Electric utility segment

9 Months Ended

Sep. 30, 2016

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 third quarters of 2016 and 2015 and nine months ended September 30, 2016 and 2015 approximately $51 million, $58 million, $138 million and $159 million, respectively, of revenue taxes in “revenues” and in “taxes, other than income taxes” expense.

Recent tax developments. On December 18, 2015, Congress passed, and President Obama signed into law, the “Protecting Americans from Tax Hikes (PATH) Act of 2015” and the “Consolidating Appropriations Act, 2016,” providing government funding and a number of significant tax changes.

The provision with the greatest impact on the Company is the extension of bonus depreciation. The PATH Act continues 50% bonus depreciation through 2017 and phases down the percentage to 40% in 2018 and 30% in 2019 and then terminates bonus depreciation thereafter. The extension of bonus depreciation resulted in an increase in 2015 tax depreciation of $123 million. Tax depreciation is expected to increase by approximately $126 million in 2016 and result in increased accumulated deferred tax liabilities.

Additionally, the “Consolidating Appropriations Act, 2016” extended a variety of energy-related credits that were expired or were soon to expire. These credits include the production credit for wind facilities and the 30% investment credit for qualified solar energy property, with various phase-out dates through 2021.

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 September 30, 2016 and December 31, 2015 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 nine months ended September 30, 2016 and 2015 each consisted of $2.5 million of interest income received from the 2004 Debentures; $2.4 million of distributions to holders of the Trust Preferred Securities; and $75,000 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 September 30, 2016, the Utilities had five PPAs for firm capacity and other PPAs with IPPs and Schedule Q providers (e.g., customers with cogeneration and/or power production facilities who buy power from or sell power to the Utilities), none of which are currently required to be consolidated as VIEs. Purchases from all IPPs were as follows:

	Three months ended September 30				Nine months ended September 30
(in millions)	2016		2015		2016		2015
AES Hawaii	$	38	$	37	$	112	$	97
Kalaeloa	44		51		109		143
HEP	8		13		23		34
Hpower	19		18		52		50
Puna Geothermal Venture	7		8		19		22
Hawaiian Commercial & Sugar (HC&S)	1		2		1		7
Other IPPs	41		32		97		93
Total IPPs	$	158	$	161	$	413	$	446

In October 2015 the amended PPA between Maui Electric and HC&S became effective following PUC approval in September 2015. The amended PPA amends the pricing structure and rates for energy sold to Maui Electric, eliminates the capacity payment to HC&S, eliminates Maui Electric’s minimum purchase obligation, provides that Maui Electric may request up to 4 MW of scheduled energy during certain months, and be provided up to 16 MW of emergency power, and extends the term of the PPA from 2014 to 2017. In 2016 HC&S requested to terminate the PPA in January of 2017, approximately 1 year early due to HC&S ceasing sugar operations.

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 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 2015, 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 additives cost component 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 facility has been certified by the Federal Energy Regulatory Commission as a Qualifying Facility under the Public Utility Regulatory Policies Act of 1978.

Hawaiian Electric and Kalaeloa are in negotiations to address the PPA term that ended on May 23, 2016. The PPA automatically extends on a month-to-month basis as long as the parties are still negotiating in good faith. The month-to-month term extensions shall end 60 days after either party notifies the other in writing that negotiations have terminated.

On August 1, 2016, Hawaiian Electric and Kalaeloa entered into an agreement that neither party will give written notice of termination of the PPA prior to October 31, 2017. This agreement complements continued negotiations between the parties and accounts for time needed for PUC approval of a negotiated resolution.

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. The energy payments paid by Hawaiian Electric will fluctuate as fuel prices change, however, 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 September 30, 2016, Hawaiian Electric’s accounts payable to Kalaeloa amounted to $12 million.

AES Hawaii, Inc. In March 1988, Hawaiian Electric entered into a PPA with AES Barbers Point, Inc. (now known as AES Hawaii, Inc.), which, as amended (through Amendment No. 2) and approved by the PUC, provided that Hawaiian Electric would purchase 180 MW of firm capacity for a period of 30 years beginning in September 1992. In November 2015, Hawaiian Electric entered into an Amendment No. 3, for which PUC approval has been requested. If approved by the PUC, Amendment No. 3 would increase the firm capacity from 180 MW to a maximum of 189 MW. The payments that Hawaiian Electric makes to AES Hawaii for energy associated with the first 180 MW of firm capacity include a fuel component, a variable O&M component and a fixed O&M component, all of which are subject to adjustment based on changes in the Gross National Product Implicit Price Deflator. If Amendment No. 3 is approved by the PUC, payments for energy associated with firm capacity in excess of 180 MW will be at fixed rates not subject to adjustment based on changes in the Gross National Product Implicit Price Deflator. The capacity payments that Hawaiian Electric makes to AES Hawaii are fixed in accordance with the PPA and, if approved by the PUC, Amendment No. 3.

Pursuant to the current accounting standards for VIEs, Hawaiian Electric is deemed to have a variable interest in AES Hawaii by reason of the provisions of Hawaiian Electric’s PPA with AES Hawaii. However, management has concluded that Hawaiian Electric is not the primary beneficiary of AES Hawaii because Hawaiian Electric does not have the power to control the most significant activities of AES Hawaii that impact AES Hawaii’s economic performance, including operations and maintenance of AES Hawaii’s facility. Thus, Hawaiian Electric has not consolidated AES Hawaii in its consolidated financial statements. As of September 30, 2016, Hawaiian Electric’s accounts payable to AES Hawaii amounted to $13 million.

Commitments and contingencies.

Fuel contracts.The Utilities have contractual agreements to purchase minimum quantities of fuel oil, diesel fuel and biodiesel for multi-year periods, some through December 2019. Fossil fuel prices are tied to the market prices of crude oil and petroleum products in the Far East and U.S. West Coast and the biodiesel prices are tied to the market prices of animal fat feedstocks in the U.S. West Coast and U.S. Midwest.

Hawaiian Electric and Chevron Products Company (Chevron), a division of Chevron USA, Inc., are parties to the Low Sulfur Fuel Oil Supply Contract (LSFO Contract) for the purchase/sale of low sulfur fuel oil (LSFO), which terminates on December 31, 2016. The LSFO Contract will be replaced by a new contract with Chevron for LSFO and diesel fuel to meet MATS requirements for the island of Oahu that begins on January 1, 2017, terminates on December 31, 2019 and may automatically renew for annual terms thereafter unless earlier terminated by either party.

The Utilities are also parties to amended Inter-Island contracts for the supplies of industrial fuel oil and diesel fuels with Chevron and Par Hawaii Refining, LLC (PAR) (formerly known as Hawaii Independent Energy, LLC), respectively, which terminate on December 31, 2016. The Inter-Island contracts will be replaced by a new Inter-Island contract with Chevron for industrial fuel oil, diesel and ultra-low sulfur diesel for the islands of Oahu, Hawaii, Maui and Molokai, which begins on January 1, 2017, terminates on December 31, 2019 and may automatically renew for annual terms thereafter unless earlier terminated by either party.

Hawaii Electric Light and Chevron are also parties to a terminalling agreement for the island of Hawaii, which begins on January 1, 2017, terminates on December 31, 2019 and may automatically renew for annual terms thereafter unless earlier terminated by either party. Currently, terminalling services are provided to Hawaii Electric Light under the Inter-island Fuel Supply Contract with Chevron that expires on December 31, 2016.

The PUC has approved all of the foregoing contracts (LSFO, Inter-Island and Terminalling) and the costs incurred under these contracts are included in the Utilities’ respective ECACs, to the extent such costs are not recovered through the base rates.

The energy charge for energy purchased from Kalaeloa Partners, L.P. (Kalaeloa) under Hawaiian Electric’s PPA with Kalaeloa is based, in part, on the price Kalaeloa pays PAR (formerly known as Hawaii Independent Energy, LLC) for LSFO under a Facility Fuel Supply Contract (fuel contract) between them. The term of the fuel contract between Kalaeloa and PAR ended on May 31, 2016 and is being extended until terminated by one of the parties.

AES Hawaii, Inc. Under a PPA entered into in March 1988, as amended, for a period of 30 years beginning September 1992, Hawaiian Electric agreed to purchase 180 MW of firm capacity from AES Hawaii. In August 2012, Hawaiian Electric filed an application with the PUC seeking an exemption from the PUC’s Competitive Bidding Framework to negotiate an amendment to the PPA to purchase 186 MW of firm capacity, and amend the energy pricing formula in the PPA. The PUC approved the exemption in April 2013, but Hawaiian Electric and AES Hawaii were not able to reach agreement on an amendment. In June 2015, AES Hawaii filed an arbitration demand regarding a dispute about whether Hawaiian Electric was obligated to buy up to 9 MW of additional capacity based on a 1992 letter. Hawaiian Electric responded to the arbitration demand and, in October 2015, AES Hawaii and Hawaiian Electric entered into a Settlement Agreement to stay the arbitration proceeding. The Settlement Agreement includes certain conditions precedent which, if satisfied, will release the parties from the claims under the arbitration proceeding. Among the conditions precedent is the successful negotiation of an amendment to the existing purchase power agreement and PUC approval of such amendment.

On November 13, 2015, Hawaiian Electric entered into Amendment No. 3 to the AES Hawaii PPA, subject to PUC approval. Amendment No. 3 provides more favorable pricing for the additional 9 MW than the existing pricing, the benefit of which will be passed on to customers, and among other things, provides (1) for an increase in firm capacity of up to 9 MW (the Additional Capacity) above the 180 MW capacity of the AES Hawaii facility, subject to a demonstration of such increased available capacity, (2) for the payment for the Additional Capacity to include a Priority Peak Capacity Charge, a Non-Peak Capacity Charge, a Priority Peak Energy Charge and a Non-Peak Energy Charge and (3) that AES will make certain operational commitments to improve reliability, and Hawaiian Electric will pay a reliability bonus according to a schedule for reduced Full Plant Trips. On January 22, 2016, Amendment No. 3 was filed with the PUC for approval. If such approval is obtained, the final condition to the Settlement Agreement’s release of the parties from the arbitration claims will be satisfied. The arbitration proceeding has been stayed to allow the PUC approval proceeding to proceed.

Liquefied natural gas. On May 18, 2016, Hawaiian Electric and Fortis Hawaii Energy Inc. (Fortis Hawaii), an affiliate of Fortis, Inc. (Fortis), entered into a Fuel Supply Agreement (FSA) whereby Fortis Hawaii intended to sell to Hawaiian Electric liquefied natural gas (LNG) to be produced from the LNG facilities on Tilbury Island in Delta, British Columbia, Canada. Pursuant to the FSA, Fortis Hawaii had arranged, or planned to arrange, for the transportation of gas for delivery to, and liquefaction at, the Tilbury LNG facilities, including with respect to the transport and delivery of LNG across a jetty at such facilities, for the purchase and storage of LNG at such LNG facilities and for the transportation of LNG to delivery points in Hawaii for the benefit of Hawaiian Electric and its subsidiaries. The FSA was subject to approval by the PUC and to the satisfaction of certain conditions precedent, including the consummation of the merger between HEI and NEE. On July 16, 2016, pursuant to the terms of the Merger Agreement, NEE terminated the Merger Agreement. Accordingly, on July 19, 2016, Hawaiian Electric provided notice of termination of the FSA to Fortis Hawaii, effective immediately, and withdrew the application for PUC approval of the FSA, which included a request for approval to commit approximately $341 million to convert existing generating units to use natural gas, and to commit approximately $117 million for containers to support LNG. In addition, on July 19, 2016, Hawaiian Electric withdrew its applications to the PUC for a waiver from the competitive bidding process to allow Hawaiian Electric to construct a modern, efficient, combined cycle generation system at the Kahe power plant that would utilize LNG and to commit $859 million for such project. Hawaiian Electric will continue to evaluate all options to modernize generation using a cleaner fuel to bring price stability and support adding renewable energy for its customers.

Utility projects.  Many public utility projects require PUC approval and various permits from other governmental agencies. Difficulties in obtaining, or the inability to obtain, the necessary approvals or permits can result in significantly increased project costs or even cancellation of projects. In the event a project does not proceed, or if it becomes probable the PUC will disallow cost recovery for all or part of a project, project costs may need to be written off in amounts that could result in significant reductions in Hawaiian Electric’s consolidated net income.

Renewable energy project matters.  In February 2012, the PUC granted Hawaiian Electric’s request for deferred accounting treatment for the inter-island project support costs. The amount of the deferred costs was limited to $5.89 million. Through December 31, 2013, Hawaiian Electric deferred $3.1 million related to outside contractor service costs incurred with the Oahu 200 MW RFP, and began amortizing such costs over 3 years beginning in July 2014.

In May 2012, the PUC instituted a proceeding for a competitive bidding process for up to 50 MW of firm renewable geothermal dispatchable energy (Geothermal RFP) on the island of Hawaii, and in July 2012, Hawaii Electric Light filed an application to defer 2012 costs related to the Geothermal RFP. In November 2015, the PUC approved the deferral of $2.1 million of costs related to the Geothermal RFP, and will review the prudency and reasonableness of the deferred costs in the Hawaii Electric Light 2016 test year rate case. In February 2013, Hawaii Electric Light issued the Final Geothermal RFP. Six bids were received, but Hawaii Electric Light notified bidders that none of the submitted bids sufficiently met both the low-cost and technical requirements of the Geothermal RFP. In October 2014, Hawaii Electric Light issued Addendum No. 1 (Best and Final Offer) and Attachment A (Best and Final Offer Bidder's Response Package) directly to five eligible bidders. The submittals received in January 2015 were considered for final selection of one project to proceed with PPA negotiations. In February 2015, Ormat Technologies, Inc. was selected for an award and began PPA negotiations with Hawaii Electric Light. In February 2016, Hawaii Electric Light provided the PUC with a status update notifying the PUC that Ormat Technologies, Inc. had determined the proposed project not to be economically and financially viable, resulting in conclusion of PPA negotiations. On March 8, 2016, the Independent Observer issued a report on the results of the negotiation phase of the Geothermal RFP.

In February 2016, Huena Power Inc. (Huena) filed with the PUC a Petition for Declaratory Order (which the PUC later dismissed without prejudice) and a Complaint relating to the Geothermal RFP. Hawaii Electric Light filed a motion to dismiss Huena’s Petition which was granted on March 28, 2016. Hawaii Electric Light’s motion to dismiss Huena’s Complaint is still pending.

Enterprise Resource Planning/Enterprise Asset Management (ERP/EAM) Implementation Project. The Utilities submitted their Enterprise Information System Roadmap to the PUC in June 2014 and refiled an application for an ERP/EAM implementation project in July 2014 with an estimated cost of $82.4 million. In October 2015, the PUC issued a D&O (1) finding that there is a need to replace the Utilities’ existing ERP/EAM system, (2) denying the Utilities request to defer the costs for the ERP software purchased in 2012 and (3) deferring any ruling on whether it is reasonable and in the public interest for the Utilities to commence with the project under two options. As a result, the Utilities expensed the ERP software costs of $4.8 million in the third quarter of 2015. In April 2016, the Utilities filed additional information on the costs and benefits of the project and the Consumer Advocate submitted its reply.

On August 11, 2016, the PUC issued a second D&O approving the Utilities’ request to commence the ERP/EAM implementation project, subject to certain conditions, including a $77.6 million cap on cost recovery as well as a requirement that the Utilities pass onto customers a minimum of $244 million in savings associated with the system over its 12-year service life. Pursuant to the D&O and subsequent orders, the Utilities will be required to file: the proposed methods of passing on to customers the estimated monetary savings attributable to the project by November 7, 2016; a bottom-up, low-level analysis of the project’s benefits; performance metrics and tracking mechanism for passing the project’s benefits on to customers by September 2017; and monthly reports on the status and costs of the project starting February 2017

Schofield Generating Station Project. In August 2012, the PUC approved a waiver from the competitive bidding framework to allow Hawaiian Electric to negotiate with the U.S. Army for the construction of a 50 MW utility owned and operated firm, renewable and dispatchable generation facility at Schofield Barracks. In September 2015, the PUC approved Hawaiian Electric’s application to expend $167 million for the project. In approving the project, the PUC placed a cost cap of $167 million for the project, stated 90% of the cap is allowed for cost recovery through cost recovery mechanisms other than base rates, and stated the $167 million cap will be adjusted downward due to any reduction in the cost of the engine contract due to a reduction in the foreign exchange rate. Hawaiian Electric was required to take all necessary steps to lock in the lowest possible exchange rate. On January 5, 2016, Hawaiian Electric executed a window forward agreement which lowered the cost of the engine contract by $9.7 million, resulting in a revised project cost cap of $157.3 million. Hawaiian Electric has received all of the major permits for the project, including a 35 year site lease from the U.S. Army. Construction of the facility began in October 2016. The generating station is expected to be placed in service in the first quarter of 2018.

Hamakua Energy Partners, L.P. (HEP) Asset Purchase Agreement. Hawaii Electric Light has been purchasing up to 60 MW (net) of firm capacity from HEP under a power purchase agreement (PPA) that expires on December 30, 2030. The HEP plant currently contributes about 23% of the island of Hawaii’s generating capacity. On December 22, 2015, Hawaii Electric Light entered into an agreement, subject to PUC approval, to acquire the assets of HEP for approximately $84.5 million. If approved by the PUC, the agreement to purchase the existing HEP generating assets will terminate the existing PPA. The elimination of certain required capacity payments under the PPA is expected to result in lower costs to customers. Additionally, by owning the plant, Hawaii Electric Light will be able to manage HEP’s efficient generating units more productively, providing greater flexibility to cycle HEP’s generating units to more effectively manage the Hawaii island grid. This increased operational flexibility will be essential to support and facilitate Hawaii Electric Light’s efforts to integrate more renewable energy onto the grid.

An application to approve the project has been filed with the PUC.

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.

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. The Utilities 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.

Clean Water Act Section 316(b). On August 14, 2014, the EPA published in the Federal Register 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 were effective October 14, 2014 and 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 each 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 State of Hawaii Department of Health (DOH) can determine what entrainment or impingement controls, if any, might be necessary at the affected facilities to comply with the new 316(b) rule.

Mercury Air Toxics Standards. On February 16, 2012, EPA published the final rule establishing the National Emission Standards for Hazardous Air Pollutants for fossil-fuel fired steam electrical generating units (EGUs) in the Federal Register. The final rule, known as the Mercury and Air Toxics Standards (MATS), applies to the 14 EGUs at Hawaiian Electric’s power plants. MATS established the Maximum Achievable Control Technology standards for the control of hazardous air pollutants emissions from new and existing EGUs. Hawaiian Electric received a one-year extension to comply by April 16, 2016. Hawaiian Electric initially selected a MATS compliance strategy based on switching to lower emission fuels, but has since continued developing and refining its emission control strategy. Hawaiian Electric’s liquid oil-fired steam generating units that are subject to the MATS limits are able to comply with the new standards without a significant fuel switch in combination with a suite of operational changes.

On April 16, 2012, Hawaiian Electric submitted to the EPA a Petition for Reconsideration and Stay (Petition) that asked the EPA to revise an emissions standard for non-continental oil-fired EGUs on the grounds that the promulgated standard was incorrectly derived. On April 21, 2015, the EPA denied Hawaiian Electric's Petition and Hawaiian Electric subsequently filed a lawsuit on June 29, 2015 appealing the EPA’s denial. On April 4, 2016, the D.C. Circuit Court of Appeals granted Hawaiian Electric’s uncontested motion to dismiss the case. Hawaiian Electric has proceeded with the implementation of the MATS Compliance Plan and has met all compliance requirements to date including the April 16, 2016 compliance date. Hawaiian Electric submitted a formal compliance demonstration report to the EPA and DOH on September 23, 2016.

1-Hour Sulfur Dioxide National Ambient Air Quality Standard. On August 1, 2015, the EPA published the Data Requirements Rule for the 2010 1-Hour Sulfur Dioxide (SO₂₎ Primary National Ambient Air Quality Standard (NAAQS). Hawaiian Electric is working with the DOH to gather data the EPA requires through the installation and operation of two new 1-hour SO₂ air quality monitoring stations on the island of Oahu. This data will be integrated into the DOH’s statewide monitoring network and will assist the State’s development of its strategy to maintain the NAAQS and comply with the new 1-Hour SO₂ Rule in its State Implementation Plan.

Potential Clean Air Act Enforcement. On July 1, 2013, Hawaii Electric Light and Maui Electric (the Utilities) received a letter from the U.S. Department of Justice (DOJ) alleging potential violations of the Prevention of Significant Deterioration and Title V requirements of the Clean Air Act involving the Hill and Kahului Power Plants. In correspondence dated November 4, 2014, the DOJ also identified potential violations by Hawaiian Electric at its Kahe facility and proposed resolving the identified, potential violations by entering into a consent decree pursuant to which the Utilities would install certain pollution controls and pay a penalty. The Utilities continue to negotiate with the DOJ to resolve these issues, but are unable to estimate the amount or effect of a consent decree, if any, at this time.

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 identified environmental impacts in the subsurface soil at the Site. Although Maui Electric never operated at the Site or owned the Site property, after 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 environmental contamination. 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, residual fuel oils and other subsurface contaminants. Maui Electric has a reserve balance of $3.6 million as of September 30, 2016 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.

Pearl Harbor sediment study. In July 2014, the U.S. Navy notified Hawaiian Electric of the Navy’s determination that Hawaiian Electric is a Potentially Responsible Party responsible for cleanup of PCB contamination in sediment in the area offshore of the Waiau Power Plant as part of the Pearl Harbor Superfund Site. The Navy has also requested that Hawaiian Electric reimburse the costs incurred by the Navy to date to investigate the area. The Navy has completed a remedial investigation and a feasibility study (FS) for the remediation of contaminated sediment at several locations in Pearl Harbor and issued its Final FS Report on June 29, 2015. On February 2, 2016, the Navy released the Proposed Plan for Pearl Harbor Sediment Remediation and Hawaiian Electric submitted comments. The extent of the contamination, the appropriate remedial measures to address it and Hawaiian Electric’s potential responsibility for any associated costs have not been determined.

On March 23, 2015, Hawaiian Electric received a letter from the EPA requesting that Hawaiian Electric submit a work plan to assess potential sources and extent of PCB contamination onshore at the Waiau Power Plant. Hawaiian Electric submitted a sampling and analysis (SAP) work plan to the EPA and the DOH. Onshore sampling at the Waiau Power Plant was completed in two phases in December 2015 and June 2016. The extent of the onshore contamination, the appropriate remedial measures to address it and any associated costs have not yet been determined.

As of September 30, 2016, the reserve account balance recorded by Hawaiian Electric to address the PCB contamination was $4.4 million. The reserve represents the probable and reasonably estimable cost to complete the onshore and offshore investigations and the remediation of PCB contamination in the offshore sediment. The final remediation costs will depend on the results of the onshore investigation and assessment of potential source control requirements, as well as the further investigation of contaminated sediment offshore from the Waiau Power Plant.

Global climate change and greenhouse gas emissions reduction.  National and international concerns 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 federal legislative and regulatory proposals and action by the State of Hawaii to reduce GHG emissions.

In July 2007, the State Legislature passed 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. On June 20, 2014, the Governor signed the final regulations required to implement Act 234 (i.e., the final GHG rule), which went into effect on June 30, 2014. In general, Act 234 and the corresponding GHG rule require affected sources (that have the potential to emit GHGs in excess of established thresholds) to reduce their GHG emissions by 16% below 2010 emission levels by 2020. In accordance with the GHG rule, the Utilities submitted their Emissions Reduction Plan (EmRP) to the DOH on June 30, 2015, demonstrating how they will comply. The Utilities have committed to a 16% reduction in GHG emissions company-wide. Pursuant to the State’s GHG rule, the DOH will incorporate the proposed facility-specific GHG emission limits into each facility’s covered source permit based on the 2020 levels specified in Hawaiian Electric’s approved EmRP.

The GHG rule also requires affected sources to pay an annual fee that is based on tons per year of GHG emissions starting on the effective date of the regulations. The fee for the Utilities is estimated to be approximately $0.5 million annually. The latest assessment of the proposed federal and final state GHG rules is that the continued growth in renewable power generation will significantly reduce the compliance costs and risk for the Utilities.

As part of a negotiated amendment to the Power Purchase Agreement between Hawaiian Electric and AES Hawaii (AES), Hawaiian Electric plans to include the AES facility on Oahu as a partner in the Utilities’ EmRP. Additionally, if the proposed acquisition of the Hamakua Energy Partners (HEP) facility by Hawaii Electric Light is approved by the PUC, the GHG emissions from the HEP facility would need to be addressed in the Utilities’ EmRP. Hawaiian Electric is working with the DOH on the timing of the EmRP modifications to address these changes in the partnership.

On September 22, 2009, the EPA issued its “Final Mandatory Reporting of Greenhouse Gases Rule,” which requires certain sources that emit GHGs to report their GHG emissions. Following these requirements, the Utilities have submitted the required reports for 2010 through 2015 to the EPA.

The EPA issued the final federal rule for GHG emissions limits for new and existing EGUs, also known as the Clean Power Plan, on August 3, 2015. The Clean Power Plan set interim state-wide emissions limits for EGUs operating in the 48 contiguous states that must be met on average from 2022 through 2029, with final limits in effect starting in 2030. The final Clean Power Plan did not set forth guidelines for Alaska, Hawaii, Puerto Rico or Guam, because the EPA did not have enough information to include them at the time the Rule was published. Subsequently, on February 9, 2016, the U.S. Supreme Court granted a stay of the Clean Power Plan pending resolution of several petitions for review in the U.S. Court of Appeals for the D.C. Circuit Court.

The Utilities have taken, and continue to identify opportunities to take, direct action to reduce GHG emissions from their operations, including 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 Campbell Industrial Park combustion turbine No. 1 (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 will continue to pursue the use of cleaner fuels to replace, at least in part, petroleum. Management is unable to evaluate the ultimate impact on the Utilities’ operations of more comprehensive GHG regulations that might be promulgated; however, the various initiatives that the Utilities are pursuing are likely to provide a sound basis for appropriately managing the Utilities’ carbon footprint and thereby meet both state and federal GHG reduction goals.

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. This effect could potentially result in impacts to coastal and other low-lying areas (where much of the Utilities’ electric infrastructure is sited), and result in increased flooding and storm damage due to heavy rainfall, increased rates of beach erosion, saltwater intrusion into freshwater aquifers and terrestrial ecosystems, and higher water tables in low-lying areas. The effects of climate change on the weather (for example, more intense or more frequent rain events, flooding, or hurricanes), sea levels, and freshwater 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.

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.

Hawaiian Electric has recorded estimated AROs related to removing retired generating units at its Honolulu and Waiau power plants. These removal projects are ongoing, with activity and expenditures occurring in partial settlement of these liabilities. Both removal projects are expected to continue through 2016.

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

	Nine months ended September 30
(in thousands)	2016			2015
Balance, beginning of period	$	26,848		$	29,419
Accretion expense	10			18
Liabilities incurred	—			—
Liabilities settled	(661		)	(2,349		)
Revisions in estimated cash flows	—			—
Balance, end of period	$	26,197		$	27,088

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 rate adjustments for certain other operation and maintenance (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 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 return on average common equity (ROACE) allowed in its most recent rate case. Decoupling provides for more timely cost recovery and earning on investments. Under the decoupling tariff approved in 2011, the annual RAM is accrued and billed from June 1 of each year through May 31 of the following year.

As part of a January 2013 Settlement Agreement with the Consumer Advocate, which was approved by the PUC, for RAM years 2014 - 2016, Hawaiian Electric was allowed to record RAM revenue beginning on January 1 and to bill such amounts from June 1 of the applicable year through May 31 of the following year (current accrual method). After 2016, the RAM provisions approved in 2011 will again apply to Hawaiian Electric. On November 1, 2016, Hawaiian Electric filed a motion requesting the current accrual method for the RAM that is in place through the end of 2016, be made permanent. If approved, Hawaiian Electric’s ROACE for 2017 would be 75 basis points better than not getting the request approved. Hawaiian Electric’s request is based on a number of factors including changed circumstances since the PUC’s decision on the RAM revenues in 2011, the original intent of decoupling, and consistency with accrual accounting. The filing also requests the implementation of Hawaiian Electric’s current accrual method for RAM revenues for Hawaii Electric Light and Maui Electric beginning in 2017. The Utilities requested a PUC decision by December 31, 2016 but no later than the end of January 2017 and cannot predict the outcome of the request.

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. In October 2013, the PUC issued orders that bifurcated the proceeding (into Schedule A and Schedule B issues).

On February 7, 2014, the PUC issued a decision and order (D&O) on the Schedule A issues, which made certain modifications to the decoupling mechanism. Specifically, the D&O required:

• 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.

As required, the Utilities have made available to the public, on the Utilities’ websites, performance metrics identified by the PUC. The Utilities are updating the performance metrics on a quarterly basis.

On March 31, 2015, the PUC issued an Order (the March Order) related to the Schedule B portion of the proceeding to make certain further modifications to the decoupling mechanism, and to establish a briefing schedule with respect to certain issues in the proceeding. The March Order modified the RAM portion of the decoupling mechanism to be capped at the lesser of the RAM Revenue Adjustment as currently determined (adjusted to eliminate the 90% limitation on the current RAM Period Rate Base RAM adjustment that was ordered in the Schedule A portion of the proceeding) and a RAM Revenue Adjustment calculated based on the cumulative annual compounded increase in Gross Domestic Product Price Index (GDPPI) applied to the 2014 annualized target revenues (adjusted for certain items specified in the Order) (the RAM Cap). The 2014 annualized target revenues represent the target revenues from the last rate case, and RAM revenues, offset by earnings sharing credits, if any, allowed under the decoupling mechanism through the 2014 decoupling filing. The Utilities may apply to the PUC for approval of recovery of revenues for Major Projects (including related baseline projects grouped together for consideration as Major Projects) through the RAM above the RAM Cap or outside of the RAM through the Renewable Energy Infrastructure Program (REIP) surcharge or other adjustment mechanism. The RAM was amended on an interim basis pending the outcome of the PUC’s review of the Utilities’ Power Supply Improvement Plans. The triennial rate case cycle required under the decoupling mechanism continues to serve as the maximum period between the filing of general rate cases, and the amendments to the RAM do not limit or dilute the ordinary opportunities for the Utilities to seek rate relief according to conventional/traditional ratemaking procedures.

In making the modifications to the RAM Adjustment, the PUC stated the changes are designed to provide the PUC with control of and prior regulatory review over substantial additions to baseline projects between rate cases. The modifications do not deprive the Utilities of the opportunity to recover any prudently incurred expenditure or limit orderly recovery for necessary expanded capital programs.

The RBA, which is the sales decoupling component, was retained by the PUC in its March Order, and the PUC made no change in the authorized return on common equity. The PUC stated that performance-based ratemaking is not adopted at this time.

As required by the March Order, the parties filed initial and reply briefs related to the following issues: (1) whether and, if so, how the conventional performance incentive mechanisms proposed in this proceeding should be refined and implemented in this docket; (2) what are the appropriate steps, processes and timing for determining measures to improve the efficiency and effectiveness of the general rate case filing and review process; and (3) what are the appropriate steps, processes and timing to further consider the merits of the proposed changes to the ECAC identified in this proceeding. In identifying the issue on possible changes to the ECAC, the PUC stated that changes to the ECAC should be made with great care to avoid unintended consequences.

In accordance with the March Order, the Utilities and the Consumer Advocate filed on June 15, 2015, their Joint Proposed Modified REIP Framework/Standards and Guidelines regarding the eligibility of projects for cost recovery above the RAM Cap through the REIP surcharge. On the same date, the Utilities filed their proposed standards and guidelines on the eligibility of projects for cost recovery through the RAM above the RAM Cap. On June 30, 2015, the Consumer Advocate filed comments on this proposal, and the County of Hawaii filed comments on both the REIP and the RAM above the RAM Cap proposals. On October 26, 2015, Hawaiian Electric filed an application to recover the revenue requirements associated with 2015 net plant additions in the amount of $40.3 million and other associated costs for its Underground Cable Program and the 138kV Transmission and 46kV Sub-Transmission Structures Major Baseline Projects through the RAM above the 2015 RAM Cap. On October 30, 2015, Maui Electric filed an application to recover the revenue requirements associated with 2015 net plant additions in the amount of $4.3 million and other associated costs for its transmission and distribution and generation plant reliability Major Baseline Project through the RAM above the 2015 RAM Cap. In March 2016, Maui Electric withdrew its October 30, 2015 application. Maui Electric determined that the application is unnecessary because it could recover the revenue requirements associated with its 2015 net plant additions under the RAM Cap due to: (1) the extension of bonus depreciation in 2015 which resulted in an increased level of accumulated deferred income taxes as an offset to 2015 net plant additions; and (2) the recorded amount of net plant additions in 2015 was less than the estimate of net plant additions in the application. On April 18, 2016, Hawaiian Electric modified its October 26, 2015 application to reduce its request to recover revenue requirements associated with 2015 net plant additions from $40.3 million to $35.7 million for the same reason as Maui Electric regarding the extension of bonus depreciation in 2015. On August 3, 2016, the PUC dismissed Hawaiian Electric’s October 26, 2015 Above the RAM Cap application because the application did not also request approval of the commitment of capital expenditures.

On August 25, 2016, Maui Electric filed an application to recover the revenue requirements associated with 2017 plant additions for substations in the total amount of $27.2 million and other associated costs through the RAM above the 2017 RAM Cap.

Annual decoupling filings.  On March 31, 2016, the Utilities submitted to the PUC their annual decoupling filings for tariffed rates that will be effective from June 1, 2016 through May 31, 2017. On May 19, 2016, Hawaii Electric Light amended its annual decoupling filing to update and revise certain cost information. The tariffed rates include: (1) 2016 RAM Revenue Adjustment as determined by the March Order, (2) accrued earnings sharing credits to be refunded, and (3) the amount of the accrued RBA balance as of December 31, 2015 (and associated revenue taxes) to be collected:

($ in millions)	Hawaiian Electric			Hawaii Electric Light			Maui Electric
Annual incremental RAM adjusted revenues	$	11.0		$	2.3		$	2.4
Annual change in accrued earnings sharing credits	$	—		$	—		$	0.5
Annual change in accrued RBA balance as of December 31, 2015 (and associated revenue taxes)	$	(13.6	)	$	(2.5	)	$	(4.3	)
Net annual incremental decrease in amount to be collected under the tariffs	$	(2.6	)	$	(0.2	)	$	(1.4	)
Impact on typical residential customer monthly bill (in dollars) *	$	0.01		$	0.13		$	(0.95	)

* Based on a 500 kilowatthour (KWH) bill for Hawaiian Electric, Maui Electric and Hawaii Electric Light. The bill impact for Lanai and Molokai customers is a decrease of $0.76, based on a 400 KWH bill. Although Hawaiian Electric and Hawaii Electric Light have a net annual incremental decrease in amount to be collected under the tariffs, their bills will increase by $0.01 and $0.13, respectively, due to lower anticipated KWH sales.

On May 24, 2016, the PUC approved the annual decoupling filings for Hawaiian Electric and Maui Electric, and as amended on May 19, 2016, for Hawaii Electric Light, to go into effect on June 1, 2016.

Potential impact of lava flows. In June 2014, lava from the Kilauea Volcano on the island of Hawaii began flowing toward the town of Pahoa. Hawaii Electric Light monitored utility property and equipment near the affected areas and protected that property and equipment to the extent possible (e.g., building barriers around poles). In March 2015 Hawaii Electric Light filed an application with the PUC requesting approval to defer costs incurred to monitor, prepare for, respond to, and take other actions necessary in connection with the June 2014 Kilauea lava flow such that Hawaii Electric Light can request PUC approval to recover those costs in a future rate case. The Consumer Advocate objected to the request. A PUC decision is pending.

Hawaiian Telcom. The Utilities each have separate agreements for the joint ownership and maintenance of utility poles with Hawaiian Telcom, Inc. (Hawaiian Telcom), the respective county or counties in which each utility operates and other third parties, such as the State of Hawaii. The agreements set forth various circumstances requiring pole removal/installation/replacement and the sharing of costs among the joint pole owners. The agreements allow for the cost of work done by one joint pole owner to be shared by the other joint pole owners based on the apportionment of costs in the agreements. The Utilities have maintained, replaced and installed the majority of the jointly-owned poles in each of the respective service territories, and have billed the other joint pole owners for their respective share of the costs. The counties and the State have been fully reimbursing the Utilities for their share of the costs. However, Hawaiian Telcom has been delinquent in reimbursing the Utilities for its share of the costs.

For Hawaiian Electric, a dispute resolution process to collect the unpaid amounts from Hawaiian Telcom is proceeding as specified by the joint pole agreement. For Hawaii Electric Light, the agreement does not specify an alternative dispute resolution process, and thus a complaint for payment was filed with the Circuit Court in June 2016. Maui Electric has not yet commenced any legal action to recover the delinquent amounts. As of September 30, 2016, total receivables under the joint pole agreement, including interest, from Hawaiian Telcom are $20.1 million ($13.7 million at Hawaiian Electric, $5.5 million at Hawaii Electric Light, and $0.9 million at Maui Electric). Management has reserved for the accrued interest on the receivables amounting to $3.9 million. Management expects to prevail on their claims and collect at least $16.2 million.

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 Utilities addressed these orders 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 directed each of Hawaiian Electric and Maui Electric to file within 120 days its respective Power Supply Improvement Plans (PSIPs), and the PSIPs were filed in August 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) 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 - the Utilities’ Plan was filed in August 2014.

• Plan to implement an on-going distribution circuit monitoring program to measure real-time voltage and other power quality parameters - the Utilities’ Plan was filed in June 2014.

• Action Plan for improving efficiencies in the interconnection requirements studies - the Utilities’ Plan was filed in May 2014.

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

• Integrated interconnection queue for each distribution circuit for each island grid - the Utilities’ integrated interconnection queue plan was filed in August 2014 and the integrated interconnection queues were implemented in January 2015.

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 (see “Distributed Energy Resources (DER) Investigative Proceeding” below) 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 an integrated Demand Response (DR) Portfolio Plan that will enhance system operations and reduce costs to customers. The Utilities’ Plan was filed in July 2014. Subsequently, the Utilities submitted status updates and an update and supplemental report to the Plan. On July 28, 2015, the PUC issued an order appointing a special advisor to guide, monitor and review the Utility’s Plan design and implementation. On December 30, 2015, the Utilities filed applications with the PUC (1) for approval of their proposed DR Portfolio Tariff Structure, Reporting Schedule and Cost Recovery of Program Costs through the Demand-Side Management (DSM) Surcharge, and (2) for approval to defer and recover certain computer software and software development costs for a Demand Response Management System (DRMS) through the Renewable Energy Infrastructure Program (REIP) Surcharge. In July 2016, the PUC issued an order in the DR Portfolio Tariff proceeding. The PUC granted intervenor and participant status to certain movants, made some preliminary observations on the proposed grid service tariffs and supporting modeling efforts, and instructed the Utilities to move forward with the development of DR programs for all islands. The PUC plans to conduct one or more technical conferences and ordered the Utilities to develop an implementation timeline and procedural schedule to enable an end-of-year implementation.

Review of PSIPs. Collectively, the PUC’s April 2014 resource planning orders confirm the energy policy and operational priorities that will guide the Utilities’ strategies and plans going forward.

PSIPs for Hawaiian Electric, Maui Electric and Hawaii Electric Light were filed in August 2014. The PSIPs each include a tactical plan to transform how electric utility services will be offered to meet customer needs and produce higher levels of renewable energy. Each plan contains a diversified mix of technologies, including significant distributed and utility‑scale renewable resources, that is expected to result, on a consolidated basis, in over 65% of the Utilities’ energy being produced from renewable resources by 2030. Under these plans, the Utilities will support sustainable growth of rooftop solar, expand use of energy storage systems, empower customers by developing smart grids, offer new products and services to customers (e.g., community solar, microgrids and voluntary “demand response” programs), switch from high-priced oil to lower cost liquefied natural gas, retire higher-cost, less efficient existing oil-based steam generators and lower full service residential customer bills in real dollars.

In November 2015, the PUC issued an order in the proceeding to review the PSIPs filed. The order provided observations and concerns on the PSIPs submitted. As required by the order, the Utilities submitted a Proposed Revision Plan in November 2015, which included a schedule and a work plan to supplement, amend and update the PSIPs in order to address the PUC’s observations and concerns, and submitted updated PSIPs on April 1, 2016. The parties and participants filed comments on the Utilities Proposed Revision Plan in January 2016. The updated PSIPs, filed on April 1, 2016, provide the Utilities’ assumptions, analyses and plans to achieve 100% renewable energy using a diverse mix of energy resources by 2045.

In August 2016, the PUC issued an order establishing a procedural schedule to address the Utilities’ April 1, 2016 PSIP updates, which was further modified in an order issued in October 2016. The utilities are required to file an updated PSIP incorporating input from the Parties, develop alternative scenarios and sensitivity analyses and perform iterations on modeling and simulations by December 23, 2016. The final steps in the procedural schedule are for the parties’ submission of their respective statements of position in February 2017. The Utilities will continue to evaluate all options to achieving the state’s 100% renewable energy goal, to stabilize and reduce customer rates and to maintain safe and reliable service.

Distributed Energy Resources (DER) Investigative Proceeding. In March 2015, the PUC issued an order to address DER issues.

On June 29, 2015, the Utilities submitted their final Statement of Position in the DER proceeding, which included:

(1) new pricing provisions for future rooftop photovoltaic (PV) systems,

(2) technical standards for advanced inverters,

(3) new options for customers including battery-equipped rooftop PV systems,

(4) a pilot time-of-use rate,

(5) an improved method of calculating the amount of rooftop PV that can be safely installed, and

(6) a streamlined and standardized PV application process.

On October 12, 2015, the PUC issued a D&O establishing DER reforms that: (1) promote rapid adoption of the next generation of solar PV and other distributed energy technologies; (2) encourage more competitive pricing of distributed energy resource systems; (3) lower overall energy supply costs for all customers; and (4) help to manage DER in terms of each island’s limited grid capacity.

The D&O approved a customer self-supply tariff and a customer grid supply tariff to govern customer generators connected to the Utilities’ systems. These tariffs replace the Net Energy Metering (NEM) program.

The D&O ordered the Utilities, among other things, (a) to collaborate with inverter manufacturers to develop a test plan by December 15, 2015 for the highest priority advanced inverter functions that are not UL certified and (b) to complete the circuit-level hosting capacity analysis for all islands in the Utilities’ service territories by December 10, 2015. The DER Phase 2 of this docket began in November 2015 and focused on further developing competitive markets for distributed energy resources, including storage.

On October 21, 2015, The Alliance for Solar Choice, LLC (TASC) filed a complaint in Hawaii state court seeking an order enjoining the PUC from implementing the D&O and declaring that the D&O be reversed, modified and/or remanded to the PUC for further proceedings. On January 19, 2016, the Circuit Court entered a final judgment against TASC on all of its claims. TASC has filed a notice of appeal from the final judgment. TASC also filed a second appeal of the D&O directly with the Intermediate Court of Appeals. On April 20, 2016, the Intermediate Court of Appeals approved stipulations to dismiss both appeals with prejudice.

On June 15, 2016, the PUC issued an order approving the Utilities’ Advanced Inverter Test Plan with, among other conditions, a requirement to supplement the Test Plan to include testing procedures. In addition, the PUC ordered the Utilities to submit the results of the testing described in the Test Plan by December 15, 2016.

Pursuant to a PUC order, in October 2016, the Utilities submitted tariffs for a Residential Interim Time of Use program, which is limited to 2 years and 5,000 customers. The primary objective is to encourage more efficient use of the electric system and enable more cost-effective integration of renewable energy by shifting customer load from the system’s higher cost, peak demand period to the mid-day period when relatively inexpensive renewable resources are abundant.

On October 3, 2016, the PUC issued an Order, which, in part, granted five additional motions to intervene and establishes a preliminary statement of issues for Phase 2 of this proceeding.

Derivative financial instrument. On January 5, 2016, Hawaiian Electric executed a window forward agreement to hedge the foreign currency risk associated with the anticipated purchase of engines from a European manufacturer to be included as part of the Schofield generating station. This window forward agreement has been designated as a cash flow hedge under which a single guaranteed exchange rate agreed upon on a certain date for future currency transactions scheduled to occur on specific dates with a “window” or range of plus/minus 30 days. Unrealized gains are recorded at fair value as assets in “other current assets,” and unrealized losses are recorded at fair value as liabilities in “other current liabilities,” both for the period they are outstanding. For this window forward agreement, the effective portion is reported as a component of accumulated other comprehensive income until reclassified into net income consistent with any gains or losses recognized on the engines. The generating station is expected to be placed in service in the first quarter of 2018.

	September 30, 2016				December 31, 2015
(dollars in thousands)	Notional amount		Fair value		Notional amount		Fair value
Window forward contract	$	20,725	$	664	$	—	$	—

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 September 30, 2016

(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments		Hawaiian Electric Consolidated
Revenues	$	404,352		83,105		84,831		—	(35	)	$	572,253
Expenses
Fuel oil	88,676			14,603		25,345		—	—		128,624
Purchased power	118,751			22,728		16,271		—	—		157,750
Other operation and maintenance	64,683			15,017		15,089		—	—		94,789
Depreciation	31,520			9,449		5,790		—	—		46,759
Taxes, other than income taxes	38,666			7,836		8,017		—	—		54,519
Total expenses	342,296			69,633		70,512		—	—		482,441
Operating income	62,056			13,472		14,319		—	(35	)	89,812
Allowance for equity funds used during construction	1,806			238		230		—	—		2,274
Equity in earnings of subsidiaries	14,729			—		—		—	(14,729	)	—
Interest expense and other charges, net	(11,903		)	(2,972	)	(2,483	)	—	35		(17,323		)
Allowance for borrowed funds used during construction	669			91		94		—	—		854
Income before income taxes	67,357			10,829		12,160		—	(14,729	)	75,617
Income taxes	20,113			3,392		4,640		—	—		28,145
Net income	47,244			7,437		7,520		—	(14,729	)	47,472
Preferred stock dividends of subsidiaries	—			133		95		—	—		228
Net income attributable to Hawaiian Electric	47,244			7,304		7,425		—	(14,729	)	47,244
Preferred stock dividends of Hawaiian Electric	270			—		—		—	—		270
Net income for common stock	$	46,974		7,304		7,425		—	(14,729	)	$	46,974

Hawaiian Electric Company, Inc. and Subsidiaries

Consolidating Statement of Comprehensive Income (unaudited)

Three months ended September 30, 2016

(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments		Hawaiian Electric Consolidated
Net income for common stock	$	46,974		7,304		7,425		—	(14,729	)	$	46,974
Other comprehensive income (loss), net of taxes:
Derivatives qualified as cash flow hedges:
Effective portion of foreign currency hedge net unrealized loss, net of tax benefits	321			—		—		—	—		321
Less: reclassification adjustment to net income, net of tax benefits	(173		)	—		—		—	—		(173		)
Retirement benefit plans:
Less: amortization of prior service credit and net losses recognized during the period in net periodic benefit cost, net of tax benefits	3,314			429		387		—	(816	)	3,314
Less: reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of taxes	(3,311		)	(429	)	(389	)	—	818		(3,311		)
Other comprehensive income (loss), net of taxes	151			—		(2	)	—	2		151
Comprehensive income attributable to common shareholder	$	47,125		7,304		7,423		—	(14,727	)	$	47,125

Hawaiian Electric Company, Inc. and Subsidiaries

Consolidating Statement of Income (unaudited)

Three months ended September 30, 2015

(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments		Hawaiian Electric Consolidated
Revenues	$	463,394		89,817		94,941		—	(25	)	$	648,127
Expenses
Fuel oil	142,194			17,208		36,231		—	—		195,633
Purchased power	119,302			26,713		14,503		—	—		160,518
Other operation and maintenance	69,621			18,936		15,096		—	—		103,653
Depreciation	29,389			9,313		5,654		—	—		44,356
Taxes, other than income taxes	43,923			8,455		8,932		—	—		61,310
Total expenses	404,429			80,625		80,416		—	—		565,470
Operating income	58,965			9,192		14,525		—	(25	)	82,657
Allowance for equity funds used during construction	1,714			148		195		—	—		2,057
Equity in earnings of subsidiaries	11,858			—		—		—	(11,858	)	—
Interest expense and other charges, net	(11,468		)	(2,674	)	(2,440	)	—	25		(16,557		)
Allowance for borrowed funds used during construction	605			53		79		—	—		737
Income before income taxes	61,674			6,719		12,359		—	(11,858	)	68,894
Income taxes	18,398			2,397		4,595		—	—		25,390
Net income	43,276			4,322		7,764		—	(11,858	)	43,504
Preferred stock dividends of subsidiaries	—			133		95		—	—		228
Net income attributable to Hawaiian Electric	43,276			4,189		7,669		—	(11,858	)	43,276
Preferred stock dividends of Hawaiian Electric	270			—		—		—	—		270
Net income for common stock	$	43,006		4,189		7,669		—	(11,858	)	$	43,006

Hawaiian Electric Company, Inc. and Subsidiaries

Consolidating Statement of Comprehensive Income (unaudited)

Three months ended September 30, 2015

(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments		Hawaiian Electric Consolidated
Net incomefor common stock	$	43,006		4,189		7,669		—	(11,858	)	$	43,006
Other comprehensive income (loss), net of taxes:
Retirement benefit plans:
Less: amortization of prior service credit and net losses recognized during the period in net periodic benefit cost, net of tax benefits	5,095			682		626		—	(1,308	)	5,095
Less: reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of taxes	(5,091		)	(683	)	(627	)	—	1,310		(5,091		)
Other comprehensive income (loss), net of taxes	4			(1	)	(1	)	—	2		4
Comprehensive income attributable to common shareholder	$	43,010		4,188		7,668		—	(11,856	)	$	43,010

Hawaiian Electric Company, Inc. and Subsidiaries

Consolidating Statement of Income (unaudited)

Nine months ended September 30, 2016

(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments		Hawaiian Electric Consolidated
Revenues	$	1,088,537		229,940		231,295		—	(72	)	$	1,549,700
Expenses
Fuel oil	224,995			40,725		68,543		—	—		334,263
Purchased power	313,730			58,885		40,052		—	—		412,667
Other operation and maintenance	202,438			46,574		49,248		—	—		298,260
Depreciation	94,564			28,347		17,389		—	—		140,300
Taxes, other than income taxes	104,764			21,632		21,990		—	—		148,386
Total expenses	940,491			196,163		197,222		—	—		1,333,876
Operating income	148,046			33,777		34,073		—	(72	)	215,824
Allowance for equity funds used during construction	4,771			571		668		—	—		6,010
Equity in earnings of subsidiaries	33,541			—		—		—	(33,541	)	—
Interest expense and other charges, net	(34,113		)	(8,606	)	(7,087	)	—	72		(49,734		)
Allowance for borrowed funds used during construction	1,785			219		272		—	—		2,276
Income before income taxes	154,030			25,961		27,926		—	(33,541	)	174,376
Income taxes	45,022			9,075		10,585		—	—		64,682
Net income	109,008			16,886		17,341		—	(33,541	)	109,694
Preferred stock dividends of subsidiaries	—			400		286		—	—		686
Net income attributable to Hawaiian Electric	109,008			16,486		17,055		—	(33,541	)	109,008
Preferred stock dividends of Hawaiian Electric	810			—		—		—	—		810
Net income for common stock	$	108,198		16,486		17,055		—	(33,541	)	$	108,198

Hawaiian Electric Company, Inc. and Subsidiaries

Consolidating Statement of Comprehensive Income (unaudited)

Nine months ended September 30, 2016

(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments		Hawaiian Electric Consolidated
Net income for common stock	$	108,198		16,486		17,055		—	(33,541	)	$	108,198
Other comprehensive income (loss), net of taxes:
Derivatives qualified as cash flow hedges:
Effective portion of foreign currency hedge net unrealized gain, net of taxes	578			—		—		—	—		578
Less: reclassification adjustment to net income, net of tax benefits	(173		)	—		—		—	—		(173		)
Retirement benefit plans:
Less: amortization of prior service credit and net losses recognized during the period in net periodic benefit cost, net of tax benefits	9,941			1,288		1,162		—	(2,450	)	9,941
Less: reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of taxes	(9,934		)	(1,289	)	(1,166	)	—	2,455		(9,934		)
Other comprehensive income (loss), net of taxes	412			(1	)	(4	)	—	5		412
Comprehensive income attributable to common shareholder	$	108,610		16,485		17,051		—	(33,536	)	$	108,610

Hawaiian Electric Company, Inc. and Subsidiaries

Consolidating Statement of Income (unaudited)

Nine months ended September 30, 2015

(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments		Hawaiian Electric Consolidated
Revenues	$	1,254,142		261,604		264,057		—	(71	)	$	1,779,732
Expenses
Fuel oil	364,875			56,834		96,961		—	—		518,670
Purchased power	329,922			73,161		42,726		—	—		445,809
Other operation and maintenance	206,133			51,493		48,893		—	—		306,519
Depreciation	88,167			27,938		16,735		—	—		132,840
Taxes, other than income taxes	119,603			24,783		25,054		—	—		169,440
Total expenses	1,108,700			234,209		230,369		—	—		1,573,278
Operating income	145,442			27,395		33,688		—	(71	)	206,454
Allowance for equity funds used during construction	4,418			458		490		—	—		5,366
Equity in earnings of subsidiaries	29,174			—		—		—	(29,174	)	—
Interest expense and other charges, net	(33,996		)	(7,946	)	(7,299	)	—	71		(49,170		)
Allowance for borrowed funds used during construction	1,557			164		197		—	—		1,918
Income before income taxes	146,595			20,071		27,076		—	(29,174	)	164,568
Income taxes	43,064			7,210		10,077		—	—		60,351
Net income	103,531			12,861		16,999		—	(29,174	)	104,217
Preferred stock dividends of subsidiaries	—			400		286		—	—		686
Net income attributable to Hawaiian Electric	103,531			12,461		16,713		—	(29,174	)	103,531
Preferred stock dividends of Hawaiian Electric	810			—		—		—	—		810
Net income for common stock	$	102,721		12,461		16,713		—	(29,174	)	$	102,721

Hawaiian Electric Company, Inc. and Subsidiaries

Consolidating Statement of Comprehensive Income (unaudited)

Nine months ended September 30, 2015

(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments		Hawaiian Electric Consolidated
Net incomefor common stock	$	102,721		12,461		16,713		—	(29,174	)	$	102,721
Other comprehensive income (loss), net of taxes:
Retirement benefit plans:
Less: amortization of prior service credit and net losses recognized during the period in net periodic benefit cost, net of tax benefits	15,285			2,046		1,878		—	(3,924	)	15,285
Less: reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of taxes	(15,274		)	(2,050	)	(1,882	)	—	3,932		(15,274		)
Other comprehensive income (loss), net of taxes	11			(4	)	(4	)	—	8		11
Comprehensive income attributable to common shareholder	$	102,732		12,457		16,709		—	(29,166	)	$	102,732

Hawaiian Electric Company, Inc. and Subsidiaries

Consolidating Balance Sheet (unaudited)

September 30, 2016

(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	$	43,945		6,214		3,016		—	—		$	53,175
Plant and equipment	4,148,099			1,234,234		1,101,229		—	—		6,483,562
Less accumulated depreciation	(1,362,474		)	(503,109	)	(478,018	)	—	—		(2,343,601		)
Construction in progress	197,715			18,503		20,390		—	—		236,608
Utility property, plant and equipment, net	3,027,285			755,842		646,617		—	—		4,429,744
Nonutility property, plant and equipment, less accumulated depreciation	5,761			82		1,531		—	—		7,374
Total property, plant and equipment, net	3,033,046			755,924		648,148		—	—		4,437,118
Investment in wholly owned subsidiaries, at equity	570,358			—		—		—	(570,358	)	—
Current assets
Cash and cash equivalents	9,821			7,008		6,047		101	—		22,977
Advances to affiliates	—			18,500		15,500		—	(34,000	)	—
Customer accounts receivable, net	93,253			21,646		19,519		—	—		134,418
Accrued unbilled revenues, net	69,753			12,904		12,510		—	—		95,167
Other accounts receivable, net	11,469			2,852		2,316		—	(12,008	)	4,629
Fuel oil stock, at average cost	45,298			6,885		12,297		—	—		64,480
Materials and supplies, at average cost	32,676			8,424		16,256		—	—		57,356
Prepayments and other	28,073			4,484		3,548		—	(460	)	35,645
Regulatory assets	67,042			4,582		3,057		—	—		74,681
Total current assets	357,385			87,285		91,050		101	(46,468	)	489,353
Other long-term assets
Regulatory assets	594,723			111,715		98,656		—	—		805,094
Unamortized debt expense	193			33		41		—	—		267
Other	42,872			12,786		13,336		—	—		68,994
Total other long-term assets	637,788			124,534		112,033		—	—		874,355
Total assets	$	4,598,577		967,743		851,231		101	(616,826	)	$	5,800,826
Capitalization and liabilities
Capitalization
Common stock equity	$	1,766,727		299,276		270,981		101	(570,358	)	$	1,766,727
Cumulative preferred stock—not subject to mandatory redemption	22,293			7,000		5,000		—	—		34,293
Long-term debt, net	875,573			213,673		190,081		—	—		1,279,327
Total capitalization	2,664,593			519,949		466,062		101	(570,358	)	3,080,347
Current liabilities
Short-term borrowings from affiliate	55,000			—		—		—	(34,000	)	21,000
Accounts payable	79,341			14,844		13,312		—	—		107,497
Interest and preferred dividends payable	17,863			4,034		4,048		—	(11	)	25,934
Taxes accrued	115,245			27,669		24,822		—	(460	)	167,276
Regulatory liabilities	—			1,777		1,210		—	—		2,987
Other	46,326			9,856		12,568		—	(11,997	)	56,753
Total current liabilities	313,775			58,180		55,960		—	(46,468	)	381,447
Deferred credits and other liabilities
Deferred income taxes	510,457			105,574		98,213		—	315		714,559
Regulatory liabilities	274,070			91,897		31,525		—	—		397,492
Unamortized tax credits	57,058			15,774		14,962		—	—		87,794
Defined benefit pension and other postretirement benefit plans liability	396,468			67,415		72,029		—	—		535,912
Other	50,068			13,436		14,595		—	(315	)	77,784
Total deferred credits and other liabilities	1,288,121			294,096		231,324		—	—		1,813,541
Contributions in aid of construction	332,088			95,518		97,885		—	—		525,491
Total capitalization and liabilities	$	4,598,577		967,743		851,231		101	(616,826	)	$	5,800,826

Hawaiian Electric Company, Inc. and Subsidiaries

Consolidating Balance Sheet (unaudited)

December 31, 2015

(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	$	43,557		6,219		3,016		—	—		$	52,792
Plant and equipment	4,026,079			1,212,195		1,077,424		—	—		6,315,698
Less accumulated depreciation	(1,316,467		)	(486,028	)	(463,509	)	—	—		(2,266,004		)
Construction in progress	147,979			11,455		15,875		—	—		175,309
Utility property, plant and equipment, net	2,901,148			743,841		632,806		—	—		4,277,795
Nonutility property, plant and equipment, less accumulated depreciation	5,659			82		1,531		—	—		7,272
Total property, plant and equipment, net	2,906,807			743,923		634,337		—	—		4,285,067
Investment in wholly owned subsidiaries,at equity	556,528			—		—		—	(556,528	)	—
Current assets
Cash and cash equivalents	16,281			2,682		5,385		101	—		24,449
Advances to affiliates	—			15,500		7,500		—	(23,000	)	—
Customer accounts receivable, net	93,515			20,508		18,755		—	—		132,778
Accrued unbilled revenues, net	60,080			12,531		11,898		—	—		84,509
Other accounts receivable, net	16,421			1,275		1,674		—	(8,962	)	10,408
Fuel oil stock, at average cost	49,455			8,310		13,451		—	—		71,216
Materials and supplies, at average cost	30,921			6,865		16,643		—	—		54,429
Prepayments and other	25,505			9,091		2,295		—	(251	)	36,640
Regulatory assets	63,615			4,501		4,115		—	—		72,231
Total current assets	355,793			81,263		81,716		101	(32,213	)	486,660
Other long-term assets
Regulatory assets	608,957			114,562		100,981		—	—		824,500
Unamortized debt expense	359			74		64		—	—		497
Other	47,731			14,693		13,062		—	—		75,486
Total other long-term assets	657,047			129,329		114,107		—	—		900,483
Total assets	$	4,476,175		954,515		830,160		101	(588,741	)	$	5,672,210
Capitalization and liabilities
Capitalization
Common stock equity	$	1,728,325		292,702		263,725		101	(556,528	)	$	1,728,325
Cumulative preferred stock—not subject to mandatory redemption	22,293			7,000		5,000		—	—		34,293
Long-term debt, net	875,163			213,580		189,959		—	—		1,278,702
Total capitalization	2,625,781			513,282		458,684		101	(556,528	)	3,041,320
Current liabilities
Short-term borrowings from affiliate	23,000			—		—		—	(23,000	)	—
Accounts payable	84,631			17,702		12,513		—	—		114,846
Interest and preferred dividends payable	15,747			4,255		3,113		—	(4	)	23,111
Taxes accrued	131,668			30,342		29,325		—	(251	)	191,084
Regulatory liabilities	—			1,030		1,174		—	—		2,204
Other	41,083			8,760		13,194		—	(8,958	)	54,079
Total current liabilities	296,129			62,089		59,319		—	(32,213	)	385,324
Deferred credits and other liabilities
Deferred income taxes	466,133			100,681		87,706		—	286		654,806
Regulatory liabilities	254,033			84,623		30,683		—	—		369,339
Unamortized tax credits	54,078			15,406		14,730		—	—		84,214
Defined benefit pension and other postretirement benefit plans liability	409,021			69,893		74,060		—	—		552,974
Other	51,273			13,243		13,916		—	(286	)	78,146
Total deferred credits and other liabilities	1,234,538			283,846		221,095		—	—		1,739,479
Contributions in aid of construction	319,727			95,298		91,062		—	—		506,087
Total capitalization and liabilities	$	4,476,175		954,515		830,160		101	(588,741	)	$	5,672,210

Hawaiian Electric Company, Inc. and Subsidiaries

Consolidating Statement of Changes in Common Stock Equity (unaudited)

Nine months ended September 30, 2016

(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments		Hawaiian Electric Consolidated
Balance, December 31, 2015	$	1,728,325		292,702		263,725		101	(556,528	)	$	1,728,325
Net income for common stock	108,198			16,486		17,055		—	(33,541	)	108,198
Other comprehensive income (loss), net of taxes	412			(1	)	(4	)	—	5		412
Common stock dividends	(70,199		)	(9,906	)	(9,795	)	—	19,701		(70,199		)
Common stock issuance expenses	(9		)	(5	)	—		—	5		(9		)
Balance, September 30, 2016	$	1,766,727		299,276		270,981		101	(570,358	)	$	1,766,727

Hawaiian Electric Company, Inc. and Subsidiaries

Consolidating Statement of Changes in Common Stock Equity (unaudited)

Nine months ended September 30, 2015

(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments		Hawaiian Electric Consolidated
Balance, December 31, 2014	$	1,682,144		281,846		256,692		101	(538,639	)	$	1,682,144
Net income for common stock	102,721			12,461		16,713		—	(29,174	)	102,721
Other comprehensive income (loss), net of taxes	11			(4	)	(4	)	—	8		11
Common stock dividends	(67,804		)	(7,515	)	(11,382	)	—	18,897		(67,804		)
Common stock issuance expenses	(8		)	—		(1	)	—	1		(8		)
Balance, September 30, 2015	$	1,717,064		286,788		262,018		101	(548,907	)	$	1,717,064

Hawaiian Electric Company, Inc. and Subsidiaries

Consolidating Statement of Cash Flows (unaudited)

Nine months ended September 30, 2016

(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments		Hawaiian Electric Consolidated
Cash flows from operating activities
Net income	$	109,008		16,886		17,341		—	(33,541	)	$	109,694
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in earnings of subsidiaries	(33,616		)	—		—		—	33,541		(75		)
Common stock dividends received from subsidiaries	19,776			—		—		—	(19,701	)	75
Depreciation of property, plant and equipment	94,564			28,347		17,389		—	—		140,300
Other amortization	2,462			1,366		1,552		—	—		5,380
Deferred income taxes	41,005			4,529		10,085		—	29		55,648
Tax credits, net	4,314			464		478		—	—		5,256
Allowance for equity funds used during construction	(4,771		)	(571	)	(668	)	—	—		(6,010		)
Other	(1,389		)	(302	)	(331	)	—	—		(2,022		)
Changes in assets and liabilities:
Decrease (increase) in accounts receivable	328			(2,716	)	(1,313	)	—	3,046		(655		)
Increase in accrued unbilled revenues	(9,673		)	(373	)	(612	)	—	—		(10,658		)
Decrease in fuel oil stock	4,157			1,425		1,154		—	—		6,736
Decrease (increase) in materials and supplies	(1,755		)	(1,559	)	387		—	—		(2,927		)
Decrease (increase) in regulatory assets	(2,474		)	(150	)	373		—	—		(2,251		)
Increase (decrease) in accounts payable	(2,628		)	143		1,809		—	—		(676		)
Change in prepaid and accrued income and utility revenue taxes	(7,324		)	2,230		(4,472	)	—	(29	)	(9,595		)
Increase (decrease) in defined benefit pension and other postretirement benefit plans liability	449			40		(129	)	—	—		360
Change in other assets and liabilities	(10,548		)	2,856		(2,571	)	—	(3,046	)	(13,309		)
Net cash provided by operating activities	201,885			52,615		40,472		—	(19,701	)	275,271
Cash flows from investing activities
Capital expenditures	(188,415		)	(37,835	)	(24,454	)	—	—		(250,704		)
Contributions in aid of construction	18,181			2,691		2,696		—	—		23,568
Other	901			169		30		—	—		1,100
Advances from affiliates	—			(3,000	)	(8,000	)	—	11,000		—
Net cash used in investing activities	(169,333		)	(37,975	)	(29,728	)	—	11,000		(226,036		)
Cash flows from financing activities
Common stock dividends	(70,199		)	(9,906	)	(9,795	)	—	19,701		(70,199		)
Preferred stock dividends of Hawaiian Electric and subsidiaries	(810		)	(400	)	(286	)	—	—		(1,496		)
Net increase in short-term borrowings from non-affiliates and affiliate with original maturities of three months or less	32,000			—		—		—	(11,000	)	21,000
Other	(3		)	(8	)	(1	)	—	—		(12		)
Net cash used in financing activities	(39,012		)	(10,314	)	(10,082	)	—	8,701		(50,707		)
Net increase (decrease) in cash and cash equivalents	(6,460		)	4,326		662		—	—		(1,472		)
Cash and cash equivalents, beginning of period	16,281			2,682		5,385		101	—		24,449
Cash and cash equivalents, end of period	$	9,821		7,008		6,047		101	—		$	22,977

Hawaiian Electric Company, Inc. and Subsidiaries

Consolidating Statement of Cash Flows (unaudited)

Nine months ended September 30, 2015

(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments		Hawaiian Electric Consolidated
Cash flows from operating activities
Net income	$	103,531		12,861		16,999		—	(29,174	)	$	104,217
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in earnings of subsidiaries	(29,249		)	—		—		—	29,174		(75		)
Common stock dividends received from subsidiaries	18,972			—		—		—	(18,897	)	75
Depreciation of property, plant and equipment	88,167			27,938		16,735		—	—		132,840
Other amortization	2,029			1,331		1,639		—	—		4,999
Deferred income taxes	46,493			907		10,497		—	314		58,211
Tax credits, net	3,680			372		195		—	—		4,247
Allowance for equity funds used during construction	(4,418		)	(458	)	(490	)	—	—		(5,366		)
Impairment of utility assets	3,380			724		724					4,828
Other	221			(286	)	(261	)				(326		)
Changes in assets and liabilities:
Decrease (increase) in accounts receivable	(4,226		)	(2,071	)	43		—	1,790		(4,464		)
Decrease in accrued unbilled revenues	6,283			3,696		3,817		—	—		13,796
Decrease in fuel oil stock	25,019			5,358		5,565		—	—		35,942
Decrease (increase) in materials and supplies	(759		)	(1,615	)	651		—	—		(1,723		)
Increase in regulatory assets	(19,138		)	(3,944	)	(376	)	—	—		(23,458		)
Decrease in accounts payable	(34,476		)	(4,070	)	(1,829	)	—	—		(40,375		)
Change in prepaid and accrued income and utility revenue taxes	(52,505		)	(2,276	)	(6,540	)	—	(314	)	(61,635		)
Increase in defined benefit pension and other postretirement benefit plans liability	—			—		331		—	—		331
Change in other assets and liabilities	(16,847		)	722		(2,563	)	—	(1,790	)	(20,478		)
Net cash provided by operating activities	136,157			39,189		45,137		—	(18,897	)	201,586
Cash flows from investing activities
Capital expenditures	(204,406		)	(34,048	)	(27,067	)	—	—		(265,521		)
Contributions in aid of construction	30,153			2,940		1,534		—	—		34,627
Other	583			124		71		—	—		778
Advances from affiliates	4,100			—		(2,500	)	—	(1,600	)	—
Net cash used in investing activities	(169,570		)	(30,984	)	(27,962	)	—	(1,600	)	(230,116		)
Cash flows from financing activities
Common stock dividends	(67,804		)	(7,515	)	(11,382	)	—	18,897		(67,804		)
Preferred stock dividends of Hawaiian Electric and subsidiaries	(810		)	(400	)	(286	)	—	—		(1,496		)
Net increase (decrease) in short-term borrowings from non-affiliates and affiliate with original maturities of three months or less	97,495			1,500		(5,600	)	—	1,600		94,995
Other	(219		)	(3	)	(1	)	—	—		(223		)
Net cash provided by (used in) financing activities	28,662			(6,418	)	(17,269	)	—	20,497		25,472
Net increase (decrease) in cash and cash equivalents	(4,751		)	1,787		(94	)	—	—		(3,058		)
Cash and cash equivalents, beginning of period	12,416			612		633		101	—		13,762
Cash and cash equivalents, end of period	$	7,665		2,399		539		101	—		$	10,704