12,517		25,706		—	—		161,293
Materials and supplies, at average cost	37,606			7,129		16,144		—	—		60,879
Prepayments and other	43,057			7,185		11,900		—	(251	)	61,891
Regulatory assets	64,210			6,947		7,788		—	—		78,945
Total current assets	548,838			86,864		109,841		101	(33,498	)	712,146
Other long-term assets
Regulatory assets	380,993			64,159		58,548		—	—		503,700
Unamortized debt expense	6,020			1,532		1,353		—	—		8,905
Other	42,662			11,565		14,199		—	—		68,426
Total other long-term assets	429,675			77,256		74,100		—	—		581,031
Total assets	$	4,111,568		866,210		784,921		101	(562,959	)	$	5,199,841
Capitalization and liabilities
Capitalization
Common stock equity	$	1,618,987		278,995		250,365		101	(529,461	)	$	1,618,987
Cumulative preferred stock—not subject to mandatory redemption	22,293			7,000		5,000		—	—		34,293
Long-term debt, net	830,546			189,999		186,000		—	—		1,206,545
Total capitalization	2,471,826			475,994		441,365		101	(529,461	)	2,859,825
Current liabilities
Current portion of long-term debt	—			11,400		—		—	—		11,400
Short-term borrowings from non-affiliates	102,989			—		—		—	—		102,989
Short-term borrowings from affiliate	—			3,400		20,200		—	(23,600	)	—
Accounts payable	114,803			18,434		20,506		—	—		153,743
Interest and preferred dividends payable	14,827			4,177		2,755		—	(8	)	21,751
Taxes accrued	150,709			33,058		32,858		—	(251	)	216,374
Regulatory liabilities	453			—		336		—	—		789
Other	49,370			9,391		15,447		—	(9,639	)	64,569
Total current liabilities	433,151			79,860		92,102		—	(33,498	)	571,615
Deferred credits and other liabilities
Deferred income taxes	399,826			84,147		73,083		—	—		557,056
Regulatory liabilities	240,533			79,990		33,668		—	—		354,191
Unamortized tax credits	48,386			14,668		14,659		—	—		77,713
Defined benefit pension and other postretirement benefit plans liability	195,599			26,952		30,234			—		252,785
Other	57,397			13,821		13,059		—	—		84,277
Total deferred credits and other liabilities	941,741			219,578		164,703		—	—		1,326,022
Contributions in aid of construction	264,850			90,778		86,751		—	—		442,379
Total capitalization and liabilities	$	4,111,568		866,210		784,921		101	(562,959	)	$	5,199,841

Hawaiian Electric Company, Inc. and Subsidiaries

Consolidating Balance Sheet (unaudited)

December 31, 2013

(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consoli- dating adjustments		Hawaiian Electric Consolidated
Assets
Property, plant and equipment
Utility property, plant and equipment
Land	$	43,407		5,460		3,016		—	—		$	51,883
Plant and equipment	3,558,569			1,136,923		1,006,383		—	—		5,701,875
Less accumulated depreciation	(1,222,129		)	(453,721	)	(435,379	)	—	—		(2,111,229		)
Construction in progress	124,494			7,709		11,030		—	—		143,233
Utility property, plant and equipment, net	2,504,341			696,371		585,050		—	—		3,785,762
Nonutility property, plant and equipment, less accumulated depreciation	4,953			82		1,532		—	—		6,567
Total property, plant and equipment, net	2,509,294			696,453		586,582		—	—		3,792,329
Investment in wholly owned subsidiaries,at equity	523,674			—		—		—	(523,674	)	—
Current assets
Cash and cash equivalents	61,245			1,326		153		101	—		62,825
Advances to affiliates	6,839			1,000		—		—	(7,839	)	—
Customer accounts receivable, net	121,282			28,088		26,078		—	—		175,448
Accrued unbilled revenues, net	107,752			17,100		19,272		—	—		144,124
Other accounts receivable, net	16,373			4,265		2,451		—	(9,027	)	14,062
Fuel oil stock, at average cost	99,613			14,178		20,296		—	—		134,087
Materials and supplies, at average cost	37,377			6,883		14,784		—	—		59,044
Prepayments and other	29,798			8,334		16,140		—	(1,415	)	52,857
Regulatory assets	54,979			6,931		7,828		—	—		69,738
Total current assets	535,258			88,105		107,002		101	(18,281	)	712,185
Other long-term assets
Regulatory assets	381,346			64,552		60,288		—	—		506,186
Unamortized debt expense	6,051			1,580		1,372		—	—		9,003
Other	42,163			11,270		13,993		—	—		67,426
Total other long-term assets	429,560			77,402		75,653		—	—		582,615
Total assets	$	3,997,786		861,960		769,237		101	(541,955	)	$	5,087,129
Capitalization and liabilities
Capitalization
Common stock equity	$	1,593,564		274,802		248,771		101	(523,674	)	$	1,593,564
Cumulative preferred stock—not subject to mandatory redemption	22,293			7,000		5,000		—	—		34,293
Long-term debt, net	830,547			189,998		186,000		—	—		1,206,545
Total capitalization	2,446,404			471,800		439,771		101	(523,674	)	2,834,402
Current liabilities
Current portion of long-term debt	—			11,400		—		—	—		11,400
Short-term borrowings from affiliate	1,000			—		6,839		—	(7,839	)	—
Accounts payable	145,062			24,383		20,114		—	—		189,559
Interest and preferred dividends payable	15,190			3,885		2,585		—	(8	)	21,652
Taxes accrued	175,790			37,899		37,171		—	(1,415	)	249,445
Regulatory liabilities	1,705			—		211		—	—		1,916
Other	48,443			9,033		15,424		—	(9,019	)	63,881
Total current liabilities	387,190			86,600		82,344		—	(18,281	)	537,853
Deferred credits and other liabilities
Deferred income taxes	359,621			79,947		67,593		—	—		507,161
Regulatory liabilities	235,786			76,475		35,122		—	—		347,383
Unamortized tax credits	44,931			14,245		14,363		—	—		73,539
Defined benefit pension and other postretirement benefit plans liability	202,396			28,427		31,339		—	—		262,162
Other	63,374			14,703		13,658		—	—		91,735
Total deferred credits and other liabilities	906,108			213,797		162,075		—	—		1,281,980
Contributions in aid of construction	258,084			89,763		85,047		—	—		432,894
Total capitalization and liabilities	$	3,997,786		861,960		769,237		101	(541,955	)	$	5,087,129

Hawaiian Electric Company, Inc. and Subsidiaries

Consolidating Statement of Changes in Common Stock Equity (unaudited)

Six months ended June 30, 2014

(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments		Hawaiian Electric Consolidated
Balance, December 31, 2013	$	1,593,564		274,802		248,771		101	(523,674	)	$	1,593,564
Net income for common stock	69,650			10,007		8,769		—	(18,776	)	69,650
Other comprehensive income, net of taxes	22			—		—		—	—		22
Common stock dividends	(44,246		)	(5,813	)	(7,175	)	—	12,988		(44,246		)
Common stock issuance expenses	(3		)	(1	)	—		—	1		(3		)
Balance, June 30, 2014	$	1,618,987		278,995		250,365		101	(529,461	)	$	1,618,987

Hawaiian Electric Company, Inc. and Subsidiaries

Consolidating Statement of Changes in Common Stock Equity (unaudited)

Six months ended June 30, 2013

(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries		Consolidating adjustments		Hawaiian Electric Consolidated
Balance, December 31, 2012	$	1,472,136		268,908		228,927		104		(497,939	)	$	1,472,136
Net income (loss) for common stock	53,122			9,300		10,353		(1	)	(19,652	)	53,122
Other comprehensive income (loss), net of taxes	35			(1	)	—		—		1		35
Common stock dividends	(40,789		)	(7,194	)	(7,008	)	—		14,202		(40,789		)
Balance, June 30, 2013	$	1,484,504		271,013		232,272		103		(503,388	)	$	1,484,504

Hawaiian Electric Company, Inc. and Subsidiaries

Consolidating Statement of Cash Flows (unaudited)

Six months ended June 30, 2014

(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments		Hawaiian Electric Consolidated
Cash flows from operating activities
Net income	$	70,190		10,274		8,960		—	(18,776	)	$	70,648
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in earnings of subsidiaries	(18,826		)	—		—		—	18,776		(50		)
Common stock dividends received from subsidiaries	13,038			—		—		—	(12,988	)	50
Depreciation of property, plant and equipment	54,601			17,951		10,644		—	—		83,196
Other amortization	554			1,299		1,744		—	—		3,597
Increase in deferred income taxes	34,976			4,478		5,932		—	—		45,386
Change in tax credits, net	3,482			434		311		—	—		4,227
Allowance for equity funds used during construction	(2,889		)	(186	)	79		—	—		(2,996		)
Change in cash overdraft	—			—		(1,038	)	—	—		(1,038		)
Changes in assets and liabilities:
Decrease (increase) in accounts receivable	(4,840		)	(1,527	)	708		—	620		(5,039		)
Decrease (increase) in accrued unbilled revenues	1,058			(352	)	1,549		—	—		2,255
Decrease (increase) in fuel oil stock	(23,457		)	1,661		(5,410	)	—	—		(27,206		)
Increase in materials and supplies	(229		)	(246	)	(1,360	)	—	—		(1,835		)
Increase in regulatory assets	(15,893		)	(1,640	)	(198	)	—	—		(17,731		)
Decrease in accounts payable	(54,777		)	(5,621	)	(2,908	)	—	—		(63,306		)
Change in prepaid and accrued income and utility revenue taxes	(33,867		)	(3,709	)	(694	)	—	—		(38,270		)
Decrease in defined benefit pension and other postretirement benefit plans liability	(281		)	—		(217	)	—	—		(498		)
Change in other assets and liabilities	(19,897		)	(2,586	)	(3,155	)	—	(620	)	(26,258		)
Net cash provided by operating activities	2,943			20,230		14,947		—	(12,988	)	25,132
Cash flows from investing activities
Capital expenditures	(104,710		)	(20,567	)	(20,457	)	—	—		(145,734		)
Contributions in aid of construction	8,520			2,493		2,196		—	—		13,209
Advances from (to) affiliates	(16,761		)	1,000		—		—	15,761		—
Net cash used in investing activities	(112,951		)	(17,074	)	(18,261	)	—	15,761		(132,525		)
Cash flows from financing activities
Common stock dividends	(44,246		)	(5,813	)	(7,175	)	—	12,988		(44,246		)
Preferred stock dividends of Hawaiian Electric and subsidiaries	(540		)	(267	)	(191	)	—	—		(998		)
Net increase in short-term borrowings from non-affiliates and affiliate with original maturities of three months or less	101,989			3,400		13,361		—	(15,761	)	102,989
Other	(334		)	(48	)	(75	)	—	—		(457		)
Net cash provided by (used in) financing activities	56,869			(2,728	)	5,920		—	(2,773	)	57,288
Net increase (decrease) in cash and cash equivalents	(53,139		)	428		2,606		—	—		(50,105		)
Cash and cash equivalents, beginning of period	61,245			1,326		153		101	—		62,825
Cash and cash equivalents, end of period	$	8,106		1,754		2,759		101	—		$	12,720

Hawaiian Electric Company, Inc. and Subsidiaries

Consolidating Statement of Cash Flows (unaudited)

Six months ended June 30, 2013

(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries		Consolidating adjustments		Hawaiian Electric Consolidated
Cash flows from operating activities
Net income (loss)	$	53,662		9,567		10,544		(1	)	(19,652	)	$	54,120
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Equity in earnings of subsidiaries	(19,702		)	—		—		—		19,652		(50		)
Common stock dividends received from subsidiaries	14,227			—		—		—		(14,202	)	25
Depreciation of property, plant and equipment	49,708			17,094		10,068		—		—		76,870
Other amortization	(160		)	716		2,328		—		—		2,884
Increase in deferred income taxes	27,560			5,584		5,636		—		—		38,780
Change in tax credits, net	2,598			70		329		—		—		2,997
Allowance for equity funds used during construction	(2,230		)	(330	)	(215	)	—		—		(2,775		)
Changes in assets and liabilities:
Decrease (increase) in accounts receivable	35,431			(2,281	)	(318	)	—		(579	)	32,253
Decrease (increase) in accrued unbilled revenues	(2,095		)	(2,848	)	54		—		—		(4,889		)
Decrease (increase) in fuel oil stock	38,428			5,812		(266	)	—		—		43,974
Increase in materials and supplies	(4,069		)	(1,480	)	(1,590	)	—		—		(7,139		)
Increase in regulatory assets	(25,647		)	(4,852	)	(7,087	)	—		—		(37,586		)
Decrease in accounts payable	(36,971		)	(2,513	)	(1,750	)	—		—		(41,234		)
Change in prepaid and accrued income and utility revenue taxes	(25,831		)	(6,171	)	(6,121	)	—		—		(38,123		)
Increase (decrease) in defined benefit pension and other postretirement benefit plans liability	1,163			(128	)	(46	)	—		—		989
Change in other assets and liabilities	(12,731		)	(3,171	)	5,929		—		579		(9,394		)
Net cash provided by (used in) operating activities	93,341			15,069		17,495		(1	)	(14,202	)	111,702
Cash flows from investing activities
Capital expenditures	(104,846		)	(22,367	)	(23,038	)	—		—		(150,251		)
Contributions in aid of construction	11,924			4,270		994		—		—		17,188
Other	623			—		—		—				623
Advances from (to) affiliates	(8,600		)	8,450		—		—		150		—
Net cash used in investing activities	(100,899		)	(9,647	)	(22,044	)	—		150		(132,440		)
Cash flows from financing activities
Common stock dividends	(40,789		)	(7,194	)	(7,008	)	—		14,202		(40,789		)
Preferred stock dividends of Hawaiian Electric and subsidiaries	(540		)	(267	)	(191	)	—		—		(998		)
Net increase in short-term borrowings from non-affiliates and affiliate with original maturities of three months or less	45,542			—		8,600		—		(150	)	53,992
Other	(6		)	(1	)	(2	)	—		—		(9		)
Net cash provided by (used in) financing activities	4,207			(7,462	)	1,399		—		14,052		12,196
Net decrease in cash and cash equivalents	(3,351		)	(2,040	)	(3,150	)	(1	)	—		(8,542		)
Cash and cash equivalents, beginning of period	8,265			5,441		3,349		104		—		17,159
Cash and cash equivalents, end of period	$	4,914		3,401		199		103		—		$	8,617