WAILUKU — The state Public Utilities Commission has advised Molokai Properties Ltd. Chief Executive Officer Peter Nicholas that the company cannot shut down its utility companies providing water and wastewater services in west Molokai.

The notice came in letters from the PUC and from state Consumer Advocate Catherine Awakuni responding to a May 30 letter from Nicholas saying the three utilities operated by the Molokai Ranch owner would be terminated in August.

A letter dated Thursday from the PUC advised Nicholas that "utilities have a duty to provide service to their customers; and as such, they are required to provide service unless and until the commission approves a transfer or surrender of their certificates of public convenience and necessity (CPCNs).

"While the commission is cognizant of the utilities' present financial conditions, it cannot and will not approve a surrender or transfer of the CPCNs unless and until another public or private entity can be found to operate the water and wastewater systems."

Nicholas had written to the commission May 30, as a director of Wai'ola O Molokai, Molokai Public Utilities Inc. and Mosco Inc., advising that the companies intended to terminate services at the end of August unless another operator is found to take over the services. The three companies had been issued certificates of public convenience and necessity to provide the essential water and wastewater services for the communities at Maunaloa and Kaluakoi, involving an estimated 1,200 residents and businesses.

Nicholas' letter said Molokai Ranch had supported the utilities because the ranch used the services, but with the ranch shut down, Molokai Properties advised that it will no longer subsidize the services.

He also said the utility companies did not have the funds to request rate increases to make the utilities self-sustaining.

In its response, the PUC said the company would be subject to investigation and penalties if it shuts down without approval of the commission.

In a related letter, Awakuni advised the commission that the Division of Consumer Advocacy is "deeply troubled by Molokai Utilities' suggestion that their obligation to serve their customers may be terminated at their discretion, as a result of their declared lack of sufficient revenues to recover the operating costs for Wai'ola and MPUI."

She said the utilities were granted benefits in "the exclusive opportunity to provide water and wastewater services in their respective service areas" when they received their certificates of public convenience and necessity.

In accepting the monopoly rights, the utilities "accepted the corresponding obligation to provide utility services to their customers," Awakuni said.

No one was available for comment late Friday at the Molokai Properties office in Honolulu.

Mayor Charmaine Tavares, who had appealed to Gov. Linda Lingle in a letter on May 27 to intervene in the threat from the Molokai utilities to shut down services, said Friday that she wished to thank the governor "for asking her departments to respond to the Molokai community's pleas for her intervention in this critical situation."

The mayor said she was pleased by the response of the PUC and the consumer advocate and supports the positions taken by the agencies, after Lingle's Chief of Staff Barry Fukunaga on Wednesday said he did not know if the state had authority to require the utilities to continue when they said they cannot afford to do so.

"I fully support the action by these state regulatory agencies," Tavares said. "It reconfirms my belief that Molokai Properties and other operators of private water and wastewater systems can be held responsible to their customers."

On Wednesday, Tavares released a series of letters sent to the governor appealing for the state to assist in the situation. While county officials had begun to review the condition of the systems that Molokai Properties was proposing to abandon, Tavares said the county was not in a position to take over water and wastewater systems that had been allowed to deteriorate.

Acknowledging that the county normally is responsible for providing water and wastewater services to residents, she said the county also requires private developers to provide systems that comply with county and federal environmental standards for public health and safety.

To accept utility systems that are inadequate would force county taxpayers to pay the costs of bringing the systems into compliance with public health standards, she said.

Responding to the situation, County Council Member Danny Mateo on Friday filed a request to the council for a resolution to authorize hiring of a private attorney to represent the county in "possible legal claims" against Molokai Properties for its planned closure of its water and wastewater systems.

Mateo's request was referred to the council's Policy Committee.

He said later that he was "very excited the state finally came up and stepped to the plate and came up with a directive.

"I now have more respect for the Public Utilities Commission and for the consumer advocate, that they uphold the essence of public safety and need. Their determination is the right one."

But Mateo said the county still needs to be cautious in addressing the issues raised by the threat to shut down the west Molokai utility services "to look at what we need to do."

The PUC letter, signed by Chairman Carlito Calibuso and members John E. Cole and Leslie H. Kondo, advised Nicholas that the commission expects his companies to provide a plan for continued operations of the utilities beyond the end of August.

"Specifically, please provide the commission with detailed information and documentation on the financial requirements of each of the utilities to be self-sustaining and the impact on the utilities' ratepayers," the PUC said.

It noted that the information on costs provided indicates that rates for water would need to increase from $1.85 per 1,000 gallons to $5.50 for consumers served by Wai'ola and from $3.18 to $5.66 for consumers served by Molokai Public Utilities. But the commission required "more detailed information and documentation."

The utilities operator was also required to document costs of operations since 2006 and to "describe all of the efforts undertaken by MPL and the utilities to find a public or private entity or entities to operate the water and wastewater systems."

Any shutdown of services without the PUC's approval "may subject the utilities (and any other parties deemed to be responsible) to investigatory action by the commission and penalties as authorized by law," the PUC letter said.

Tavares said she had been in discussions on the situation with the state for several months and chose to release the details of the shutdown threat this week "out of growing concern for Molokai and the actions of Molokai Properties.

"I appreciate the intervention now being provided by the PUC and (Department of Commerce and Consumer Affairs) and look to them to enforce the law to its fullest extent," she said.

• Maui News Staff Writer Ilima Loomis contributed to this story. Edwin Tanji can be reached at citydesk@mauinews.com.

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