Utility Rate Hikes Approved

Commission to begin temporary rate increases Sept. 1.

By Jennifer Smith

In the midst of an economic downswing the Hawaii Public Utilities Commission (PUC) has taken the unprecedented step of approving temporary rate increases for two water utility service providers on Molokai. This is the first time the Commission has initiated the opening of a rate case for a utility provider.

The rate case was opened in response to an announcement by Molokai Ranch that it would abandon services to customers of its three regulated utilities on Aug. 31. The company claimed that its two water utilities, Molokai Public Utilities, Inc. (MPU) and Wai`ola o Molokai, Inc. (Wai`ola), and one wastewater utility, Mosco, Inc. had been operating in the red for years and therefore would cease services.

“Under these dire circumstances, the commission has no choice but to approve the temporary rate increases as a stop-gap measure,” said Carlito Caliboso, chairman of the PUC in a statement released Thursday. “We need to do what we can to require the utilities to keep operating, at least, temporarily, for the sake of the health and welfare of the people of West Molokai.”

The rate hikes will affect approximately 1,200 customers in areas of west and central Molokai, many of whom were also affected by the closure of Molokai Ranch in April. Customers will see inflated rates for the next six months, beginning Sept. 1.

“I’m appalled that the Governor would put this financial burden on the people,” said DeGray Vanderbilt, former chair of the Molokai Planning Commission.

PUC Explanation
PUC auditor Steve Iha came up with the numbers for the  rate increases, which ended up significantly higher than the increases initially proposed by the commission in July.

Rates for Wai`ola customers will jump from $1.85 per 1,000 gallons to $5.15 per 1,000 gallons, potentially providing an additional $156,710 of annual revenue over the next year.

MPU user rates will increase from $3.18 per 1,000 gallons to $6.04 per 1,000 gallons, which is expected to yield an additional $398,687.

The rates for Mosco users will not increase as the PUC review deemed the action unnecessary because the company failed to show a loss.

“We are still gathering information from the utilities and the ranch,” said Kaiulani Kidani Shinsato, Commission Council. As of last Friday the Ranch had not responded to the PUC decision, but she said, “We think it’s going to work.”

Shinsato said the decision is only a temporary measure, and that the commission is hoping that another provider will step in to take over the system. 

“I would like to see the state hold Molokai Ranch responsible to this issue and all costs before a transfer is made,” said Walter Ritte, Homestead farmer during last week’s Governor’s Molokai Advisory Committee meeting.

He asked the council to provide the Governor with two recommendations, which included auditing all of the Ranch’s systems, and the Governor beginning eminent domain procedures to cover costs.

The order states all three utilities are required to provide monthly financial reports and bi-weekly status reports. At the end of the six months, if another service provider is not found, MPU and Wai`ola must file applications for rate increases to allow for the determination of final rates.

If the ranch chooses to defy the order, the PUC has the authority to fine the company $25,000 per day. “We do have pretty broad authority,” said Shinsato.

Questioning the PUC
“It may appear they are being soft on the rate case issue,” but the commission has to provide adequate rate relief to the utility companies in order to compel them to continue providing services, said Carl Freedman, Haiku Design & Analysis consultant and expert witness for PUC rate cases. He said the strongest course of action for the commission at this point is to give the utilities exactly what they want.

If the companies continue to refuse services, then the PUC has taken away the company’s claim to financial hardships, he said.

Vanderbilt was quick to disagree. “The PUC didn’t have the gumption to challenge MPL’s claims of having no money.”

“The three PUC commissioners, all appointed by Governor Linda Lingle, showed little backbone and totally wimped out when they approved the massive rate hike MPL demanded,” he said.

County Takes Action
The county has been quick to step up and assure residents that those who are unable to bear the brunt of additional financial obligations will not be left without services.

“I’m confident that we will be able to come up with a program that can provide temporary relief,” said Mayor Charmaine Tavares.

Tavares said county staff on Maui and Molokai are busy trying to come up with a plan of how to provide assistance to those who will not be able to make the payments for these “harsh increases.” The Department of Housing and Human Concerns will determine the qualifications for supplemental assistance.

Funds are expected to come from a combination of federal, state, and county sources.

DOH Orders
The county is also busy working on fulfilling a Department of Health (DOH) order to prepare an emergency response plan if the Ranch utilities do choose to discontinue services. In the event of a walk out, Tavares said the county would treat the situation as a natural disaster.

The plan is due to the state Civil Defense on Aug. 25.

Once the emergency plan is submitted, Tavares said the county will be on standby, offering any technical assistance to the state that may be required to evaluate the system. She said they have expertise in the way of engineers, lavatory technicians, and operators that the state lacks.

“I would like to assure the Molokai people that they are not forgotten,” said Tavares. The county is aware of the issues looming over the entire community, she said, and “it is going to take all of us to get through this period.”

Orders to the Ranch
On Thursday, the Ranch, also known as Molokai Properties Limited, received an order from the DOH ordering the company to continue providing services for at least 90 days.

“It remains to be seen whether the company will obey or defy the state’s orders,” said Tavares in a statement. “We hope that the company, including its larger and wealthier parent company in Hong Kong, will do what’s right and comply so that water and sewer services to over a thousand people on Molokai will continue without interruption.”

“Should the company refuse to obey the orders, we anticipate that the state will enforce them vigorously on behalf of its citizens.”