Molokai utilities won’t shut down — yet

WAILUKU - Molokai Properties Ltd. confirmed Thursday that it will continue to provide water and sewer service to west Molokai - for now - despite its earlier threats to shut down the systems on Sunday because the company was losing money.

Gov. Linda Lingle announced Thursday that MPL Director Peter Nicholas sent a letter the day before to the state Public Utilities Commission agreeing to comply with the commission's approval of recent rate hikes intended to keep afloat the company's Waiola O Molokai, Molokai Utilities Inc. and Mosco Inc. utilities.

But Maui Mayor Charmaine Tavares said the company's statement in the letter to the PUC is ambiguous and fails to recognize the utilities' responsibilities to customers.

Previously, MPL had been mum about its intentions even after a Health Department hearings officer ordered the utilities to continue operating and the PUC granted extraordinary interim rate hikes.

Nicholas' letter called the rate increases a "stop-gap measure."

"We have been clear that we will not continue to operate these utilities indefinitely," Nicholas wrote.

In the last month, both the PUC and Department of Health have ordered MPL to continue operating for six and three months, respectively, under penalty of law. The independent three-member PUC further stated that if a new entity is not found to run the utilities in six months, that MPL must apply for general rate increases in order to maintain water and sewer services uninterrupted for 1,200 Friendly Isle customers.

"It is unfortunate that the people on Molokai have been treated with such disrespect by Molokai Properties," Mayor Charmaine Tavares said in a statement Thursday evening. "After the company announced that they would abandon their private water and wastewater systems, the PUC and state Department of Health were required to take legal action against the company to prevent the utilities from abandoning water and sewer service to their customers.

"For a very long time now, over a thousand people have faced uncertainty about the health and safety of their families and friends.

"There is no indication of just how long they will continue," Tavares said.

Tavares also said that the company's response to the PUC appears to pertain only to water services. She called it ambiguous and said it does not clearly confirm that it will obey the Department of Health's orders pertaining to the Mosco wastewater service as well.

A news release issued by Lingle's office did not mention the Department of Health or PUC orders. The governor again insisted that Maui County should ultimately take over operating the company's three utilities - which claim to have lost $1.2 million over the past two years - if another public or private entity cannot be found to take them over.

County officials have insisted that such a move would set a precedent holding all counties responsible for private utility systems, while increasing costs to Maui County rate payers for water and sewage services. County attorneys have said there is nothing in state law to require a county to assume control of a privately owned and operated utility.

"But that's what counties usually do (run utilities)," said Lingle spokesman Russell Pang.

In his letter, Nicholas told PUC Chairman Carl Caliboso that he does not believe it is appropriate to hold MPL as a private company responsibile for continuing the utilities after MPL closed its ranch, lodge, golf course and other businesses on the island in April.

"We continue to emphasize that in the absence of a private entity, operating and maintaining water and wastewater systems is a basic responsibility of county government," Lingle said. "Mayor Tavares, council members, state legislators, and Molokai residents have asked for my help, and we will continue to work with the county to ensure uninterrupted water and wastewater service to protect the health and safety of the island."

Just the PUC decision to dramatically raise utility rates has drawn protests from Molokai residents who said they will be facing unfair new bills when many of them are now jobless. Tavares vowed to provide assistance to the residents who qualify with a combination of county, state and a nonprofit funding.

Tavares' administration has been critical of the company, saying it is leaning on the government to bail it out when MPL still owns one-third of the island and refuses to sell any assets to cover losses resulting from its own poor management decisions.

MPL closed down its Molokai interests within months of a critical Hawaii Supreme Court ruling that the company needs to reapply for a permit to draw water from its Well 17 at Kualapuu - the source of the water it needs to provide customers at Maunaloa and Kaluakoi. MPL also had been stalled in its effort to win approval of a proposal to develop a luxury rural residential subdivision above Laau Point on the southwest corner of the island.

The PUC-approved interim rate hikes take effect Monday. Under the order, Molokai Public Utilities rates will go from $3.18 per 1,000 gallons to $6.04 per 1,000 gallons; and Waiola O Molokai Inc. rates will go from $1.85 per 1,000 gallons to $5.15 per 1,000 gallons.

The price adjustments are projected to generate $555,397 a year for the two water utilities. Nicholas said that the temporarily rate increases will enable the company to continue to provide service.

"Now this issue appears to have been temporarily resolved, I confirm the utilities will continue to operate and provide services to their customers past August 31," Nicholas wrote. "How long the temporary rate increase will be sufficient for the utilities to be able to continue to operate depends on future fuel, power and labor cost increases."

Lingle noted that raising rates is not an ideal situation for Molokai residents, but will ensure the continuation of water service until a permanent solution is found.

"We recognize that this is a difficult situation for everyone involved, and we especially understand residents' concerns regarding increases in water rates, " Lingle said. "However, facing the potential shutdown of water and wastewater services, the Public Utilities Commission has taken appropriate action to ensure the health and safety of residents are not compromised by any disruption of water or wastewater service."

After MPL announced its intentions to shut down the utilities, the county initiated an emergency plan to provide water and wastewaters services. The Department of Health subsequently ordered the county prepare the emergency plan.

Another Health Department order for the county to plan to take over the MPL utilities apparently has been rescinded, but the hearings officer has not yet issued findings on the issue.

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