House committees pass HB982 HD1 to establish wildfire recovery fund and enable HECO securitization

The House committees on Consumer Protection & Commerce and on Judiciary and Hawaiian Affairs voted Feb. 13 to pass House Bill 982, House Draft 1, which would establish a wildfire recovery fund, authorize securitization of up to $1 billion to capitalize the fund, and set administrative and claim procedures for future catastrophic wildfires.

The bill is designed to create a dedicated financing mechanism and an aggregate liability cap intended to protect property owners, renters and insurers from losses caused by future catastrophic wildfires, while limiting utilities’ exposure to unlimited wildfire liability. Proponents said the structure would help Hawaiian Electric (HECO) restore its credit rating and lower borrowing costs; opponents and some testifiers warned that liability limits and other provisions could restrict victims’ access to full recovery and raise constitutional questions.

Supporters and opponents testified at the Feb. 13 hearing in Conference Room 329. Jason Benn, senior vice president for Hawaiian Electric, said the company supports the bill’s goal but objected to an HD1 amendment that would require an additional $500 million shareholder contribution. “The HD 1 requirement for an additional shareholder contribution of 500,000,000 is simply not feasible at this time and would delay or prevent the fund from operating,” Benn said, adding that the company already agreed to a $2,000,000,000 settlement funded by shareholders and that further required shareholder contributions could harm HECO’s ability to raise capital.

Labor and local business testifiers urged passage. Kika Bukowski, testifying on behalf of IBEW Local 1260, asked the committees to “consider amending section A3, subsection B(1)(2)(1) and (2), and reinstate the language that was in the original draft of House Bill 982.” Eric Wright, president of PAR Hawaii, described local contractors’ reliance on timely payments from Hawaiian Electric and said a financially stable utility benefits the broader local economy.

Opponents cautioned about limiting liability for claimants. Evan Oi of the Hawaii Association for Justice said the association opposed caps on liability, raised concerns about broad authority for the fund’s executive director, and said the draft lacked clear guidance on offer procedures and how claims that exceed fund resources would be handled.

Key provisions and committee amendments discussed at the hearing included: - Capitalization and securitization: The bill as considered authorizes a $1 billion securitization as an initial financing mechanism. Testimony indicated the $1 billion figure was intended to be a first step and that credit rating agencies prefer larger funds but prioritize an aggregate cap. HECO told committees it needed legislative authority for bankruptcy-remote securitization and that without legislative backing financing would be more costly to customers. - Shareholder contribution: The HD1 draft included language that would increase the shareholder contribution (disputed at the hearing as a $500 million item); HECO testified that it had committed $2 billion toward settlement obligations and that further large shareholder contributions were not feasible. - Administrative structure: The bill establishes an executive director for the fund, a trust structure for the fund, and a $5,000,000 carve-out for administrative start-up costs (the committees agreed to separate that $5 million from the larger capitalization figure). The committees’ adopted amendments also said interest earned on securitized proceeds must be refunded annually to ratepayers as a credit. - Claim deadline and scope: Committees moved to require a minimum four-year deadline for filing claims with the fund to help ensure claimants who are displaced or recovering after a disaster have time to file. The committees clarified that “qualified damages” under the bill focus on property-related damages and that civil claims for those qualified damages would be covered by the fund’s compensation procedures; the committees adjusted language to exclude existing indemnity agreements from certain provisions. - Role of the Public Utilities Commission (PUC): The PUC retains authority to review prudency and to issue financing orders; committee members asked whether added statutory criteria for PUC review were consistent with usual bond approvals, and the PUC representative said the additional criteria would be considered as informational guidance but would not automatically change PUC’s balancing process. - Governance and limits: The committees discussed formulas for caps on recovery — including a provision that the fund’s payout cap would be the greater of (a) 50% of the fund or (b) a county-based assessed-value calculation tied to the number of structures destroyed — and directed staff to provide scenario analyses. The committees also requested language making the fund a trust and giving the fund’s executive director responsibility for investment policy.

Several procedural clarifications and follow-ups were requested during questioning: whether the securitization would use special-purpose revenue bonds and the state’s private activity bond cap; whether the securitization mechanism had been tested in bankruptcy; how the fund’s initial capitalization interacts with HECO’s separate settlement process; and whether government entities should be eligible claimants (the attorney general said the bill’s exclusion of government entities was an issue she would advocate to remove).

Votes at a glance — HB982 HD1 (committee level): The Commerce, Consumer Protection & Commerce committee voted to pass HB982 HD1 with amendments (recorded yes votes in committee: chair and vice chair; Representatives Iligan, Ichiyama, Iwamoto (with reservations), Kong, Lowen, Martin and Tam; one member excused). The Judiciary & Hawaiian Affairs committee also voted to pass HB982 HD1 with amendments (recorded yes votes included chair and vice chair and Representatives Bellotti, Kahalua, Caruso, Takayama and Todd; several members were recorded excused). Both committees’ chair recommendations to pass with amendments were adopted.

What happens next: With both committees’ votes to pass HB982 HD1 with amendments, the measure will proceed in the House legislative process; the bill’s operation depends on subsequent PUC orders, any required settlement finalizations in court, and further rulemaking by the fund’s executive director. Testifiers and committee members flagged open technical and constitutional questions — including the treatment of personal-injury claims, potential effects on the state’s private activity bond cap, and the practical capacity of HECO shareholders to provide additional capital — that sponsors and administrative agencies said they would follow up on before later legislative action.

Speakers and committee members requested follow-up information from the PUC, HECO and the attorney general on bankruptcy treatment of securitizations, the adequacy of the $1 billion initial securitization amount for credit-rating purposes, and the interaction of the bill with state bond cap rules. The committees recessed and reconvened for decision making before adopting the reported amendments and passing the measure with the votes recorded above.