The Molokai Times
Tuesday, June 10, 2008
By Kate Gardiner
The state Public Utilities Commission has ordered Molokai Properties Limited to continue operation of its utility services for Molokai's West End.
The PUC has also asked MPL to provide proof that it can no longer support its three monitored water and sewage utilities by June 12.
In a letter dated June 5, PUC chairman Carlito Caliboso informed company chief executive officer Peter Nicholas his commission would not allow MPL to abandon its three companies until a suitable alternative provider has been secured.
"The utilities must continue to operate to ensure the health and safety of their customers," wrote the commissioners. "Nonetheless, until the County or other third party takes over the operation of the Utilities' water and wastewater systems, the Commission expects the Utilities and MPL to take all necessary and prudent action to continue operations."
On Molokai, more than 1,200 clients are affected by the MPL decision to cease its utilities operations. Its three PUC-licensed companies, Wai'ola, MPU and Mosco, and three other private utility companies, serve roughly half the island's households, including the towns of Kualapu'u and Maunaloa, and developments at Kala'e, Kaluakoi and the Papohaku Ranchlands.
A letter from Nicholas dated Feb. 7 offered Well 17, which supplies much of the private system's water, and its assorted chattels to the Department of Hawaiian Homelands. DHHL refused to purchase the companies in mid-April. As of April 2, however, Maui County Department of Water Supply director Jeff Eng said no one had approached him.
As of Friday, Tavares's worries were at least temporarily assuaged. The Mayor said in a press release Friday, "I fully support the action by these State regulatory agencies. It reconfirms my belief that Molokai Properties and other operators of private water and wastewater systems can be held responsible to their customers."
In his May 30 letter on behalf of Wai'ola O Moloaki, Molokai Public Utilities Inc, and Mosco, Inc., Nicholas told the PUC that MPL could no longer afford to pay for the utilities, much less utilities no longer used to operate Molokai Ranch Lodge & Beach Village, which closed April 5.
Nicholas said two of MPL's three companies, MPU and Wai'ola, have not generated enough revenue to cover their operating costs.
He told the PUC that MPL, as parent company for the utilities, has been soliciting offers for the companies, including Maui County and the state of Hawaii, "in an effort to transfer the assets and operations of Wai'ola and MPU so that service would not be interrupted." Nicholas also cited a December 2007 state Supreme Court decision in favor of Native Hawaiian Legal Corporation ordered MPU to reapply to the Commission on Water Resources to continue operating Well 17. Nicholas told the PUC his utilities have insufficient funds to complete the lengthy process.
At a May meeting of the Molokai Action Team, chairman and director of the state office of planning Abbey Mayer said any entity that depends on Well 17 for its water source for the West End utilities companies would have to reapply. Additionally, he said rule 343, pertaining to environmental assessments, would likely be triggered by the application.
Utilities abandonment would be precedent setting
While it appears that MPL will not be allowed to abandon its utilities, if that were to happen the impact would be serious.
Monsanto Molokai, the island's largest employer since the closure of Molokai Ranch's active operations April 5, said last Wednesday that it is concerned on behalf of its employees, but that it is not in the business of providing residential water services.
Paul Koehler, manager of scientific and community affairs for Monsanto Hawaii, said in an email, "If the water and sewage systems are actually terminated, the impact on our employees whose homes are presently being serviced by those utilities would be more serious than any possible impacts to our farming operations." Therefore, the State of Hawaii Department of Agriculture, which already operates the troubled Molokai Irrigation System and the Maui County Department of Water Supply, are MPL's two most promising options.
The state has said it is not interested in running the utilities, in part because it is not in the business of running residential water and sewage systems; if it were to take on the system, it would be opening the door for other floundering water and sewage utility systems statewide.
If MPL bankrupts its subsidiaries by removing their funding, the West End water utilities would likely be operated by the County of Maui. This is in part because it has the requisite experience running residential water utilities on Molokai and elsewhere in the county.
Tavares said that despite the county's history of operations, it cannot be expected to take over inadequate private systems because accepting the responsibility would be unfair to county taxpayers. Taxpayers will likely be burdened with bringing the systems up to county standards, hypothesized Maui County council member Danny Mateo.
West End resident Steve Morgan said it was the government's fault for allowing the developments without a guaranteed water system. Morgan runs a water catchment system on his property. The Molokai Ranch utilities would serve his family as a last resort.
"The county and the state need to face up to their contributions to this problem," wrote Morgan. "The county allowed for the initial development of both Kaluakoi and Maunaloa without any long-term guarantee of water supply and the state allowed for a foreign entity to assume the operations of these water utilities without any assurance of the parent company." He continued, "Given the politicizing going on, the folks on the West End have every right to be concerned." Mateo introduced a resolution to the council Friday to hire special attorneys to deal with any county litigation that comes out of the transition. In the interim, the PUC estimated future water costs to be in the neighborhood of $5.50 per 1,000 gallons on Wai'ola, three times current cost; and $5.66 per 1,000 gallons, from $3.18, for users of MPU. MPL has not applied to the PUC for any sort of rate increase since it became apparent that the utilities are not self-sustaining.
Chief counsel Stacy Djou said Sunday in a press release that her commission requested an "explanation as to the Utilities' assertion that Mosco would be ceasing operation in August even though its 2007 financial report, filed with the PUC, indicated that its revenues exceeded its expenditures."
Molokai state Sen. J. Kalani English said he wondered if the responsibilities could be avoided, without the subsidiaries going bankrupt. "It comes down to the corporate veil," said English. "The parent company owns something, and they've sold land with the promise of water and sewer. Can they hide behind the corporate veil?"
According to the statute regulating public utilities, all three of the PUC-regulated water utilities are liable for a $25,000 per day fine for cessation or termination of services without the permission of the commission.
Original article URL: http://www.molokaitimes.com/articles/8610142920.asp