LIHU'E, Kaua'i — The Kaua'i Board of Water Supply is proposing deferring most of a previously approved 32 percent water rate hike, saying it doesn't need that much money right now.

The board is proposing instead to raise the rates by roughly 8.5 percent annually over 5 years.

Water manager Ed Tschupp said that while the department has been operating in the red for about a year, it has an ample supply of cash, and the board has concluded after a rate study that it doesn't need the big increase.

Tschupp said the main reason the board has the cash reserves it does is because its capital improvements have not progressed as quickly as the panel expected when the original rate hike was proposed six years ago. Thus, it hasn't spent as much money as expected.

"We're actually very financially healthy," he said.

The board has scheduled a public hearing on the new rate proposal at 10 a.m. tomorrow at its board room in Lihu'e. If the new rates do not go into effect, the 32 percent hike — approved more than five years ago — will become effective Jan. 1, 2006.

The average residential user with a 5/8-inch meter now uses roughly 20,000 gallons every two-month billing period. Those users are now billed a $9 per month service charge, plus $2.10 per 1,000 gallons. Additionally, since July 1, 2005, consumers have been paying an additional 12 cents per 1,000 gallons to cover the utility's electricity costs.

Such a user's bi-monthly bill would be $62.40 — which represents $18 for two months' service charge, $42 for water and $2.40 for electricity.

Under the proposed rate change, the water portion of the bill would go up to $2.25 per 1,000 gallons Jan. 1, 2006, raising the average bimonthly bill by $3 to $65.40. There would be subsequent increases in each of the years through 2010.

The rate plan also includes a number of other changes in the department's billing schedule, including an agricultural schedule that will reduce the cost of water to the smallest agricultural operators, but result in an increase for the biggest farm users. At both ends of the agricultural rates, those billings represent less than the department's cost to deliver the water, and residential and commercial customers are subsidizing agricultural water, Tschupp said.

Reach Jan TenBruggencate at jant@honoluluadvertiser.com.