Suit seeks to bar shutdown of MPL utilities

WAILUKU - Maui County filed a lawsuit in 2nd Circuit Court on Friday afternoon seeking a court order that bars Molokai Properties Ltd. from ever shutting down its water and sewage treatment services on the Friendly Isle.

While an executive of Molokai Properties insisted this week that the company could not be required to continue to operate the three utility companies indefinitely, the county's civil suit claims that MPL and its predecessors signed contracts obligating them to maintain utility services.

The utility services were required when the owners of the Molokai Ranch were granted development rights at Kaluakoi, Kualapuu and Maunaloa, the suit said.

"Molokai Ranch's anticipated failure to operate and maintain its private water systems and its Kualapuu wastewater treatment facility is a breach of agreements with the county," the suit said.

"Now that Molokai Ranch has benefited from the development of its land, it cannot simply walk away from the clear contractual obligations to Maui County."

Two days earlier, in a letter to the state Public Utilities Commission, MPL Chief Executive Peter Nicholas said the company would continue to operate the three utilities after the Public Utilities Commission approved temporary rate hikes to keep the money-losing water utilities afloat.

But Nicholas called the hikes a "stop-gap" measure and gave no commitment for long-term operations.

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

On Friday, former Attorney General Margery Bronster, who was hired by Maui County to assist with the dispute, filed the suit seeking a declaratory order that was assigned to 2nd Circuit Judge Joel August.

Bronster said she and her firm reviewed 31 contracts signed by MPL and its predecessors to build and run the utilities to support MPL's Molokai Ranch, housing developments, resort accommodations and the Kaluakoi Golf Course. The contracts go back to the 1970s, when Kaluakoi was approved by the state Land Use Commission and county planning commission, and every one says that companies developing the Molokai Ranch lands are irrevocably responsible for operating the utilities.

The complaint seeks to have the court order MPL to honor the contracts and pay the county for unspecified damages and legal costs.

A representative of MPL could not be reached for comment Friday.

Mayor Charmaine Tavares said Molokai Properties is offering "ambiguous responses" that offer no reassurance to affected residents.

"Certainly a wealthy company that has financially supported its subsidiaries should not simply walk away from legal and moral obligations," she said. "Today's action further points to the seriousness of this situation and our commitment to hold the company accountable."

In a telephone interview from Honolulu, Bronster said that the contracts also explicitly indemnify the county from taking over Molokai Public Utilities Inc., Waiola O Molokai Inc. and Mosco - the three utilities operated by MPL serving about 1,200 residents in Kualapuu, Maunaloa and Kaluakoi.

While the company told the PUC it will continue water services with the interim rate hikes, Tavares said Thursday that the letter to the PUC did not say that MPL will continue to operate Mosco - the wastewater services.

"The temporary resolution offered by Peter Nicholas is not very reassuring to the people of Molokai," Bronster said. "We don't know if they will stay open a day or a week or a month. The people deserve more certainty."

In granting the interim rate hikes, the PUC had ordered MPL to continue to operate the utilities and if a new operator cannot be found in six months, the company must apply for general rate increases.

The Department of Health also weighed in, ordering the company to run the facilities for at least three months in order to avoid a public health disaster. But the department joined Gov. Linda Lingle in initially ordering Maui County to take over the utilities that MPL said it will abandon.

After MPL announced its plans to stop utility operations as of Aug. 31, Lingle repeatedly said it is Maui County's ultimate responsibility to run the utilities if MPL wants to quit.

The county and Bronster said there is no law that requires a county takeover if a private utility backs out even if it is losing money. Bronster on Friday said it is the state's responsibility to restore services should MPL "turn off the spigots" through the regulatory authority of the state over utilities and public health systems.

Maui County has prepared an emergency plan to provide water and wastewater services to west Molokai residents if MPL shuts down anyway.

Tavares said the county has been pointing out the "dire consequences" to Molokai residents if MPL follows through on its threat.

With the PUC granting 30 to 55 percent increases for water, she said the county will assist qualified families hit by higher bills under rates that take effect Monday.

"We are doing what we can on behalf of the people of Molokai,' she said.

For her part, Bronster said that MPL and Molokai Ranch officials signed many of the water agreements and contracts obligating the utility services.

"MPL must be held accountable to keep the water flowing," Bronster said. "MPL has been trying to hide and claim to have no direct involvement with the utilities. But these agreements are outlined going back 30 years with MPL and predecessors. They made commitments to develop, build, operate and maintain water systems and did that as part of all the developments and subdivisions they built as long as they owned the property."

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