The brushfire that destroyed Lahaina last year was one of 28 weather and climate disasters in 2023 that cost a billion dollars or more in damages.
Electric utilities face increasing expenses related to extreme weather events like hurricanes, ice storms and wildfires. Several utilities, including Hawaiian Electric, have eyed ratepayer-backed bonds as a possible avenue to recoup some of those costs.
This form of utility financing, also known as securitization, allows utilities to issue bonds to pay for weather-related investments or debt. That cost is transferred to ratepayers and appears on their bills as monthly charges that may continue for years.
Still, securitization may not be a bad deal for ratepayers, said Mark Toney, the executive director of The Utility Reform Network, a California-based consumer advocacy group.
HPR spoke with Toney about what customers in Hawaiʻi need to know as state lawmakers debate whether or not HECO can use securitization to finance some of its costs related to the Lahaina wildfire.
Because the interest rates for these recovery bonds tend to be lower, customers may end up paying less than they might if the utility used other financing methods.
"Just think about the difference between the people who got their home loans at 3% or less and people today who are having to pay 7% or more. The same house, your payments are double what they are. So it's kinda like that, it's the same principle," Toney told HPR.
But Toney added that ratepayers should never be on the hook for utility negligence. If that’s the case, he said “there has to be a guarantee that shareholders reimburse the ratepayers in real time.”
The Utility Reform Network has been involved in one of the largest securitization cases in the country with Northern California electric utility PG&E, which took out $7.5 billion in ratepayer bonds to pay costs related to the 2017 California wildfires.
However, he said, California law does not allow a utility to make ratepayers pay for wildfires started due to the company's negligence.
"If you look on a PG&E bill and you open it up when it comes in the mail, you will see a line item that talks about repaying the bond as a bill, but there will be a bill credit for the exact same amount, which represents the shareholders reimbursing the ratepayers in real time."
This story aired on The Conversation on April 16, 2024. The Conversation airs weekdays at 11 a.m. on HPR-1.
