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Rate Case Status Report and Update

SUMMARY OF MOLOKAI PUBLIC UTILITIES, INC.’S APPLICATION TO INCREASE WATER RATES

On March 2, 2009, Molokai Public Utilities, Inc. (MPUI) filed its initial application with the Hawaii Public Utilities Commission (PUC) to increase water rates to its Kaluakoi consumers. At the same time, Waiola O’ Molokai (WOM) filed a similar application to increase water rates to its consumers. MPUI filed an amended application on June 29, 2009. It asked for water consumption rates of $7.9996 per thousand gallons (TG), effective upon PUC order, and $9.6061 TG effective six months thereafter. (A Temporary Rate Order issued by the PUC in August, 2008 had increased rates from $3.18 TG to $6.04 TG, ostensibly to prevent water from being shut off by MPUI. Those interim rates were continued by another Temporary Rate Order issued February, 2009.)

In these proceedings, WMA and Maui County experienced resistance by MPUI at every phase of its participation. WMA’s request to be a party was opposed by MPUI. Protective orders were required of WMA in order to assure confidentiality with regard to information that MPUI had to share with the Consumer Advocate, (CA) the County of Maui (County), and WMA.

Immediately before the scheduled evidentiary hearing, MPUI negotiated a separate “Settlement Agreement” with the CA. Other parties (i.e. WMA and the County in the MPUI case, and the County in the WOM case) were not included in those negotiations and, ultimately, did not consent to the deals. Pursuant to the PUC’s rules, the evidentiary hearings went forward.

WMA had three witnesses sponsor testimonies in the case: (a) Lyle Dunham was a policy witness on behalf of WMA; (b) Larry Fujino, CPA, provided an analysis of fixed and variable costs, as well as proposing revisions to MPUI’s rate design in order to have water rates track costs as those costs are incurred by MPUI; and (c) Robert Marusich, who brought forty years of technical engineering experience to locate and quantify the substantial water losses being experienced by MPUI.

WMA’s major objective was to have rates set based upon reasonable costs. WMA’s proposed usage fees would have generated approximately 53% of MPUI’s total revenues, with the remaining 47% derived from fixed charges imposed upon all customers, including the golf course and the hotel.

In the course of the hearing, the principal representative of the owner of Molokai Properties, Ltd. testified under oath that with a final Commission rate order in hand, MPUI, MPL and its owner will subsidize the operations, if required, to ensure the continuation of potable water service to all customers.

On May 29, 2010, the PUC granted Interim Orders in both the MPUI and WOM proceedings. Both Orders were approved by a majority (ie. 2) of the Commissioners, with Commissioner Leslie H. Kondo dissenting. (In the evidentiary hearings, Mr. Kondo only questioned if MPUI’s revenue requirements were large enough!)

In the MPUI Interim Order, MPUI was granted a water rate increase to be implemented in two increments on an “across-the-board” basis. Beginning the week of June 7, 2010, rates increase to a new “interim” level of $6.72 per TG; in December, 2010, the final phased-in usage rate will become effective, at approximately $7.41 per TG. Other fees and monthly charges are also increasing on June 7, 2010, and again in December, 2010. (The tariff sheet containing all Phase I rates and charges can be found on the WMA website) WMA’s arguments for rate reform (“cost based rates”), energy cost adjustment surcharges, excess capacity charges, etc. were not addressed by the PUC in their Interim Decision and Order.

The Interim Order awards MPUI $976,375 in annual revenues, but 82% (or $767,634) of the revenues are to be collected from usage charges, and only 18% of revenues collected will be related to the fixed costs of providing the service. Because the rate increase will be spread over the existing rate structure, the actual consumers of water are paying an unduly large percentage of the fixed costs previously being paid for by the golf course and the hotel which are no longer in operation. In effect, the remaining users are paying all of the costs of the plant that have been effectively abandoned by MPL’s golf course and hotel (i.e. “standard plant”).

Notwithstanding our disappointment, these hearings were NOT a waste of time and money as it gave all of us who participated a much clearer insight into the PUC’s and the CA’s agenda and attitude. And, even though WMA cannot claim a “victory”, its participation may have avoided MPUI’s getting even more of what it asked for. Further, MPUI knows that in the future their actions will be met with strong and meaningful resistance if they are in derogation of WMA’s interests. Finally, it should be noted that this is an “interim” order and that the process will continue for several months. MPUI will file a legal brief within a certain interval after the hearing transcript becomes available, then WMA and the County of Maui will file responding briefs (jointly or individually) and the PUC will eventually issue a final Decision and Order, expected August/September 2010.

Documents worth reading, and posted on this web site for Docket No. 2009-0048, the MPUI rate case, include the:

For completeness, similar documents worth reading, and posted on this web site for Docket No. 2009-0049, the WOM rate case are the:

Inquiries have been made with regard to the pros and cons of taking an appeal. WMA’s attorney has stated that prior to 2009, appeals of PUC Orders were directed to the Supreme Court. Now, appeals are taken to the Circuit Court, which is a quicker, cheaper way of obtaining court review. If errors occurred, they would require reversal of the final PUC decision.

A large majority of prior decisions by the Supreme Court and Circuit Court involving PUC Decisions have affirmed those decisions. This is primarily due to the fact that a single judge or even five Supreme Court Justices are reluctant to overturn three full-time Commissioners who regularly hear and decide ratemaking cases. For an appeal of a PUC Decision to be successful, there must be blatant procedural errors that have deprived the appealing party of its procedural due process rights. Our attorney states that the record established to date in this case does not have those type of procedural errors even though the commentary coming from certain Commissioners during the course of the hearing suggested a bias in favor MPUI.

June 8, 2010

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Status Report on the Molokai Public Utilities, Inc. Rate Case, PUC Docket No. 2009-0048

To the membership:

WMA’s Directors are extremely disappointed at the outcome of the Molokai Public Utilities, Inc. (MPUI) rate case thus far. We have expended many hours of OUR time and a substantial amount of YOUR money on PUC Docket No. 2009-0048. Clearly, the PUC’s recent INTERIM decision did not reflect the facts presented by WMA’s legal counsel, forensic accountant and witnesses.

WMA developed and presented a reasoned, rational case for our members benefit, with the central theme being RATE REFORM NOW, not at some indefinite future date. Within the context of rate reform, WMA argued for:

  1. Allocation of the Company’s approved fixed costs, such as the MIS annual rental charge of $136,500, to the fixed charges on your monthly bill.
  2. Establishing the water usage rate on the basis of the Company’s approved variable expenses, predominantly pumping costs, and ONLY on such approved variable expenses.
  3. Energy cost adjustment surcharges that would eliminate the Company’s exposure to large increases in the cost of diesel fuel and electrical energy used at Well #17 and the Mahana Pump Station and, consequently, that would have lowered the initial water usage rate by about $2.00 per thousand gallons (TG).
  4. Arms length accounting practices for all transactions between MPUI, MPL and other subsidiaries of MPL.
  5. Excess Capacity Charges for prior users, such as the Hotel and the Golf Course

For a better understanding of WMA’s case, read the Joint Statement of Probable Entitlement, dated May 21, 2010 posted on this web site.

But no one listened. Not the Commissioners, not the Consumer Advocate (CA) and certainly not MPUI. Instead, MPUI and the Consumer Advocate “cut a deal” just prior to the evidentiary hearing without WMA’s or The County of Maui’s involvement. Since WMA and The County of Maui did not agree to this “settlement agreement”, the evidentiary hearing was conducted on schedule. However, as the hearing progressed, it became evident that the Commission would probably accept the “done deal” essentially as is.

The Consumer Advocate’s performance in all of this was unworthy of his title and position. His primary concern was the viability of the utility companies and not the interests of the consumers he supposedly represents. This concern was stated repeatedly throughout the CA’s written direct testimony and his oral testimony during the evidentiary hearing. He did not even calculate the increase in a typical consumer’s monthly bill or present such calculations as evidence. Furthermore, one of the Commissioners repeatedly asked MPUI witnesses if they had requested enough funds to meet their anticipated expenses. WMA presented it’s case, scored some points, but did not prevail. We intend to file a comprehensive closing brief by mid-July and await the PUC’s final decision sometime in the fall.

In retrospect, several questions arise:

  1. Should we have petitioned for Intervenor status in the first place? ABSOLUTELY YES!
  2. Should we have done things differently? CLEARLY YES! Somehow, we should have presented a more complete and comprehensive case in our direct testimony submitted on January 6, 2010. But I personally cannot state how that objective could have been achieved.
  3. Was it worth the cost and effort? Again, ABSOLUTELY YES! WMA represented it’s members in an unprecedented capacity before the PUC to the best of our ability, using the limited resources available. We forced issues by actually being in the case and made positive contributions to the record. “Stand For Water” made no contribution to the record, and the PUC dismissed them as an Intervenor in both the MPUI and Waiola O Molokai (WOM) rate cases for lack of performance and other reasons.

Any comments or questions on this report should be directed to me at robert.marusich@gmail.com. Please include a phone number for follow up purposes.

Finally, it should be noted that the PUC did NOT accept the proposed rate schedules in both the MPUI and WOM rate cases as per orders issued last week. So the ordeal continues.

Robert B. Marusich
June 14, 2010

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WMA Granted Intervener Status in Molokai Public Utilities, Inc Rate Case

In an Order issued last Friday, The Hawaii Public Utilities commission formally named the West Molokai Association as an Intervener in the rate case proceedings initiated by Molokai Public Utilities, Inc. (PUC Docket 2009-0049). Thus, WMA will be a full party in these proceedings with the right to submit questions and evidence, challenge the content of MPU’s application as well as other information furnished during the proceedings, cross-examine the utility company’s officials and expert witnesses, and to fully participate in any other appropriate manner.

It is the first time WMA has been granted this level of participation, and your Board of Directors intends to respond in a fully professional manner to the new challenges/responsibilities that accompany such status.

During the last three months the Board hired William W. Milks, a Honolulu based attorney, as WMA’s lead counsel for this matter. It authorized Mr. Milks to prepare a Motion to Intervene and reviewed several drafts of that document. In addition, the Board authorized Mr. Milks and Board member Robert Marusich to present testimony on WMA’s behalf at the Public Hearing held in Kaunakakai on September 3, 2009.

All of WMA’s formal submittals and correspondence are a matter of public record and can be found on the PUC’s web site (http://dms.puc.hawaii.gov/dms/) under the documents tab for Docket No. 2009-0048. Of particular relevance are:

  • The PUC’s Order Granting Intervention, dated October 16, 2009;
  • WMA’s Motion To Intervene, dated September 11, 2009; and
  • Written testimony submitted by Robert Marusich, dated September 3, 2009.

Further updates as to specific actions and schedule dates will be posted within the next three weeks.

If as a user of the water system or as a property owner you have insights you may wish to share with the Association, in furtherance of our effort in ascertaining what the appropriate rates for water should be for Association members, it is requested that you contact Bob Marusich, at MarusichHomeinMV@aol.com, as Bob is taking the lead in compiling evidence to fortify the Association’s presentation in this complex proceeding.

Thank you,
The West Molokai Association Board of Directors

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Molokai Public Utilities, Inc. – Application for Water Rate Increase

The PUC and Division of Consumer Affairs most recent filings follow.

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Governor Lingle News Release 8/28/08

MOLOKAʻI PROPERTIES TO CONTINUE WATER SERVICE BEYOND AUGUST 31

HONOLULU – Governor Linda Lingle today announced that Molokaʻi Properties Limited has confirmed it will continue to provide water service beyond August 31.

In a letter to Public Utilities Commission (PUC) Chairman Carl Caliboso, Molokaʻi Properties Limited Director Peter Nicholas said the recent approval by the PUC to temporarily increase water rates for West Molokaʻi will enable the company to continue to provide service. The company previously said it lacked the financial resources to continue to operate beyond August 31.

“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 stated in the letter. “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,” Nicholas continued.

Nicholas’ letter also pointed out that the temporary rate increases are a “stop-gap measure,” and that the company will not operate the utilities indefinitely. Molokaʻi Properties Limited’s long-term obligation to operate the utilities has not been determined.

Governor Lingle noted that the rate increase is not an ideal situation for Molokaʻi residents, but it will ensure the continuation of water service until a permanent solution is found.

“The temporary rate increases will allow Molokaʻi Properties to continue to provide water service until another entity can take over the operation,” said Governor Lingle. “We recognize that this is a difficult situation for everyone involved, and we especially understand residents’ concerns regarding increases in water rates. 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.

“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. Mayor Tavares, council members, state legislators, and Molokaʻi 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,” the Governor added.

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From Neeley & Anderson, LLP to WMA Members – August 12, 2008

This firm has acted as general counsel for West Molokai Association for a number of years. Along with a number of other lawyers and experts, we have been assisting the Board of Directors of the Association with regard to the very serious problems created by the recent positions taken by Molokai Properties Limited and the Utility companies. The most immediate issue is the threatened loss of water and sewage utilities:

Molokai Properties Limited, will stop funding for its six water and sewage utility companies on the island at the end of August.

MPL chief executive officer Peter Nicholas said in a letter to the state Public Utilities Commission his company no longer needed the services of its utilities, and was thus severing ties with the companies.

We feel very strongly that the Board has acted in accordance with its fiduciary duties in responding to this crisis. The Board of Directors at WMA is comprised of 7 directors, 2 of whom felt they were conflicted out of this issue. In order to obtain the best input possible, the remaining directors voted to form a committee comprised of former presidents of WMA and other owners with special expertise or knowledge that the Board believed would be helpful. The committee has been meeting regularly, and conferring with outside experts to develop a plan to attempt to protect the members of WMA. The committee has been kept up to date with the State and County agencies faced with these issues and has, when possible or recommended, intervened in administrative procedures.

The following is a more detailed summary prepared with the assistance of the experts who are working with the WMA Board and committee; however, I would first like to respond to the question of one owner about why these committee meetings are being kept confidential. In order to preserve the attorney-client privilege and other privileges as well as confidential information and strategy discussions, the committee meetings must be kept confidential at this time. As recognized by our legislature, the loss of the attorney-client privilege would do serious damage to WMA and to its ability to work effectively on this matter. The committee, with approval of the Board President, will continue to issue periodic reports on this matter to all members as information becomes available and will welcome any written thoughts on the matter from the members via email to the WMA office. Calls by members to attorneys retained by WMA are inappropriate because the attorneys’ client is WMA, a nonprofit corporation, not its individual members.

Joyce Neeley

In early May WMA retained Gilbert D. Butson, a well-respected Honolulu real estate attorney well-versed in water rights matters, to represent the WMA before the Commission on Water Resource Management in the matter of the Molokai Properties, Ltd. (“MPL”) subsidiary entities’ pending 1997 application for a water use permit to continue using water from Well No. 17, the source of our water since the initial development of Kaluakoi and to otherwise provide advice to WMA on related water matters. Those proceedings are currently at a standstill, and our attorney has been informed that if and when those proceedings recommence, WMA will be advised by the Commission as to how it may participate in light of MPL’s statements that its subsidiary entities will not participate further. In addition, Mr. Butson’s partner, Jerrold K. Guben, a renowned Honolulu bankruptcy attorney, has been providing WMA with advice should MPL’s subsidiary entities seek bankruptcy protection as part of the planned discontinuance of water and sewer services to our members.

WMA also retained the services of administrative law attorney William W. Milks, Esq. to represent the Association in the Public Utility Commission proceedings. Mr. Milks filed motions to intervene in the two on-going PUC administrative hearings involving the MPL subsidiary entities and the County of Maui. Unfortunately, on August 8, 2008, the Commission entered orders denying the WMA motions to intervene in those proceedings. Our retained attorneys are also monitoring the current proceedings before the Department of Health.

Evaluations and recommendations will be made by counsel to determine what, if any, legal proceedings by WMA should be commenced against Maui County, the Utilities, and Molokai Public Properties. Additional information will be provided regarding this information as it becomes available.

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Letters

PUC – Updated June 13, 2008

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DEPARTMENT OF HEALTH (DOH) – News Release – 7/21/08

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THE MAUI NEWS – Article – 7/23/08

County seeks to dismiss order

Hearing on Molokai utilities delayed after ranch owner says it’s not ready to proceed

By BRIAN PERRY, Assistant City Editor

With less than 24 hours’ notice, Maui County officials showed up Tuesday morning at a state Department of Health hearing in Honolulu ready to fend off an attempt to require the county take over water and wastewater services in west Molokai.

But the battle was put off until July 30. Then, Molokai Properties Ltd. is scheduled to present its case for walking away from operating utilities that the landowner says serve 1,200 customers. At the same sessions, a Health Department hearings officer is expected to rule on a motion to have the state’s case dismissed against Maui County.

“The county wholeheartedly supports the Department of Health’s case against Molokai Ranch,” said Deputy Corporation Counsel Jane Lovell. But she said the county strongly disputes the state’s notices of violation to Maui County for water and wastewater facilities operated by subsidiaries of Molokai Properties, which also owns the now-closed Molokai Ranch.

On Monday, the Health Department ordered Molokai Properties to continue providing utility services for at least 90 days. But the department also put Maui County in its sights, ordering it to prepare to take over the utilities if they are abandoned by the company’s subsidiary utilities.

Lovell said she insisted that the state proceed with its case against Maui County. During cross-examination of state water and wastewater officials, none of them could point to a violation by the county, she said. State witnesses did testify about the adverse health consequences if there were a sewage spill or if Molokai residents didn’t have clean drinking water, she said.

Lovell didn’t dispute the health issues, but she asked every witness: “What is the violation? What has the county been charged with violating?” “Every witness said the county was not violating anything,” she said. State witnesses also presented diagrams and maps, but “those documents didn’t prove Maui County was in violation of anything either,” Lovell said.

Molokai Ranch asked for and received a continuance of the hearing to 9 a.m. July 30 in the Health Department’s Environmental Management Division conference room in Honolulu, said department spokeswoman Janice Okubo. She said the hearings officer took the county’s motion for dismissal under advisement, and the county and state were directed to submit memoranda for the July 30 hearing.

Lovell said she asked to have the hearing held on Molokai or at least on Maui, but the hearings officer denied her request, apparently ruling that the logistics of holding the hearing away from Honolulu would be too difficult for the state officials.

She pointed out that the logistics for Maui County officials, preparing legal briefs and flying to Honolulu on less than 24 hours’ notice, were “extremely difficult.”

Maui County has been told to assess the Molokai utilities within seven days from Monday and to update a report on the assessment every seven days thereafter, Lovell said. The county also has been ordered to be ready to take over operations of the Molokai utilities in 90 days or whenever the ranch stops providing utility services. “There is no legal authority whatsoever that allows the Department of Health to do that,” she said.

Lovell said the county is willing to provide assistance if Molokai Properties were to abandon the utilities. That assistance could include sending in water tanker trucks for residents or opening up county facilities to allow people to take showers or use toilets, she said. But she said it’s “unprecedented” for the state “to force the county to acquire and operate private water and wastewater utilities.” “That they have no power to do,” she said.

If the county’s motion to dismiss is not granted by the Health Department’s hearings officer, the county can appeal the decision, probably to the 2nd Circuit Court, Lovell said. “That’s the way I read the rules anyway,” she said.

If it comes to that, the Corporation Counsel’s Office should have support from a private attorney, former Attorney General Margery Bronster. Also on Tuesday, the County Council’s Policy Committee unanimously recommended hiring Bronster as a special counsel for the county in the evolving Molokai utilities dispute.

The panel’s recommendation is expected to be taken up by the full council at its Aug. 8 meeting.

“Hopefully with her help we’ll be able to deal with some of the legal mumbo jumbo that the state has laid out for the county,” said Policy Committee Chairman Danny Mateo, who holds the Molokai residency seat on the council. “There are so many different issues that we need to address. You know this so-called just-let-the-county take it over is not as general as it sounds. It is a takeover that involves major capital costs with it and we don’t know what those capital costs are,” Mateo said. “We need to get these little things worked out so we have a better understanding of what the state is demanding the county do. That’s a fair process. No business would consider acquiring something when it has no idea what the costs are going to be.”

Mateo said the cost of operating and maintaining the Molokai Ranch’s water and wastewater systems are only one of many issues on which the county will need to have better information before it can consider agreeing or not agreeing to a takeover.

He cited the position taken by the state Public Utilities Commission, which has ordered Molokai Properties Ltd. to proceed with a hearings on increasing rates based on MPL’s claims that it can no longer afford to operate the systems. The Department of Health in contrast is simply ordering the county to take over the privately owned systems and demanding the county proceed with an analysis of the costs. “Talk about inconsistencies by the state agencies when it comes to the Department of Health saying the county must take it over in 90 days,” he said.

County spokeswoman Mahina Martin said the administration is “excited and greatly appreciates this action by the council . . . the spirit of cooperation in dealing with this situation.” She said Bronster will be a great addition to the county’s legal team. The resolution authorizing the hiring of special counsel allocates up to $100,000 for Bronster’s fees.

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PUC PUBLIC HEARING – JULY 15, 2008

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Molokai Community Mtg — July 8, 2008

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News Update – June 30, 2008

By now most of you have read the series of letters (a) from the PUC to the Utilities, MPL and to Mayor Tavares, (b) from the Utility Companies to the PUC and Mayor Tavares, and (c) from elected Molokai officials to the Governor. Below is a brief summary of current positions. For additional information, review the letters and documents posted on this website.

PUC — The PUC has taken the unprecedented step of initiating a rate case to generate funds so the Utilities can supply water for a little longer (a 40.95% increase — ostensibly for 6 months from the date of the rate increase — apparently so services can continue until a buyer is found or until the County takes over). The PUC acknowledges that it cannot force the Utilities to supply water “in perpetuity”. The PUC has told the Mayor that the County is the entity that should take over the water utilities but apparently the PUC lacks power to force the County to do so.

Maui County Mayor — The mayor’s position is that it would be bad precedent to provide county residents with water and sewer services when a defunct and irresponsible private company cannot or will not do it. The County has filed a complaint in the PUC asking for relief in the form of show cause orders, subpoena, subpoena duces tecum, etc. issued to the Utilities to provide more information.

Molokai’s State Senator and Representative — The elected officials argue that it is the State’s responsibility to take care of Molokai’s water and sewer problem.

Councilmember Mateo — Mr. Mateo has written to the Governor stating that it is the State’s responsibility to solve Molokai’s water and sewer crisis and that the Utilities must continue to provide services.

There remains a lot of finger pointing. No entity has proposed a long term solution to the water crisis – which remains a crisis from well to faucet. As to Mosco sewer services, please review the PUC’s June 16th Order posted on this website and Mosco’s response to the PUC dated June 23, 2008.

As you should know from prior postings on this website, WMA has engaged legal counsel. WMA’s PUC counsel will be responding to the actions taken in the PUC and will coordinate action with WMA’s Water Commission counsel. Additional information will be provided in future postings and in the next update. You are encouraged to read all postings on this website for more detailed information.

For those who have still not paid assessments, your actions put WMA at risk of becoming unrepresented when representation is crucial.

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MAT SPEECH

PAUL MORDISINI, WMA PRESIDENT

June 16, 2008

We are facing a potential water and sewer crisis. Without water and sewer services, the whole unserved area would be totally unlivable. As our mayor suggested so cavalierly, people would have to move — give up their homes and shut down their businesses.

On March 24, WMA was told that Molokai Public Utilities and Mosco Inc. were going to be abandoned in six months. We knew then that it would impact the entire Kaluakoi area – more than 800 parcels of property, including

  • homes in the Ranchlands
  • three condominium projects
  • homes on the golf course
  • Moana Makani
  • Papohaku Beach Park and beaches accessed from Kaluakoi and Pohakuloa Roads
  • All fire hydrants along Kaluakoi Road, Pohakuloa Road and all the interconnected loop roads

Since March 24, the pending crisis has escalated as Wai’ola O Molokai has been added to the list of Utilities to be abandoned. Now who could be seriously, even irreparably injured, if there is a water and sewer shut down in August?

  • Over 3,300 men, women and children who have homes and properties in Maunaloa, Kualapu’u, Kaluakoi, and part of Kalae
  • School children attending Maunaloa School; Kualapu’u Charter School and the teachers and staff who work there
  • Those who live in subsidized housing in Maunaloa
  • Businesses such as Coffees of Hawaii, Maunaloa General Store, Kualapu’u store, The Cook house, the Kualapu’u Business Center, Denise’s Furniture, the Post Office in Maunaloa, The Kite Factory, the rental units at Kaluakoi, Tri-L Construction, and the Hawaiian Research Center
  • Special Needs programs that will have to move, including the daily meal program for the Kapuna in Maunaloa, the school lunch program for Maunaloa and Kualapu’u, the new Community Center being built in Maunaloa, and the subsidized housing program in Maunaloa
  • The firefighters who would have to suppress fires without functioning fire hydrants in Maunaloa, all of Kaluakoi, and parts of Kualapu’u and Kalae
  • Campers and others who use Kualapu’u Park, Papohaku Beach Park and many other public beaches

To help determine where we are, WMA has prepared a chronological list of actions to show what WMA has done and what actions others have taken. We have given each member of the team a copy.

You will see from this list that although three months have passed, progress toward a short term solution is limited and progress toward a long term solution is nonexistent. There is much by way of finger pointing, but little by way of coordinated efforts to achieve a common goal-that all Molokai have access to a basic necessity of life – water.

It does not appear that anyone at any level of government has tried to broker a short or long-term solution and the PUC’s solution is to increase our water rates so the Utilities can stay and operate the Utilities just a little longer. The County, the State, the Utility companies, and Utility customers’ representatives must begin concerted efforts to work through a solution immediately or we may face a State of Emergency.

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Molokai Ranch Resists Utilities Order, June 14, 2008

Read the article.

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NEWS UPDATE:

This Update was prepared the day before the Hawaii media ran their articles and aired their news about Molokai’s water. In order to give you information as quickly as possible, the update has not been revised. As more information is available locally, it will be passed along on this site.

The April announcement by Molokai Ranch that they intend to close down operations has now occurred. The Lodge, movie theater, tent camps, golf course and related leisure activities so important to our lifestyle on the island have been shut down resulting in the loss of 120 directly affected jobs and also further placing the economy of the island in turmoil.

As concerning as this is, we want to keep you posted on other activities that will likely have further devastating effect on your lives and properties. As stated in prior Newsletters, Molokai Ranch announced that they no longer will fund the operations of Molokai Public Utilities, Inc. and Mosco, Inc.

These operating companies are the suppliers of purified water and the sewage treatment serving our development. In a letter to the Public Utilities Commission dated May 30, Mr. Nicholas stated “unless some public or private entity is located to take over the operations of these . . . companies by the end of August, there will probably be an unavoidable termination of services to those customers. The Ranch has also announced that it will no longer fund another water company called Wai’loa O Molokai so that the areas covered by these closures will include all of the properties covered by the West Molokai Association (WMA) as well as certain properties in Maunaloa, Kualapu’u and Kalae.

Since the original announcement was made, the Board of Directors has been carefully searching for alternatives to keep these facilities in operation, including the takeover by the County of Maui, takeover by the State of Hawaii, and takeover by the Association.

The following format may assist in gaining an understanding of both the complexity and status of this issue.

Question: Why doesn’t the WMA assume responsibility for the plants that directly affect their water supply?
Answer: After review, it has been determined that the WMA does not have the expertise, money, time, or desire to operate such an activity on Molokai. It would also require WMA to become actively involved in island-wide distribution and water supply issues well beyond the scope of WMA.

Q: Can’t the Public Utilities Commission of the State of Hawaii force Molokai Ranch to continue operations in the interests of public safety?
A: Although WMA representatives have had multiple contacts with the PUC, the PUC has yet to announce their plan to provide relief to users of the water and sewer companies. According to the PUC, they do not have any staff which can “take over” and operate the companies and have no jurisdiction to compel the county or state to take them over. WMA has contacted PUC attorneys and will continue to explore what, if any, legal action may be appropriate as to the PUC. And, in the event the companies seek bankruptcy relief, WMA has also consulted with a bankruptcy attorney.

Q: Why wouldn’t the State of Hawaii take over the operation of these plants?
A: On June 3, 2008, WMA representatives met with Governor Lingle in Honolulu. In that meeting the Governor emphasized that the State does not currently operate any domestic water systems, and it does not intend to do so in the future. She stated that the function is better performed by the County. She is acutely aware of the severe hardship that many Molokai residents will suffer and appears quite sympathetic. She stated she will do whatever she can to try to cooperate with the County to work on a long term solution, but acknowledges that this is long term, not short term in nature.

Q: Why hasn’t the County agreed to assume responsibility for the water and sewer systems?
A: This is a good question without any definitive answer. On April 14, Mayor Tavares was contacted by WMA representatives. At that time, she stated she was aware of Molokai’s water problem and told WMA that an inspection of the water and sewer systems in question would be conducted by the Water Department to determine their condition. The inspection has yet to occur. We can only speculate as to why the Mayor later contacted the Governor and informed her that it was the State’s responsibility, not the County’s responsibility, to solve the water and sewer problems of Molokai. It is possible that funding is the primary reason for the County’s reaction.

Q: Why is the third party sale of the water utility a problem?
A: According to financial records received from Molokai Ranch, the water companies are operating at a significant loss. Unless there is a major increase in rates which must also be approved by the PUC, the attraction to outside buyers is low. It also takes a long period to gain approval, well beyond the announced closure date. In addition, the State Water Commission’s decision which granted a permit for the withdrawal of water from the Well used to supply WMA members was reversed by the Hawaii Supreme Court and the matter was remanded to the Water Commission for further proceedings. Accordingly, there is now a contested case pending before the Water Commission. The Ranch entities recently informed the hearing officer in that case that it will not be taking any further action. Any third party interested in the water company would have to obtain a permit and participate in a Water Commission proceeding. We were just told that there are also other cases pending with regard to water use and allocation uses.

Q: What role does Danny Mateo, Vice Chair of the Maui County Council play in this scenario?
A: Councilman Mateo is the elected Molokai representative to the Council and as such should be the major proponent of a solution. Your letters to him requesting his assistance will have positive impact in persuading the County to assume its logical responsibility. If you haven’t already written your letter or sent your email, please review the recommendations sent to you with the May 1 Newsletter and do so immediately.

Q: What is WMA doing to protect our interests?
A: Since the announcement, thousands of volunteer hours have been spent, both by the Board of Directors and the Board-appointed Advisory Committee. There have been meetings with elected officials including State, County and Administration officials with responsibilities related to water issues. In addition, there have been many consultations with attorneys in various specialties. A lawyer experienced with Water Commission matters was engaged to advise on the issues in the contested water case which were urgent and are of extreme importance to us. He has recently taken action on WMA’s behalf.

Bankruptcy counsel and water counsel for WMA are partners in the same law firm. They are in regular communication with each other and they keep abreast of the changes in events that take place almost daily. Consultations will continue and engagements entered into as necessity might dictate.

Q: The recent $150.00 assessment seems high. Is it really necessary?
A: This website will include financial statements which will explain the uses of these funds, and they will be regularly updated. As a matter of policy, the Board has agreed that any unexpended revenues attained through special assessments to deal with these water issues will be returned to Owners once a successful resolution has been obtained. The Board recognizes that this situation may be very expensive before it is finally resolved, both for attorney and court costs as well as additional administrative expenses required for meetings. There may well be additional assessments in the future if we cannot reach a speedy and beneficial conclusion to this issue.

Q: My owner’s association (Ranchlands, condo, etc.) is taking a low profile on this issue. Who is responsible for payment of the special assessment?
A: When you purchased your property (whether a condo unit, home, or vacant lot), your real estate agent was required to give you documents which explained your obligations. Each individual owner is personally responsible for payment of all assessments. As a matter of convenience to their owners and to save administrative costs, some owner associations have agreed to make payments of these assessments in bulk. If you do not know if such a bulk payment has been made, check with your individual association. A copy of the collection policy for WMA is on the website and late charges are applicable as incurred.

Q: This is a public safety issue. Can the Ranch really turn off the water?
A: Yes. We all know that regardless of legal ramifications, business do walk away from their obligations. As a practical matter, whether or not a business files bankruptcy, doors can be locked and employees told to go home. WMA is exploring all alternatives to keep water flowing to our properties should this occur, but there are no immediate, fast, tried and true solutions. Remember New Orleans and the hurricane a few years ago? There still are neighborhoods there without water and sewer services. Hopefully, this will not be our problem as well.

Q: What can we do?
A: Send letters to Danny Mateo Fax #808-270-7717 or email danny.mateo@mauiconty.us requesting that the County find the necessary funding to protect the lives and properties on the island of Molokai. Templates have previously been sent to you as an aid, but should you need another, contact wmaoffice@comcast.net.

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“Molokai utilities set for shutdown”

From The Maui News

June 5, 2008

WAILUKU — Mayor Charmaine Tavares protested what she said are misstatements by a governor’s representative and insisted that Maui County is not in a position to take over utility systems that Molokai Properties Ltd. says it will cease to operate in August.

In a statement released Wednesday, she was joined by Council Member Danny Mateo of Molokai, state Rep. Mele Carroll and Sen. J. Kalani English in appealing to Gov. Linda Lingle to intervene to prevent the company from shutting down water and wastewater systems for residents of Kaluakoi and Maunaloa.

Read the rest of the article at The Maui News website.

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Soundclip from Channel 13

Please keep in mid that you’ll need a media player capable of mp3 playback to listen to this clip.

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BREAKING NEWS FROM MAUI COUNTY

Date: Thu, 5 Jun 2008 06:06:50 +0000

 

News Flash: Breaking News from Maui TV News

Local, State Officials Beseech Governor Lingle to Intervene in Moloka’i Ranch Water Shut-down

WAILUKU – Responding to growing concerns from the Molokai community that Molokai Ranch will terminate water and sewer services, Mayor Charmaine Tavares, joined by Molokai Council Member Danny Mateo, State Senator J. Kalani English, and State Representative Mele Carroll have called upon Governor Lingle to exercise her powers to address the impact the termination of such vital services as sewer and water service would create.

Assertions by State Planning Director, Abbey Mayer, who heads the Governor’s Task Force responding to the Ranch’s recent closure, that the County would be taking on the sewer and water systems left by Molokai Ranch are inaccurate and misinformed. “It is a dangerous practice for local government to step in and take over operations of a private business when it decides to abandon its customers”, said Mayor Tavares. “What will happen if suddenly several private water or sewer systems stop operating because the private developer and operator have decided not to continue operations?

“To expect the taxpayers of Maui County to absorb the costs and liabilities of each privately developed system that is allowed to fall into disrepair would be irresponsible. Regulatory agencies such as the PUC and the Department of Health should play a role when a private business decides on its own to cease services. Molokai Ranch should be required to continue meeting the public health needs of Molokai residents or find another private operator.”

“Molokai Properties has not filed for bankruptcy and is terminating these essential services despite retaining land holdings and possible future development plans”, said Council Member Mateo. “The State administration supported a private venture in the Hawaii Superferry, spending public money on services provided by a private business. It is my hope that the Governor would be able to apply her powers as well to help the residents of Molokai with a critical need such as water and wastewater services.”

Citing that state regulatory agencies oversee water and wastewater systems, in a letter to the Governor, State Representative Carroll wrote that Molokai Ranch needs “to be made responsible for their actions and held accountable”. “I am deeply concerned about the community and have asked that Governor Lingle support the needs of Molokai and explore all viable options.

If Molokai Ranch is allowed to walk away in about 12 weeks, Molokai will suffer seriously.” said Representative Carroll. Senator English expressed his concerns in a letter to the Governor last week. “I have asked the Governor to intervene and assert her powers to look out for the health and well-being of the Molokai community”, said Senator English. “It is important for the people of Molokai to know that their need for essential services like water and sewer cannot be simply tossed aside by a private company when it determines that it will no longer provide such services. “Governor Lingle has an opportunity to hold Molokai Ranch and Molokai Properties accountable.”

Molokai Ranch has issued a letter to the Hawaii Public Utilities Commission stating that in March of this year its parent company, Molokai Properties Limited, would provide financial support for the company’s water and wastewater systems but only for a limited time. Molokai Properties has committed to funding the operations through August, at which time operations will cease unless a government entity or another private company takes it over.

“This entails serious consideration with concerns about ongoing litigation, substantial financial requirements, and already distressed systems in need of repair. The residents of Molokai deserve to be assured by the state that they are protected by the same agencies that regulate such critical services”, said Mayor Tavares. “I appreciate the efforts of Council Member Mateo, Senator English and Representative Carroll in addressing the concerns of the people of Molokai. We are all very alarmed by the newest actions of Molokai Properties and hope that with the Governor’s intervention their right to water and wastewater services will continue to be protected.”

NOTICE: The information on this website is privileged and confidential and is intended only for the property owners of the West Molokai Association. Any review, use, disclosure or copying of this information is prohibited except by, or on behalf of, the intended owners.