A bill that would provide for a faster, more equitable system for determining when power utilities are responsible for compensating their customers for significant interruptions in service cleared the state Senate and is under consideration in the House.

Senate Bill 1648 was introduced in the aftermath of a series of hours-long outages in downtown Honolulu and Chinatown in June 2024 that resulted in area businesses suffering spoiled inventory, equipment damage and revenue loss.

An estimated 3,000 Hawaii Electric customers were affected by the outages; about 300 claims were filed, roughly half the total filed over the entire year.

Under the existing system, affected businesses had 30 days to file a claim for losses due to an outage. Under Public Utility Commission rules, utilities are required to compensate customers for damaged incurred by an outage that was within the utility’s control — as determined by the utility.

“Not surprisingly, utilities rarely determine that a loss or damage was within their control; in 2023, 90% of damage claims filed with Hawaiian Electric were denied,” the bill states. “Even when a claim is approved, the time between the outage and payment can be excruciating.”

An independent, third-party forensic analysis commissioned by Hawaiian Electric ultimately determined that the utility was not responsible for the June 2024 outages. The utilityoffered to cover up to 50% of losses as a goodwill gesture.

The bill states that this system “unacceptably fails to provide utility customers with a clear, fair, equitable and efficient system through which they are compensated for losses stemming from power outages.”

Sen. Karl Rhoads, who led the introduction of the measure, said the legislation aims to create a balanced system in determining who should bear the cost of power outage damages — a determination previously left to the utilities.

“The goal of this bill is to determine who should pay the losses for a power outage when no one is at fault or fault cannot be determined,” Rhoads said, “I don’t believe this burden should default to the shoulders of small business owners.” 

SB 1648 would establish a default rule requiring a regulated utility to compensate customers for all actual damages occurring because of a result of a power interruption affecting more than a thousand customers for four hours or more; preventing the utility from recovering losses and expenses from rate-payers and establishing a clear timeline for a utility to pay compensation. The bill also provides for utilities to seek a waiver from the PUC relieving them of the obligation to provide compensation if the interruption is one of a set of circumstances legitimately beyond the utility’s control, such as unpreventable damage from weather events, customer tampering and other  causes.

In written testimony to the Senate Committee on Judiciary, Hawaiian Electric said it opposed the measure because existing tariff rules already require the utility to compensate customers for loss, cost or damage due to outages deemed within the utility’s control or responsibility. The utility also argued that the bill could have the unintended consequence of dis-incentivizing electric utilities from prioritizing the safety of the public and their employees, such as when a utility elects not to restore power for a period due to safety concerns.

Michael Tsai covers local and state politics for Spectrum News Hawaii. He can be reached at michael.tsai@charter.com.