HB2700 SD2

PART I

SECTION 1. The legislature finds that as the risk of catastrophic wildfires in Hawaii has increased, so has the threat of property damage from these fires. Although most property owners have insurance, some do not, and others have insurance that may not fully cover their losses.

The legislature further finds that when the cause of a wildfire is uncertain or contested, costly and protracted litigation ensues. Litigation regarding wildfire damages can impose massive costs, including on the State, counties, utilities, landowners, and other defendants that may be alleged to have contributed to catastrophic wildfires. Those costs can overwhelm major institutions in the community, undermining their ability to make investments that the State needs. Indeed, even the possibility of litigation regarding a future catastrophic wildfire can create a cloud of uncertainty that can impair an entity's ability to attract capital on reasonable terms--capital that is vital for making investments in wildfire prevention, among other priorities that may affect the health and safety of the State's residents.

The legislature also finds that the risk of property damage stemming from catastrophic wildfires may lead property insurers to raise rates or refuse to provide coverage for certain losses or certain high-risk areas of Hawaii--as occurred in the wake of hurricane Iniki with respect to hurricane insurance.

The legislature additionally finds that it is in the public interest to take steps to ensure that property insurance remains available to cover losses associated with wildfires by providing benefits to property insurers. Furthermore, the legislature finds that it is in the public interest to ensure that the threat of wildfires does not make investment in Hawaii's public utilities so financially risky that it becomes too costly or impossible for them to raise capital to implement vital plans, including plans to mitigate wildfire risk, and to provide safe, reliable, and affordable service to the people of the State.

Moreover, the legislature finds that it is in the public interest to avoid the costs of litigation arising out of catastrophic wildfires in order to protect Hawaii's economy and encourage investment in the State. The legislature further finds that a fund of this nature would suit the public interest as an element of sound wildfire mitigation planning. Therefore, the purpose of this part is to serve the public interest in the event of a devastating wildfire by establishing a means to provide compensation for property damage resulting from wildfires.

SECTION 2. The Hawaii Revised Statutes is amended by adding a new chapter to be appropriately designated and to read as follows:

"Chapter

WILDFIRE RELIEF FUND

§ -1 Definitions. As used in this chapter, unless the context otherwise requires:

"Administrator" means the wildfire relief fund administrator appointed under section -5.

"Board" means the wildfire relief fund corporation board of directors created under section -4.

"Catastrophic wildfire" means a wildfire occurring on or after the effective date of this Act that damages or destroys more than five hundred residential or commercial structures.

"Contributor" means any person who contributes to the wildfire relief fund as provided in section -7.

"Corporation" means the wildfire relief fund corporation established under section -3.

"Electric utility" means a public utility that exists for the furnishing of electrical power.

"Investor-owned utility" means a public utility that is owned by shareholders and overseen by a board of directors elected by shareholders.

"Operation date" means the date by which all of the following have occurred prior to the initial date of operation of the wildfire relief fund:

(1) The deadline for property owners to submit a request to opt-out under section -13(b);

(2) The deadline for property insurers to submit elections under section -14(a); and

(3) The date for contributors to elect to participate in the wildfire relief fund under section -7(b);

provided that the administrator shall take all reasonable steps necessary to ensure that the operation date is no later than February 14, 2025.

"Other governmental entities" refers to governmental entities, including county government agencies, other than state government agencies.

"Public utility" has the same meaning as defined in section 269-1.

"Wildfire relief fund" means the wildfire relief fund established under section -2.

§ -2 Wildfire relief fund; establishment. (a) There is established outside the state treasury a wildfire relief fund and any accounts thereunder to carry out the purposes of this chapter.

(b) The wildfire relief fund shall be placed within the department of commerce and consumer affairs for administrative purposes. The wildfire relief fund shall be a public body corporate and politic.

(c) Moneys deposited in the wildfire relief fund and any accounts thereunder shall be held by the wildfire relief fund, as trustee, in a depository, as defined in section 38-1, or according to a similar arrangement at the discretion of the board.

(d) All moneys received by the corporation under this chapter shall be paid immediately to the director of finance and shall become a part of the wildfire relief fund.

(e) All payments authorized to be made by the corporation by this chapter, including all payments for claims for catastrophic wildfire damages, all salaries, and all other expenses, shall be made from the wildfire relief fund.

(f) The moneys in the wildfire relief fund shall be invested according to the same investment plans developed for the Hawaii retirement savings special fund under chapter 389, and the earnings from the investments shall be credited to the wildfire relief fund.

(g) All moneys in the wildfire relief fund shall be appropriated and expended exclusively for the uses and purposes set forth in this chapter; provided that this section shall not be deemed to amend or impair the force or effect of any law of this State specifically authorizing the investment of moneys from the wildfire relief fund.

(h) The wildfire relief fund shall not be subject to chapter 431.

§ -3 Wildfire relief fund corporation; establishment; purposes; duties. (a) There is established the wildfire relief fund corporation, which shall be an independent public body corporate and politic.

(b) The corporation shall be established within the department of commerce and consumer affairs for administrative purposes.

(1) Eligible claims arising from catastrophic wildfires from the wildfire relief fund; and

(2) Contributions of contributors to the wildfire relief fund.

(d) The corporation shall:

(1) Receive, process, and determine payments for eligible claims for property damage arising from catastrophic wildfires from the wildfire relief fund;

(2) Determine and enforce the collection of contributions from contributors to the wildfire relief fund;

(3) Retain, employ, or contract with officers; experts; employees; accountants; actuaries; financial professionals; and other advisers, consultants, attorneys, and professionals, as may be necessary in the administrator's judgment, for the efficient operation, management, and administration of the corporation;

(4) Enter into contracts and other obligations related to the operation, management, and administration of the corporation;

(5) Purchase insurance or take other actions to maximize the claims-paying resources of the wildfire relief fund;

(6) Pay costs, expenses, and other obligations of the corporation from the wildfire relief fund's assets;

(7) Take any actions necessary to collect any amounts owed to the wildfire relief fund; and

(8) Undertake other activities related to the operation, management, and administration of the wildfire relief fund, as approved by the board.

§ -4 Wildfire relief fund corporation; board of directors. (a) There is established a wildfire relief fund corporation board of directors, which shall consist of members appointed by the governor in accordance with section 26-34. The board shall be the policy-making body of the corporation. The board shall be responsible for adopting policies for the administration and operation of the wildfire relief fund and the performance of other duties and functions assigned to the wildfire relief fund, to the degree not specified in this chapter.

(b) The members of the board shall serve staggered terms, with one-half of the members' initial terms ending four years after the initial appointment, and one-half of the members' initial terms ending six years after the initial appointment. Thereafter, each member shall serve four-year terms. Vacancies shall be filled for the remainder of any unexpired term in the same manner as the original appointments.

(c) The chairperson of the board shall be elected from among the appointed members of the board. A majority of all members currently appointed to the board shall constitute a quorum to conduct business, and the concurrence of a majority of all members currently appointed to the board shall be necessary to make any action valid, unless otherwise specified in this chapter.

(d) Members of the board shall be appointed to ensure:

(1) A broad and balanced representation, with proper judgment, character, expertise, skills, and knowledge useful to the oversight of the corporation; and

(2) Diversity with regard to viewpoints, background, work experience, and demographics.

The members of the board shall serve without compensation but shall be reimbursed for actual and necessary expenses, including travel expenses, incurred in the discharge of their duties.

(e) The board shall meet at least once every three months at a time and place determined by the board. The board shall meet at other times and places as determined by the call of the chairperson or by a majority of the members of the board.

(f) No later than twenty days before the convening of each regular session of the legislature, the board shall submit to the legislature and governor a report regarding the activities and operations of the corporation during the preceding year. The report shall include, at a minimum, a description of:

(1) The effectiveness of the wildfire relief fund's claims-payment process; and

(2) The level of participation in the wildfire relief fund by all eligible participants, including property owners, property insurers, and contributors.

(g) Each member of the board shall retain all immunities and rights provided to a member under section 26-35.5.

§ -5 Wildfire relief fund corporation; administrator. (a) The board shall appoint an administrator and oversee the administrator's management and administration of the corporation.

(b) The administrator shall serve at the pleasure of the board and shall be exempt from chapter 76.

(c) The administrator shall have powers as are necessary to carry out the functions of the corporation, subject to the policy direction of the board.

(d) The administrator may employ, terminate, and supervise employees, including assistants, experts, field personnel, and clerks, as may be necessary for the administration of the corporation.

(e) The board may overturn any decision of the administrator through a majority vote.

(f) At the direction of the board, the administrator shall prepare and present for approval a plan of operations related to the operations, management, and administration of the wildfire relief fund on an annual basis. At least annually and at the direction of the board, the administrator shall submit the plan of operations to the appropriate policy committees of the legislature. The plan shall include but not be limited to reporting on the wildfire relief fund's assets and projections for the duration of the wildfire relief fund.

(g) At the direction of the board, the administrator shall at least annually prepare and publish on the corporation's website a public-facing report that describes the operations and activities of the corporation and the wildfire relief fund during the preceding year, including a description of the financial condition of the wildfire relief fund.

§ -6 Wildfire relief fund corporation; audit. (a) The auditor shall conduct an annual financial audit of the corporation and fund under chapter 23. As part of this audit, the auditor may contract with a firm qualified to perform an independent actuarial review.

(b) The auditor shall determine the scope of the review required by this section, which shall include but not be limited to:

(1) A review of the sources and uses of the moneys in the wildfire relief fund;

(2) A reconciliation of changes in actuarial assumptions and reserve values from the preceding year;

(3) An examination of the development of claim reserve inadequacies or redundancies over time; and

(4) An assessment of the future financial viability of the wildfire relief fund.

(c) The corporation shall cooperate with the actuarial firm in all respects and shall permit the firm full access to all information the firm deems necessary for a true and complete review. Information provided to the actuarial firm conducting the annual review shall be subject to the same limitations on public inspections as required for the records of the corporation.

(d) The audit required by this section shall be conducted using both generally accepted accounting principles and the generally accepted government auditing standards.

(e) The cost of the audit required by this section shall be paid by the corporation.

(f) The auditor shall issue an annual report to the legislature and governor on the results of the audit and review. The audit and report of the review performed by the independent actuarial firm shall be available for public inspection, in accordance with the auditor's established rules and procedures governing public disclosure of audit documents.

§ -7 Wildfire relief fund; participation. (a) The following entities may participate in the wildfire relief fund as contributors:

(1) The State;

(2) Electric utilities;

(3) Public utilities that are not electric utilities that contribute to the risk of occurrence or severity of a catastrophic wildfire, including but not limited to public utilities for the production, conveyance, transmission, delivery, or furnishing of gas;

(4) Other governmental entities; and

(5) Private property owners who own, or whose affiliated persons or entities own in the aggregate, at least acres of land in Hawaii.

(b) To participate in the wildfire relief fund, an entity shall:

(1) Notify the administrator that it intends to participate in the wildfire relief fund by in the year preceding the year in which the entity seeks to participate in the wildfire relief fund; and

(2) Have made required contributions to the wildfire relief fund under section -8.

(c) A contributor that is also a property owner in Hawaii may make a claim to the wildfire relief fund for compensation in the same manner provided for in section -13 as other property owners; provided that the contributor:

(1) Shall retain all of the rights, privileges, and obligations of a contributor; and

(2) Notwithstanding any other provisions of this chapter and regardless of the existence of a depletion event under section -16(c), shall be bound by the limitation on claims under section -18.

(d) Any person or entity that poses a risk of causing or exacerbating the severity of a catastrophic wildfire that is not eligible under subsection (a) to participate as a contributor in the wildfire relief fund may submit an application to the board for participation.

(e) The board shall adopt rules under chapter 91 and issue criteria for applications submitted under subsection (d).

(f) The board shall include in its annual report to the legislature and governor under section -4 all applications submitted under subsection (d) and shall recommend to the legislature whether participation criteria for contributors should be broadened.

§ -8 Wildfire relief fund; funding. (a) Total capitalization. The total capitalization amount of the wildfire relief fund shall be $ . Neither the board nor the administrator may modify the total capitalization amount, except as otherwise expressly provided in this chapter.

(b) Actuarial study. The board shall commission an actuarial study to be completed in 2024 to assess whether the total capitalization amount should be increased or decreased based on a holistic assessment of the risk of catastrophic wildfires in Hawaii and the potential exposure of the wildfire relief fund to claims arising out of catastrophic wildfires. The board shall include this assessment in the annual report that it submits to the legislature and governor under section -4.

(c) Time to total capitalization. The administrator shall recommend to the board, and the board shall, by majority vote, approve initial contribution amounts under $ for potential contributors, other than the State and electric utilities, based on the actuarial factors identified in subsection (b) and with the goal of, to the extent reasonably possible, having the wildfire relief fund reach the total capitalization amount within five years of the effective date of this Act, taking into consideration reasonably expected investment returns and assuming no payments will be made by the wildfire relief fund during that time period.

(d) Capitalization amounts. With the exception of the contribution made by the State in paragraph (4), contribution amounts shall be divided by the administrator into an initial contribution amount to be made by , and annual contribution amounts to be made over a five-year period, subject to the administrator's ability to increase payments under the insufficient funding provision in subsection (g).

The wildfire relief fund shall be capitalized by the following contributions:

(1) From other governmental entities that are eligible to participate in the wildfire relief fund, an amount determined by the administrator based on an actuarial assessment of the risk of payments to these entities by the wildfire relief fund resulting from catastrophic wildfires created by these entities, as well as the risk of potential payments made by the wildfire relief fund resulting from catastrophic wildfires created by these entities;

(2) From public utilities, other than electric utilities, and private property owners that are in all cases eligible to participate in the wildfire relief fund, an amount determined by the administrator based on an actuarial assessment of the risk of potential payments by the wildfire relief fund resulting from catastrophic wildfires created by these entities;

(3) From electric utilities, $ ; and

(4) From the State, $ .

(e) The board shall determine the contribution amounts of eligible contributors by ; provided that this date is thirty days before the date by which participants are required to notify the administrator of their intention to participate in the wildfire relief fund. If an eligible contributor declines to notify the administrator that the eligible contributor wishes to participate in the wildfire relief fund and become a contributor, the board shall reduce the total capitalization amount by subtracting the amount the board allocated to that eligible contributor.

(f) If an electric utility, public utility other than an electric utility, other governmental entity, or private property owner elects to become a contributor after the initial capitalization of the wildfire relief fund, the electric utility, public utility other than an electric utility, other governmental entity, or private property owner shall provide, by in the year before the year in which the electric utility, public utility other than an electric utility, other governmental entity, or private property owner seeks to become a contributor, an initial contribution in an amount determined by the board by a majority vote upon the administrator's recommendation, based on an up-to-date consideration of the factors identified in subsection (b), such that the previous and present initial contributions by all contributors reflect their relative contributions to the risk of future payments from the wildfire relief fund.

If necessary to achieve an allocation of initial contributions, and if the election is made before the fifth year of the wildfire relief fund operation, the administrator shall reduce the amount of annual contributions by one or more contributors who previously made initial contributions until an allocation is reached. The administrator shall increase the total capitalization amount of the wildfire relief fund by the amount of the initial contribution of the new wildfire relief fund contributor. The administrator may, in the administrator's discretion, permit a new contributor under this subsection to make payments over a five-year period.

(g) If the administrator determines that payments made by the wildfire relief fund, and expected future contributions by contributors and investment returns, will result in the wildfire relief fund: failing to reach the total capitalization amount, as adjusted, as applicable, under subsection (a), by the fifth year of operation after the operation date; or falling below the total capitalization amount after the fifth year of operation after the operation date, including, in either case, as a result of the legislature increasing the total capitalization amount, the administrator shall recommend that the board establish a supplemental contribution to be contributed to the wildfire relief fund. Responsibility among contributors for the supplemental contribution shall be allocated as follows:

(1) The administrator shall recommend to the board, and the board shall determine by majority vote, the respective portions of the supplemental contribution amount to be paid by each contributing electric utility, public utility other than an electric utility, other governmental entity, and private property owner contributor, based on an up-to-date assessment of any actuarial factors; and

(2) The remaining amount of the supplemental contribution, but not more than the largest contribution by other contributors, shall be paid by the State, subject to legislative appropriation.

(h) The administrator may allow contributors to pay supplemental contributions via annual contributions, or in part via an upfront contribution followed by annual contributions unless the administrator determines that a contribution schedule will create a material risk that the wildfire relief fund will not reach or return to its total capitalization amount within a reasonable period of time to perform the functions identified in this chapter.

The administrator may permit annual supplemental contributions, instead of a single upfront contribution, subject to the payment of interest at the rate set under subsection (m).

(i) If the board establishes a supplemental contribution under subsection (g), before the wildfire relief fund receives the supplemental contribution, the wildfire relief fund may issue revenue bonds up to the amount of the supplemental contribution, which shall be backed by future contributions to the wildfire relief fund.

(j) The board may order supplemental contributions under this chapter even if an investigation under the replenishment process under section -9 is ongoing. If payments are later made under that replenishment process, the board may refund supplemental contributions in whole or in part if the other conditions of the refunds section are met under section -11.

(k) The public utilities commission, if authorized by law, may authorize recovery of an investor-owned utility's initial and supplemental contributions, to the wildfire relief fund via a securitization transaction; provided that the commission ensures that the securitization transaction, considered in conjunction with any other securitization transaction the commission has authorized, prevents an undue burden on consumers of the electric utility by capping the total bill impact of such securitization transactions. If the commission does not authorize a securitization to recover the investor-owned utility's initial and supplemental contributions to the wildfire relief fund, the commission shall authorize recovery from its customers in rates, subject to a cap determined by the commission.

(l) If the total amount of payments that the administrator determines should be paid in connection with a catastrophic wildfire under sections -13, -14, and -15 exceeds the current balance of the wildfire relief fund, the State may provide a loan to the wildfire relief fund in an amount up to the depletion percentage, as determined by section -16(d). The loan shall be repaid over time through annual contributions by contributors.

(m) A contributor may request that the administrator permit the contributor to pay the contributor's initial contribution over five years via upfront and annual payments; provided that the contributor shall pay interest on all amounts deferred beyond the upfront payment date at a rate equal to the State's average incremental borrowing rate plus two hundred basis points.

(n) The upfront payment date shall be the date upon which the upfront portion of all contributors' initial contributions shall be paid to the wildfire relief fund. The administrator shall determine the upfront payment date and announce it at least ninety days in advance. The upfront payment date shall be at least thirty days after the operation date and in no event earlier than April 15, 2025; provided that if a catastrophic wildfire occurs before March 15, 2025, the administrator may accelerate the upfront payment date to thirty days after the administrator provides notice of the acceleration to all contributors.

§ -9 Replenishment of the wildfire relief fund; determination of prudence. (a) If the administrator, or an agency of the State with responsibility for determining the causes of wildfires or catastrophic wildfires informs the public utilities commission that a catastrophic wildfire may have been ignited by the facilities of a public utility that is a contributor, the public utilities commission shall initiate a proceeding to review the public utility's conduct leading to the catastrophic wildfire and make findings. The public utilities commission, even without formal notice from the administrator or the agency, may initiate this proceeding of its own accord.

(b) The public utilities commission shall evaluate the prudence of the conduct of the public utility in connection with a catastrophic wildfire. The public utilities commission shall determine whether the public utility acted prudently, considering only acts that may have caused the ignition and evaluating the public utility's actions in the context of the public utility's overall systems, processes, and programs, such that an error by a public utility employee would not be a basis for a finding of imprudence, unless that error resulted from any imprudent system, process, or program.

(c) In evaluating prudence under this section, the public utilities commission shall determine whether the actions of the public utility were consistent with actions that a reasonable public utility would have undertaken in good faith under similar circumstances, at the relevant point in time, and based on the information available to the public utility at the relevant point in time.

Reasonable conduct shall not be limited to the optimum practice, method, or act to the exclusion of others, but rather shall encompass a spectrum of possible practices, methods, or acts consistent with utility system needs, the interest of ratepayers, and the requirements of governmental agencies of competent jurisdiction.

(d) If the public utilities commission determines that imprudent conduct by the public utility caused the catastrophic wildfire, the public utilities commission shall determine whether to order the public utility to reimburse the wildfire relief fund in whole or in part for payments from the wildfire relief fund made in connection with the catastrophic wildfire. In determining the amount of reimbursement, if any, the public utilities commission shall consider the extent and severity of the public utility's imprudence and factors within and beyond the public utility's control that may have led to or exacerbated the costs from the catastrophic wildfire, including but not limited to humidity, temperature, winds, fuel, merged wildfires with independent ignitions, third-party actions that affected the spread of the wildfire, and fire suppression activities.

(e) The public utilities commission shall not order the public utility to reimburse the wildfire relief fund in an amount that exceeds the lesser of:

(1) The costs that the public utilities commission determines were due to the public utility's imprudence; or

(2) Twenty per cent of the public utility's transmission and distribution equity rate base minus the amounts the public utility has reimbursed, or is required to reimburse, the wildfire relief fund during the period of three consecutive calendar years ending on December 31 of the year in which the calculation is being performed.

(f) If the public utilities commission orders the public utility to reimburse the wildfire relief fund, the public utility shall not recover the amount of the reimbursement in rates charged to ratepayers.

(g) If the administrator, or an agency of the State with responsibility for determining the causes of wildfires or catastrophic wildfires, concludes that the conduct of another governmental entity or private property owner that is a contributor may have caused the occurrence or contributed to the severity of a catastrophic wildfire, the administrator shall assess the prudence of the contributor's conduct, applying the same standard of prudence applied to public utilities under subsection (c).

(h) If the administrator determines that the contributor acted imprudently and that the imprudence caused or contributed to the severity of the catastrophic wildfire, the administrator shall recommend that the board require the contributor to reimburse the wildfire relief fund in whole or in part for payments that the wildfire relief fund made in connection with the catastrophic wildfire, considering the factors set forth in subsection (d), subject to a cap of ten per cent of the contributor's assets within Hawaii, measured over a rolling three-year period.

§ -10 Failure to make contributions to wildfire relief fund. (a) Contributors shall notify the administrator if they will make, or fail to make, a required contribution, whether initial, annual, or supplemental, to the wildfire relief fund at least days before the contribution is due.

(b) If a contributor fails to make a required contribution to the wildfire relief fund, that contributor will no longer be a contributor as of the date that the contribution was due. That entity may rejoin the wildfire relief fund under the process for joining the wildfire relief fund after initial capitalization set forth in section -8.

(c) The administrator shall not refund to an entity that fails to make a contribution any previous payments made to the wildfire relief fund. However, the administrator shall credit all previous contributions when determining the amount of payment to be made if a participant rejoins the wildfire relief fund under subsection (b).

§ -11 Refunds. (a) If the total amount in the wildfire relief fund exceeds one hundred twenty per cent of the total capitalization amount, the administrator may recommend that the board authorize refunds to be made to the contributors; provided that the refunds do not deplete the wildfire relief fund below one hundred twenty per cent of the total capitalization amount.

(b) Refunds shall be made in proportion to the total amount contributed by the contributors to the wildfire relief fund as of the date of the refund, excluding any payments made under the replenishment provisions under section -9.

(c) The administrator has no obligation to recommend, and the board has no obligation to authorize, a refund. The board shall make a refund only if it takes into consideration all relevant factors and circumstances and determines that making a refund will be unlikely to result in the wildfire relief fund's falling below one hundred twenty per cent of total capitalization within three years after the refund.

(d) Any contributor may request that the board make a refund whenever the conditions under this section are met.

(e) If the board elects to issue a refund or elects not to do so after receiving a request under subsection (d), the administrator shall issue an order explaining the board's decision.

§ -12 Processing of claims. (a) With the approval of the board, the administrator shall establish and approve procedures for the review, approval, and timely payment of claims for reimbursement from the wildfire relief fund. The procedures may be revised from time to time by the administrator with the approval of the board.

(b) If a catastrophic wildfire occurs within the State, the administrator shall process claims made for compensation against the wildfire relief fund related to the catastrophic wildfire, consistent with the requirements of this chapter.

§ -13 Claims by property owners. (a) To be eligible for compensation from the wildfire relief fund for damage to property from a catastrophic wildfire, a property owner shall not have opted out from participation in the wildfire relief fund before the occurrence of the catastrophic wildfire.

(b) County tax assessors shall include, with each real property tax assessment sent to a property owner in the State, a prominent notice regarding participation in the wildfire relief fund. The notice shall be in a form prescribed by the administrator and shall clearly explain the property owner's right to opt out of participation in the wildfire relief fund by submitting a request to opt out to the administrator within a specific time. A property owner who does not submit a timely request to opt out shall be deemed to participate in the wildfire relief fund as of the deadline for submitting a request to opt out.

(d) To opt out of participation in the wildfire relief fund with regard to property either in areas within the State that have been assigned extreme, high, and moderate wildfire risk classes by , a property owner shall submit documentation of insurance coverage for the property along with the property owner's request to opt out of the wildfire relief fund, and the administrator shall approve the documentation as adequate evidence of insurance for the applicable property.

(e) Following a catastrophic wildfire, to make a claim for compensation from the wildfire relief fund for damage to property from the wildfire, a property owner shall submit to the administrator documentation establishing:

(1) That the catastrophic wildfire damaged the owner's property;

(2) The extent of the losses to the owner's property caused by that catastrophic wildfire; and

(3) Any insurance policy providing coverage for those losses.

(f) Within ninety days after a property owner submits a claim for compensation from the wildfire relief fund, including the documentation required in this section, the administrator shall determine whether the documentation is adequate and, if so, the appropriate amount of the payment to the property owner from the wildfire relief fund. If the administrator determines that the property owner has not submitted sufficient documentation for the administrator to evaluate the claim, the administrator may request additional documentation from the property owner and may set a date by which the additional information shall be provided.

(g) If no insurance policy provides coverage for the losses for which a property owner seeks compensation from the wildfire relief fund, the property owner shall be eligible to receive as compensation from the wildfire relief fund a maximum of $ .

(h) If an insurance policy provides coverage for the losses for property damage incurred by an eligible property owner who seeks compensation from the wildfire relief fund, the property owner shall be eligible to receive, as compensation from the wildfire relief fund, only compensation for uninsured real or personal property damage, in an amount up to the lesser of:

(1) per cent of the amount by which the property owner's losses exceed the amount of insurance coverage for the losses; or

(2) per cent of the property owner's insurance coverage applicable to the losses;

provided that the property owner submits adequate documentation of those losses, as required by this section.

§ -14 Claims by property insurers. (a) To be eligible for compensation from the wildfire relief fund, a property insurer shall have elected to participate in the wildfire relief fund before the annual policy period in which the catastrophic wildfire occurred. The administrator shall establish a process for property insurers to annually submit an election to participate in the wildfire relief fund to the administrator within a specified time.

(b) All property insurers who elect to participate in the wildfire relief fund shall be eligible to receive as compensation from the wildfire relief fund per cent of their total payments for property damage claims in Hawaii as a result of a catastrophic wildfire.

(c) Following a catastrophic wildfire, to make a claim for compensation from the wildfire relief fund based on claims resulting from the wildfire, an eligible property insurer shall submit to the administrator documentation establishing the number, nature, and total value of the insurance claims that the property insurer paid under its policies for damage resulting from the catastrophic wildfire as well as documentation sufficient to assess the reasonableness of the property insurer's payment of the claims.

(d) After receipt of a property insurer's claim for compensation from the wildfire relief fund, including the documentation required in this section, the administrator shall:

(1) Review via an expedited procedure the property insurer's claim for compensation from the wildfire relief fund; and

(2) Determine:

(A) Whether the documentation provided is adequate; and

(B) The appropriate amount of the payment to the property insurer from the wildfire relief fund.

§ -15 Claims by the State and other governmental entities. (a) The State may submit claims for compensation from the wildfire relief fund for damages it incurred resulting from a catastrophic wildfire, including damage to infrastructure or other property, costs of fire suppression, and natural resource damages, to the extent recovery of the losses is authorized by law.

(b) Other governmental entities may submit claims for compensation from the wildfire relief fund for damages they incurred resulting from a catastrophic wildfire, including damage to infrastructure or other property and other losses, to the extent recovery of the losses is authorized by law; provided that to be eligible for compensation from the wildfire relief fund related to a catastrophic wildfire, the other governmental entity shall elect to be a contributor and shall have satisfied contribution obligations under section ‑8 before the occurrence of the catastrophic wildfire.

(c) To make a claim under this section, the State or other governmental entity shall submit to the administrator documentation establishing:

(1) That the catastrophic wildfire caused the damages;

(2) The extent of the damages caused by the catastrophic wildfire; and

(3) Any other documentation necessary to establish the State's or other governmental entity's right to recover the losses under law.

(d) After receipt of a claim for compensation from the wildfire relief fund under this section, the administrator shall determine whether the State or other governmental entity may recover damages under applicable law and, if so, the appropriate amount of the payment.

§ -16 Fund depletion. (a) Within thirty days of a catastrophic wildfire, the administrator shall assess whether the total payments that the wildfire relief fund is projected to make to eligible property owners, property insurers, the State and other governmental entities under sections ‑13, -14, and -15, respectively, are expected to exceed seventy-five per cent of the total available money in the wildfire relief fund. The board shall adopt rules under chapter 91 regarding the performance of this assessment.

(b) If the administrator assesses under subsection (a) that the total payments that the wildfire relief fund is projected to make to eligible property owners, property insurers, the State and other governmental entities under sections -13, -14, and -15, respectively, are expected to exceed seventy-five per cent of the total available money remaining in the wildfire relief fund, the administrator shall seek to increase the total amount of money in the wildfire relief fund using all available methods under this chapter.

(c) If the administrator is unable, despite taking the steps under subsection (b), to secure sufficient additional financial capacity for the wildfire relief fund, including credible pledges for future funding, to reverse the administrator's assessment under subsection (b) within forty-five days, the administrator shall declare the existence of a depletion event. The administrator, for good cause, may extend the period for an additional period not to exceed thirty days.

(d) If the administrator declares the existence of a depletion event, the administrator shall determine what percentage of total eligible payments the wildfire relief fund can make without the likelihood that the payments will exceed seventy-five per cent of the total financial capacity in the wildfire relief fund. This percentage shall be deemed the depletion percentage.

(e) The administrator shall thereafter offer all property owners, property insurers, and the State and other governmental entities that submit claims for compensation from the wildfire relief fund and would otherwise, under sections -13, -14, and -15, respectively, be entitled to a particular payment amount, that amount multiplied by the depletion percentage. This amount shall be deemed the depletion payment.

(f) All claimants that are offered the depletion payment may choose to accept or decline the payment. Any property owner or property insurer, other than a contributor, that declines to accept the depletion payment shall:

(1) Be ineligible for any payments by the wildfire relief fund with respect to the catastrophic wildfire for which the claim was made; and

(2) Not be bound by the limitation on claims under section -18 with respect to only that catastrophic wildfire.

The limitation period for any cause of action arising out of the catastrophic wildfire that could be asserted by the property owner or property insurer that declines to accept the depletion payment shall be tolled for the period from the date of the catastrophic wildfire to the date the administrator offers claimants the depletion payment.

(g)(1) Any property owner or property insurer, other than a contributor, that accepts the depletion payment shall be entitled to an additional payment from the wildfire relief fund, within three years of receipt of the depletion payment, equal to the difference between the depletion payment and what the property owner or property insurer would have been entitled to from the wildfire relief fund in the absence of a depletion event. This shall be called the true-up payment.

(2) If, after the expiration of that three-year period, the wildfire relief fund has failed to make the true‑up payment to a particular property owner or property insurer, that property owner or property insurer shall not be bound by the limitation on claims under section -18 with respect to only that catastrophic wildfire. In any suit brought by or on behalf of that property owner or property insurer that, but for the failure of the wildfire relief fund to make the true-up payment, would have been barred by the limitation on claims under section –18, the following provision will apply: total recovery, inclusive of damages, attorney's fees, and interest, shall be limited to three times the true-up payment.

(3) The limitation period for any cause of action arising out of the catastrophic wildfire that could be asserted by the property owner or property insurer that accepted the depletion payment shall be tolled for the period from the date of the catastrophic wildfire to the date the true-up payment under paragraph (1) is made or is due, whichever is earlier.

(h) The board shall adopt rules under chapter 91 regarding how to pay claims if one or more catastrophic wildfires occur while the corporation is in the process of assessing, receiving, determining, or paying claims from an earlier catastrophic wildfire.

§ -17 Hearings and appeals of determinations. (a) Within thirty days after the administrator's determination of the amount of payment due to any claimant from the wildfire relief fund under sections -13, -14, and -15, respectively, or the board's determination of a contributor's allocation for any contribution, the affected person or entity may request a contested case hearing on that determination before the department of commerce and consumer affairs under chapter 91.

(b) Upon receipt of a request for a hearing on the administrator or board's determination, the office of administrative hearings shall schedule a hearing date no later than days after its receipt of the request for a hearing.

(c) Following the conclusion of any hearing or before the conclusion of the hearing, with the concurrence of the parties, the office of administrative hearings shall decide the matter within days after the conclusion of the hearing and issue findings of fact, conclusions of law, and a decision in accordance with the hearings officer's determination.

(d) Within days after the date upon which a copy of the office of administrative hearings' order is mailed to the parties, a party may seek judicial review of the order by filing a petition for review in the applicable circuit court, with a right of appeal as allowed by law. If no petition is timely filed, the order of the office of administrative hearings shall be final.

§ -18 Limitations on claims. (a) No suit, claim, or other civil legal action may be instituted or maintained against contributors or their affiliates, employees, agents, or insurers:

(1) For recovery of losses or damages of a type for which compensation may be sought from the wildfire relief fund; and

(2) By persons or entities:

(A) Who are contributors, property owners who do not opt out of the wildfire relief fund, or property insurers who elect to participate in the wildfire relief fund; or

(B) Who seek indemnity or contribution for amounts paid, or that may be paid, to contributors, property owners who do not opt out of the wildfire relief fund, or property insurers who elect to participate in the wildfire relief fund;

provided that the rights of a property insurer to sue as a subrogee of its policyholder shall not be affected by a property owner's participation in the wildfire relief fund and eligibility to seek uninsured property damages from the wildfire relief fund; provided further that the subrogation rights shall be affected only if the property insurer elects to participate in the wildfire relief fund.

(b) Persons or entities who are eligible to seek compensation from the wildfire relief fund for property damage arising from a catastrophic wildfire may not seek to recover for damage from electric utilities, public utilities other than electric utilities, the State, or private property owners who are contributors, notwithstanding that the claimed property damage may exceed the amount of payment by the wildfire relief fund for the damage.

(c) The wildfire relief fund shall be subrogated to the rights of the contributors, property owners who do not opt out of the wildfire relief fund, and property insurers who elect to participate in the wildfire relief fund, to the extent of any payment made by the wildfire relief fund to those persons or entities and may pursue claims against a person or entity that is not a contributor for damages resulting from the catastrophic wildfire.

§ -19 Non-applicability. This chapter shall not apply to any electric utility cooperative association, as defined by section 421C-1."

SECTION 3. Section 76-16, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

"(b) The civil service to which this chapter applies shall comprise all positions in the State now existing or hereafter established and embrace all personal services performed for the State, except the following:

(1) Commissioned and enlisted personnel of the Hawaii National Guard as such, and positions in the Hawaii National Guard that are required by state or federal laws or regulations or orders of the National Guard to be filled from those commissioned or enlisted personnel;

(2) Positions filled by persons employed by contract where the director of human resources development has certified that the service is special or unique or is essential to the public interest and that, because of circumstances surrounding its fulfillment, personnel to perform the service cannot be obtained through normal civil service recruitment procedures. Any such contract may be for any period not exceeding one year;

(3) Positions that must be filled without delay to comply with a court order or decree if the director determines that recruitment through normal recruitment civil service procedures would result in delay or noncompliance, such as the Felix-Cayetano consent decree;

(4) Positions filled by the legislature or by either house or any committee thereof;

(5) Employees in the office of the governor and office of the lieutenant governor, and household employees at Washington Place;

(6) Positions filled by popular vote;

(7) Department heads, officers, and members of any board, commission, or other state agency whose appointments are made by the governor or are required by law to be confirmed by the senate;

(8) Judges, referees, receivers, masters, jurors, notaries public, land court examiners, court commissioners, and attorneys appointed by a state court for a special temporary service;

(9) One bailiff for the chief justice of the supreme court who shall have the powers and duties of a court officer and bailiff under section 606-14; one secretary or clerk for each justice of the supreme court, each judge of the intermediate appellate court, and each judge of the circuit court; one secretary for the judicial council; one deputy administrative director of the courts; three law clerks for the chief justice of the supreme court, two law clerks for each associate justice of the supreme court and each judge of the intermediate appellate court, one law clerk for each judge of the circuit court, two additional law clerks for the civil administrative judge of the circuit court of the first circuit, two additional law clerks for the criminal administrative judge of the circuit court of the first circuit, one additional law clerk for the senior judge of the family court of the first circuit, two additional law clerks for the civil motions judge of the circuit court of the first circuit, two additional law clerks for the criminal motions judge of the circuit court of the first circuit, and two law clerks for the administrative judge of the district court of the first circuit; and one private secretary for the administrative director of the courts, the deputy administrative director of the courts, each department head, each deputy or first assistant, and each additional deputy, or assistant deputy, or assistant defined in paragraph (16);

(10) First deputy and deputy attorneys general, the administrative services manager of the department of the attorney general, one secretary for the administrative services manager, an administrator and any support staff for the criminal and juvenile justice resources coordination functions, and law clerks;

(11) (A) Teachers, principals, vice-principals, complex area superintendents, deputy and assistant superintendents, other certificated personnel, and no more than twenty noncertificated administrative, professional, and technical personnel not engaged in instructional work;

(B) Effective July 1, 2003, teaching assistants, educational assistants, bilingual/bicultural school-home assistants, school psychologists, psychological examiners, speech pathologists, athletic health care trainers, alternative school work study assistants, alternative school educational/supportive services specialists, alternative school project coordinators, and communications aides in the department of education;

(D) Members of the faculty of the University of Hawaii, including research workers, extension agents, personnel engaged in instructional work, and administrative, professional, and technical personnel of the university;

(12) Employees engaged in special, research, or demonstration projects approved by the governor;

(13) (A) Positions filled by inmates, patients of state institutions, and persons with severe physical or mental disabilities participating in the work experience training programs;

(B) Positions filled with students in accordance with guidelines for established state employment programs; and

(C) Positions that provide work experience training or temporary public service employment that are filled by persons entering the workforce or persons transitioning into other careers under programs such as the federal Workforce Investment Act of 1998, as amended, or the Senior Community Service Employment Program of the Employment and Training Administration of the United States Department of Labor, or under other similar state programs;

(14) A custodian or guide at Iolani Palace, the Royal Mausoleum, and Hulihee Palace;

(15) Positions filled by persons employed on a fee, contract, or piecework basis, who may lawfully perform their duties concurrently with their private business or profession or other private employment and whose duties require only a portion of their time, if it is impracticable to ascertain or anticipate the portion of time to be devoted to the service of the State;

(16) Positions of first deputies or first assistants of each department head appointed under or in the manner provided in section 6, article V, of the Hawaii State Constitution; three additional deputies or assistants either in charge of the highways, harbors, and airports divisions or other functions within the department of transportation as may be assigned by the director of transportation, with the approval of the governor; one additional deputy in the department of human services either in charge of welfare or other functions within the department as may be assigned by the director of human services; four additional deputies in the department of health, each in charge of one of the following: behavioral health, environmental health, hospitals, and health resources administration, including other functions within the department as may be assigned by the director of health, with the approval of the governor; two additional deputies in charge of the law enforcement programs, administration, or other functions within the department of law enforcement as may be assigned by the director of law enforcement, with the approval of the governor; three additional deputies each in charge of the correctional institutions, rehabilitation services and programs, and administration or other functions within the department of corrections and rehabilitation as may be assigned by the director [or] of corrections and rehabilitation, with the approval of the governor; an administrative assistant to the state librarian; and an administrative assistant to the superintendent of education;

(17) Positions specifically exempted from this part by any other law; provided that:

(A) Any exemption created after July 1, 2014, shall expire three years after its enactment unless affirmatively extended by an act of the legislature; and

(B) All of the positions defined by paragraph (9) shall be included in the position classification plan;

(18) Positions in the state foster grandparent program and positions for temporary employment of senior citizens in occupations in which there is a severe personnel shortage or in special projects;

(19) Household employees at the official residence of the president of the University of Hawaii;

(20) Employees in the department of education engaged in the supervision of students during meal periods in the distribution, collection, and counting of meal tickets, and in the cleaning of classrooms after school hours on a less than half-time basis;

(21) Employees hired under the tenant hire program of the Hawaii public housing authority; provided that [~~not~~] no more than twenty-six per cent of the authority's workforce in any housing project maintained or operated by the authority shall be hired under the tenant hire program;

(22) Positions of the federally funded expanded food and nutrition program of the University of Hawaii that require the hiring of nutrition program assistants who live in the areas they serve;

(23) Positions filled by persons with severe disabilities who are certified by the state vocational rehabilitation office that they are able to perform safely the duties of the positions;

(24) The sheriff;

(25) A gender and other fairness coordinator hired by the judiciary;

(26) Positions in the Hawaii National Guard youth and adult education programs;

(27) In the Hawaii state energy office in the department of business, economic development, and tourism, all energy program managers, energy program specialists, energy program assistants, and energy analysts;

(28) Administrative appeals hearing officers in the department of human services;

(29) In the Med-QUEST division of the department of human services, the division administrator, finance officer, health care services branch administrator, medical director, and clinical standards administrator;

(30) In the director's office of the department of human services, the enterprise officer, information security and privacy compliance officer, security and privacy compliance engineer, security and privacy compliance analyst, information technology implementation manager, assistant information technology implementation manager, resource manager, community/project development director, policy director, special assistant to the director, and limited English proficiency project manager/coordinator;

(31) The Alzheimer's disease and related dementia services coordinator in the executive office on aging;

(32) In the Hawaii emergency management agency, the executive officer, public information officer, civil defense administrative officer, branch chiefs, and emergency operations center state warning point personnel; provided that for state warning point personnel, the director shall determine that recruitment through normal civil service recruitment procedures would result in delay or noncompliance;

(33) The executive director and seven full-time administrative positions of the school facilities authority;

(34) Positions in the Mauna Kea stewardship and oversight authority;

(35) In the office of homeland security of the department of law enforcement, the statewide interoperable communications coordinator; [~~and~~]

(36) In the social services division of the department of human services, the business technology analyst[.]; and

(37) The administrator of the wildfire relief fund corporation.

The director shall determine the applicability of this section to specific positions.

Nothing in this section shall be deemed to affect the civil service status of any incumbent as it existed on July 1, 1955."

SECTION 4. There is appropriated out of the general revenues of the State of Hawaii the sum of $ or so much thereof as may be necessary for fiscal year 2024-2025 for deposit into the wildfire relief fund.

SECTION 5. There is appropriated out of the general revenues of the State of Hawaii the sum of $ or so much thereof as may be necessary for fiscal year 2024-2025 for the establishment of full-time equivalent ( FTE) administrator position, who shall be exempt from chapter 76, Hawaii Revised Statutes, to support the Hawaii wildfire relief fund corporation; provided that in all subsequent fiscal years, all funding for the administrator position shall be paid from the wildfire relief fund.

The sum appropriated shall be expended by the department of commerce and consumer affairs for the purposes of this Act.

SECTION 6. In accordance with section 9 of article VII of the Hawaii State Constitution and sections 37‑91 and 37‑93, Hawaii Revised Statutes, the legislature has determined that the appropriations contained in H.B. No. , will cause the state general fund expenditure ceiling for fiscal year 2024‑2025 to be exceeded by $ or per cent. In addition, the appropriation contained in this Act will cause the general fund expenditure ceiling for fiscal year 2024‑2025 to be further exceeded by $ or per cent. The combined total amount of general fund appropriations contained in only these two Acts will cause the state general fund expenditure ceiling for fiscal year 2024‑2025 to be exceeded by $ or per cent. The reasons for exceeding the general fund expenditure ceiling are that:

(1) The appropriation made in this Act is necessary to serve the public interest; and

(2) The appropriation made in this Act meets the needs addressed by this Act.

PART II

SECTION 7. The legislature finds that the risk of catastrophic wildfires has increased, making it imperative that electric utilities develop, implement, and administer effective plans for wildfire risk mitigation. Electric utilities should develop, implement, and administer wildfire protection plans, and, through a public process, the public utilities commission should review and approve such plans and the recovery of any related costs to implement the plans.

The legislature also finds that a resilience working group, convened throughout 2019 and 2020, sought to:

(1) Identify and prioritize resilience threat scenarios and potential grid impacts;

(2) Identify key customer and infrastructure sector capabilities and needs following a severe event and loss of power;

(3) Identify gaps and priorities in grid and customer capabilities following a severe event and loss of power;

(4) Provide recommendations and inputs for investor-owned utility grid planning to address resilience needs; and

(5) Recommend additional grid and customer actions to close gaps and capabilities following severe events.

The resilience working group identified wildfires as one of five types of severe events of utmost importance to consider for achieving a resilient grid and provided resilience options for utilities to consider.

The legislature further finds that securitization may be the most efficient, least-cost way to finance wildfire risk mitigation costs and expenses. Utility rate securitization transactions have an extensive track record of success. Bonds securitized by the right to recover rates receive investment grade credit ratings from credit rating agencies and thus provide a means of securing capital at a lower interest rate than those currently available to utilities, in particular utilities without an investment grade credit rating.

The purpose of this part is to create a process whereby electric utilities develop and submit effective risk-based wildfire risk protection plans to the public utilities commission for approval; the public utilities commission evaluates those plans and either approves them or does so with modifications; the electric utilities are able to timely recover the prudently incurred costs and expenses of developing, implementing, and administrating those plans; and those costs and expenses are not borne disproportionately by any particular ratepayer or county.

SECTION 8. Chapter 269, Hawaii Revised Statutes, is amended by adding a new part to be appropriately designated and to read as follows:

"PART . WILDFIRE PROTECTION AND MITIGATION

§269-A Definitions. As used in this part:

"Ancillary agreement" means a bond insurance policy, letter of credit, reserve account, surety bond, swap arrangement, hedging arrangement, liquidity or credit support arrangement, or other similar agreement or arrangement entered into in connection with the issuance of bonds that is designed to promote the credit quality and marketability of the bonds or to mitigate the risk of an increase in interest rates.

"Assignee" means a legally recognized entity:

(1) To which an electric utility company assigns, sells, or transfers, other than as security, all or a portion of its interest in or right to wildfire protection property; or

(2) Who acquires, by way of assignment or otherwise, all or a portion of the wildfire protection property following the exercise of remedies upon a default under the terms of the bonds.

"Assignee" includes a corporation, limited liability company, general partnership or limited partnership, public authority, trust, financing entity, or any entity to which an assignee assigns, sells, or transfers, other than as security, its interest in or right to wildfire protection property.

"Bond" means any bond, note, certificate of participation or beneficial interest, or other evidence of indebtedness or ownership that is issued by the financing entity under a financing order, the proceeds of which are used to recover, finance, or refinance any wildfire protection costs, and that are secured by or payable from wildfire protection property.

"Catastrophic wildfire" means any wildfire in the State that damaged or destroyed more than five hundred commercial buildings or residential structures designed for habitation.

"Commission" means the public utilities commission.

"Consumer" means any individual, governmental body, trust, business entity, or nonprofit organization that consumes electricity that has been transmitted or distributed by means of electric transmission or distribution facilities, whether those electric transmission or distribution facilities are owned by the consumer, the electric utility, or any other party.

"Electric utility" means a public utility as defined in section 269-1 that is engaged in the production, transmission, or distribution of electricity.

"Electric utility cooperative association" shall have the same meaning as in section 421C-1.

"Financing costs" means the costs to issue, service, repay, or refinance bonds, whether incurred or paid upon issuance of the bonds or over the life of the bonds, if they are approved for recovery by the commission in a financing order. "Financing costs" may include any of the following:

(1) Principal, interest, and redemption premiums that are payable on bonds;

(2) A payment required under an ancillary agreement;

(3) An amount required to fund or replenish reserve accounts or other accounts established under an indenture, ancillary agreement, or other financing document related to the bonds;

(4) Taxes, franchise fees, or license fees imposed on a financing entity as a result of the issuance of the financing order, the assignment, sale or transfer of any wildfire property or the sale of the bonds or imposed on the wildfire protection charges, or otherwise resulting from the collection of the charges, in any such case whether paid, payable, or accrued;

(5) Costs related to issuing and servicing bonds or the application for a financing order, including without limitation servicing fees and expenses, trustee fees and expenses, legal fees and expenses, accounting fees, administrative fees, underwriting and placement fees, financial advisory fees, original issue discount, capitalized interest, rating agency fees, and any other related costs that are approved for recovery in the financing order; and

(6) Other costs as specifically authorized by a financing order.

"Financing entity" means an electric utility and an entity to which an electric utility or an affiliate of an electric utility sells, assigns or pledges all or a portion of the electric utility's or its affiliate's interest in wildfire protection property, including an affiliate of the electric utility or any unaffiliated entity, in each case as approved by the commission in a financing order.

For this purpose, and subject to section 269-E(c), an entity to which an electric utility or its affiliate sells, assigns, or pledges all or a portion of the electric utility's interest in wildfire protection property may include any governmental entity that is able to issue bonds that are exempt from federal tax under section 103 of the Internal Revenue Code of 1986, including the State or a political subdivision thereof or any department, agency or instrumentality of the foregoing; provided that the bonds issued thereby shall not constitute a debt or liability of the State or any political subdivision thereof or any department, agency or instrumentality thereof and shall not constitute a pledge of the full faith and credit of the entity or of the State or any political subdivision thereof, but shall be payable solely from the wildfire relief funds provided under this chapter.

"Financing order" means an order of the commission under this part that has become final as provided by law, and that authorizes the issuance of bonds and the imposition, adjustment from time to time, and collection of wildfire protection charges. "Financing order" includes without limitation a procedure to require the expeditious approval by the commission of periodic adjustments to wildfire protection charges and any associated fixed recovery tax amounts included in that financing order to ensure recovery of all wildfire protection costs and the costs associated with the proposed recovery, financing, or refinancing thereof, including the costs of servicing and retiring the bonds contemplated by the financing order.

"Financing party" means any holder of bonds, any party to or beneficiary of an ancillary agreement, and any trustee, collateral agent, or other person acting for the benefit of any of the foregoing.

"Fixed recovery tax amounts" means those non-bypassable rates and other charges, including but not limited to distribution, connection, disconnection, and termination rates and charges, that are needed to recover federal and state taxes associated with wildfire protection charges authorized by the commission in a financing order, but are not approved as financing costs financed from proceeds of bonds.

"True-up adjustment" means a formulaic adjustment to the wildfire protection charges as they appear on consumer bills that is necessary to correct for any overcollection or undercollection of the wildfire protection charges authorized by a financing order and to otherwise ensure the timely and complete payment and recovery of wildfire protection costs over the authorized repayment term.

"Wildfire protection charges" means the non-bypassable charges authorized by section 269-G and in a financing order authorized under this part to be imposed on and collected from all existing and future consumers to recover both of the following:

(1) Wildfire protection costs specified in the financing order; and

(2) The costs of recovering, financing, or refinancing wildfire protection costs through a plan approved by the commission in the financing order, including the costs of issuing, servicing and retiring bonds.

"Wildfire protection costs" means any capital costs and operation and maintenance expenses related to the development, implementation, and administration of a wildfire protection plan prepared under section 269-C(a), but, for the avoidance of doubt, shall not include any amounts, including, without limitation, fees, costs, and awards, payable in connection with any legal claims made in any way related to any wildfire. "Wildfire protection costs" does not include any penalties levied against an electric utility under section 269-D. "Wildfire protection costs" may also include any of the following:

(1) Catastrophic wildfire costs or expenses, other than amounts, for the avoidance of doubt, payable in connection with any legal claims made in any way related to any wildfire, that the commission has determined were prudently incurred, including but not limited to costs or expenses that have been paid that the electric utility has a legal obligation to pay or that the electric utility would be otherwise obligated to pay;

(2) Federal and state taxes associated with recovery of the amounts under paragraph (1);

(3) Financing costs; and

(4) Professional fees, consultant fees, redemption premiums, tender premiums, and other costs incurred by the electric utility in using proceeds of bonds to acquire outstanding securities of the electric utility, as authorized by the commission in a financing order.

"Wildfire protection plan" means the risk-based wildfire protection plan mandated by section 269-C(a) and approved by the commission.

"Wildfire protection property" means the property right created under this part, including without limitation the right, title, and interest of the public utility, financing entity, or its assignee:

(1) In and to the wildfire protection charge established under a financing order, including the right to impose, bill, collect, and receive fixed recovery charges under the financing order and all rights to obtain adjustments to the wildfire protection charge under section 269-G and the financing order; and

(2) To be paid the amount that is determined in a financing order to be the amount that the public utility or its assignee is lawfully entitled to receive under this part and the proceeds thereof, and in and to all revenues, collections, claims, payments, moneys, or proceeds of, or arising from, the wildfire protection charge that is the subject of a financing order.

"Wildfire protection property" does not include a right to be paid fixed recovery tax amounts. "Wildfire protection property" shall constitute a current property right, notwithstanding the fact that the value of the property right will depend on consumers using electricity or, in those instances where consumers are customers of the public utility, the public utility performing certain services.

§269-B Electric utility workshops. The commission may periodically convene workshops to help electric utilities develop and share information for the identification, adoption, and implementation of best practices regarding wildfires, including but not limited to risk-based wildfire protection and risk-based wildfire mitigation procedures and standards. The best practices discussed in these workshops may be incorporated into the proposed wildfire protection plans and updates submitted for the approval of the commission under section 269‑C.

§269-C Wildfire protection plans. (a) Each electric utility shall have and operate in compliance with a risk-based wildfire protection plan, which shall be submitted to the commission for approval. The risk-based wildfire protection plan shall be based on reasonable and prudent practices that may be determined by commission standards adopted by decision or rule. The electric utility shall design the risk-based wildfire protection plan to protect public safety, reduce risk to electric utility customers, and promote resilience of the Hawaii electric system to wildfire damage. Each electric utility's wildfire protection plan shall, at a minimum:

(1) Account for the responsibilities of persons responsible for executing the plan;

(2) Describe the objectives of the plan;

(3) Identify areas that are subject to a heightened risk of wildfire and are:

(A) Within the right of way or legal control or ownership of the electric utility; and

(B) Outside the right of way or legal control or ownership of the electric utility but within a reasonable distance, as determined by the commission, of the electric utility's generation or transmission assets;

(4) Identify a means for mitigating wildfire risk that reflects a reasonable balancing of mitigation costs with the resulting reduction of wildfire risk;

(5) Identify preventive actions and programs that the electric utility shall carry out to minimize the risk of electric utility facilities causing wildfire;

(6) Identify the metrics the electric utility plans to use to evaluate the plan's performance and the assumptions that underlie the use of those metrics;

(7) Describe how the application of previously identified metrics to previous plan performances has informed the plan;

(8) After seeking information from state and local entities, identify a protocol for the deenergizing of power lines and adjusting of power system operations to mitigate wildfires, promote the safety of the public and first responders, and preserve health and communication infrastructure;

(9) Describe appropriate and feasible procedures for notifying a customer who may be impacted by the deenergizing of electrical lines. The procedures shall consider the need to notify, as a priority, critical first responders, health care facilities, operators of wastewater and water delivery infrastructure, and operators of telecommunications infrastructure;

(10) Describe the procedures, standards, and time frames that the electric utility shall use to inspect electric utility infrastructure in areas that the electric utility identifies under paragraph (3), including whether those procedures, standards, and time-frames are already set forth in the electric utility's existing plans or protocols and in coordination with any relevant entities;

(11) Describe the procedures, standards, and time frames that the electric utility will use to carry out vegetation management in areas that the electric utility identifies under paragraph (3), including whether those procedures, standards, and time frames are already set forth in the electric utility's existing plans or protocols and in coordination with any relevant entities;

(12) Include a list that identifies, describes, and prioritizes all wildfire risks, and drivers for those risks, throughout the electric utility's service territory. The list shall include but not be limited to the following:

(A) Risks and risk drivers associated with design, construction, operation, and maintenance of the electric utility's equipment and facilities; and

(B) Particular risks and risk drivers associated with topographic and climatological risk factors throughout the different parts of the electric utility's service territory;

(13) Describe how the plan accounts for the wildfire risk identified in the electric utility's risk assessment;

(14) Describe the actions the electric utility will take to ensure its system will achieve the highest level of safety, reliability, and resiliency, and to ensure that its system is prepared for a wildfire, including hardening and modernizing its infrastructure with improved engineering, system design, standards, equipment, and facilities, including but not limited to undergrounding lines, insulation of distribution wires, and pole replacement;

(15) Demonstrate that the electric utility has an adequately sized and trained workforce to promptly restore service after a wildfire, taking into account employees of other utilities under mutual aid agreements and employees of entities that have entered into contracts with the electric utility;

(16) Identify the estimated development, implementation, and administration costs for the risk-based wildfire protection plan;

(17) Identify the timelines, as applicable, for development, implementation, and administration of any aspects of the risk-based wildfire protection plan;

(18) Describe how the plan is consistent with the electric utility's other hazard mitigation and grid hardening plans, including plans to prepare for, and to restore service after, a wildfire, including workforce mobilization and prepositioning equipment and employees;

(19) Identify community outreach and public awareness efforts that the electric utility will use before, during, and after a wildfire;

(20) Describe the processes and procedures the electric utility will use to do all of the following:

(A) Monitor and audit the implementation of the plan;

(B) Identify any deficiencies in the plan or the plan's implementation and correct those deficiencies; and

(C) Monitor and audit the effectiveness of electrical line and equipment inspections, including inspections performed by contractors, carried out under the plan and other applicable statutes and rules of the commission;

(21) Demonstrate elements of data governance, including enterprise systems; and

(22) Any modifications to paragraphs (1) through (21), or other information as required by the commission.

(b) Each electric utility shall regularly submit updates to its risk-based wildfire protection plan for approval on a schedule determined by the commission.

(c) To develop the risk-based wildfire protection plan, the electric utility may consult with and consider information from federal, state, local, and other expert entities.

(d) The commission shall evaluate each electric utility's risk-based wildfire protection plan and plan updates according to the commission's rules of practice and procedure in chapter 16-601, Hawaii Administrative Rules. The commission shall authorize the department of land and natural resources and local emergency services agencies to participate in proceedings evaluating risk-based wildfire protection plans.

(e) Not more than ninety days after the last party filing, and not more than a total of one hundred twenty days after the initial application for approval of the submitted risk-based wildfire protection plan or update in the docketed proceeding, the commission shall approve, approve with conditions, or reject the plan or update based on whether the commission finds that the plan or update is based on reasonable and prudent practices and designed to meet all applicable rules and standards adopted by the commission. The commission, in approving the plan or update with conditions, may direct the electric utility to make modifications to the plan or updates that the commission believes represent a reasonable balancing of mitigation costs with the resulting reduction of wildfire risk based on the information provided by the electric utility and based on best practices. The commission shall issue a decision explaining any directed modifications at the time the commission approves the wildfire protection plan or plan update. The decision shall include a determination of the reasonable costs to develop, implement, and administer the wildfire protection plan or plan update. The commission shall establish a mechanism to allow timely and prompt recovery of the costs in rates that shall be incremental to the rates the electric utility is otherwise authorized to charge.

(f) The electric utility shall track the costs that it incurs to develop, implement, and administer the risk-based wildfire protection plan. In the electric utility's risk-based wildfire protection plan update, the electric utility shall report on the costs as incurred for the most recent past period for which the information is available.

If the actual costs are less than the amounts that the commission determined were reasonable in its decision under subsection (e), the commission shall direct the electric utility to refund or credit the costs to consumers; provided that any refund or credit to consumers shall not affect, alter, or impair the value of the wildfire protection property, wildfire protection charges, or any bonds secured by wildfire protection property.

If the actual costs are equal to or greater than the amounts that the commission determined were reasonable in its decision under subsection (e), the commission shall not direct the electric utility to refund to ratepayers the amount the commission previously determined was reasonable and shall limit its review to any additional costs, which it shall allow the electric utility to recover from ratepayers if the commission finds the costs unreasonable.

(g) The commission's approval of a risk-based wildfire protection plan does not by itself establish a defense to any enforcement action for violation of a commission decision, order, or rule.

(h) The commission, as appropriate, shall adopt rules or issue orders for the implementation of this section. The rules or orders may include procedures and standards regarding data governance, risk-based decision-making, vegetation management, public power safety shutoffs and restorations, pole materials, circuitry, and monitoring systems.

(i) In its decision under subsection (e), the commission shall determine the reasonable costs to develop, implement, and administer the plan and shall authorize the electric utility to recover the costs in rates. The commission shall establish a method to authorize timely and prompt recovery of the wildfire protection costs. For an electric utility cooperative association, recovery shall be through a dedicated, discrete tariff rider. The commission shall establish rules for the electric utility to track actual wildfire protection costs and for the commission to authorize, as applicable, refunds or credits to ratepayers where actual wildfire protection costs are ultimately less than those the commission determined reasonable and authorized for rate recovery; provided that any such refund or credit to consumers shall not affect, alter, or impair the value of the wildfire protection property, wildfire protection charges, or any bonds secured by wildfire protection property. To the degree actual wildfire protection costs exceed those the commission determined were reasonable and authorized for rate recovery, the commission shall authorize cost recovery if it determines those additional wildfire protection costs are just and reasonable. The method established may include the issuance of bonds under section 269-E.

(j) Unless an electric utility acts in a manner that constitutes wilful misconduct, bad faith, or reckless disregard of its obligations, in each case, in compliance with its obligations under a financing order and any applicable wildfire protection plan, no electric utility shall be civilly liable for the death of or injury to persons, or property damage, as a result of:

(1) Any act taken in accordance with a plan or updated plan approved by the commission under this part; or

(2) Any failure to take an action proposed by an electric utility in a plan or updated plan and thereafter removed from the plan by modification of the commission.

(k) There shall be no liability on the part of, and no cause of action of any nature shall arise against, the commission or its agents and employees, the State, the commission commissioners, or the commissioners' representatives for the death of or injury to persons, or property damage, for any action taken by any of the foregoing in the performance of their powers and duties under this part.

(l) Any determination by the commission that the electric utility materially failed to comply with an approved plan or part of an approved plan, and any imposition of a civil penalty, shall be inadmissible in any lawsuit or other action against the electric utility seeking compensation for the alleged death of or injury to persons, or property damage. In any action seeking to hold an electric utility civilly liable for the death of or injury to persons, or property damage, no inference of liability may be drawn solely based on a failure by the electric utility to adhere to the requirements of an approved plan.

§269-D Penalties. In addition to any other penalties provided by law, a failure by an electric utility to comply with an approved wildfire protection plan or part of an approved wildfire protection plan shall be subject to a civil penalty, as determined by the commission. Imposition of penalties under this section shall otherwise be in accordance with section 269‑28 and all applicable administrative rules. All moneys collected under this section shall be deposited into the public utilities commission special fund. The commission shall utilize performance-based regulation to develop financial penalties and incentives tied to compliance with and performance under an approved wildfire protection plan.

§269-E Applications to issue bonds and authorize wildfire protection charges. (a) An electric utility may apply to the commission for one or more financing orders to issue bonds to recover any wildfire protection costs, each of which authorizes the following:

(1) The imposition, charging, and collection of a wildfire protection charge, to become effective upon the issuance of the bonds, and an adjustment of any such wildfire protection charge in accordance with a true‑up adjustment mechanism under this part in amounts sufficient to pay the principal of and interest on the bonds and all other associated financing costs on a timely basis;

(2) The creation of wildfire protection property under the financing order; and

(3) The imposition, charging, and collection of fixed recovery tax amounts to recover any portion of the public utility's federal and state taxes associated with those wildfire protection charges and not financed from the proceeds of bonds.

(b) The application shall include all of the following:

(1) The wildfire protection costs to be financed through the issuance of bonds;

(2) The principal amount of the bonds proposed to be issued;

(3) An estimate of the date each series of bonds is expected to be issued;

(4) The scheduled final payment date, not to exceed thirty years, and a legal final maturity date, which may be longer, subject to rating agency and market considerations, during which term the wildfire protection charge associated with the issuance of each series of bonds is expected to be imposed and collected;

(5) An estimate of the financing costs associated with the issuance of each series of bonds;

(6) An estimate of the amount of the wildfire protection charge revenues necessary to pay principal and interest on the bonds and all other associated financing costs as set forth in the application and the calculation for that estimate;

(7) A proposed design of the wildfire protection charge and the methodology for allocating the wildfire protection charge among consumer classes within the electric utility's service territory;

(8) A description of the financing entity selected by the electric utility;

(9) A description of a proposed true-up mechanism for the adjustment of the wildfire protection charge to correct for any overcollection or undercollection of the wildfire protection charge, and to otherwise ensure the timely payment of principal and interest on the bonds and all associated financing costs; and

(10) Any other information required by the commission.

(c) At the option of the electric utility, the electric utility may include in its application for a financing order a request for authorization to sell, transfer, assign, or pledge wildfire protection property to a governmental financing entity if it expects bonds issued by a governmental financing entity would result in a more cost efficient means, taking into account all financing costs related to the bonds, than using another financing entity to issue bonds to finance the same wildfire protection costs, taking into account the costs of issuing the other financing entity's bonds. If a public utility exercises such option, the commission may hire a financial advisor in connection with its review, upon which it may rely.

(d) The commission shall issue an approval or denial of any application for a financing order filed under this section within one hundred twenty days of the filing of the application.

(e) In exercising its duties under this section, the commission shall consider:

(1) Whether the wildfire protection costs to be financed by any bonds to be issued are just and reasonable;

(2) Whether the costs are consistent with the public interest;

(3) Whether the structuring, marketing, and pricing of the bonds are expected to result in the lowest wildfire protection charges consistent with market conditions at the time the bonds are priced and the terms of the financing order;

(4) Whether the terms and conditions of any bonds to be issued are just and reasonable;

(5) Whether the issuance of the bonds would be beneficial, including by avoiding or significantly mitigating abrupt and significant increases in rates to consumers for the applicable time period in the absence of the bonds;

(6) Whether the recovery of recovery costs through the designation of the fixed recovery charges and any associated fixed recovery tax amounts, and the issuance of recovery bonds in connection with the fixed recovery charges, would result in net savings to consumers and reduce, to the maximum extent possible, the rates on a present value basis that consumers would pay as compared to the use of traditional utility financing mechanisms, which shall be calculated using the electric utility's updated overall corporate debt and equity costs in the ratio approved by the commission at the time of the financing order; provided that the commission may hire and rely upon a financial advisor in connection with this determination; provided further that the financial advisor shall not direct how the recovery bonds are placed to market; and

(7) Any other factors that the commission deems reasonable and in the public interest.

(f) The electric utility may request the determination specified in this section by the commission in a separate proceeding, in an existing proceeding, or both. If the commission makes the determination specified in this section, the commission shall establish, as part of the financing order, a procedure for the electric utility to submit applications from time to time to request the issuance of additional financing orders designating wildfire protection charges and any associated fixed recovery tax amounts as recoverable. The electric utility may submit an application with respect to wildfire protection costs that an electric utility has paid, has an existing legal obligation to pay, or would be obligated to pay under an agreement. Within one hundred twenty days of the filing of that application, the commission shall issue a financing order if the commission determines that the amounts identified in the application are wildfire protection costs.

At the option of the electric utility, the electric utility may include in its application for a financing order a request for authorization to sell, transfer, assign, or pledge recovery property to a governmental entity if the electric utility expects recovery bonds issued by a governmental entity would result in a more cost-efficient means, taking into account all financing costs related to the recovery bonds, than using another financing entity to issue recovery bonds to finance the same recovery costs, taking into account the costs of issuing the other financing entity's bonds. If an electric utility exercises this option, the commission may hire and rely upon a financial advisor in connection with the commission's review; provided that the financial advisor shall not direct how the recovery bonds are placed to market.

(g) The commission shall not issue a financing order to the extent that the aggregate amount of all wildfire protection charges under all financing orders previously issued under this part, combined with any new wildfire protection charges to be authorized pursuant the requested new financing order, constitute more than five per cent of the average residential customer bill, including the aggregate wildfire protection charges across affiliated utilities and taking account of any credits from affiliate utilities, calculated at the time of an application for new financing order under this part. This provision shall not affect any financing order previously issued under this part.

(h) Wildfire protection charges shall be imposed only on existing and future consumers within the utility service territory who shall continue to pay wildfire protection charges until the bonds and associated financing costs are paid in full by the financing entity or, if the wildfire protection property has been assigned to an assignee in connection with the exercise of remedies upon a default under the terms of the bonds, until the receipt of proceeds by the assignee in an amount sufficient to repay the principal amount of, and interest that would have accrued on, the bonds had they remained outstanding.

§269-F Wildfire protection plan financing order. (a) A financing order shall remain in effect until the bonds issued under the financing order and all financing costs related to the bonds have been paid in full or defeased by their terms or, if the wildfire protection property has been assigned to an assignee in connection with the exercise of remedies upon a default under the terms of the bonds, until the receipt of proceeds by the assignee in an amount sufficient to repay principal and interest on the bonds that would have accrued had they remained outstanding. A financing order shall remain in effect and unabated notwithstanding the bankruptcy, reorganization, or insolvency of the electric utility or the commencement of any judicial or nonjudicial proceeding on the financing order.

(b) Notwithstanding any other law, and except as otherwise provided in section 269-C(e), with respect to wildfire protection property that has been made the basis for the issuance of bonds and with respect to any associated fixed recovery tax amounts, the financing order, the wildfire protection charges, and any associated fixed recovery tax amounts shall be irrevocable. The State and its agencies, including the commission, pledge and agree with bondholders, the owners and assignees of the wildfire protection property, and other financing parties that the State and its agencies will not take any action listed in this subsection. This subsection does not preclude limitation or alteration if full compensation is made by law for the full protection of the wildfire protection property collected under a financing order and of the bondholders and any assignee or financing party entering into a contract with the electric utility. The following actions shall be prohibited:

(1) Altering the provisions of this part that authorize the commission to create an irrevocable contract right or choosing in action by the issuance of a financing order, to create wildfire protection property, and make the wildfire protection charges imposed by a financing order irrevocable, binding, non-bypassable charges for all existing and future consumers;

(2) Taking or permitting any action that impairs or would impair the value of wildfire protection property or the security for the bonds or revises the wildfire protection costs for which recovery is authorized;

(3) In any way impairing the rights and remedies of the bondholders, assignees, and other financing parties;

(4) Except for changes made under the formula-based true‑up mechanism authorized under subsection (d), reducing, altering, or impairing wildfire protection charges that are to be imposed, billed, charged, collected, and remitted for the benefit of the bondholders, any assignee, and any other financing parties until any and all principal, interest, premium, financing costs and other fees, expenses, or charges incurred, and any contracts to be performed, in connection with the related bonds have been paid and performed in full or, if the wildfire protection property has been assigned to an assignee in connection with the exercise of remedies upon a default under the terms of the bonds, until the receipt of proceeds by the assignee in an amount sufficient to repay principal and interest on the bonds that would have accrued had they remained outstanding.

The financing entity is authorized to include this pledge in the bonds.

(c) Under a final financing order, the electric utility shall retain sole discretion to select the financing entity and to cause bonds to be issued, including the right to defer or postpone the issuance, assignment, sale, or transfer of wildfire protection property. The commission shall not impose any penalty, disallowance, or other negative consequence on the electric utility in respect of its exercise of its discretion.

(d) The commission may create, under an application from an electric utility, a non-bypassable surcharge referred to as a wildfire protection charge, which shall be applied to recover financing costs and wildfire protection costs. The wildfire protection charge shall be a dedicated, discrete tariff rider. The commission, in any financing order, shall establish a procedure for periodic true-up adjustments to wildfire protection charges, which shall be made at least annually and may be made more frequently. Within thirty days after receiving an electric utility's filing of a true-up adjustment, the commission's review of the filing shall be limited to mathematical or clerical errors as determined in accordance with any true-up adjustment formulas set forth in the applicable financing order. The commission shall either approve the filing or inform the electric utility of any mathematical or clerical errors in its calculation. If the commission informs the electric utility of mathematical or clerical errors in its calculation, the electric utility shall correct its error and refile its true-up adjustment. The time frames previously described in this subsection shall apply to a refiled true-up adjustment.

(e) Financing orders or bonds issued under this part shall be payable solely from the wildfire protection property provided under this part and shall not constitute a general obligation of the State or any political subdivision thereof or constitute a pledge of the full faith and credit of the State or any of its political subdivisions. All bonds shall contain on the face thereof a statement to the following effect: "Neither the full faith and credit nor the taxing power of the State of Hawaii is pledged to the payment of the principal of, or interest and premium on, this bond." The issuance of bonds under this part shall not directly, indirectly, or contingently obligate the State or any political subdivision thereof to levy or to pledge any form of taxation or to make any appropriation for their payment.

(f) Wildfire protection charges are wildfire protection property when, and to the extent that, a financing order authorizing the wildfire protection charges has become effective in accordance with this part, and the wildfire protection property shall thereafter continuously exist as property for all purposes, and all of the rights and privileges relating to that property shall continuously exist for the period and to the extent provided in the financing order, but until the bonds are paid in full, including all principal, premiums, if any, interest with respect to the bonds, and all other financing costs are paid in full or, if the wildfire protection property has been assigned to an assignee in connection with the exercise of remedies upon a default under the terms of the bonds, until the receipt by the assignee of proceeds in an amount sufficient to repay the principal amount of, and interest that would have accrued on, the bonds had they remained outstanding. A financing order may provide that the creation of wildfire protection property shall be simultaneous with the sale of the wildfire protection property to an assignee as provided in the application of the pledge of the wildfire protection property to secure the bonds.

(g) Any successor to a financing entity shall be bound by the requirements of this part and shall perform and satisfy all obligations of, and have the same rights under a financing order as, and to the same extent as, the financing entity.

(h) Neither financing orders nor bonds issued under this part shall constitute a debt or liability of the State or of any political subdivision thereof, nor shall they constitute a pledge of the full faith and credit of the State or any of its political subdivisions, but are payable solely from the wildfire relief funds provided therefor under this part. All bonds shall contain on the face thereof a statement to the following effect: "Neither the full faith and credit nor the taxing power of the State of Hawaii is pledged to the payment of the principal of, or interest on, this bond."

(i) The issuance of bonds under this part shall not directly, indirectly, or contingently obligate the State or any political subdivision thereof to levy or pledge any form of taxation or to make any appropriation for their payment.

(j) To the extent that any interest in wildfire protection property is sold, assigned, or pledged as collateral under subsection (b), the commission shall require the public utility to contract with the financing entity and its assignees that it will continue to operate its system to provide service to consumers within its service territory, will collect amounts in respect of the wildfire protection charges for the benefit and account of the financing entity and its assignees, and will account for and remit these amounts to or for the account of the financing entity or its assignees. Contracting with the financing entity and its assignees in accordance with that authorization shall not impair or negate the characterization of the sale, assignment, or pledge as an absolute transfer, a true sale, or a security interest, as applicable. To the extent that billing, collection, and other related services with respect to the provision of the public utility's services are provided to a consumer by any person or entity other than the public utility in whose service territory the consumer is located, that person or entity shall collect the wildfire protection charges and any associated fixed recovery tax amounts from the consumer for the benefit and account of the public utility, financing entity, or assignees with the associated revenues remitted solely for such person's benefit as a condition to the provision of electric service to that consumer. Each financing order shall impose terms and conditions, consistent with the purposes and objectives of this part, on any person or entity responsible for billing, collection, and other related services, including without limitation collection of the wildfire protection charges and any associated fixed recovery tax amounts, that are the subject of the financing order.

(k) The financing entity may issue bonds upon approval by the commission in a financing order. Bonds shall be nonrecourse to the credit or any assets of the public utility, other than the wildfire protection property as specified in that financing order.

(l) Wildfire protection property that is specified in a financing order shall constitute an existing, present property right, notwithstanding the fact that the imposition and collection of wildfire protection charges depend on the electric utility continuing to provide services or continuing to perform its servicing functions relating to the collection of wildfire protection charges or on the level of future service consumption, including electricity consumption. Wildfire protection property shall exist whether or not the wildfire protection charges have been billed, have accrued, or have been collected and notwithstanding the fact that the value for a security interest in the wildfire protection property, or amount of the wildfire protection property, is dependent on the future provision of service to consumers. All wildfire protection property specified in a financing order shall continue to exist until the bonds issued under a financing order and all associated financing costs are paid in full or, if the wildfire protection property has been assigned to an assignee in connection with the exercise of remedies upon a default under the terms of the bonds, until the receipt by the assignee of proceeds in an amount sufficient to repay the principal amount of, and interest that would have accrued on, the bonds had they remained outstanding.

(m) Wildfire protection property, wildfire protection charges, and the interests of an assignee, bondholder, or financing entity, or any pledgee in wildfire protection property and wildfire protection charges shall not be subject to setoff, counterclaim, surcharge, recoupment, or defense by the electric utility or any other person or in connection with the bankruptcy, reorganization, or other insolvency proceeding of the electric utility, any affiliate of the electric utility, or any other entity.

(n) Notwithstanding any other law to the contrary, any requirement under this part or a financing order that the commission takes action with respect to the subject matter of a financing order shall be binding upon the commission, as it may be constituted from time to time, and any successor agency exercising functions similar to the commission, and the commission shall have no authority to rescind, alter, or amend that requirement in a financing order.

(o) The electric utility may sell and assign all or portions of its interest in wildfire protection property to one or more financing entities that make that wildfire protection property the basis for issuance of bonds, to the extent approved in a financing order. The electric utility or financing entity may pledge wildfire protection property as collateral, directly or indirectly, for bonds to the extent approved in the pertinent financing orders providing for a security interest in the wildfire protection property, in the manner set forth in section 269-I. In addition, wildfire protection property may be sold or assigned by either of the following:

(1) The financing entity or a trustee for the holders of bonds or the holders of an ancillary agreement in connection with the exercise of remedies upon a default under the terms of the bonds; or

(2) Any person acquiring the wildfire protection property after a sale or assignment under this part.

§269-G Wildfire protection charge. (a) The commission may create, under a financing order approved under section 269‑E, a non-bypassable charge for a financing entity, referred to as a wildfire protection charge that shall be applied to the repayment of bonds and related financing costs as described in this part. The wildfire protection charge and any associated fixed recovery tax amounts may be a usage-based charge, a flat user charge, or a charge based upon customer revenues as determined by the commission for each consumer class in any financing order.

(b) As long as any bonds are outstanding and any financing costs have not been paid in full or, if the wildfire protection property has been assigned to an assignee in connection with the exercise of remedies upon a default under the terms of the bonds, proceeds in an amount sufficient to repay principal and interest on the bonds that would have accrued had they remained outstanding have not been received, any wildfire protection charge and any associated fixed recovery tax amounts authorized under a financing order shall be non-bypassable. Subject to any exceptions provided in a financing order, a wildfire protection charge and any associated fixed recovery tax amounts shall be paid by all existing and future consumers within the utility service territory.

(c) The wildfire protection charge shall be collected by an electric utility or its successors, in accordance with subsection (a), in full through a charge that is separate and apart from the electric utility's rates.

(d) An electric utility may exercise the same rights and remedies under its tariff and applicable law and regulation based on a consumer's nonpayment of the wildfire protection charge as it could for a consumer's failure to pay any other charge payable to that electric utility.

§269-H Bonds; issuance; wildfire protection property interests. (a) An electric utility may sell and assign all or portions of its interest in wildfire protection property to one or more financing entities that make that wildfire protection property the basis for issuance of bonds, to the extent approved in a financing order.

(b) The electric utility or financing entity may pledge wildfire protection property as collateral, directly or indirectly, for bonds to the extent approved in the applicable financing orders providing for a security interest in the wildfire protection property, in the manner set forth in this section.

(1) The financing entity or a trustee for the holders of bonds or the holders of an ancillary agreement in connection with the exercise of remedies upon a default under the terms of the recovery bonds; or

(2) Any person acquiring the wildfire protection property after a sale or assignment under this part.

§269-I Security interests in wildfire protection property; financing statements. (a) A security interest in wildfire protection property is valid and enforceable against the pledgor and third parties, subject to the rights of any third parties holding security interests in the wildfire protection property perfected in the manner described in this section, and attaches when all of the following have taken place:

(1) The commission has issued a financing order authorizing the wildfire protection charge included in the wildfire protection property;

(2) Value has been given by the pledgees of the wildfire protection property; and

(3) The pledgor has signed a security agreement covering the wildfire protection property.

(b) A valid and enforceable security interest in wildfire protection property is perfected when it has attached and when a financing statement has been filed with the bureau of conveyances of the State naming the pledgor of the wildfire protection property as "debtor" and identifying the wildfire protection property.

Any description of the wildfire protection property shall be sufficient if it refers to the financing order creating the wildfire protection property. A copy of the financing statement shall be filed with the commission by the public utility that is the pledgor or transferor of the wildfire protection property, and the commission may require the public utility to make other filings with respect to the security interest in accordance with procedures that the commission may establish; provided that the filings shall not affect the perfection of the security interest.

(c) A perfected security interest in wildfire protection property shall be a continuously perfected security interest in all wildfire protection property revenues and proceeds arising with respect thereto, whether or not the revenues or proceeds have accrued. Conflicting security interests shall rank according to priority in time of perfection. Wildfire protection property shall constitute property for all purposes, including for contracts securing bonds, whether or not the wildfire protection property revenues and proceeds have accrued.

(d) Subject to the terms of the security agreement covering the wildfire protection property and the rights of any third parties holding security interests in the wildfire protection property perfected in the manner described in this section, the validity and relative priority of a security interest created under this section shall not be defeated or adversely affected by the commingling of revenues arising with respect to the wildfire protection property with other funds of the public utility that is the pledgor or transferor of the wildfire protection property, or by any security interest in a deposit account of that public utility perfected under chapter 490, article 9, into which the revenues are deposited.

Subject to the terms of the security agreement, upon compliance with the requirements of section 490:9-312(b)(1), the pledgees of the wildfire protection property shall have a perfected security interest in all cash and deposit accounts of the electric utility in which wildfire protection property revenues have been commingled with other funds.

(e) If default occurs under the security agreement covering the wildfire protection property, the pledgees of the wildfire protection property, subject to the terms of the security agreement, shall have all rights and remedies of a secured party upon default under chapter 490, article 9, and shall be entitled to foreclose or otherwise enforce their security interest in the wildfire protection property, subject to the rights of any third-parties holding prior security interests in the wildfire protection property perfected in the manner provided in this section. In addition, the commission may require in the financing order creating the wildfire protection property that, if default by the electric utility in payment of wildfire protection property revenues occurs, the commission and any successor thereto, upon the application by the pledgees or transferees, including assignees of the wildfire protection property, under section 269-J, and without limiting any other remedies available to the pledgees or assignees by reason of the default, shall order the sequestration and payment to the pledgees or assignees of wildfire protection property revenues. Any order shall remain in full force and effect notwithstanding any bankruptcy, reorganization, or other insolvency proceedings with respect to the debtor, pledgor, or transferor of the wildfire protection property. Any surplus in excess of:

(1) Amounts necessary to pay principal, premiums, if any, interest, costs, and arrearages on the bonds, and associated financing costs arising under the security agreement; or

(2) An amount sufficient to repay the principal amount of, and interest that would have accrued on, the bonds had the bonds remained outstanding in instances where the wildfire protection property has been assigned to an assignee in connection with the exercise of remedies upon a default under the terms of the bonds,

shall be remitted to the debtor or to the pledgor or transferor.

(f) Sections 490:9-204 and 490:9-205 shall apply to a pledge of wildfire protection property by the public utility, an affiliate of the public utility, or a financing entity.

§269-J Transfers of wildfire protection property. (a) A transfer or assignment of wildfire protection property by the public utility to an assignee or to a financing entity, or by an assignee of the public utility or a financing entity to another financing entity, which the parties in the governing documentation have expressly stated to be a sale or other absolute transfer, in a transaction approved in a financing order, shall be treated as an absolute transfer of all of the transferor's right, title, and interest, as in a true sale, and not as a pledge or other financing, of the wildfire protection property, other than for federal and state income and franchise tax purposes.

(b) The characterization of the sale, assignment, or transfer as an absolute transfer and true sale and the corresponding characterization of the property interest of the assignee shall not be affected or impaired by, among other things, the occurrence of any of the following:

(1) Commingling of wildfire protection charge revenues with other amounts;

(2) The retention by the seller of either of the following:

(A) A partial or residual interest, including an equity interest, in the financing entity or the wildfire protection property, whether direct or indirect, subordinate or otherwise; or

(B) The right to recover costs associated with taxes, franchise fees, or license fees imposed on the collection of wildfire protection charge;

(3) Any recourse that an assignee may have against the seller;

(4) Any indemnification rights, obligations, or repurchase rights made or provided by the seller;

(5) The obligation of the seller to collect wildfire protection charges on behalf of an assignee;

(6) The treatment of the sale, assignment, or transfer for tax, financial reporting, or other purpose; or

(7) Any true-up adjustment of the wildfire protection charge as provided in the financing order.

(c) A transfer of wildfire protection property shall be deemed perfected against third persons when both of the following occur:

(1) The commission issues the financing order authorizing the wildfire protection charge included in the wildfire protection property; and

(2) An assignment of the wildfire protection property in writing has been executed and delivered to the assignee.

(d) As between bona fide assignees of the same right for value without notice, the assignee first filing a financing statement in accordance with chapter 490, article 9, part 5, naming the assignor of the wildfire protection property as debtor and identifying the wildfire protection property shall have priority. Any description of the wildfire protection property shall be sufficient if it refers to the financing order creating the wildfire protection property. A copy of the financing statement shall be filed by the assignee with the commission, and the commission may require the assignor or the assignee to make other filings with respect to the transfer in accordance with procedures the commission may establish, but these filings shall not affect the perfection of the transfer.

§269-K Financing entity successor requirements; default of financing entity. (a) Any successor to an electric utility subject to a financing order, whether under any bankruptcy, reorganization, or other insolvency proceeding, or under any merger, sale, or transfer, by operation of law, or otherwise, shall be bound by the requirements of this part. The successor of the electric utility shall perform and satisfy all obligations of the electric utility under the financing order, in the same manner and to the same extent as the electric utility, including the obligation to collect and pay the wildfire protection charge to any financing party as required by a financing order or any assignee. Any successor to the electric utility shall be entitled to receive any fixed recovery tax amounts otherwise payable to the electric utility.

(b) The commission may require in a financing order that if a default by the electric utility in remittance of the wildfire protection charge collected arising with respect to wildfire protection property occurs, the commission, without limiting any other remedies available to any financing party by reason of the default, shall order the sequestration and payment to the beneficiaries of the wildfire protection charge collected arising with respect to the wildfire protection property. Any order shall remain in full force and effect notwithstanding any bankruptcy, reorganization, or other insolvency proceedings with respect to the electric utility.

§269-L Severability. If any provision of this part is held to be invalid or is superseded, replaced, repealed, or expires for any reason:

(1) That occurrence shall not affect any action allowed under this part that is taken before that occurrence by the commission, a financing entity, a bondholder, or any financing party, and any such action shall remain in full force and effect; and

(2) The validity and enforceability of the rest of this part shall remain unaffected."

SECTION 9. Chapter 269-17, Hawaii Revised Statutes, is amended to read as follows:

"§269-17 Issuance of securities. A public utility corporation may, on securing the prior approval of the public utilities commission, and not otherwise, except as provided in section 269-E, issue stocks and stock certificates, bonds, notes, and other evidences of indebtedness, payable at periods of more than twelve months after the date thereof, for the following purposes and no other, namely: for the acquisition of property or for the construction, completion, extension, or improvement of or addition to its facilities or service, or for the discharge or lawful refunding of its obligations or for the reimbursement of moneys actually expended from income or from any other moneys in its treasury not secured by or obtained from the issue of its stocks or stock certificates, [or] bonds, notes, or other evidences of indebtedness, for any of the aforesaid purposes except maintenance of service, replacements, and substitutions not constituting capital expenditure in cases where the corporation has kept its accounts for [~~such~~] expenditures in [~~such~~] a manner as to enable the commission to ascertain the amount of moneys so expended and the purposes for which the expenditures were made, and the sources of the wildfire relief funds in its treasury applied to the expenditures. As used [~~herein,~~] in this section, "property" and "facilities"[,] mean property and facilities used in all operations of a public utility corporation whether or not included in its public utility operations or rate base. A public utility corporation may not issue securities to acquire property or to construct, complete, extend, [or] improve, or add to its facilities or service if the commission determines that the proposed purpose will have a material adverse effect on its public utility operations.

All stock and every stock certificate, and every bond, note, or other evidence of indebtedness of a public utility corporation not payable within twelve months, issued without an order of the commission authorizing the same, then in effect, shall be void."

SECTION 10. No later than December 31, 2024, each electric utility shall file with the public utilities commission the utility's initial risk-based wildfire protection plan as required under section 269-C, Hawaii Revised Statutes, established by section 8 of this Act.

SECTION 11. In codifying the new part added to chapter 269, Hawaii Revised Statutes, by section 8 of this Act, the revisor of statutes shall substitute appropriate section numbers for the letters used in designating and referring to the new sections in this Act.

PART III

SECTION 12. This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun before its effective date.

SECTION 13. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 14. This Act shall take effect on July 1, 3000.

HOUSE OF REPRESENTATIVES	H.B. NO.	2700
THIRTY-SECOND LEGISLATURE, 2024		H.D. 3
STATE OF HAWAII		S.D. 2