Water Fight

Molokai residents faced with proposed water rate increases as high as 500 percent.

By Molokai Dispatch Staff

For Molokai residents paying water rates that had been called outrageous, another “rate shock” may be on the way, in the words of Molokai Properties Ltd (MPL), parent company of subsidiary water utilities Wai`ola O Molokai and Molokai Public Utilities (MPU). Both utility companies have filed their general rate increase with the Public Utilities Commission (PUC), requesting rate increases as high as 500 percent of what ratepayers on the island’s west end were paying last August.

How It Started
In June last year, MPL threatened to cut water utility services to over 1,000 central and west Molokai residents after claiming that its subsidiary utility companies did not have the financial resources to continue service. The announcement caused panic among island residents and lawmakers in both the state and county. Emergency plans were made, lawyers were hired, and a heated discussion ensued over who would be responsible for keeping water flowing. The State put pressure on the County, and the County filed a lawsuit against MPL, pointing to the binding agreements the water utility companies had signed with the County to provide residents with water services.

In the end, MPL agreed to continue service temporarily, but at a high cost. In an unprecedented move, the PUC approved a temporary six month rate hike of as much as 178% for the water utilities. In the mean time, MPL was required to either find another entity to buy the utilities or file for a general rate application with the PUC. No successor was found, according to MPL statements, and the PUC granted them a six-month extension while they filed for permanent rates.

Now those applications for yet more rate increases have been filed, and if residents were outraged at a 178 percent increase, they have another shock coming: MPU and Wai`ola filed for hikes as high as 577 percent increase from the original rates.
 
Crunching the Numbers
Having filed for rate increases approximately twice the temporary rates, MPL is looking out for ratepayer’s possible financial hardship.

“To minimize the “rate shock” to customers from the proposed increase, [MPU and Wai`ola are] proposing a two stage phase-in of the new rates and charges,” states the utilities’ permanent rate applications. Both companies are seeking the PUC’s approval of a one year test period for the increased rates from July 1, 2009 through June 30, 2010. That year is broken into two phases of approximately six months each, according to the applications.

The proposed rate schedule for MPU outlines a water consumption charge of $8.65 per 10000 gallons per month for Phase I, and $10.39 per 1000 gallons per month for Phase II (effective about six months after the start of Phase I).

Last August, before the temporary rate increase went into effect, MPU ratepayers were charged $3.18. The temporary rate hike drove that up to $6.04. That means Molokai residents who get their water from MPU would experience a 326 percent increase in rates between August 2008 and January 2010 if the PUC approves the proposed rate increases.

Wai`ola customers would get even more of a “rate shock.”

Last August, Wai`ola ratepayers were charged $1.85 per 1000 gallons per month. After the temporary rate increase, that number rose to $6.04. Phase I of the proposed general increases is $7.76 per 1000 gallons per month, and in Phase II, rates would jump to $10.69 as outlined in Wai`ola’s application to the PUC. That translates to a 577 percent increase in water rates from the original rate last August to Phase II in January of next year.

What It Means for Ratepayers
A family in Kualapu`u or Maunaloa using the residential standard of 600 gallons a day could see their monthly bill for water usage skyrocket from $33 they paid in August to $192 if MPL’s proposed rate increase is approved.

About 1200 Molokai residents would be affected by the increases. Wai`ola provides water to consumers in Maunaloa, Kualapu`u, Kipu, Manawainui and Molokai Industrial Park. MPU services residents at Ke Nani Kai, Paniolo Hale, Kaluakoi Villas and Papohaku Ranchlands.

“I’m just not willing to take it any more, because the game will never end,” said Cheryl Sakamoto, a West end resident and ratepayer.

“We have to acknowledge the need to make this a community effort, that this is not just a West end issue,” she continued. “This is not about La`au, this is not about Molokai Ranch – this is about water rates.”

Missing Information?
Ten months ago, the PUC requested MPL to provide “all relevant information regarding the plan for transitioning the utility companies to a third party” including “the terms of the conveyance of those assets,” as stated in a letter to MPL.

To date MPL has not provided the information, according to PUC records.

In addition to rate increases, MPL is asking the PUC to withhold from the public most of the documents it has filed with the PUC, claiming the documents are confidential, according to PUC documents.

MPL is also asking the PUC to exempt it from having to file audited financial statements as required by the PUC rules.  The PUC has not yet
 
MPL’s CEO Peter Nicholas told the PUC that if MPL were forced to comply with the County’s information requests “it would jeopardize the continued operation of the utilities.”

If Nicholas allows the utilities to walk away from their service responsibilities, the PUC has acknowledged that it can access fines of $75,000 a day.

The PUC’s rules require applicants, including MPL, to provide audited financial statements when applying for a utility rate increase.

Illegal Water?
Currently MPL is pumping water from Well #17 without a permit, and is continuing to illegally transmit water through the Molokai Irrigation System (MIS) pipeline without a valid agreement.

In a letter to the PUC Commissioners, Nicholas said, “these two issues [Well 17 permit and transmission agreement] remain outstanding” and that his company “has not been required to actively pursue (the resolution) of either issue.”

In the same letter to the PUC, Nicholas explained that if MPL will be required to attain legal water permit for Well 17 or prepare the EA required by law in order to legalize the company’s use of the MIS transmission pipeline that his company “will not be able to meet those demands and will be forced to cease operation regardless of any rate increase.”

Unknown Future
Processing Wai`ola and MPU’s general rate applications will involve the input of consumers and lobbying of the Division of Consumer Advocacy, with the PUC making the final rate decision, according to PUC attorney Lani Shinsato.

Two separate proceedings will take place, one for MPU and one for Wai`ola, Shinsato explained. One public hearing will take place on Molokai for each utility, but in practice, she added, the hearings will likely take place back to back on the same day.

Michael Azama, an attorney with the PUC, said the PUC’s final decision on whether or not to approve the proposed rates will be based on whether or not the rates are just, reasonable, and in the public interest.

A date for the public hearing has not yet been scheduled. A PUC staff member said the hearing could be held as early as the last week in April.

Division of Consumer Advocacy (DCA) Director Catherine Awakuni said the DCA has not yet taken a stand on the issue. “We are still reviewing the applications and won’t finalize our position until we have public comment,” she said. She added the DCA needs consumer input on such subjects as whether or not the water utility services have been reliable and of good quality, as well as how much consumers are able to pay. The DCA’s final position will be based on a review of all components of the utilities’ application, whether or not the proposed rates are reasonable and substantiated with financial evidence, and public comment and testimony, according to Awakuni.

The DCA will be in attendance at the PUC hearing on Molokai, but Awakuni encourages consumers to submit comments to the DCA as soon as possible. Written testimony may be sent to the DCA by emailing consumeradvocate@dcca.hawaii.gov. Awakuni requests that people also send a copy to the PUC at Hawaii.PUC@Hawaii.gov.

To view the full text of Wai`ola and MPU’s rate increase applications, visit www.hawaii.gov/dcca/areas/dca/dno/dno2009.