It is April 2022. A worker at the Salvation Army center in Lahaina receives a visit from a young woman living high in Kauaʻula Valley seeking entry for her family into the organization’s homeless shelter.
The Salvation Army worker notifies Maui Councilmember Tamara Paltin, hoping Paltin might be able to help. In an email to Paltin, the Salvation Army worker writes of the family’s plight:
The young woman, a mother of five children, all under the age of eight, “shared with me that effective today there will be no water available in her home. She alleges that Peter Martin will be denying water access to the ohanas in the valley. Additionally, she claims that there will likely be no access to the reservoir, which she says is always full, but is now depleted to almost empty….
“She is now forced to exercise her options. One of which is to leave the valley until there is water accessibility again. She is currently applying for entry into the Homeless shelter. I am not sure if that will be available to her family as they are not actually ‘homeless,’ but we will see.”
That same day, April 14, the state Commission on Water Resource Management learns that the residents whose water was cut off have filed a lawsuit against the Launiupoko Irrigation Company (LIC), the utility that is owned primarily by Martin and which is required to provide water to them.
The commission has its own issues with LIC. Two weeks earlier, on March 31, it had issued a notice of alleged violation to the company for failure to comply with interim instream flow standards set for Kauaʻula Stream four years earlier.
The notice appears to have prompted the company to shut off the water to valley residents and also to a farm on land owned by Kamehameha Schools.
April 19: A judge of the 2nd Circuit in Maui issues a 10-day stay, ordering LIC to restore flows to valley families. The same day, the Water Commission takes up the matter of the failure of LIC to undertake the improvements needed to implement the instream flow standards set in March 2018 and ends up granting a temporary stay of their enforcement.
Fast forward to last month. The lawsuit brought by the valley residents has lain dormant for most of two years but is now scheduled for an October hearing. The “temporary” stay the Water Commission approved for exceeding the IIFS of Kauaʻula Stream was set to expire June 30 – but will likely be renewed yet again, according to a spokesperson for the Water Commission. Finally, a rate hike request for groundwater that LIC applied for more than four years ago still awaits approval from the state Public Utilities Commission.
The drama and anxiety set off by the cut-off of water to families who depended on it for their very livelihoods was the culmination of more than a century of land use changes in the area that skewed traditional water delivery systems. Now, as the Water Commission tries to redress the abuses and even restore Lahaina to its status as the Venice of the Pacific, as it was once described, the forces at play are engaged in a multi-front battle.
‘Agricultural’ Subdivisions
A report to the Water Commission in July 2022 describes the importance of Kauaʻula Stream to Native Hawaiians before the Pioneer Mill Company began growing sugar in the area: “At the time of the Māhele, there were three main ʻauwai on the Lahaina (North) side of Kauaʻula Stream: Piʻilani, Waimana, Puʻuhuliliole. … Piʻilani ʻauwai transported water from Kauaʻula Stream to support wetland and dryland agricutulture on the plateau of Kauaʻula Valley high above the stream channel. This ʻauwai was displaced when Pioneer Mill constructed Diversion 957 to collect water … for plantation use. Remnants of the Piʻilani ʻauwai are visible along the pali for great distances. … Pioneer mill destroyed portions (e.g., Piʻilani) or restricted downstream flow of all the ʻauwai and only the Waimana ʻauwai is currently in use.”
After the sugar plantation went out of business, most of Pioneer’s land was sold in the late 1990s to companies owned by Martin, who proceeded to develop large-lot nominally agricultural subdivisions. The irrigation infrastructure that once supported sugar was now directed to support the landscaping, water features, and pools that most of the new houses featured.
Soon after Martin-affiliated companies acquired around 7,000 acres of the former Pioneer land, promotional materials were published suggesting that the agricultural requirements are secondary to residential use and could be ignored by the purchasers. A group of Native Hawaiians, concerned over the impacts the planned developments would have on the availability of water for their traditional agricultural uses – largely, taro – petitioned the state Land Use Commission for a finding that in approving the Martin subdivisions, Maui County had “failed to carry out its responsibilities to protect agricultural lands.”
But rather than proceed with a contested case before the LUC, the petitioners, formed as a group called Kuleana Kuʻikahi, and three Martin-affiliated companies agreed to resolve access and water issues through mediation.
The result was an “interim settlement agreement,” signed on June 5, 2003, that called for improvements to be made to delivery systems providing irrigation water to lands held by members of the Aquino, Dizon, Kapu, and Palakiko families. “All of these upgrades and delivery of water shall be provided at no charge to the ʻOhana,” the agreement stated. Kuleana Kuʻikahi withdrew its petition for a declaratory ruling without prejudice. But by January 2004, it sought to reopen the proceedings. Six months later, the LUC denied the request, resulting in Kuleana Kuʻikahi then filing a new petition, seeking much the same relief, finding: that the new subdivisions were not conforming to state and county laws relating to the use of agricultural lands; that Maui County improperly approved the subdivisions without making sure that adequate irrigation water would be available; that exercise of Native Hawaiians rights to water from Kauaʻula Stream would be impaired by the subdivisions’ use of the stream as a source of irrigation; that the subdivisions don’t comply with laws concerning traditional access rights; that the county has failed to enforce laws pertaining to use of agricultural land; that “actions of the developers and landowners … are creating and will create an interruption of the natural and historic flow of waters in the Kauaʻula Stream, adversely impacting the entire ecosystem of the streambed;” and that the LUC is required to protect “lands adjacent to Kauaʻula Stream, the streambed, and the area surrounding the stream.”
The LUC appointed a hearing officer, who heard testimony from several of the owners of land in the new subdivisions, all attesting to their sincere intention to pursue agricultural activities on their lots. Maui County’s Planning Department explained how its approval of building permits for lots in the Agricultural District was conditioned on strict compliance with state law, including submittal of agricultural plans before approval of plans for “farm dwellings.”
For its part, one of the Martin development companies, Kauaʻula Land Company, stated that it had placed restrictions on the agricultural lots it developed, including that they be a minimum of five acres, that they remain in Agricultural zoning, that the lots could not be “condominiumized,” and that the owners be required to submit agricultural plans to the homeowners’ associations. The restrictive covenants included a provision that lots “may be used only for agricultural uses including farm dwellings, orchards, crops, ranching, and other productive agricultural pursuits.”
In the end, the LUC approved the hearing officer’s proposed findings of fact and determined that Kuleana Kuʻikahi “failed to meet its burden of proof that the present and proposed uses of agricultural lands on the property are not in conformity with and are in direct violation of applicable state laws, rules, and regulations pertaining to the uses of agricultural lands and subdivisions.”
‘A Regulated Utility’
As the LUC proceedings continued, Makila Land Company applied to the PUC for a Certificate of Public Convenience and Necessity (CPCN) that would allow a new company, Launiupoko Irrigation Company, to operate as a regulated utility providing irrigation water to customers within a service area of around 7,000 acres. (About half of that is in the mauka area and lies within the state Conservation District. The actual area of service connections is makai, stretching practically to the ocean.)
In that 2003 proceeding, Makila Land said the yet-to-be-incorporated irrigation company would serve agricultural subdivisions that would be developed by closely affiliated “development companies” – “115 lots in 2002, another 105 agricultural lots by 2006, and with rezoning an additional 300 rural lots by 2008.”
With respect to “seven existing private owners whose property is located adjacent to the Kauaʻula Stream … Makila has not been charging these seven existing private landowners for non-potable water,” the PUC was told. “Applicant will continue to respect existing legal rights along the Kauaʻula Stream,” Makila added.
As to the quantities of irrigation water required, Makila estimated at full build-out, the demand would be approximately 1,311,000 gallons per day – a quantity that “the Launiupoko and Kauaʻula Streams are capable of providing,” with Kauaʻula providing almost all of that.
Around the same time, Launiupoko Water Company obtained a certificate of public convenience and necessity from the PUC, allowing it to provide potable water, pumped from wells, to lot owners in the same service area. At the time the PUC approved that application, in June 2003, LWC estimated its daily demand for potable water to reach 444,000 gallons per day by 2008.
Over the next 15 years, the lots developed by the Martin-related companies were sold to buyers whose interests in agriculture seemed to go no further than signing a pledge to the county Planning Department that indeed the home they wanted to build would be in support of agricultural uses – a “farm dwelling,” as required under state and county laws of all homes on agricultural-zoned lands. Such a pledge was a condition of receiving a building permit.
Also, any prohibition on the division of lots into condominium units was similarly observed in the breach. Launiupoko Water Company, which is also seeking a rate increase from the PUC, has provided the PUC with copies of documents it submitted to the state Water Commission in support of its application for existing water use permits. Among other things, the company provided a list of all the tax-map-key numbers of the lots receiving potable water from the utility.
The list contains more than 375 parcels, many of which have been condominiumized into two or at times even three units. Of those, no fewer than 178 units are “non-owner occupied,” according to Maui County tax records, and at least four are taxed as TVRs, or transient vacation rentals. Aerial photographs of the lots served by LWC show hundreds of lots where the “farm dwellings” have been lushly landscaped, with pools, spas, and other water features.
Water daily consumption figures were provided for each service connection. Not infrequently, the usage exceeded the water demand of any agricultural crop. One two-and-a-half acre parcel, split into two units by a CPR, used an average of nearly 9,000 gallons per day of potable water. Another two-unit lot, covering just 2.15 acres, used an average of 13,236 gpd of fresh water from LWC.
By 2017, demand for potable water was still under the projections for 2008, averaging just 230,270 gallons per day. By 2022, however, total metered use had soared to 662,200 gpd. Per-customer use over the same time rose from 705 gpd to 1,766 gpd.
Part of the increase was a result of the ongoing construction of “farm dwellings.” But also there was the drying-up of the watersheds of West Maui, which made it harder every year to meet irrigation demands through reliance on stream flows alone.
In recognition of that, in 2017, the Water Commission began a process of re-evaluating the instream flow standards for West Maui. In March 2018, the Water Commission set the interim instream flow standards for Kauaʻula Stream, requiring Launiupoko Irrigation Company to reduce substantially the amount of draw from the stream.
For the next four years, the company pretty much ignored the IIFS, even as stream flows themselves made it harder to deliver to customers the irrigation water they had come to expect. LIC went so far as to supplement stream flows with well water.
The company has stated that it stopped placing potable water into its irrigation system as of November 9, 2020. As it explained to the PUC a month later, “[T]he additional pumping from the potable wells not only increased operating costs (and losses), it has resulted in an unacceptable increase in the chloride content of water from the potable wells, making that interim alternative no longer a viable source to replace the lost stream water even on an interim basis.”
Since then, customers have been using potable water for landscaping, water features, and other uses for which irrigation water would otherwise have been used.
So, in 2017, the 399 customers of LIC used on average 4,471 gpd. By 2022, that average was down to 3,069 gpd.
In 2022, the Water Commission got serious about enforcing the IIFS for Kauaʻula Stream and issued the notice of alleged violation to LIC on March 30, setting in motion the series of events described at the start of this article.
The Status Quo
Since 2022, practically all of West Maui has seen events unfold at a pace that is head-spinning. That year, not only did the dispute between the Water Commission and Launiupoko Irrigation Company come to a head in April, but in addition, in June, the commission voted to designate West Maui as both a groundwater and surface-water management area. The criteria for designation under state law include, among other things, a finding that the existing and planned uses exceed levels that can be withdrawn without impairing the sustainability of the resource.
One of the reasons cited by the commission in designating both surface and groundwater as water management areas simultaneously was the growing recognition of the interconnectedness of the two. Dr. Ayron Strauch of the commission staff stated in his report: “Since 1983, we have experienced a significant decline in rainfall in West Maui that has led to a real reduction in surface water to meet instream and non-instream uses. The integration of ground and surface water sources to meet both potable and non-potable demands across hydrologic units throughout Lahaina necessitates a holistic approach.”
In the case of the Kauaʻula watershed, mean annual rainfall totals dropped 10 inches between 1978 and 2009. High in the West Maui mountains at Puʻu Kukui, long-term trends from 1980 to 2012 showed a significant decline in rainfall, especially during the dry season (May to October). According to Water Commission records, the Launiupoko aquifer system, with a sustainable yield of 7 million gallons a day, was already committed to supporting withdrawals from existing and approved developments amounting to 89 percent of sustainable yield. When other permitted well capacity was thrown into the mix, the potential withdrawals amounted to 110 percent of SY.
Yet both LIC and LWC have applied for increases in the volume of water they are allowed to pump from wells and divert from Kauaʻula Stream. In a joint August 3, 2023, letter to Kaleo Manuel, then the deputy director of the Department of Land and Natural Resources for the Water Commission, Glenn Tremble, signing as secretary/treasurer of LWC, and Peter K. Martin, signing as president of LIC, stated that the existing use of the combined companies was 3.3 mgd (675,000 gpd of potable water, 2.6 mgd of non-potable, irrigation water). They were proposing to more than double this, to 7,523,682 gallons per day, to accommodate what they described as the existing users plus 133 APUs (authorized planned uses) for the potable water system, covering 1,028 acres, and 276 additional APUs for the irrigation system (no acreage provided). Nearly half of that total – 3,747,381 gpd – is proposed to be taken from Kauaʻula Stream, where stream flows were already hard-pressed to meet existing demand. The existing flows from Launiupoko Stream, 340,325 gpd, are already maxed out. Nothing further is proposed to be drawn from it. In 2020, LIC applied for a well permit, LIC-2. Projections from that well are for 100,000 gpd, according to the August 2023 letter. In the application submitted to CWRM, however, pumpage was proposed at 700,000 gpd.
(A table in the letter that breaks down the existing and proposed water uses contains a mistake. The existing draw on Kauaʻula Stream, said to be 1,647,318 gpd, is proposed to be expanded by an additional 2,100,000 gpd. That comes to a total of 3,747,318 gpd. The table has an incorrect figure of 3,647,318 gpd. That could be an honest mistake. But effect of the error means that total surface water proposed to be permitted is displayed as 3,987,643, ever so slightly under 4,000,000, instead of the 4,087,643 actually proposed – like the strategy of retailers to price a thing at $3.98 instead of $4.00.)
The amount of water being sought from the two Launiupoko water utilities, in other words, would consume a total of 7,523,682 gallons per day from the streams and groundwater of the aquifer – an amount that exceeds the aquifer’s sustainable yield by more than half a million gallons.
Martin and Tremble acknowledged this: “LIC and LWC recognize that the new use requests, when added to the existing demand on the aquifer, exceed CWRM’s calculations and assumptions for the sustainable yield.” But they seem to think those calculations could now change in their favor: “During the [water management area] designation process, CWRM’s assumptions evolved, and will likely continue to evolve as more data is available. The new use applications are submitted in abundance of caution, in the event that CWRM processes new and use application[s] concurrently.”
Addressing the issues of maintenance and system efficiency, Tremble and Martin write that they have established “several protocols to improve operations and minimize water losses.” “The biggest system loss issue for LWC has been with a material defect in the service laterals made of high-density polyethylene (HDPE),” they write. “The 139 HDPE service laterals were installed in the older subdivisions and have been rupturing… The laterals are deep, with portions under paved roads and costly to replace. … As of 2023 LWC has replaced approximately 75 percent of the HPDE with copper.”
They also have an explanation for what they admit is the “unusually high potable water demand.” This, they said, is “due primarily to the lack of supply of non-potable irrigation water… The higher demand is due to climatic conditions and regulatory limitation of stream water for off-stream non-potable use. … [T]he trend of potable water consumption increased from 705 gpd per user [in 2017] by more than double to 1,991 gpd per user” by 2022.
While some might look at this rate of consumption as excessive, Tremble and Martin preferred to speak of the benefits of irrigation, which, they said, “recharges the aquifer” and stabilizes upslope soils, keeping nearshore water clean and reefs healthy. “Greenery helps to cool the environment and mitigate global warming,” they wrote. “Most importantly, irrigation around homes provides critical fire buffers.”
In addition to the new irrigation well that LIC wants to develop, several landowners in the Launiupoko in the area have also proposed drilling wells. One is the owner of Maui Kuia Estate Chocolate, a Kamehameha Schools tenant who has been receiving irrigation water from LIC. It proposes daily pumpage of 270,000 gallons. Four other wells for which permits are being sought would have a capacity of 204,000 gpd.
A Temporary Rate Hike for LIC
In June 2020, Launiupoko Irrigation Company petitioned the Public Utilities Commission for a temporary rate hike of more than 125 percent to cover what it described as extraordinary and unexpected events. In 2018, and “with little warning,” LIC claims, the Commission on Water Resource Management had set new interim instream flow standards (IIFS) for Kauaʻula Stream, source of about 90 percent of the water LIC distributed to its 400 or so customers.
“[T]he prior diverted Kauaʻula Stream water source utilized the phenomenon of gravity as the primary means of transmission through applicant’s non-potable water system,” LIC’s attorneys wrote in the initial filing on June 5, 2020. Following CWRM action, the company now had to rely heavily on groundwater sources for irrigation, which required “significant electrical energy to pump … to applicant’s upgradient water storage reservoir.” The costs of electricity and fuel increased over the span of just one year from $63,555 in 2018 to $270,037 in 2019, LIC stated. “Clearly, the current rates charged for applicant’s purveyance of non-potable water … do not account for the significant electrical and other pumping costs that are now required for the provision of service due to the implementation of the IIFS.” In 2020, monthly losses averaged $65,000, LIC reported.
LIC also wanted to begin charging the kuleana users. Since LIC became a regulated utility, it wrote in the rate application, “those and other purported kuleana landowners have constructed unpermitted dwelling structures and are utilizing Applicant’s water for domestic purposes. There is also evidence that a lack of tariff has resulted in significant water waste. Consequently, Applicant is requesting that all kuleana landowners be charged at the appropriate user rate in the tariff. Applicant believes that there are costs associated with providing service to the area, which should be borne in its proportionate share by these users. It is likely that this action will also result in conservation efforts on the water use in this area.”
The begrudging supply of water to the kuleana users had been expressed earlier, in a letter to the Water Commission on September 5, 2018, after CWRM had imposed the stricter interim instream flow standards for Kauaʻula Stream.
As part of the process of evaluating its water uses, LIC wrote, “LIC will analyze the economic viability of operating and maintaining the diversion on Kauaʻula Stream. Should LIC determine it is not economically viable to continue to operate that diversion, it will discontinue operation of the diversion. Persons who receive water through pipes and tunnels connected to the Kauaʻula diversion (KSBE and the valley families), may need to find alternative sources, obtain diversion permits, and build and maintain delivery systems for their needs.”
Now, before the PUC, the kuleana users joined into the proceeding as intervenors, as did several of the Launiupoko homeowner associations, a status that allows them to submit formal questions – “information requests” – to the utility and generally requires the utility to respond. It also allows the utility to submit questions to the intervenors. As a matter of law, the state Division of Consumer Advocacy is an intervenor, intended to represent the interests of the public at large.
The rate application was potentially problematic in several respects. For one thing, LIC was seeking after-the-fact approval of loans approaching $10 million from Martin, with interest rates ranging from 8 to 12 percent. These loans, LIC said, were needed in order to pay for the improvements in the system required following the “sudden” reduction of water available to it from Kauaʻula Stream in the wake of the imposition of interim instream flow standards. Utilities are supposed to obtain advance approval from the PUC for any loans whose term is longer than a year and are required to submit audited financials in support of the request, something LIC has not done, claiming the expense of an audit would be too great.
For another, LIC paid other Martin-affiliated companies to maintain its system and design and contract for improvements. LIC itself has no employees, it stated, but relies instead on staffing provided by West Maui Land Company, owned 60 percent by Martin and 10 percent by Tremble. For the equipment needed to maintain the LIC system, West Maui Land provides it, charging LIC. LIC also pays rent to West Maui Land. Hope Builders, a contractor LIC uses, is 50 percent owned by Martin. For “design review and construction management,” LIC pays West Maui Construction, in which Martin and Tremble each have 30 percent ownership interests. LIC itself is owned by Makila Land Company, which is owned by Martin (96.25 percent) and Tremble (3.75 percent).
The value of contracts that LIC executed with closely related affiliates “appears to potentially exceed the $300,000 threshold set forth” in state law, and “none of them were filed with the commission ‘within forty-five days of the effective date of the contract or agreement,’” the PUC wrote in its order approving a 15.22 percent rate increase, issued in July 2021.
LIC appealed, asking the PUC to reconsider.
The PUC was skeptical. The company had not answered the question of what rate would allow it “to begin pumping water in the amount necessary to immediately restore normal service” to customers, the commission stated in an order it issued in April 2022. “Without a response to this question,” it continued, “the commission is left with Launiupoko’s remaining statements, which consistently show that Launiupoko seeks a temporary rate increase to staunch its financial losses, not to restore service to its customers.”
A month later, the PUC granted the full temporary rate increase the company sought. “For the first time in this proceeding,” the PUC order granting the request stated, “Launiupoko has provided the commission sufficient evidence to support its request.” Even so, the PUC’s decision to grant the increase was, it noted, “informed by multiple filings in the record outside” of the company’s motion for reconsideration. As a result, the commission was granting the increase “on its own motion, informed by the docket record, rather than pursuant to” the motion for reconsideration.
Still Pending
Those “multiple filings” were made by LIC in response to information requests associated with the general rate increase it is seeking. Following input from all parties, the PUC narrowed the scope of issues to one very broad question, with multiple sub-parts, and two others that are much shorter.
The first question – whether the rate increase is “just and reasonable” — includes addressing such issues as whether the increase comports with Article XII, Section 7 of the Hawaiʻi Constitution, dealing with the rights of Native Hawaiians; Article XI, Section 1 of the Constitution, requiring protection of public trust resources; compliance with state law mandating that the PUC consider a utility’s greenhouse gas emissions; whether the revenue forecasts are reasonable; and, finally, whether LIC is even capable of improving its service in the future.
The second question: Are the proposed tariff changes reasonable?
And the third: Are the applicant’s financial arrangements reasonable – specifically, should the PUC approve retroactively the millions of dollars of loans extended by Martin, and whether the multiple financial ties between LIC and other Martin-controlled entities complies with state law pertaining to relations with affiliated entities.
In its statement of position on the rate increase, the Office of Consumer Advocacy specifically took on the matter of Hawaiian water rights.
Apart from the signed agreement that bound LIC to provide water at no charge to the kuleana users, “The Consumer Advocate offers that the use of water by kuleana families to grow kalo as well as their domestic uses are both an exercise of their appurtenant rights as well as their domestic uses are both an exercise of their appurtenant rights as well as protected, public trust uses of water.”
“The Constitution and state Water Code have extensive protections for the holders of appurtenant rights,” the Consumer Advocate’s statement continued. “If kuleana families were required to pay a rate for water delivery, especially one that is based on and tied to upon increasing levels of consumptive off-stream water uses, it would quickly render any held appurtenant rights meaningless. Being allowed to charge kuleana families a water rate would directly harm their appurtenant rights. This request should be rejected on its face.”
The PUC agreed. “Launiupoko has not demonstrated any change in its legal relationship to those entities,” it determined.
The Consumer Advocate went on to state the obvious: “While surface and ground water are permitted separately by CWRM, they are hydrologically connected. The withdrawal of groundwater necessarily over the long term will reduce surface water flow by lessening or eliminating groundwater contributions to surface water.”
In addition, the Consumer Advocate raised the matter of the impact on LIC’s operations on restoration of the famous Lahaina wetland during the time of the Hawaiian Kingdom:
“The required bi-monthly reports by LIC to the commission have indicated an ongoing significant withdrawal of water from the Waineʻe A Pump. It is directly mauka of the historic fishpond Mokuhunia, which surrounded the seat of government in the Hawaiian kingdom, Mokuʻula.
“The Consumer Advocate offers that the commission’s obligations under the Public Trust Doctrine arise as LIC’s requested rate increases may impact other public trust uses, particularly the uses associated with Mokuhinia.”
The office noted that in public testimony, one of the intervenors in the proceeding, J. Keeaumoku Kapu, testified in a public hearing September 19, 2023, “that Na Aikane O Maui, Inc., submitted a Surface Water Use Permit application to promote the restoration of Loko o Mokuhinia, a historic ground and surface water-fed fishpond surrounding Mokuʻula and directly makai of” two skimming wells that LIC was seeking approvals to use.
LIC vigorously disputed the link between its skimming wells and the ʻauwai that fed the old Lahaina ponds, bringing forth testimony from its hydrological consultant, Tom Nance, who said it was a “scientific certainty” that no connection whatsoever existed between the former Pioneer Mill system of water diversions and the dewatering of the Lahaina wetlands.
On June 21, at least one of the issues before the PUC was resolved – or, rather, part of one. On the matter of the after-the-fact loan approval, LIC surrendered. It would no longer be seeking – in this docket, at least – to win approval for loans that, by this time, amounted to $10 million. In notifying the PUC that it was withdrawing this request, LIC referred to the PUC’s decision of June 6 in a related case – the one involving Launiupoko Water Company.
In that case as well, the applicant had sought to obtain after-the-fact approval for loans of $1.269 million on a $3 million line of credit from Martin, at 8 percent, as well as a $6,000 loan from Tremble at the same rate of interest. In the case of the loan from Martin, he was already owed interest of $269,358, while Tremble was owed $2,240 in accumulated interest. The PUC informed the company on June 4 that the loans were void and that if it sought to seek approval of them in the future, it would need to submit a new application, accompanied by audited financial statements. In the meantime, LWC was required to file an amended application, without the loan requests and reflecting more accurate “test year” assumptions. (A test year is the estimate of a year’s worth of reasonably estimated expenses and income, on which rate applications are based.)
Apparently seeing that the denial of the LWC loan approval foreshadowed similar action in the LIC case, LIC withdrew the request. This, it said, should “allow this case to proceed to a final determination.” LIC made no mention about the related question as to whether its business relations with affiliated parties complied with PUC laws.
The Potable Water Issues
On December 28, 2023, Launiupoko Water Company, purveyor of potable water to the subdivisions that the Martin-affiliated companies have built on former sugar land, filed for a general rate increase of 64.7 percent.
Within three months, the PUC issued an order, finding that the application was incomplete. Among other things, the commission noted that the company’s service area was within a designated water management area, subject to the Commission on Water Resource Management’s administrative oversight ‘over the withdrawals and diversions of ground and surface waters…’ LWC has not provided any information about whether it has submitted an existing water use permit to CWRM. As such, the amount of LWC’s water allocation, its authority to withdraw water, and other relevant information are unknown at this time.”
In addition, the PUC was concerned “by the inconsistent information provided by the [LWC] application as compared to recent representations made by LWC’s affiliate, Launiupoko Irrigation Company, which adds to the uncertainty about LWC’s test year estimates for customer water demand.”
Even though the company claims that the issue of irrigation water shortages from LIC “has been remedied,” the PUC found, “on December 19, 2023, LIC reported that, ‘Effective December 19, 2023, LIC will stop pumping ground water to recharge its reservoirs and will have to rely on stream water only until such time as a supplemental temporary rate or general rate is approved that will allow LIC to at least break even.”
As a result of these concerns, the PUC ordered the water company to make a supplemental filing and include, among other things, copies of any applications it has made to the Water Commission for existing and new uses and any future plans it or it affiliates might have to develop sites within the water company’s service area. Also, it was to explain how it “intends to address the impending curtailment of irrigation services by LIC.”
In response, the water company provided the PUC with its combined application to the Water Commission for both surface and groundwater use permits. As to the question of the “impending curtailment” of irrigation water, the company stated that “this may be a matter of semantics.”
“LIC would like to point out that it is not ‘curtailing’ non-potable water and even if LIC wanted to curtail water, LIC is unable to do so as LIC does not have the funds to employ and enforce curtailment. Instead, LIC stopped pumping the groundwater that would otherwise supplement whatever stream water is available because of a lack of funds. LIC sent notices to its customers to conserve water… Use of LIC water has decreased as a result.” (The PUC questioned the authority of the water company to make statements on behalf of the irrigation company – and was then provided with an affidavit from Tremble, as secretary/treasurer of LIC, that he verified the truthfulness of the statements made on behalf of LIC.)
As noted earlier, on June 6, the PUC instructed Launiupoko Water Company to submit an amended application for the rate increase it is seeking – this time excluding any reference to loan approvals. No further filings have been made.
— Patricia Tummons
(An incorrect reference in this article to the Launiupoko Water Company as the Lahaina Water Company has been corrected.)
Leave a Reply