In a letter to the Public Utilities Commission, Molokai Ranch has repeated its position that without outside money it will have to shut down its Molokai utilities Aug. 31, The Maui News reported.

The June 23 letter presents balance sheets showing actual and anticipated losses at the two water companies and the sewage treatment system. It says Molokai Properties Ltd., owner of the ranch, has had to inject almost $1.2 million in cash into the utilities over the past two years to cover losses and capital expenses.

The letter was a response to a PUC demand on June 13 for information about the utilities' application for a temporary rate increase.

In its own letter to the PUC, attorneys for Maui County argued that the utilities should be forced to remain in operation, and rejected the proposal that the county acquire the aging sewer and water systems. The county repeated its contention that it is not able to and not legally required to provide utility services.

The county response also noted that despite claiming to be insolvent, the utilities have not filed for bankruptcy.

"Should MPL continue to fail to comply with the PUC's orders, monetary and criminal penalties should be assessed," argued the county in its response, as written by Deputy Corporation Counsel Jane Lovell.

The ranch estimates that without a subsidy, customers would have to pay a minimum of $5.15 to $6.04 per thousand gallons for water and $52.56 a month for sewage treatment to cover current expenses.

The rate adjustment might have to go even higher, the ranch told the PUC, because the calculations do not include additional increases in running expenses for fuel and other items. The calculation also assumes sales volume would be the same, although when rates go up, consumption usually goes down.

Molokai Properties has shut down its commercial operations on the Friendly Isle, leaving it with two publicly regulated water utilities — Waiola O Molokai and Molokai Public Utilities Inc. — and a sewage system, Mosco Inc.

In June, the PUC proposed rate increases of 41 percent and 122 percent for the two water utilities owned by Molokai Ranch. A meeting on the proposed rate hikes will be held at 10 a.m. July 15 at Molokai's Maunaloa Elementary School

No rate change is proposed for Mosco, on the grounds that the utility is still profitable.

After Molokai Properties announced it could not continue to operate because its offshore owners would not provide any more money, the PUC demanded a transition plan to keep the services going. The letter says, "The utilities have not developed a transition plan as the County of Maui has not taken any action or begun discussions with the utilities to take over ownership and operation of the systems."

Nor have any firm offers arrived for a private takeover, it said.

"Absent some method of obtaining a subsidy or rate adjustment sufficient to cover all expenses on an ongoing basis, we will have no choice but to terminate service on Aug. 31, 2008."

The balance sheets show what the ranch considers to be the net book value of the utilities: around $3.3 million for the three utilities and another $6 million for Molokai Ranch Ltd. assets that benefit the utilities.

The ranch says there are no formal agreements covering these ranch assets (like pipelines, tanks and wells), and that in a transition the new operator would have to buy or lease them from the ranch.

The two water companies have been losing money, but Mosco shows a profit and even returned about $7,700 a month in cash to the ranch.

However, the ranch says, Mosco has benefitted from reduced expenses associated with the consolidated operation of the utilities together. They share tools and trucks, for example.

If it had to stand alone, Mosco "will no longer be a viable operation under its current rate structure."

The county reply says the ranch's unverified financial claims are not enough to support a rate change. Although an increase "may be warranted," the county says it cannot determine whether the amounts cited are justified.

The county blames the ranch for running down the utilities, which it says were not built to county standards in the first place. "Nor does the county fully comprehend how the PUC could allow the utilities to operate in the red for more than five years."

In May, the ranch told the Commission on Water Resource Management that it had lost a total of $1.5 million on the utilities between 2003 and 2007, and another $546,000 from January to April this year.

The county attributes this to mismanagement, including failure by the ranch to obtain government approvals.

The ranch's letter also calls the attention of the commission to "two non-PUC issues that have an impact on the viability of continued operation, even with an appropriate rate increase:"