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In the Matter of the Application

June 14, 2012

IN THE MATTER OF THE APPLICATION OF WAI'OLA O MOLOKA'I, INC.


APPEAL FROM THE PUBLIC UTILITIES COMMISSION (DOCKET NO. 2009-0049)

The opinion of the court was delivered by: Foley, J.

FOR PUBLICATION IN WEST'S HAWAII REPORTS AND PACIFIC REPORTER

For Review and Approval of Rate Increases, Revised Rate Schedules, and Revised Rules

FOLEY, PRESIDING J., FUJISE AND LEONARD, JJ.

OPINION OF THE COURT BY FOLEY, J.

Intervenor-Appellant County of Maui (Maui County) appeals from the February 8, 2011 Decision and Order (Order) filed by the Public Utilities Commission (PUC). In its Order, PUC granted approval to Applicant-Appellee Wai'ola O Moloka'i (Wai'ola) for a rate increase of approximately 284.5% over previous rates.

On appeal, Maui County contends PUC erred by concluding Wai'ola's proposed rate increase was just and reasonable when

(1) the increase was based in part on unauthorized expenses;

(2) Wai'ola failed to satisfy its burden of proof;

(3) the representative appointed by the Division of Consumer Advocacy (Consumer Advocate) did not comply with his statutory mandate to represent, protect, and advance the interests of consumers;

(4) Wai'ola failed to satisfy its burden of proof in justifying its depreciation expense;

(5) Wai'ola failed to support an insurance expense of $16,000 by evidence in the record;

(6) the rate increase included a cost of sales expense that was not supported in the record;

(7) PUC failed to consider whether the ratepayers could afford to pay for the approved increase; and

(8) the record supporting $225,000 of regulatory expenses was insufficiently descriptive.

Wai'ola is a wholly-owned subsidiary of Moloka'i Properties Limited (MPL), which provides water utility services to businesses, residences, churches, and Maui County parks located in Maunaloa, Kualapu'u, Kipu, Manawainui, and the Moloka'i Industrial Park areas of Moloka'i. In addition to mountain water as a source of water, Wai'ola purchases water from Molokai Public Utilities (MPU), another subsidiary of MPL, and from the Department of Hawaiian Home Lands (DHHL).

In 1993, Wai'ola was granted a Certificate of Public Convenience and Necessity (CPCN) to provide water service to residential, commercial, and agricultural customers on the island of Moloka'i. Through granting the CPCN, PUC authorized Wai'ola's rates and charges, effective January 13, 1993.

In March 2008, MPL announced plans to cease all business operations on Moloka'i, including Wai'ola, within six months because it lacked sufficient revenues to pay its operating expenses. On June 5, 2008, the Consumer Advocate requested that PUC not allow MPL to terminate its utility operations. PUC granted the Consumer Advocate's request, and on June 5, 2008, PUC ordered Wai'ola to continue providing services until PUC approved a transfer or surrender of Wai'ola's CPCN.

I.

On June 13, 2008, PUC informed Maui County that PUC would be opening a docket to allow for a temporary increase in the water rates for Wai'ola in order to allow the utility to continue to provide water service to its customers. PUC then sua sponte opened Docket No. 2008-0115 to consider temporary rate relief for Wai'ola. After a public hearing on the matter, PUC approved a temporary increase in Wai'ola's monthly rate from $1.85 per thousand gallons to $5.15 per thousand gallons. The temporary increase was projected to result in additional annual revenues of $156,710. PUC extended the temporary increase until August 2009 or until a ruling was made on Wai'ola's application for a general rate increase.

On June 29, 2009, Wai'ola filed its Amended Application for Review and Approval of Rate Increases (amended application) seeking an increase in its total revenues to $473,431, or approximately 382.85% over its present revenue requirement. ...


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