Huge Hikes in Water Rates Planned for West Molokai

As resources run low, residents may bare the brunt.

By Jennifer Smith

In the midst of a face-off to see who will have to take over utility services on Molokai, the Hawaii Public Utilities Commission (PUC) has been forced to propose staggeringly high rate increases for West End users. While, the proposed increase is meant to be a short-term fix for a potentially long-term problem, many are left wondering whether or not residents will be able to foot the bill.

The PUC is proposing a 121 percent increase for Wai’ola o Molokai users and a 41 percent increase for Molokai Public Utilities, Inc., users. Both companies provide water utility services to the central and west end of the island. In March, Molokai Properties Limited (MPL), who owns the companies, announced its plans to abandon both subsidiaries in addition to its regulated sewer utility Mosco, Inc.

The PUC hopes the temporary rate increases will offset the utility companies’ losses allowing services to continue until either a public or private provider can take over. But a debate rages on between the PUC, MPL, the state, and Maui County over whose kuleana it is to step in.

MPL Attempts to Defy PUC Order
In a June 5 letter to MPL, the PUC ordered the company to continue providing utility services. However, “the utilities can only do what they have the resources to do,” MPL CEO Peter Nicholas said, in a June 11 letter to the PUC.

MPL advanced its utility companies a total of $580,000 in the 2007 fiscal year, and $566,000 for 11 months of 2008 for operating and capital improvements. After taking into account workers’ wages, tax obligations, and payments for goods and services, Nicholas said the companies cannot afford to continue operations.

MPL runs three additional unregulated utility companies. Because the one water company and two wastewater treatment systems are unregulated the PUC cannot order MPL to continue service, but the Commission has made a formal request.

“We do not agree with you (PUC) that the utilities have a duty to service their customers when they are insolvent and unable to do so,” Nicholas said.

Unprecedented Action
While many wonder why the financially stable MPL is not held accountable, Chairman Abbey Mayer said in the Molokai Action Team’s May meeting that it can be very difficult to hold a parent company responsible for the debts of its subsidiaries. He also noted that it is very difficult to force a private company to continue operating at a loss.

Recognizing MPL’s financial limitations, the PUC had no choice but to, “take the unprecedented step of opening a rate case proceeding to order a temporary rate increase,” according to a June 13 letter from the PUC to Nicholas.

The Commission has also reiterated its request to MPL for a transition plan for continued operation beyond August 2008. Other details requested include financial requirements for the three utilities to remain self-sustaining, a description of all utility assets, and an explanation of why Mosco was included in the utility services to be shut down if it is not operating in the red.

The County’s Role
The Commission cannot compel the Utilities to operate in perpetuity, and is consequently looking to the county as the next best utility provider.

In a June 13 letter, the PUC said it is the county’s responsibility to ensure its citizens have access to basic water and wastewater services, and therefore, “urges the county to act expeditiously to do what is necessary to acquire the water and wastewater systems.”

Meanwhile, the county has filed a formal complaint against MPL. The PUC and the Department of Commerce and Consumer Affairs received the document that alleges that the company’s intention to abandon utility services could potentially violate the law.

The complaint also requests that the Commission order MPL to provide a transition plan, investigate the Utilities’ financial records, and provide obtained information to the public.

Looking Out for Consumers
The Division of Consumer Advocacy (DCA) will act on behalf of the customers to decide if the rate increases are reasonable.

“This is unprecedented,” said Catherine Awakuni, Executive Director of the DCA, during Monday’s Action Team meeting. She said normally the utility would request a rate increase instead of the PUC proposing it.

Akwakuni said she has family on Molokai and therefore, has faces to put to names of customers. When considering who will be able to afford the rate hikes, she said that customers may be put into different rate classes.

West End Viewpoints
The West Molokai Homeowners Association (WMA) members have worked primarily behind the scenes thus far, trying to help people realize the wide-spread effect that the closure of the Utilities would have on the island. But members of the organization officially stepped out last week Monday by publicly voicing their concerns during the MAT meeting.

“We are facing a potential water and sewer crisis, said Paul Mordisini, president of the WMA. “Over 3,300 men, women and children who have homes and properties in Maunaloa, Kualapu`u, Kaluakoi, and part of Kalae” would be effected if there was a water and sewage shut down in August.

“We’re not getting a lot of movement,” Mordisini said, explaining that the issue is nearly halfway through the six month deadline that MPL first gave in March. The WMA prepared a two page chronological list of actions to show what its organization and others have done in the past few months.

Members of the WMA attended the MAT meeting in hopes that the team would contact the state.

“There is much by way of finger pointing, but little by way of coordinated efforts to achieve a common goal-that all Molokai have access to a basic necessity of life – water,” Mordisini said.

“I really feel for the West End Homeowners Association,” said Collette Machado, MAT member and OHA trustee. “I didn’t realize this was getting so complicated.”

Several other MAT members agreed with Machado, but were confused as to whether or not it was the group’s place to get involved. At last month’s MAT meeting, Machado sharply criticized and silenced at least one West Molokai resident who had asked the group for help regarding West End utilities.

MAT member Barbara Kalipi recommended the WMA recruit unaffected community members to help support their cause. “It’s got to be done in the community.”

Voicing Community Concerns
“There is also no guarantee that the ratepayers can afford the increased rates,” according to the PUC.

The county and the PUC will hold forums in July to hear community concerns.

Council Member Danny Mateo and Mayor Charmaine Tavares will host a community meeting on July 8 at 6:30 p.m. at the Mitchell Pauole Center.

“We would like to assure Molokai that the County is doing everything possible to protect the community’s rights to essential needs such as water and sewer service,” said Council Member Mateo, in a press release.

The PUC will be holding a public hearing on the proposed rate increases on July 15 at 10 a.m. at Maunaloa Elementary School. For more information contact Kaiulani Kidani Shinsato, Commission counsel at 586-2020.

If approved, these rate increases would be in effect for a period of six months, unless otherwise ordered by the PUC. There is no rate increase proposed for Mosco, as the company appears to be operating at a profit.