In June 2020, Launiupoko Irrigation Company filed a request for a rate increase with the Public Utilities Commission. Among other things, it sought PUC approval for nearly $10 million in loans that it had received from Peter Martin, who holds a majority share of the company.<\/p>\n\n\n\n
And that was a problem. By law, any loans to a utility with a payback term longer than one year have to be approved in advance by the commission. The PUC approved a temporary rate hike in 2022 but conditioned it on LIC not using any of the additional revenue \u201cfor any purpose other than restoring normal service to its customers, such as paying off unapproved loans.\u201d Before allowing those loans to be repaid, the PUC wanted LIC to brief it on what LIC believed to be the legal authority for it doing so.<\/p>\n\n\n\n
Last June, the irrigation company withdrew its request for approval of the loans, stating it did not want to \u201cunduly burden LIC\u2019s rate case. In the event that the commission deems the loans void, LIC submits that there is no impact to the rate case numbers as filed. LIC has not included interest expense for the loans in LIC\u2019s revenue requirement,\u201d it told the PUC.<\/p>\n\n\n\n
Yet, as Environment Hawai\u02bbi <\/em>reported in September, LIC continued to include its loan obligations in its regular profit-and-loss reports to the PUC. These obligations, amounting to around $50,000 a month, meant that month after month, year after year, LIC was reporting losses. Without the loan repayment set-asides, we reported, the company would have reported net profits.<\/p>\n\n\n\n When questioned about the set-asides, a company spokesperson stated that none of the additional revenues was used to pay loans or interest expense related to the loans. Inclusion of the loan obligation was an IRS requirement, the spokesperson explained.<\/p>\n\n\n\n The group of intervenors in the PUC case that represents Native Hawaiians who receive water from the irrigation company then filed a \u201cmotion to clarify\u201d with the commission. Specifically, it asked the PUC to clarify whether the inclusion of unapproved loan interest in the profit-and-loss reports had an impact on the commission\u2019s consideration of the reasonableness of the requested rate increase and whether it spoke to the utility\u2019s \u201cfitness as a water public utility.\u201d And, finally, it asked the PUC to order the utility to \u201cadjust their general ledger and all financial reports submitted to the commission \u2026 that has included the unapproved interest as a liability.\u201d<\/p>\n\n\n\n On December 11, the commission issued an order responding to the clarification request. The request did not cite any PUC orders in need of clarification, it said. The profit-and-loss statements \u201cadequately comply\u201d with the PUC\u2019s order requiring the company to \u201cprovide reports that \u2018itemize money spent on fuel, water delivered to customers, and any instances of curtailment \u2026\u2019 As LIC\u2019s profit-and-loss statements adequately comply\u201d with this order, the commission denied the intervenors\u2019 request that the financial reports be revised.<\/p>\n\n\n\n But in the same order, the PUC deemed the Martin loans void. \u201cShould LIC seek any prospective financing from the same lender or other lenders, LIC shall seek prior approval from the commission before<\/em> incurring any loans or other evidence of indebtedness, in compliance with [Hawai\u02bbi Revised Statutes 269-17].\u201d<\/p>\n\n\n\n The December 11 order also directed the parties to provide status updates by January 8. Among other things, the updates are to discuss whether LIC \u201cmust refile any working papers or other material submitted in this docket, in light of this order voiding LIC\u2019s unapproved loans.\u201d<\/p>\n\n\n\n They may make \u201cprocedural requests\u201d to the PUC, such as a request for a contested case or additional briefings, additional discovery, \u201cand\/or any other procedural requests or suggestions.\u201d<\/p>\n\n\n\n Parties are also invited to make \u201cany updates to the party\u2019s statement of position, in light of \u2026 any new information learned since the statements of position were filed, or because of this order deeming void LIC\u2019s unapproved loans.\u201d In a footnote, the PUC states that the Native Hawaiian intervenors \u201cfiled direct testimony\u201d in their motion to clarify, \u201cin lieu of a statement of position. The commission directs the Kapu Intervenors to file an update styled as a statement of position \u2026 as the commission finds it more efficient to review a concise statement organized by the discrete issues outlined\u201d in the order setting forth issues to be considered in the LIC\u2019s request for approval of a general rate increase.<\/p>\n\n\n\n With respect to the held-back funds to repay the Martin loans, the PUC order asks the parties to state their position \u201con whether any temporary rate revenues are in excess of the rates, fares, or charges the commission deemed just and reasonable \u2026 and must be returned to ratepayers.\u201d In another footnote, the PUC states, \u201cThe commission understands that it may be difficult to calculate any such amount, based on the information currently in the records. At this time, the commission only seeks each party\u2019s position on whether the return of ratepayer funds may be necessary.\u201d<\/p>\n\n\n\n Yet More Questions<\/strong><\/p>\n\n\n\n On December 18, the Public Utilities Commission brought forward yet more requests for information from LIC. The questions arose from filings that LIC and its sister company, Launiupoko Water Company, made as part of hazard mitigation planning for all regulated utilities.<\/p>\n\n\n\n Part of the companies\u2019 plans for dealing with hazards call for replacing diesel pumps on wells with electrical power. According to the filing made April 18, \u201cInfrastructure is in place for LIC 1 [well] and HECO is actively pulling the lines. LIC 1 should have permanent power before the end of the year. Power to the A Pump is stalled with [the State Historic Preservation Division] review of the pole installation.\u201d<\/p>\n\n\n\n Four months later, in August, the companies updated the status of the wells and pumps. As for LIC Well 1, the electrical systems were reported to be complete. \u201cAll that remains is funding to pay for electrical installation by LIC\u2019s contractor.<\/p>\n\n\n\n \u201cHowever, because LIC is in debt and operating at a loss, LIC first needs the commission\u2019s approval of LIC\u2019s pending rate request in order to seek financing.\u201d<\/p>\n\n\n\n In the company\u2019s response to the PUC\u2019s information request of September, LIC reported the following in October:<\/p>\n\n\n\n \u201cBefore HECO will install a meter, the LIC Well-1 Electrical Service Equipment \u2026 must be installed. This was estimated to cost $196,619.52 on July 22, 2024. LIC lacks the funds to complete the work and is unable to seek financing with current losses.\u201d<\/p>\n\n\n\n As for A Pump, the company stated that HECO plans \u201care complete and approved\u201d and the company has applied to Maui County for a grading permit. \u201cThe county requested a 6E review by SHPD. SHPD is requiring a complete Archaeological Inventory Survey \u2026 LIC lacks the funds to process the AIS or complete the work once all permits are received.\u201d<\/p>\n\n\n\n Following up on those statements, the PUC is now asking the company to \u201cidentify any lawful debts LIC has incurred that may stall or prevent LIC from obtaining any financing\u201d and to \u201cprovide a copy of any loan applications or related correspondence submitted to any professional lenders regarding LIC Well 1 or A Pump.\u201d<\/p>\n\n\n\n The PUC also is asking LIC to explain an oddity on the company\u2019s financial reports. From January 2024 through September 2024, there were zero expenditures in the category \u201cDiesel Fuel Only \u2013 Generators,\u201d the PUC notes. In October, however, expenditures under this category totaled $11,7465.64, while in November, the total was $19,597.61.<\/p>\n\n\n\n \u201cPlease explain, in detail, the reason for this discrepancy,\u201d the PUC asks. Also, \u201cPlease explain, in detail, whether and how the quality of LIC\u2019s service to customers has been impacted during the time that LIC chose not to operate diesel fuel generators to ump groundwater.\u201d<\/p>\n\n\n\n Responses to this latest round of information requests are due January 3.<\/p>\n\n\n\n The Public Utilities Commission wants to know why customers of the Launiupoko Water Company are using so much potable water. In October, it asked the company, which filed a rate increase application with the PUC nearly a year ago, to explain why average customer usage rose from 496 gallons per day in 2007 to 1,766 gpd in 2022.<\/p>\n\n\n\n \u201cLWC does not know the exact reasons for the increased average customer potable water demand during the span from 2007-2017 (496 GPD to 705 GPD) but believes that it could be attributable to several factors,\u201d the company responded on November 8. It proceeded to offer some possible explanations:<\/p>\n\n\n\n In that period, the company added 150 new customers, who \u201cmay have had increases in household size (e.g., children, pets), fixture units [sic], number of days home per year, sub-metered farm dwellings, and irrigation use.\u201d<\/p>\n\n\n\n Also, \u201ca few large volume users with a main home plus a second farm dwelling on one meter may have skewed the averages.\u201d (Because all of the area served by LWC is in the state Agricultural land use district, all of the residences, no matter how lavish and no matter whether there is any agricultural production at all, are pretty much by definition, if not in fact, \u201cfarm dwellings.\u201d)<\/p>\n\n\n\n Another point: \u201clot sizes increased.\u201d When the \u201cagricultural\u201d subdivisions were first built out, lot sizes were between and two and five acres, LWC informed the PUC. Later subdivisions had lot sizes ranging from 15 to 25 and more acres. The PUC had reminded the utility that when it applied for a license in 2003, the company said it expected \u201cthe same number of people will live on a lot, regardless of its size, and a \u201ctypical single-family home is estimated to average between 500-600 gallons per day without irrigation use.\u201d But evidently that statement, to the effect that anticipated potable water usage was indifferent to lot size, had no basis in fact.<\/p>\n\n\n\n Launiupoko Water Company then hints at the role its troubled sister company, Launiupoko Irrigation Company, may have in driving increased demand for potable water. Most of LWC\u2019s customers also are connected to LIC, which provides \u2013 when it can \u2013 non-potable water for most agricultural uses. The potable water is sourced from wells, while the irrigation water these days is drawn almost entirely from Kaua\u02bbula Stream.<\/p>\n\n\n\n \u201cOther than the stream [interim instream flow standard] determinations and LIC\u2019s operational challenges, the factors that may have led to an increase in LWC customer water demand from 2017 to present, in addition to the factors mentioned \u2026 above, include increases in the use of potable water for new agricultural uses that require potable water (e.g., farming, cattle, horses) and irrigation. \u2026 The irrigation of green space for wildfire irrigation may be also a contributing factor.\u201d<\/p>\n\n\n\n A few paragraphs later, Launiupoko Water Company again refers to the difficulties of the irrigation company and the part they may have played in increased demand for potable water. \u201cIt is hard to say to what extent\u201d the increases in potable water consumption from 2016 to 2022 are due to \u201cLIC\u2019s operational challenges\u201d rather than \u201cchanging dynamics in customer demand,\u201d the company says.<\/p>\n\n\n\n \u201cNevertheless,\u201d it concedes, \u201cthere appears to be correlation between the increase in LWC consumption and decrease in LIC consumption during this period.\u201d<\/p>\n\n\n\n \u201cLWC believes that the primary operational challenge for LIC was due to [the Commission on Water Resource Management\u2019s] enactment of [interim instream flow standards] in 2018, which materially reduced the main source of LIC\u2019s non-potable water, causing customers to use LWC\u2019s non-potable water for irrigation and other non-potable uses,\u201d the company says.<\/p>\n\n\n\n True, in 2018, the Commission on Water Resource Management changed the interim instream flow standards for West Maui streams, including Kaua\u02bbula, limiting \u2013 in theory, at least \u2013 the volume of water Launiupoko Irrigation Company could divert to its customers. Yet shortly after the new restrictions were approved, LIC received permission from CWRM to exceed them, permission that is renewed every six months.<\/p>\n\n\n\n For a while, LIC supplemented low stream flows with potable well water. But this stopped in November 2020. At that time, the irrigation company notified the Public Utilities Commission that pumping \u201cnot only increased operating costs (and losses), it has resulted in an unacceptable increase in the chloride content of water from the potable wells.\u201d<\/p>\n\n\n\n At the same time, flows in Kaua\u02bbula Stream have decreased to the point where the irrigation company is often unable to deliver water to its customers, notwithstanding the special dispensation from CWRM.<\/p>\n\n\n\n Even with the large increases in potable water consumption, LWC contends that the average usage is reasonable. <\/p>\n\n\n\n In response to the PUC\u2019s question as to what the company generally believes to be reasonable consumption levels, both with and without the irrigation company returning to full operational capacity, LWC claims that \u201cactual consumption is a reasonable estimate of reasonable consumption levels.\u201d<\/p>\n\n\n\n In 2023, when the irrigation company pumped well water the entire year, the average customer\u2019s daily consumption of potable water was 1,534 gallons. \u201cLWC believes this \u2026 represents normalized consumption,\u201d it says. It goes on to note that its pending application before CWRM for an existing use permit for groundwater seeks 675,000 gallons per day, or 1,800 gpd per metered customer. This is more than three times what the utility expected average customer usage to be when it applied for a license from the PUC in 2006.<\/p>\n\n\n\n If the irrigation company has to rely on surface water alone, with no pumping, LWC \u201cbelieves that average consumption would be approximately 2,093 gpd.\u201d<\/p>\n\n\n\n The PUC wanted to know if the water company had sent notices to its customers to reduce the use of potable water for irrigation. Also, what, if anything, had the company done to encourage or force water conservation.<\/p>\n\n\n\n The company replied that in July it had sent notices to its 60 highest water users (out of 395 total), asking them to cut back on their use of potable water for irrigation purposes.<\/p>\n\n\n\n As to what the company has done or is doing to advance water conservation, it says it is in the process of replacing its meters with \u201csmart meters.\u201d This will allow customers \u201cto view and modify their water use behavior in real time rather than waiting for their next bill, which encourages confining use to within the next lowest price tier,\u201d the company says.<\/p>\n\n\n\n It is also \u201cconsidering the use of penalty provisions \u2026 to facility enforcement of mandatory conservation measures\u201d if such measures are imposed or a shortage emergency is declared.<\/p>\n\n\n\n The PUC noted that based on the information the water company provided on usage for each property it serves, \u201cmany individual customers use less than 1,200 gpd of potable water.\u201d But consumption at five properties exceeds 10,000 gpd, \u201cwith the top water user reporting 19,076 gpd.\u201d The PUC then asked the utility to analyze the usage of these customers and to \u201cplease explain\u201d factors that contribute to the high rate of consumption, including pools, landscaping, agricultural uses, or other features \u201cthat distinguish these parcels from more modest water users.\u201d<\/p>\n\n\n\n The company replied that it had sent requests for information to the top five users and had received three responses. One was from a farmer who grows ulu, taro, citrus, bananas, and other fruit and produce, the company said, while \u201canother user uses potable water to keep the land from becoming dry for wildfire mitigation and has a pool\/spa, and another user breeds horses and has an ohana unit.\u201d<\/p>\n\n\n\n \u2014 Patricia Tummons<\/strong><\/p>\n\n\n\n For Further Reading<\/strong><\/p>\n\n\n\n Environment Hawai\u02bbi <\/em>has published these reports that discuss Launiupoko Irrigation Company and Launiupoko Water Company:<\/p>\n\n\n\n \u201cLauniupoko Irrigation Co.\u2019s Reports to PUC Show Income Set Aside for Loan Repayments<\/a>,\u201d September 2024;<\/p>\n\n\n\n \u201cIn West Maui, the Fight Over Water Reveals Deep Social, Economic Rifts<\/a>,\u201d July 2024;<\/p>\n\n\n\n \u201cEditorial: Those Launiupoko \u2018Farms<\/a>,\u2019\u201d July 2024.<\/p>\n\n\n\n <\/p>\n","protected":false},"excerpt":{"rendered":" In June 2020, Launiupoko Irrigation Company filed a request for a rate increase with the Public Utilities Commission. Among other things, it sought PUC approval for nearly $10 million in loans that it had received from Peter Martin, who holds … Continued<\/a><\/p>\n","protected":false},"author":1,"featured_media":16209,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[533,338,28],"tags":[7],"class_list":["post-16308","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-january-2025","category-land-use","category-water","tag-patricia-tummons"],"_links":{"self":[{"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=\/wp\/v2\/posts\/16308","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=16308"}],"version-history":[{"count":0,"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=\/wp\/v2\/posts\/16308\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=\/wp\/v2\/media\/16209"}],"wp:attachment":[{"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=16308"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=16308"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=16308"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
\n\n\n\nLauniupoko Water Co. Answers<\/strong> PUC Questions on Excess Water Use<\/strong><\/h2>\n\n\n\n