KIUC Seeks Deferred Accounting Treatment for Hurricane Lowell Costs

LĪHUʻE, KAUAʻI - Kauaʻi Island Utility Cooperative (KIUC) has filed an application with the Hawaiʻi Public Utilities Commission (PUC) seeking approval to use deferred accounting treatment for costs and other financial impacts associated with Hurricane Lowell.

The application does not seek to recover Hurricane Lowell costs from members at this time. Instead, deferred accounting would allow KIUC to establish a regulatory asset to separately track and preserve eligible hurricane-related costs and financial impacts resulting from lost gross margins/sales impacts and increased bad expense for future cost recovery consideration in a later proceeding.

Hurricane Lowell passed immediately west of Kauaʻi on September 7 and 8, bringing heavy rainfall, flooding, storm surge and wind gusts exceeding 90 miles per hour in some areas. The storm caused extensive damage to KIUC's approximately 1,500 miles of transmission and distribution infrastructure, including utility poles, power lines, substations and related equipment. Approximately 33,000 of KIUC's 36,000 member accounts were without power after the storm. As of today, more than 98% of members have had their service restored.

KIUC's preliminary estimate of Hurricane Lowell-related costs is $40 million to $50 million, although the final amount will not be known for some time. Restoration work remains underway, and costs for materials, labor, contractors, mutual aid and other assistance are still being accumulated. KIUC also may receive insurance proceeds and potential federal disaster assistance that could offset some of those costs. As a not-for profit electric cooperative, KIUC is allowed to seek reimbursement from the Federal Emergency Management Agency (FEMA) of up to 75% of eligible costs in the event a presidentially declared disaster for Kauai is issued. Any FEMA reimbursements or insurance proceeds received for hurricane damage would reduce the amount of the regulatory asset.

Why deferred accounting is important

Unlike an investor-owned utility, KIUC is a not-for-profit cooperative owned by the very members it serves and does not have access to shareholder equity to absorb extraordinary costs. KIUC primarily relies on revenues from electric rates and debt financing to fund its operations and capital needs. Its financing agreements also require the cooperative to maintain certain financial measures, including a minimum debt service coverage ratio.

“This request is about protecting the financial health of our member-owned cooperative while Kauaʻi continues to recover from an extraordinary disaster,” said KIUC President and Chief Executive Officer David Bissell. “Rather than seeking an immediate rate increase at a time when many of our members are dealing with their own hurricane-related losses, we are asking for the ability to appropriately account for these extraordinary costs now and address potential recovery of those costs later, when we have a much clearer picture of the overall financial impact.”

KIUC has requested that the PUC act on the application by October 30, 2026, if possible.  If the PUC approves the application, any future proposal by KIUC to recover amounts recorded in the regulatory asset would require a separate application request and further PUC review and approval.

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