State regulators have granted Lana'ians for Sensible Growth limited participation in the ongoing review of whether transferring Lanai's public utilities to Larry Ellison, who owns the vast majority of the island, is in the public interest.
At the same time, the Hawaii Public Utilities Commission denied environmental group Life of the Land's motion to intervene in the case, according to documents filed Monday.
Lana'ians for Sensible Growth also had sought to intervene, which would have made the advocacy group a party in the case. The PUC instead will allow the group to participate "only to the degree ordered by the commission."
The PUC last month gave interim approval allowing Ellison to take ownership of Lanai's water, wastewater and transportation utilities from David Murdock's privately held Castle & Cooke Inc. The commission said at the time that it has the right to ultimately disapprove the transfer of Lanai Water Co., Manele Water Resources and Lanai Transportation Co. to Ellison.
The interim approval coincided with the closing date for the overall sale of most of the island, including more than 88,000 acres of land, the island's two luxury resorts, two golf courses and other assets for an undisclosed price.
In arguing to intervene in the utilities case, Lana'ians for Sensible Growth said that no other organization has the experience, knowledge and understanding of Lanai's utilities and operations. The group also said it has a vested interest in preserving the health of Lanai's watershed and aquifer.
"Based on (Lana'ians for Sensible Growth's) representations, the commission finds that LSG can assist the commission in developing a sound docket record on these matters," the PUC said.
Citing Ellison's pledge to invest $10 million in the three utilities over the next five years, the PUC also said it believes that Lana'ians for Sensible Growth will be helpful in developing a plan for the promised improvements.
The PUC made clear that the organization will not be allowed to unreasonably delay the case or broaden the scope of issues. The PUC said it can reconsider the group's participation if it fails to contribute meaningfully.
"We're pleased that we're going to have partial standing," said Lana'ians for Sensible Growth President Butch Gima. "We went in not supporting or opposing the transfer. We just wanted to be sure the process was transparent with regard to water issues, which are very important to the community and the island."
The PUC ruled that Honolulu-based Life of the Land's motion to intervene was beyond the scope of the utilities transfer issue.
Life of the Land's request was denied, in part, because it focused mostly on issues related to building of the proposed wind farm, the rights to which have not been transferred to Ellison. Murdock has retained that right.
"Simply put, (Life of the Land) fails to allege any connection between the issues associated with the indirect sale and transfer of the three Lanai-based public utilities and the proposed Lanai wind farm and related infrastructure," the PUC said.
Henry Curtis, Life of the Land's vice president for consumer issues, did not respond to a request for comment.
The PUC's filing Monday also laid out issues that will govern a final decision in the case, including:
* Whether the indirect sale and transfer is reasonable and in the public interest.
* Whether each public utility in the future will be fit, willing and able to operate as stand-alone utilities, without support from its parent entities.
* Whether the rates, terms and conditions of the three public utilities will be detrimentally affected by the indirect sale and transfer.
* The future movement toward cost-based water and wastewater rates.
Regarding the last point, the PUC said that it's concerned that current rates do not appear to encourage customers to conserve Lanai's water resources.
The PUC says Lanai Water Co. is charging rates approved by the commission back in 1996, which are "below the reasonable costs incurred by the water utility in providing potable water service." It also said the existing rate structure does not allow the water utility to automatically recover increases in electricity costs.
Meanwhile, the existing wastewater rates were approved in 2007 and are also "well below its cost of operations."
"The commission reiterates its concern with the efficient management of Lanai's water resources, including the adequacy of the water supply for Lanai Water Company and Manele Water Resources," the PUC said. "Furthermore, the existing rates, in turn, do not appear to efficiently encourage the conservation of water on Lanai - specifically, the lack of appropriate price signals to ratepayers."
The PUC has set a July 31 deadline for the parties - Castle & Cooke and the three utilities - and Lana'ians for Sensible Growth to jointly or separately file a proposed procedural order to govern the case going forward.
* Nanea Kalani can be reached at nkalani@mauinews.com.
