Key Performance Metrics


Hawaii's transition to a clean energy future requires a significant investment to ensure a robust electric grid to maintain service quality and reliability while increasing the development and deployment of renewable energy resources affordable to our customers. The ability to attract investors to provide the upfront funding for these projects requires a financially sound utility. The financial strength of the utility is measured through numerous metrics, but two important indicators are: 1) the Return on Common Equity (book and ratemaking); and 2) Credit Ratings issued by the rating agencies of Fitch Ratings ("Fitch"), Moody's Investors Service ("Moody's"), and Standard & Poor's Ratings Services ("S&P").

Ratemaking Return on Common Equity (“Ratemaking ROE”)

Shareholders help provide upfront funding for capital improvement projects that serve our customers. The Public Utilities Commission ("PUC") determines a reasonable "return on equity" ("Authorized ROE") or profit for shareholders. Although this profit is what is authorized by the PUC, it does not mean that shareholders are guaranteed this level of profit. In each island region's rate case, the PUC determines the Authorized ROE after reviewing the Company's and interveners' positions regarding the Company's composite cost of capital (which includes the return on equity).

Book ROE is a measure of a company's actual profit or "return" on shareholders' investments. Ratemaking ROE is a measure of a company's profit or "return," based on the PUC's methodology, and adjusted for items not included in rates, on rate base investments funded by shareholders. The primary difference between the book ROE and the Ratemaking ROE is due to items that are not included in rates. For example, incentive compensation and certain other costs are incurred by the Company as part of running its business, but those costs are not paid by customers. Therefore, they are excluded when determining ratemaking profit, resulting in a higher Ratemaking ROE than book ROE. At the end of each year, the Ratemaking ROEs are used to determine whether there will be any sharing of actual earnings that exceed the PUC's Authorized ROEs. Under the current method of calculating rates called Decoupling, each island region's Ratemaking ROE as of December 31 is compared to its Authorized ROE1. For evaluation periods beginning January 1, 2021, a symmetrical Earnings Sharing Mechanism (“ESM”) for achieved ratemaking Return on Average Common Equity (“ROACE”) outside of a 300 basis points dead band above or below the current authorized ROACE of 9.5% for each of the Utilities is used to determine whether an earning sharing adjustment is applicable. There is a 50/50 sharing between customers and Utilities for the achieved ratemaking ROACE falling within 150 basis points outside of the dead band in either direction, and a 90/10 sharing for any further difference. Decoupling went into effect on March 1, 2011, April 9, 2012, and May 4, 2012 for Oahu, Hawaii Island, and Maui County respectively.

On August 31, 2023, the PUC issued an order temporarily suspending the ESM, effective October 1, 2023 until further notice. The intent of the order is to address the unintended consequence of customers potentially bearing the costs associated with the Maui wildfires through the operation of the ESM without prior PUC review.

The gap between PUC-allowed ROACEs and the ROACEs actually achieved is primarily due to: the consistent exclusion of certain expenses from rates, the lower RBA interest rate (currently a short-term debt rate rather than the actual cost of capital), O&M increases and return on capital additions since the last rate case in excess of indexed escalations, and changes in actual pension regulatory asset and interest expense from the test year level.

1 Refer to the Management Discussion & Analysis section of HECO’s Form 10Q filed quarterly and Form 10K filed annually with the Securities and Exchange Commission for a discussion of drivers behind the gap between authorized and actual ROEs. The Forms can be found at, under SEC filings.


Oahu’s current Authorized ROE of 9.5% was approved by the PUC in Docket No. 2019-0085 in its Final Decision and Order in October 2020. As shown in the graph below, Oahu’s Ratemaking ROEs as of December 31, 2018, December 31, 2019, December 31, 2020, December 31, 2021 and December 31, 2022 were 6.83%, 8.02%, 8.82%, 8.97%, 9.38% and 9.67% which amounts to -1.48%, -0.68%, -0.53%, -0.12% and 0.17% as compared to its authorized level.

Ratemaking and Book Return on Equity vs Authorized

Maui County

Maui County's current Authorized ROE of 9.5% was approved by the PUC in its Final Decision and Order in March 2019. As shown in the graph below, its Ratemaking ROEs as of December 31, 2018, December 31, 2019, December 31, 2020, December 31, 2021 and December 31, 2022 were 7.54%, 7.96%, 7.11%, 8.22% and 8.23% which amounts to 1.96%, 1.54%, 2.39%, 1.28% and 1.27% below its authorized level.

Ratemaking ROE

Hawaii Island

Hawaii Island’s current Authorized ROE of 9.5% was approved by the PUC in Docket No. 2018-0368 in its Interim Decision and Order in November 2019. On July 28, 2020, the PUC issued its Final Decision and Order, which approved the current Authorized ROE of 9.5%. As shown in the graph below, its Ratemaking ROEs as of December 31, 2018, December 31, 2019, December 31, 2020, December 31, 2021 and December 31, 2022 were 8.36%, 6.72%, 9.42%, 6.94% and 7.10% which amounts to 1.14%, 2.78%, 0.08%, 2.56% and 2.40% below its authorized level.

Ratemaking ROE

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Learn more about Decoupling.

Credit Ratings

Credit rating agencies evaluate a company's ability to repay debt. Based on their assessment using their methodology, they assign credit ratings (Grades A, B, C, etc.). The credit rating impacts a company's ability to borrow money and the interest rate which it has to pay. The lower the rating, the higher the interest cost. Conversely, the higher the rating, the lower the interest cost. The cost of debt (weighted average interest rate) is included in each island region's composite cost of capital which becomes the rate of return on average rate base embedded in electric rates that Hawaiian Electric charges customers.

Ratings are grouped into categories ranging from 'Prime' (highest rating and lowest cost) to 'In Default' (lowest rating and highest cost or unable to borrow). Ratings from 'Prime' to 'Lower Medium Grade' are considered 'Investment Grade'. Ratings below 'Lower Medium Grade' (Fitch's and S&P's BBB- and Moody's Baa3) are considered 'Non-Investment Grade', or speculative or junk bond. Companies with 'Non-Investment Grade' ratings would be at risk of having higher interest costs and/or not being able to attract investors for its bonds.

Fitch Moody's S&P Status
Investment Grade
(Lowest risk/cost)
AAA Aaa AAA Prime
AA+ Aa1 AA+ High Grade
AA- Aa3 AA-
A+ A1 A+ Upper Medium Grade
A A2 A
A- A3 A-
BBB+ Baa1 BBB+ Lower Medium Grade
BBB- Baa3 BBB-
Non-Investment Grade BB+ Ba1 BB+ Non-Investment
BB- Ba3 BB-
B+ B1 B+ Highly Speculative
B B2 B
B- B3 B-
In Default
(Highest risk/cost)
D C D In Default

Credit ratings below B-/B3/B- and above D/C/D not included in above chart

Rating outlooks indicate the direction (e.g. positive, negative, stable) a rating is likely to move, generally over a one-year to two-year period. They incorporate trends or risks that have not reached a level that would trigger a rating action, but may trigger one if such trends or risks continue. Ratings may be placed on credit watch if events or circumstances occur that may affect a credit rating in the near term. Updating a rating outlook or placing a rating on credit watch does not mean a change in credit rating is inevitable.

The most recent ratings and credit outlooks issued by Fitch, Moody's, and S&P for Hawaiian Electric as a consolidated entity (including Oahu, Maui County and Hawaii Island) are presented in the table below. On August 15, 2023, S&P downgraded Hawaiian Electric’s long-term issuer credit rating to ‘BB-‘ from ‘BBB’, short-term issuer credit rating and commercial paper ratings to ‘B’ from ‘A-2’, and revised the outlook to ‘watch negative’ from ‘stable’. Subsequently on August 24, 2023, S&P further downgraded Hawaiian Electric’s long-term issuer credit rating to ‘B-‘ from ‘BB-‘ and reaffirmed outlook as ‘watch negative’. On August 18, 2023, Moody’s downgraded Hawaiian Electric’s issuer rating, including its senior unsecured notes to ‘Ba3’ from ‘Baa1’, preferred stock rating to ‘B3’ from ‘Baa3’, short-term commercial paper rating to ‘not prime’ from ‘prime-2’, and revised the outlook to ‘rating under review’ from ‘stable’. Subsequently on September 8, 2023, Moody’s revised the outlook to ‘review for downgrade’ from ‘rating under review’. On August 21, 2023, Fitch downgraded Hawaiian Electric’s Long-Term Issuer Default Rating (“IDR”) to ‘B’ from ‘A-‘, short-term IDR to ‘B’ from ‘F2’, senior unsecured long-term debt to ‘B+’ from ‘A’, senior unsecured short-term debt to ‘B’ from ‘F2’, Hawaii Electric Light’s senior unsecured long-term debt to ‘BB-‘ from ‘A’, Maui Electric’s senior unsecured long-term debt to ‘B+’ from ‘A’, and revised the outlook to ‘watch negative’ from ‘stable’. In addition, Fitch assigned first-time long-term IDRs of ‘B’ to Hawaii Electric Light and Maui Electric.

Hawaiian Electric  Fitch2  Moody’s3  S&P4
Rating B Ba3 B-
Outlook Watch Negative Review for Downgrade Watch Negative

2 Fitch Ratings dated August 21, 2023
3 Moody’s Rating Action dated September 8, 2023
4 S&P Global Ratings dated August 24, 2023

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General Concepts

There are three terms that appear often in financial discussions: ratemaking, cost of service regulation, and rate base. Here are some brief explanations of what these terms refer to:


Utility rates charged to consumers are set through a formal regulatory process ("ratemaking" process). The process is typically carried out through a rate case presented by a public utility before the Public Utilities Commission.

Cost of Service Regulation

In a rate case, the Commission determines the total annual revenues required by the Utility to cover both its expenses and the opportunity to earn a fair return on its investments. The determination is based on the Commission's review of the estimates submitted by the Utility. Expenses are allowed for ratemaking purposes if they are prudent and related to providing safe and reliable service to the customers.

Rate Base

Rate base is the value of facilities and other investments used to provide service to customers, net of funds from non-investors (e.g., customer deposits and accumulated deferred income taxes). Return on the investments is calculated by applying the weighted average rate of return on capital (e.g., long-term debt, preferred stock, and common stock) to the net investment amount, or rate base.