Appeal of Ranch Water Rates Denied

In an attempt to aid west end Molokai residents paying some of the highest water rates in the nation, Maui County filed an appeal last year in the state Intermediate Court of Appeals against the utilities of Molokai Properties, Ltd. (MPL), better known as Molokai Ranch. That appeal was recently denied, leaving ratepayers struggling under rates that have been called outrageous.

The appeal, filed last March, contested the Public Utility Commission (PUC)’s decision to approve permanent water rate hikes for hundreds of residents on the west end served by one of the Ranch’s subsidiary utilities, Wai`ola O Molokai. Wai`ola customers in Maunaloa, Kualapu`u, Kipu, Manawainui and the Molokai Industrial Park areas are left paying rates almost five times higher than their bills a few years ago. Wai`ola users currently pay $8.97 per 1,000 gallons per month.

The county argued that the PUC’s approval of a rate increase was not “just and reasonable” because the increase was based in part on unauthorized expenses that Wai`ola failed to prove. The Court of Appeals upheld the PUC’s decision in favor of the hikes, asserting that “the methodology employed by the PUC in its rate-making determination lies within its expertise and discretion.”

Maui County Communications Director Rod Antone called the outcome “disappointing to say the least.”

“I’m only sorry that we don’t have good news for the Molokai ratepayers,” said Jane Lovell, county Corporation Counsel.

A similar appeal filed by the county against Molokai Public Utilities’ (MPU) rates was also denied earlier this year. One of the appeal’s allegations noted that MPU did not have a valid water use permit for Well 17, its main water source, and transports it illegally through the state irrigation system. The court ruled that the lack of proper permitting does not affect the justification and reasonability of the water rates.

The appeal denials affect a total of about 1,200 Molokai users of Wai`ola and MPU. MPU ratepayers in Ke Nani Kai, Paniolo Hale, Kaluakoi Villas and Papohaku Ranchlands currently pay $9.61 per 1,000 gallons per month, while Maui County Water Supply users pay less than $2, according to Maui County Department of Water Supply.

Case History
Shortly after Molokai Ranch shut down its operations in April 2008, it threatened to abandon its utilities as well, claiming that its subsidiary utility companies –Wai`ola and MPU included –did not have the financial resources to continue service. The move would have left Maui County with the burden of servicing the 1,200 users on Molokai who receive their water from MPL. In a frantic effort to line up an emergency plan, the county spent thousands of dollars and countless hours preparing for the worst.

In August 2008, in an unprecedented move, the PUC recommended temporary rate increases that would keep the utilities in operation. The county filed a lawsuit against MPL, citing long-standing contracts mandating MPL’s continued water service, and seeking reimbursement for the emergency funds spent preparing for the threatened emergency.
In June 2009, Wai`ola and MPU applied to the PUC for permanent rate increases. A settlement with the county was reached in July 2010 requiring MPL to continue to provide utility services to Molokai residents. But despite adamant protests from the Molokai community, the PUC approved the requested rate increases.

“The commission recognizes that the final increase in MPU’s water rates is large,” according to a PUC news release in 2010. “Nonetheless, the increase in revenues is necessary for MPU to continue its essential water service to the Kaluakoi area on the island of Molokai, without interruption.”

Molokai Ranch management did not return requests for comment last week.