diff -rup cloud-init-0.7.9/cloudinit/distros/__init__.py cloud-init-0.7.9-new/cloudinit/distros/__init__.py
--- cloud-init-0.7.9/cloudinit/distros/__init__.py	2016-12-23 08:37:45.000000000 -0800
+++ cloud-init-0.7.9-new/cloudinit/distros/__init__.py	2017-04-13 16:49:29.276655111 -0700
@@ -488,6 +488,9 @@ class Distro(object):
         if 'hashed_passwd' in kwargs and kwargs['hashed_passwd']:
             self.set_passwd(name, kwargs['hashed_passwd'], hashed=True)
 
+        if 'passwd' in kwargs and kwargs['passwd']:
+            self.set_passwd(name,kwargs['passwd'],True)
+
         # Default locking down the account.  'lock_passwd' defaults to True.
         # lock account unless lock_password is False.
         if kwargs.get('lock_passwd', True):