More than a year after Wai’ola O Molokai raised its water rates for West End Molokai customers, the Intermediate Court of Appeals of Hawaii has denied an appeal of the dramatic increases.
Last Thursday, June 14, the court affirmed the Public Utilities Commission’s approval of the permanent rate increase of $360,238 or approximately 284.5 percent rate issued on Feb. 8, 2011. This ruling denies the appeal by the County of Maui to overturn the PUC decision that the increase was “just and reasonable.”
Wai‘ola is a wholly-owned subsidiary of Molokai Properties Limited, parent company to Molokai Ranch. The utility provides water utility services to Maunaloa, Kualapu‘u, Kipu, Manawainui, and the Molokai Industrial Park areas of Molokai.
It was shortly after shutting down its operations in April 2008 that Molokai Ranch announced its intention to abandon its utilities, asking Maui County to provide these services. After much legal wrangling from both parties, an agreement was reached in July 2010 between Maui County and MPL that Wa’ola would continue to provide water and wastewater services.
In addition to mountain water as a source of water, Wai‘ola purchases water from Molokai Public Utilities, another subsidiary of MPL, and from the Department of Hawaiian Home Lands. MPU serves residents at Ke Nani Kai, Paniolo Hale, Kaluakoi Villas and Papohaku Ranchlands. The county estimates that 3,300 customers are affected by this rate change.
In its appeal, Maui County claimed that Wai’ola’s rate increase was based in part on unauthorized expenses; the Consumer Advocate did not advance the interests of consumers; Wai‘ola failed to satisfy its burden of proof in justifying its depreciation expense; Wai‘ola failed to support an insurance expense of $16,000 by evidence in the record; the rate increase included a cost of sales expense that was not supported in the record; PUC failed to consider whether the ratepayers could afford to pay for the approved increase; and the record supporting $225,000 of regulatory expenses was insufficiently descriptive.
The court supported the decision-making of the PUC and the Consumer Advocate in all these matters. For instance, the court did not consider evidence of whether or not ratepayers could afford the increase. Instead, the court ruled … “[t]he methodology employed by the PUC in its rate-making determination lies within its expertise and discretion.”
Another issue of dispute involved charges to customers in the Kualapu’u area where Wai’ola did not have the proper permits to offer service. The appeals court ruled that, “PUC did not err in allowing expenses related to servicing the Kualapu‘u area to be factored into the proposed rate increases.” As a result, “within 60 days of the date of this Decision and Order, [Wai‘ola] shall file an application to expand its service territory to include the Kualapu’u area.”