Water Rate Applications Rejected

PUC orders Molokai Properties utilities to provide audited finances

By Molokai Dispatch Staff

For Molokai residents dreading higher water prices, a Public Utilities Commission (PUC) decision last week comes as a reprieve. But for Molokai Properties Limited (MPL), also known as Molokai Ranch, the decision to reject the general rate increase application as submitted by its subsidiary water utility companies is one that may leave the company in a tight place.

On March 2, 2009, the two water utilities, Wai`ola O Molokai (Wai`ola) and Molokai Public Utilities, Inc. (MPU), filed for rate increases as high as 5 times what the PUC had previously approved in a two-phase one year “test” period to offset financial losses the company claims. Wai`ola is seeking a general rate hike of $10.69 for every 1000 gallons sold, up 577 percent from the rate of $1.85 per 1000 gallons, which is what consumers were paying last August. MPU applied for rates of $10.39 per 1000 gallons, up 326 percent from the last PUC approved general rate of $3.18.
 
But both companies submitted unaudited financial records in place of audited statements. A financial audit is the review of the fairness, accuracy and completeness of a company’s financial statements by an independent party. PUC rules require applications to include audited financial statements, but Wai`ola and MPU requested an exemption from the submittal of audited statements.

Up for Review
The utilities argued that as small companies with annual revenues of less than $2 million, they do not have audited financial reports and preparing them would cause further delay in filing their applications. They also noted in the applications that “the Commission [PUC] has previously waived the audited financial statement requirement for other similarly situated utilities.”

The PUC denied the request to submit unaudited statements, however, finding that “the completion and submission of audited financial statements is just, reasonable, and consistent with the public interest,” according to the PUC order.

Now, both utility companies have to file amended applications, with several requested changes, “as soon as reasonably possible,” according to the PUC order. Wai`ola and MPU are required to file monthly status reports with the PUC, which, according to PUC attorney Lisa Kim, will insure PUC oversight so the re-filing process does not extend indefinitely.

The PUC also ordered that the amended applications propose water rates that reflect the change from the permanent rates last approved rather than the temporary rates currently in effect. The “articulation of proposed rate increase from its temporary user charge is misleading the improper,” states the order.

A public hearing on Molokai is suspended indefinitely pending the utilities preparing and re-filing new applications.

Back-up
The PUC was not the only government agency to favor the denial the MPL applications.

Division of Consumer Advocacy (DCA) Director Catherine Awakuni noted in a Position Statement filed with the PUC that the “application should not be deemed complete until the audited financial statements are provided.” While the DCA has not always required audited financial records in the past, according to the position statement, Awakuni calls this “a case that differs significantly” from other cases.

“The adequacy, sufficiency and nature of the supporting information and the reliability of the financial information relied upon to support the temporary rate increases were of suspect value,” notes the Position Statement, referring to the utility’s previous threat to terminate water services in June of 2008 and the subsequent hasty approval of temporary water rate increases.

Maui County Council Chairman Danny Mateo said he was pleased with the PUC’s recent decision.  “I commend the PUC Commissioners and the Consumer Advocate for looking out for the public’s interest,” he said.

“They are beginning to understand what the County has contended all along about the unreliable and misleading information Molokai Properties has been floating in our community, and to the general public, since it abandoned operations on Molokai and terminated 120 employees.” Mateo also said he wanted to thank those in the community for trying to “make something right” out of the water rate crisis.

Second Try
Several months ago, the County of Maui had unsuccessfully tried to obtain audited financial statements from MPL as well as its subsidiary water utility companies, according to a document filed with the PUC.

In the same document, the County advised the PUC and the Consumer Advocate they should not be put in a position of trying to make just and informed decisions based on the “unsubstantiated assertions and unaudited financial statements” MPL and its utility companies had provided.

MPL’s Executive Director Peter Nicholas responded to the PUC saying “financial information on MPL is proprietary and will not be released.”  He added that if the MPL was forced to comply with the County’s information requests, which included audited financial statements, “it would jeopardize the continued operations of MPL's utility companies.”

Molokai Properties Limited is a subsidiary of GuocoLeisure, an international investment company based in Singapore.

A complete collection of the Wai`ola and MPU applications, along with supporting documents, can be found at www.plonedev.hawaii.gov/budget/puc/RII/water/Dockets/Water/water.