Wailuku Water asks to become a public utility

Move would allow it to maintain control over West Maui waters

The Maui News
Sunday, May 11, 2008
By CHRIS HAMILTON, Staff Writer

WAILUKU - Wailuku Water Distribution Co. is seeking permission from the state to organize as a public utility in order to continue service, set new water rates and keep its contracts.

Essentially, being a utility would allow Wailuku Water to stay in the water business as it faces an ongoing dispute over water rights with farmers, environmentalists and Native Hawaiians.

The company, an affiliate of Wailuku Water Co. and rooted in the former Wailuku Sugar Co., owns a vast watershed in West Maui and controls a system of ditches that has captured and channeled water from the four Na Wai Eha streams for about 150 years.

Wailuku Water Distribution Co. wants what's called a certificate of public convenience and necessity from the state Public Utilities Commission in order to continue to provide nonpotable water service in Central Maui, specifically, to the communities and farmers in Waihee, Waiehu, Puuohala, Wailuku and Waikapu.

Company supporters say it provides reliable service that the community needs and helps maintain hundreds of jobs.

"We feel we have an important role to fill here to deliver water to these customers," said Wailuku Water Co. President Avery Chumbley. "We provide an overall benefit to the larger community."

Wailuku Sugar's operations ended in the late 1980s, but out of 39 users, Wailuku Water's biggest customer continues to be Hawaiian Commercial & Sugar Co., Chumbley said.

Company detractors have said Wailuku Water wants to continue profiting from a public resource, while damaging West Maui's natural flora and fauna and hindering traditional agricultural practices.

A public hearing will be held at 6 p.m. Wednesday at Maui Waena Intermediate School, 795 Onehee Ave. in Kahului. A large crowd is expected to attend the forum in the school's cafeteria.

Maui County Deputy Corporation Counsel Jane Lovell represents the county water department, which is also a customer of Wailuku Water. She said she's not sure yet what the county's position will be at the meeting, but county officials plan to testify.

Without being declared a public utility, Wailuku Water could continue to charge whatever the market will bear with no rate regulation, she said. When the company - which owns 8,550 acres of watershed in the West Maui Mountains - was providing water only for its sugar cane fields, it didn't need any state oversight.

The company owns 13,170 acres and is also in the process of selling 4,620 acres for a proposed coffee plantation.

The two Na Wai Eha issues that have come before the state Commission on Water Resource Management appear to be completely separate from the Public Utilities Commission application - from the outside, Lovell said.

"But it will be interesting to see how the two different forums play out against the other," Lovell said. "It's a chicken-or-egg scenario. They need the water in the first place to even be a public utility."

In March, the state Commission on Water Resource Management made a landmark ruling by designating the region a surface-water management area. Essentially, anyone who wants to divert water from the Na Wai Eha's four streams - the Iao, Waikapu, Waihee and Waiehu - will need to apply for permits over the next year.

The complicated process is expected to take five years to reach a conclusion.

The state water commission is also in the midst of a separate process concerning Na Wai Eha.

Attorney Isaac Moriwake of Earthjustice represents Hui O Na Wai Eha, which has joined other Maui environmental organizations in seeking the restoration of in-stream water flows and return of public water rights.

The grass-roots organization has petitioned the commission to set new, larger in-stream flow standards - or put more water in the streams and give less to Wailuku Water and other non-Native Hawaiian users. The testimony in that case has already been heard, and the parties are awaiting a decision from the commission.

"That may impact how much water (Wailuku Water) has to give to its customers," Lovell said.

Chumbley said there is a sense of uncertainty because of the pending water commission decisions. The commission could determine the company's long-term viability, he said.

"We don't know at what levels we will be able to divert water," he said.

As for the Public Utilities Commission application, one point of contention is the new proposed rate of 90 cents per 1,000 gallons for customers without grandfathered contracts, Lovell said.

Wailuku Water Co., which employs nine people, charges 85 cents per 1,000 gallons now to the average customer, Chumbley said. The new rates would bring the company an additional $170,242 a year, bringing total revenue to $1,239,857. Despite the raise in revenue, the company will continue to lose money, Chumbley said.

The company is projected to have a shortfall of $543,947 for the fiscal year ending in June 2009, according to the testimony in the application by Wailuku Water Distribution Co. Accounting Manager Fred Tacla. The company also must spend at least $230,000 on capital improvements as well as meet rising inflation and other higher costs, such as fuel and materials.

Lovell said she has heard concerns in the community that the basis and costs that Wailuku Water is using to justify the rate increase may be artificially inflated and thus unfair. For instance, Wailuku Water's water distribution system was built in the 1800s and paid for long ago, Lovell said.

Moriwake said he believes that Wailuku Water Co. created this new company, Wailuku Water Distribution Co., last year in order to get new value for both the assets and expenses, which would allow the new company under state formulas to charge customers more and earn a greater rate of return.

He further claimed that the application's documents show that Wailuku Water Distribution Co. is paying Wailuku Water Co. to lease its own watershed lands and justify the new rates. Both companies have the same staff, Moriwake added.

Hui O Na Wai Eha estimates that Wailuku Water takes out up to 60 million gallons a day from all four streams.

"The Wailuku Water Company does not have the right to divert a single drop of water from these streams from this dilapidated ditch system," Moriwake said. "They have no right to peddle public water."

Moriwake called Wailuku Water Distribution Co. "a paper company . . . that doesn't pass the straight-face test."

In the application, Chumbley said Wailuku Water Distribution Co. was designed to be an efficient and regulated utility. Meanwhile, Wailuku Water Co. will remain a separate entity in order to help manage its partnership to preserve the 50,000-acre West Maui watershed, Chumbley said.

The company's critics also said it held off on applying to become a public utility for as long as possible.

"Basically, they (Wailuku Water Co.) got the whistle blown on them for selling water," Moriwake said. "They dragged their heels for a couple of years before they put in the application because it means that they will have to justify their water rates. They did not do this on their own accord."

In the application, Chumbley said the company didn't apply sooner because it didn't believe the law required it. And, in the eyes of the Public Utilities Commission, his company is already a public utility, he said.

"All we're doing is trying to attempt to comply with the regulations and get a certificate of public convenience and necessity," Chumbley said.

Anyone who wants to comment on the application prior to the meeting can write to the state Public Utilities Commission at 465 S. King St., Room 103, Honolulu 96813. Opinions can also be sent via e-mail to Hawaii.PUC@hawaii.gov.

Any motion to intervene on the issue must be received by May 27. A copy of the application can be found at the Public Utilities Commission on Maui at the State Office Building No. 1, 54 S. High St., Room 218, Wailuku 96793. Its phone number is 984-8121.