County says company has no authority to charge for water

By CHRIS HAMILTON, Staff Writer
KAHULUI — Maui County will formally protest Wailuku Water Distribution Co.’s application with the state to become a public utility with the authority to charge private customers for water.

The company, formerly operating as Wailuku Agribusiness, has been charging for water delivery for years. But county Water Director Jeffrey Eng said on Wednesday that the county does not believe the 150-year-old company has any legal or “fundamental right to divert a public trust resource for private profit.”

Eng's comments immediately drew applause from a crowd of about 150 at Maui Waena Intermediate School during a Public Utilities Commission public hearing. He said that the county will petition to intervene in the application.

Office of Hawaiian Affairs attorney Jonathan Sheuer said OHA intends to do the same.

In the more than three-hour meeting, dozens of people spoke, and only two people were in favor of Wailuku Water Distribution Co.’s application. If the state-required application passes, the company could continue to serve its 39 customers and sell water at a new, higher rate of 90 cents per 1,000 gallons, which the company says it needs to remain solvent.

One speaker in favor of the plan was Avery Chumbley, who is president of both Wailuku Water Co. and its recently created affiliate company, Wailuku Water Distribution Co. The other person represented one of his main customers, Maui Tropical Plantation.

Wailuku Water Distribution Co. is seeking to run the new public utility while Wailuku Water Co. oversees its thousands of acres of watershed land.

With a stream-diversion system developed more than a century ago, Wailuku Water Distribution Co. takes up to 60 million gallons of surface water a day from four West Maui streams — Iao, Waikapu, Waihee and Waiehu — collectively called Na Wai Eha.

Chumbley spoke briefly. He said the companies are financially “fit, willing and able” to be a utility providing water to users.

“Communities were literally built on this water delivery system. . . . Many of those same users remain today,” Chumbley said.

The company’s customers include Maui County and Hawaiian Commercial & Sugar Co. as well as dryland and wetland taro users and flower nurseries, he said. Without Wailuku Water Delivery Co., he said he believes these users have no other viable options.

“But you don’t even own the water,” a man shouted from the back of the room.

Chumbley later thanked the audience and said he chose not to rebut the detractors at that time.

Eng also asked the two Public Utilities Commission members, John Cole and Leslie Kondo, to view Wailuku Water Co.’s new company division “with suspicion.” For instance, he said that in the application justifying its rate hikes, Wailuku Water Distribution Co. states that its extensive gravity-fed ditch-collection system is valued at $2.65 million.

The newest portion of the system was built a century ago, so its value has been fully depreciated, Eng said. It’s an artificial basis, he said.

The commission is authorized to regulate water rates based on formulas that consider a company’s debt and assets.

Eng further stated that Wailuku Water Distribution Co. intends to grandfather in 78 percent of its customers, not including Maui County. That means that the remaining customers will be held accountable for the company’s projected 10 percent rate of return on its investment.

Eng said that under the proposed lease agreement between Wailuku Water Co. and Wailuku Water Distribution Co., which both share the same nine employees, grandfathered contracts will continue to pay an average of 20 cents per 1,000 gallons while the rest pay up to $2 per 1,000 gallons by year 11 of the deal. Meanwhile, Chumbley himself will receive one of the grandfathered contracts, Eng said.

In the application, Chumbley said Wailuku Water Distribution Co. was designed to be an efficient and regulated utility.

Again and again, the testifiers said the Public Utilities Commission can separate its decision from the two issues currently before the state water commission dealing with Na Wai Eha.

In March, the state Commission on Water Resource Management designated the four streams a surface-water management area. All users are required to apply for permits that establish the usage, including Wailuku Water Distribution. Applications must be filed by April 30, 2009, although the process for granting permits could take five years to complete.

The water commission is also dealing with a petition to require restoration of stream flows in Na Wai Eha. Attorney Koalani Kaulukukui of Earthjustice represents Hui O Na Wai Eha and Maui Tomorrow and is asking the commission to set permanent instream flow standards that protect native stream life and provide for traditional riparian rights.

“Na Wai Eha and the surface water management area and pending petition against diversions from the four streams weighs heavily on this action,” she said.

Kondo said he wasn’t sure how long it will take the Public Utilities Commission to issue a ruling since the county and OHA are planning to intervene in the process, which will require more hearings.

But he told the crowd the PUC could issue a ruling, start regulating Wailuku Water Distribution Co. and then re-evaluate its decision after the state Commission on Water Resource Management issues its opinions. Kondo said the PUC is sensitive to the water commission’s pending decision, but believes these are separate issues, at least at this point.

Kaulukukui, among others, called on the PUC to void the application because it is incomplete as well as unjust. She said the company did not account for its future users, such as planned housing developments, and gave no adequate explanation as to why the grandfathered contracts deserve special treatment.

Critics have charged that Wailuku Water, which is expect to lose more than $500,000 this fiscal year, stays in business in order to bank land and maintain claims to water rights for housing and commercial developments on former Wailuku Agribusiness lands. The company — formerly the Wailuku Sugar Co. division of C. Brewer & Co. — holds title to 13,170 acres, mostly in watershed, and is in the process of selling 4,620 acres around Waikapu and Maalaea.

Kaulukukui said she was also very concerned about the rights of kuleana owners and water rights of long-standing family farmers. Those users have first rights to the water under state law, yet they see less and less of it every year, she said.

Wailuku Water Distribution Co. fails to explain why it ignores the obligation to the kuleana users, she said.

“Private commercial use is considered last,” she said. “If this goes through, the kuleana users will have to pay for this water.”

Kathy DeHart said she is a struggling taro farmer.

“Our land was once a place filled with water. Now the earth is cracked,” she said. “Don’t give them the right to continue this practice.”

The four streams have about 25 kuleana users, including father and son Victor and Hokuao Pellegrino in Waikapu.

On Thursday, father and son worked on their budding loi kalo and education center on 2.25 bucolic acres next to the Waikapu Stream.

With help from friends and neighbors, the family has been revitalizing Nohoana Farm as a center to teach traditional subsistence, organic and sustainable farming techniques since 2004. It has 12 terraced patches that are up to 450 years old, but they are only able to restore and maintain three with the amount of water the company allows to flow into the stream, they said.

The company takes so much water that none of it reaches the ocean, which is crucial for the development of native stream life, Hokuao Pellegrino said.

“Our whole idea has been to open up all the loi, but we haven’t been able to because of the water situation,” said Hokuao Pellegrino, who has thoroughly researched his family’s land titles and the region’s history.

If they had more water, they could grow enough food to at least help feed their community, the elder Pellegrino said.

“Give us more water,” he said.

• Chris Hamilton can be reached at chamilton@mauinews.com.