Hawaiian Electric Industries Inc.'s third quarter earnings fell 38.2 percent from the same quarter a year earlier in large part because of a regulatory requirement that its utility subsidiary refund $15 million to customers on O'ahu.

HEI, the parent of Hawaiian Electric Co. and American Savings Bank, said it earned $19.9 million, or 24 cents per share, during the three months ending Sept. 30, 2007. That compared with earnings of $32.3 million, or 40 cents per share, in the year-earlier period.

"Third quarter results were significantly impacted by the recognition of a reserve for a potential refund to O'ahu electric customers of $15 million," said Constance Lau, the company's chief executive officer.

The results fell below Wall Street's expectation. Analysts had been expecting earnings of 36 cents per share for the third quarter.

HEI shares dropped 58 cents to $22.68 on the New York Stock Exchange yesterday.

The results come less a week after the state Public Utilities Commission ordered HECO to refund $15 million, or about $17 to each of its 293,000 O'ahu customers.

The exact refund and its timing is still subject to a final decision by the PUC but HEI said it set up a reserve to help pay for the refund. The company said it incurred after-tax cost of $8.3 million, or 10 cents per share, for the reserve during the quarter.

Earnings for HECO and other electrical utilities also were affected by by increased operations maintenance costs. Those expenses increased by $12.4 million while electricity demand remained flat, HEI said.

The company's American Savings Bank subsidiary saw its income drop 13.3 percent from the year-ago quarter to $11.7 million. In addition to the higher interest rate environment, the bank net was affected by a $2.7 million provision for possible loan losses.

The reserve was primarily for a single troubled loan to a commercial borrower, which the bank did not name.

Reach Rick Daysog at rdaysog@honoluluadvertiser.com.