HECO Exhibit 10

[HECO letterhead]

The Honorable Chair and Members

of the Hawaii Public Utilities Commission

465 South King Street

Kekuanaoa Building, First Floor

Honolulu, Hawaii 96813

Dear Commissioners:

This letter (heretofore referred to as “Stipulated Settlement”) documents certain agreements between the Hawaiian Electric Companies1 and the Division of Consumer Advocacy of the Department of Commerce and Consumer Affairs (“Consumer Advocate”) (collectively referred to as the “Parties”) on certain regulatory matters as described below and in Exhibit 1.

The Parties agree to the following:

·                 Hawaiian Electric, HELCO and MECO will write-off, for accounting and ratemaking purposes, a total of $40 million of recorded capitalized costs in lieu of conducting the regulatory audits of the Campbell Industrial Park Combustion Turbine Unit 1 (“CIP CT-1”) and the Customer Information System (“CIS”) projects ordered in the Order Approving Consumer Advocate’s Recommendations regarding Focused Regulatory Audits, issued on May 2, 2011 in Docket No. 2008-0083.  This write-off amount is in addition to all credits received from the Hawaiian Electric Companies’ prior CIS vendor, which credits have already been used to reduce the capitalized costs of the CIS project.

·                 For purposes of accounting for the settlement, the entire write-off will be adjusted as part of the cost of the CIS project.  The write-off by company will be $29 million for Hawaiian Electric, $5.5 million for HELCO, and $5.5 million for MECO.

·                 The Hawaiian Electric Companies will include the net recoverable costs of CIP CT-1 and the CIS projects in rate base as of December 31, 2012.

1   The “Hawaiian Electric Companies” are Hawaiian Electric Company, Inc. (“Hawaiian Electric”), Hawaii Electric Light Company, Inc. (“HELCO”) and Maui Electric Company, Limited (“MECO”).

The Honorable Chair and Members

of the Hawaii Public Utilities Commission

January 28, 2013

Page 2

·                 The Hawaiian Electric Companies will include the net recoverable costs of the CIP CT-1 and the CIS projects not already included in rates as shown in Exhibit 3 in their 2013 Rate Adjustment Mechanism (“RAM”) Revenue Adjustments.  The Consumer Advocate will support RAM recovery in 2013 and the subsequent years thereafter and subsequent Hawaiian Electric, HELCO and MECO rate cases for the allowed portion of the CIP CT-1 project costs and CIS project costs in excess of the projects’ costs previously included in rate base, along with related accumulated depreciation, accumulated deferred income taxes, unamortized ITC, unamortized deferred CIS costs, the unamortized regulatory assets related to the carrying charges and deferred depreciation, as well as related project depreciation and regulatory asset amortization expenses.  Recovery of CIS costs through the RAM Revenue Adjustment mechanism is for the sole purpose of this settlement agreement and does not constitute a precedent for the recovery of software costs through the RAM Revenue Adjustment mechanism.

·                 HELCO will withdraw its 2013 test year rate case (Docket No. 2012-0099).  In lieu of the rate change HELCO would have received in the pending withdrawn rate case, the Company will submit annual RBA/RAM rate adjustment filings rolling forward the base year information from the prior HELCO rate case, Docket No. 2009-0164.  HELCO will not file a rate case until its next turn in the rate case cycle – i.e., for a 2016 test year.

·                 Hawaiian Electric will delay the filing of its 2014 test year rate case, and will file its 2014 test year rate case no earlier than January 2, 2014.  The Consumer Advocate will recommend that Hawaiian Electric be granted a waiver of Hawaii Administrative Rules (“HAR”) §6-61-87(4), that would enable Hawaiian Electric to file in 2014 a rate case application using a 2014 test year.

·                 Through calendar year 2016, the Hawaiian Electric Companies and the Consumer Advocate will recommend and support continuation of Hawaiian Electric Companies’ existing recovery mechanisms, which include the decoupling RBA and RAM, energy cost adjustment clause (“ECAC”), the Purchased Power Adjustment Clause (“PPAC”), the pension and OPEB tracking mechanisms, and the Renewable Energy Infrastructure Program (“REIP”) surcharge, in their present forms, except for the agreement for temporary acceleration of HECO’s RBA/RAM Revenue Adjustment described in the bullet below and the agreement to recover CIS costs through the RAM Revenue Adjustment described above.

·                 For only the 2014, 2015 and 2016 RAM Periods, Hawaiian Electric will be allowed to record the 2014, 2015 and 2016 RAM incremental revenues for the January 1 through December 31 calendar year (once Hawaiian Electric is able to assess the amount), and collect the RAM incremental revenues through the RBA Rate Adjustment (which includes the RAM Revenue Adjustment) from June 1 of each year to May 31 of the following year.  At the conclusion of that period, the current RAM provisions will again apply in accordance with the Amended Joint Proposal approved by the Final Decision and Order issued in the decoupling proceeding.

The Honorable Chair and Members

of the Hawaii Public Utilities Commission

January 28, 2013

Page 3

·                 MECO and the Consumer Advocate continue to support the Parties Stipulated Settlement in the MECO 2012 test year rate case (Docket No. 2011-0092).2  Given the other portions of this agreement, particularly in terms of the maintenance of the current financial structure and mechanisms, MECO and the Consumer Advocate even more strongly support the agreements set forth in the Parties Stipulated Settlement in the MECO 2012 test year rate case related to: (a) the rate of return on common equity used to determine the fair rate of return on rate base, (b) the ECAC, (c) the pension/OPEB tracking mechanisms, (d) decoupling and (e) the PPAC.

The Hawaiian Electric Companies’ customers, the Commission, the Consumer Advocate, the Hawaiian Electric Companies, and the Hawaiian Electric Companies’ investors will benefit if this Stipulated Settlement is approved.  First, with respect to the Hawaiian Electric Companies’ customers, approval of the Stipulated Settlement will reduce the CIP CT-1 and CIS investment costs that might otherwise be included in rates by $40 million, reduce revenues to be collected from customers as a result of the withdrawal of the HELCO 2013 test year rate case (with no filing of a HELCO rate case until the 2016 test year) and the delay in the filing of the Hawaiian Electric 2014 test year rate case, and prevent the further accrual of carrying costs pending the completion of the lengthy audit and post-audit process on the CIP CT-1 and CIS projects.

Second, the Stipulated Settlement will eliminate the need for the Commission, the Consumer Advocate and the Companies to dedicate the substantial resources, dollars and time necessary to complete the lengthy audit and post-audit process, and will allow them to focus those resources on the numerous priorities they face in improving the quality of customer service and transforming the electric utility industry in Hawaii from one based on oil-fired generation, to one based on energy efficiency and Hawaii’s indigenous renewable energy resources.

Third, with respect to the Hawaiian Electric Companies and their investors, approval of this Stipulated Settlement will resolve the substantial uncertainty as to when and how much of their investment in CIP CT-1 and CIS will be recovered.

The agreements set forth in this letter are for the purpose of simplifying and expediting the affected proceedings, and represent a negotiated compromise of the matters agreed upon, and do not constitute an admission by any party with respect to any of the matters agreed upon herein.

2   The Parties’ stipulated settlement is reflected in the Parties’ Stipulated Settlement Letter filed on April 20, 2012 and the Parties’ Revised Updated Stipulated Settlement Letter filed on May 14, 2012.

The Honorable Chair and Members

of the Hawaii Public Utilities Commission

January 28, 2013

Page 4

The Parties shall support and defend this Stipulated Settlement before the Commission.  If the Commission adopts an order approving all material terms of this Stipulated Settlement, the Parties will also support and defend the Commission’s order before any court or regulatory agency in which the order may be at issue.  If the Commission does not issue an order adopting all material terms of this Stipulated Settlement or makes material adjustments to this Stipulated Settlement, any or all of the Parties may withdraw from this Stipulated Settlement.  For the purposes of this Stipulated Settlement, whether a term is material shall be left to the discretion of the Party choosing to withdraw from this Stipulated Settlement.

Enclosure

cc: Division of Consumer Advocacy

Concurred:

DETAILS OF CERTAIN AGREEMENTS REACHED BETWEEN

HAWAIIAN ELECTRIC AND THE CONSUMER ADVOCATE

Hawaiian Electric Company, Inc. (“Hawaiian Electric”), Maui Electric Company, Limited (“MECO”) and Hawaii Electric Light Company, Inc. (“HELCO”) (collectively the “Hawaiian Electric Companies” or “Companies”) will write-off for accounting and ratemaking purposes, a total of $40 million of recorded capitalized costs in lieu of regulatory audits for the Campbell Industrial Park Combustion Turbine Unit 1 (“CIP CT-1”), Customer Information System (“CIS”) projects.  This write-off amounts are in addition to all credits received from the Hawaiian Electric Companies’ prior CIS vendor, which credits have already been used to reduce the capitalized costs of the CIS project.  For purposes of accounting for the settlement, the entire write-off will be adjusted as part of the cost of the CIS project.  The write off by company will be $29 million for Hawaiian Electric, $5.5 million for HELCO, and $5.5 million for MECO, as shown in Exhibit 2.

Campbell Industrial Park Combustion Turbine Unit 1

The Parties agree that the recorded plant in service amount of $194.9 million for CIP CT-1 (and the accumulated depreciation, accumulated deferred income taxes and unamortized state investment tax credits related to the recorded costs) shall be included in Hawaiian Electric’s rate base as of December 31, 2012 and in the 2013 and succeeding Rate Adjustment Mechanism (“RAM”) Revenue Adjustments and Hawaiian Electric rate cases until the Company retires the CIP CT-1 assets.1

The Parties agree that the independently conducted regulatory audit for the CIP CT-1 project set forth in the Order Approving Consumer Advocate’s Recommendations Regarding Focused Regulatory Audits issued on May 2, 2011 in Docket No. 2008-0083 (“Audit Order”) should not be conducted.

The recorded plant in service amount for CIP CT-1 and the related accumulated depreciation, accumulated deferred income taxes and unamortized state investment tax credits and regulatory assets related to depreciation and carrying charges estimated through the effective date of the Revenue Balancing Account (“RBA”) Rate Adjustment (that includes the Rate Adjustment Mechanism (“RAM”) Revenue Adjustment for these items) shall be included in the beginning and ending balance of Hawaiian Electric’s rate base for the RAM Revenue Adjustment for 2013 and subsequent years thereafter, and for subsequent Hawaiian Electric rate cases.  See Exhibit 3.

Hawaiian Electric will amortize the regulatory assets, directly resulting from the deferral of depreciation and the accrual of carrying charges, over six years, beginning on the effective date of the 2013 RAM Revenue Adjustment, and to include such amortization in the 2013 RAM Revenue Adjustment.

1   The “Parties” to this settlement agreement are the Hawaiian Electric Companies and the Division of Consumer Advocacy of the Department of Commerce and Consumer Affairs (“Consumer Advocate”).

Consistent with the agreements on CIP CT-1 in the Parties’ Stipulated Settlement Letter filed on July 5, 2011 in the Hawaiian Electric 2011 test year rate case, Docket No. 2010-0080, (“Hawaiian Electric 2011 Rate Case Settlement Agreement”), the following shall continue until the Commission has approved this settlement and the rate adjustment to include the project costs in rates (through the RAM Revenue Adjustment of the RBA) goes into effect:

·                 record the depreciation on the project costs in excess of the respective projects’ Commission approved costs to a regulatory asset; and

·                 accrue carrying charges (based on an interest rate equivalent to the Company’s AFUDC rate) on the project costs in excess of the respective projects’ Commission approved costs (net of accumulated depreciation, accumulated deferred income taxes, and unamortized ITC) and depreciation expense, which have been deferred for later recovery, to a regulatory asset.

The RAM Revenue Adjustment for 2013 and the subsequent years thereafter and subsequent Hawaiian Electric rate cases would reflect the additional revenue requirements related to the allowed portion of the CIP CT-1 project costs in excess of the project’s costs previously included in rate base, along with related accumulated depreciation, accumulated deferred income taxes, unamortized ITC, and including the unamortized regulatory assets related to the carrying charge and deferred depreciation, as well as related depreciation expense and amortization of regulatory asset expenses.

Customer Information System

The Parties agree that the allocable share of the deferred cost balance of CIS (which is the total deferred cost of $57.4 million for the project (after considering the credits from the prior CIS vendor), and the accrued carrying charges of $2.2 million, less a write-off of $40 million) should be included in the rate base as of December 31, 2012 of Hawaiian Electric, MECO and HELCO and recovered in the 2013 and succeeding RAM Revenue Adjustments and Hawaiian Electric Companies rate cases until the deferred costs are fully amortized.

The Parties agree that the independently conducted regulatory audit for the CIS project set forth in the Audit Order should not be conducted.

The Parties agree that reflecting the write-off entirely under the CIS docket would result in a smaller amount of depreciation expense required to be recovered in the current revenue requirements for the CIS project and CIP CT-1 project, than if the write-off amount is allocated to both the CIS project and the CIP CT-1 project.2

Consistent with the agreements on CIS in the Hawaiian Electric 2011 Rate Case Settlement and the Parties’ Stipulated Settlement Letter filed on April 20, 2012 in the MECO 2012 test year rate case, Docket No. 2011-0092, (“MECO 2012 Rate Case Settlement Agreement”), the

2   Since the CIS project would be amortized over 12 years, and the average depreciation period for the CIP CT-1 project cost is 40 years, the amortization expense savings would be greatest if the amount is amortized over the shorter period (i.e., amortization savings on $40 million over 12 years amounts to $3.33 million compared to $1.00 million over 40 years).

Parties agree that the Hawaiian Electric Companies shall continue to accrue AFUDC on the recoverable CIS project deferred costs, including the expenses removed from the Hawaiian Electric 2011 test year and the MECO 2012 test year, and CIS project expenses incurred through the in-service date as agreed in the Hawaiian Electric 2011 Rate Case Settlement Agreement and the MECO 2012 Rate Case Settlement Agreement, until the Commission has approved this Stipulated Settlement and the RBA Rate Adjustment that includes the CIS project costs goes into effect.  Amortization of CIS project deferred costs would commence on the effective date of the RBA Rate Adjustment for Hawaiian Electric, MECO and HELCO that includes the recovery of the project costs and the associated amortization expense.    The Parties agree that the RAM Revenue Adjustment for 2013 and subsequent years thereafter and subsequent rate cases for Hawaiian Electric, MECO and HELCO would reflect revenue requirements related to including the deferred CIS costs that the Parties agree to be recoverable, including the estimated carrying charges through the effective date of the RBA that includes the RAM revenue adjustment for these items and the amortization expense for the amortization of the recoverable deferred costs including carrying charges, with the recovery period not to exceed the twelve year amortization period approved by the Commission in Docket No. 04-0268.  See Exhibit 3.

RBA/RAM Revenue Adjustment

The Parties agree that for only the 2014, 2015 and 2016 RAM Periods, Hawaiian Electric will be allowed to record the 2014, 2015 and 2016 incremental revenues for the January 1 through December 31 calendar year (once Hawaiian Electric is able to assess the amount), and collect the RAM incremental revenues for the calendar year through the RBA Rate Adjustment (which includes the RAM Revenue Adjustment) on customer bills from June 1 of each year to May 31 of the following year.3

At the conclusion of that period, the current RAM provisions will again apply in accordance with the Amended Joint Proposal approved by the Final Decision and Order issued in the decoupling proceeding

3   In the case when an interim order or final order in a rate case is issued, the RAM revenue adjustment would be recalculated to determine the unrecovered recorded (accrued) revenues.  For example, if in 2014, an interim decision for a 2014 test year rate case becomes effective November 1, 2014, the RAM incremental revenues for the period from January 1, 2014 to October 31, 2014 would be calculated, and compared to RAM incremental revenues collected through the RBA Rate Adjustment, and the unrecovered amount would be reflected in the RBA Rate Adjustment to be collected from November 1, 2014 through May 31, 2015.

Exhibit 2

Page 1 of 1

Allocation of Total CIS Deferred Costs

(in Thousands)

As of 12/31/2012

Exhibit 3

Page 1 of 2

CIP CT-1 Costs in 2013 RAM Calculations

Exhibit 3

Page 2 of 2

CIS in 2013 RAM Calculations

Workpapers for Exhibit 3 CT-1

CT-1 Deferred Cost

Page 1 of 10

CIP CT-1

As of December 31, 2012 (Estimated as of 1/16/2013)

Workpapers for Exhibit 3 CT-1

CT-1 Deferred Cost

Page 2 of 10

HECO

Major Projects:  CIP CT-1

Monthly Carrying Charge Calculation