A small portion of Hawaiian Electric customers' bills will now be put in a new state trust fund to pay developers of future renewable energy projects.
HECO estimates that customers will be charged an additional 8 to 16 cents per month for up to two years. A recent law — Act 191 — allows the state to use that revenue to cover Hawaiian Electric’s monthly bills to certain independent power producers in the event that the utility defaults on its payments.
This measure is in response to developers' concerns about HECO's credit rating, which took a big hit after the Maui fires in 2023. Although it has improved since then, it’s considered non-investment grade by several credit rating agencies.
Developers say that's made it harder to negotiate favorable financing terms for new energy projects in Hawaiʻi.
“Financiers really prefer to have assurances in place to de-risk projects and make sure that they are possible to carry through,” said Eliza Talbot, the head of government and regulatory affairs for AES Hawaiʻi, the largest renewable power supplier to the state.
“With HECO's credit rating being dented a bit, it meant that potentially borrowing for financing costs would be higher,” she said.
Other developers shared similar sentiments in their testimony on Act 191.
Longroad Energy and Ameresco, both of which are in negotiations with HECO about energy projects, supported the measure.
Clearway Energy was also supportive, noting that it decided to withdraw its proposals for three new solar farms in October 2024 over financing concerns.
“Because of the utility's financial distress and change in credit since the Maui wildfires, Clearway has determined that it is currently not possible to secure financing at a reasonable cost for projects relying on revenue from Hawaiian Electric,” the developer stated.
In its testimony, HECO said that without passage of the new law, some developers had indicated that financing costs for new projects could be 20% to 30% higher, and those costs could be passed on to consumers
How can HECO use the funds?
In creating the trust fund, Hawaiʻi lawmakers elected to have HECO customers pay a small upfront cost to avoid paying more later on. If HECO's credit rating rebounds, the fund will be dissolved, and the money should be returned to customers.
State Consumer Advocate Michael Angelo called the measure a “net-benefit” for ratepayers. But he added that his office will be keeping an eye on the process to ensure the math works out for customers in the long run.
“We have the highest average bills in the country with the lowest average usage, and we want to make sure that any electricity that we're procuring is the most cost-effective,” Angelo said.
Act 191 sets limits on the trust fund's reach. The revenue that can be collected from HECO customers is capped at 15% of the projected monthly payments for power, and it only applies to certain contracts.So far, HECO said that seven projects will be covered by Act 191, though more may fall under its purview in the future.
Act 191 is one of a series of initiatives Hawaiian Electric is pushing to help bring new renewable projects on the grid. Those projects have faced significant headwinds — first the pandemic, then the Maui fires, and now current changes in federal energy policy.
Rebecca Dayhuff Matsushima, HECO's resource procurement lead, said at a recent Public Utilities Commission meeting that Hawaiʻi’s energy leaders need to expect the unexpected.
“No matter how well we plan, any local, national, global event has the potential to really largely impact these projects,” she said. “Those future events are unpredictable, but what… is predictable is that they're going to have an impact on the projects if and when they occur.”
In addition to the trust fund, HECO has called on the Public Utilities Commission to expedite approvals for new projects, and for a task force to address permitting delays.
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