PUC Hears Debate on Proposed Rate Increases

Molokai Ranch appears despite objecting to being included in hearing

Agency representatives and members of the community packed the Maunaloa Elementary School cafeteria to hear about the proposed rate increases as MPL’s Aug. 31 deadline looms closer.

By Zalina Alvi

West end water users are holding their breath as the Hawaii Public Utilities Commission (PUC) decides whether or not to raise fees in an effort to keep the water running past the end of August.

While the County of Maui seeks legal action against Molokai Properties Limited (MPL) and its subsidiary utilities (collectively, Utilities), the PUC and the state Division of Consumer Advocacy (DCA) are making plans to move ahead with “unprecedented” increases to water charges.

As the PUC gives itself until mid-August to make a decision, frustration is growing on the island among those who believe MPL is taking advantage of its water users and getting away with it, while the Commission denies a request from the County to subpoena the company’s financial documents.

The PUC’s plan
On June 16, the PUC announced an order to provide temporary rate relief to Molokai Public Utilities (MPU) Inc. and Wai`Ola O Moloka`i. This was in response to MPL’s announcement in late March that the Utilities would be discontinuing service as of Aug. 31 due to suffering “substantial losses.”

The PUC’s order described a plan to apply a 121.53 percent increase across the board for all user charges and fixed charges for Wai`Ola O Moloka`i and a similar 40.96 percent increase for MPU, which are the two water utilities. An increase was not proposed for Mosco Inc., the regulated wastewater utility, because the available financial records show that it turned a profit in 2007.

PUC Chair Carlito Caliboso explained the proposed numbers as the best estimation they could provide based on the “very raw data” of the available 2007 financial records provided by the Utilities, which included information on basic yearly revenue and net losses. The Commission looked at how much each utility made in 2007 and how much they lost, and then suggested an increase that would allow each one to break even.

The PUC has provided a deadline to all the involved parties, as well as the public, to provide any additional information, formal statements and comments by Aug. 7, and plans to deliver a decision and order on the rate increases as they currently stand on Aug. 14 that would last for a period of six months, unless determined otherwise by the Commission.

Caliboso called the plan “an unprecedented step for the commission,” as an increase would usually be initiated by the Utilities and would takes months to process so the DCA could analyze the proposal. The PUC, however, said they had “taken the burden of initiating the case” to keep water running for the health and vitality of everyone living on Molokai.

Differing rate increases
MPL CEO Peter Nicholas, however, wrote in a June 23 letter to the PUC that water users would have to pay more than what the Commission is proposing. He wrote that nothing less than a 178 percent increase for Wai`ola O Moloka`i, a 90 percent increase for MPU and a 19.5 percent increase for Mosco  would be sufficient for them to break even.

The Commission stressed at the hearing that while it appears the Utilities are asking for a larger rate increase, they are actually “very similar numbers.” This is because the PUC is proposing to raise all the fees, which includes the rate per 1,000 gallons plus a fixed monthly charge that depends on the size of your meter. Meanwhile, the Utilities are only asking to increase the rate per 1,000 gallons, while the fixed meter charges would remain the same.

As for the wastewater utility, Mosco Inc., the Utilities and MPL are currently proposing an increase from $44 per month to $52.56. The PUC, however, remained firm in the belief that it did not require any increase at all because Mosco Inc. has not been losing money according to the company’s own numbers, but said they would provide the utilities a chance to justify its request.

The PUC’s understands Mosco’s rate increase as a result of lumping administrative expenses, like employee costs, that are shared with all the utilities onto Mosco. The PUC is currently waiting to be provided with revised numbers based on those expenses being shared with the other utilities.

Mixed feelings
After presenting their order to provide “temporary rate relief” for MPL’s two water utilities, the Commission heard testimonies from representatives of MPL, the Utilities, the DCA, the County, the West Molokai Association (WMA) and a few concerned residents.

Although the cafeteria of Maunaloa Elementary School was packed, the hearing turned out to be mainly a quick reading of statements that debated the Commission’s plan to raise water charges for 1,200 West Molokai residents with no clear compromise among those involved.

In opposition to the proposed rate increases, Jane E. Lovell, deputy corporation counsel on behalf of the county, stated that they have filed a formal complaint against MPL and that they do not support the proposed rate increases because the utilities have provided sparse data that has not been verified by a third party.

Lovell urged the Commission in her testimony to use its subpoena powers to get the missing information from MPL and its Utilities that would allow it to accurately evaluate what rate increases would be truly necessary, if any.

The lack of data provided by MPL and its Utilities has been a hot topic since the announcement to shut down water service. Many have wondered why the PUC has not already subpoenaed the information from the company, especially now that it may be ordering a raise in fees based on what they have admitted is “very raw data.”

The Commission denied a recent request from the County to subpoena the documents and the presence of MPL witnesses, which include CEO Peter Nicholas. The PUC said the public hearing was not the appropriate venue to do so and that there was not enough time to summon the requested witnesses. However, the PUC stated that they would entertain another request to subpoena from the County after the July 15 hearing.

Meanwhile, recent speculation that the company ordered employees in Maunaloa to burn company documents shortly after announcing the plans to shut down are not helping matters for MPL.

In the event that the Commission does impose these rate increases, however, Lovell said the county requests that any funds acquired by MPL and the Utilities stay on Molokai, and “do not go into some back account in Singapore.” It is also requesting that the PUC should commit to making sure the systems continue functioning, as it has not heard that yet.

Meanwhile, Catherine Awakuni, DCA executive director, said during her testimony that the office would prefer more time to consider the fairness of the PUC’s proposal, but “with grave reservations” will not oppose the rate increases due to the urgency of the situation.

That being said, Awakuni recommended that the Commission require the utilities to provide documents, including billing records, for each of the six months of the temporary increase to facilitate an independent assessment.

MPL’s position
Representing the Utilities was MPL employee Sonny Reyes who, on advising the room that Nicholas was unable to attend, went on to read from one of his letters to the Commission. The statement said the Utilities would likely suffer a $179,000 loss considering rising energy and fuel costs, and said Mosco would suffer a $37,000 loss if left to operate alone.

MPL was represented by General Manager, Land and Entitlements General Counsel Daniel Orodenker who simply said he was there as a resource, despite a formal objection to being forced to be present.

The objection is based on the position that MPL is a separate entity to its Utilities. But 30-year Molokai resident DeGray Vanderbilt said MPL and its Utilities are essentially the same company. He pointed out that Nicholas, Orodenker and other MPL officers and directors are listed on all three utility boards, according to the State Business Registration Office.

Public concern
While only a few members of the public chose to testify at the hearing, the feelings that came through loud and clear were one of disappointment from some and skepticism from others.

Some were disappointed that seemingly no agency had yet taken on the responsibility of ensuring the water and wastewater utilities continue to function.

Meanwhile, there was also a sense of skepticism regarding MPL’s actions.

Vanderbilt called the company’s actions a “utility shutdown hoax” and accused MPL of trying to get away with acquiring a rate increase without going through the proper channels, while at the same time holding on to assets that could easily finance the continued operation of its utilities.

He called on the PUC to call the company’s bluff and allow them to walk out on their obligations so that they can be fined by the Commission.

Criticism of MPL’s alleged mismanagement of the systems and its own financial affairs were also discussed, especially by resident Steve Morgan, who argued that MPL has been receiving tax breaks from the county unfairly.

By the end of the meeting, however, none of the involved parties had any response to the public comments and now it rests with the Commission to take the next step come Aug. 14.

The DCA invites comments from the public, and can be reached at consumeradvocate@dcca.hawaii.gov or by phone at 586-2780. The PUC will also be accepting public comments through email at Hawaii.puc@hawaii.gov or by phone at 586-2020.