Water historically has been a disruptive issue on Moloka'i because of its fragile, limited supply and contentions over use between residents and the island's largest landowner. Now pressure is rising over the price of the basic life-giving resource.

The state Public Utilities Commission will hold a public hearing Thursday on the Friendly Isle concerning a rate increase of up to 385 percent requested by utility operator Molokai Ranch — and many residents plan to unleash their frustration about being asked to pay what may be the highest rate in the state.

The prospect of such a steep hike is particularly scary for many who live on Hawai'i's most economically depressed island, where unemployment is 16.3 percent, more than double the 7.2 percent statewide figure, and prices of food, gas and electricity are already higher than what most people in the state pay.

Molokai Ranch's plan has not only outraged the island's most fervent activists, who harbor deep resentment toward the company and have long fought to protect land from development, it has also drawn into battle even relatively recent arrivals such as Tim Brunnert, a custom homebuilder from the Mainland who moved to Moloka'i six years ago.

"We have to fight this," he said. "It's nuts."

Brunnert, who lives in Maunaloa and does caretaker work and remodeling projects, has sent letters to elected officials, from state representatives and the governor to the president, asking for help. He also started a petition and organized a sign-waving demonstration yesterday to try to garner broader support to keep water rates down.

Yesterday, Brunnert was standing on the highway above the Kaluakoi Resort holding signs reading, "PUC you pay it" and "Replace the PUC."

Brunnert had 300 signs made, including "Please don't let me go thirsty" and "Slow down, you're on Molokai, water hike too fast."

He also created 260 T-shirts with the words "Water is life." And by yesterday morning, Brunnert had run out of all of his signs and all of his T-shirts.

"We had a big turnout," he said. "When one hurts, we all hurt."

MOLOKAI RANCH

While the community is aiming much of its message at the PUC, as the regulatory agency expected to rule on the rate request by the end of the year, the object of opposition and anger is Molokai Ranch, as owner and operator of two water utilities serving about 1,200 west Moloka'i customers.

The company, a subsidiary of Singapore-based conglomerate GuocoLeisure Ltd., applied for the rate increase five months ago after shutting down ranching and resort operations in March 2008.

The shutdown followed years of struggle to win support for the ranch's controversial plan to develop 200 lots for luxury homes at La'au Point that would reverse company financial losses and finance restoration of the shuttered Kaluakoi Hotel in return for conveying 50,000 acres to a community land trust for perpetual protection.

The La'au plan won support from some residents, including a handful of community leaders who accepted it as a reasonable trade-off.

But others feared that developing La'au would harm the ecosystem by using more water than projected, and attract wealthy real estate investors who might diminish the rural atmosphere of the island, largely populated by Native Hawaiians, many of whom live off the land by farming, fishing and hunting.

After giving up the fight and laying off 120 employees, Molokai Ranch in May 2008 told the PUC it would shut off water if another operator couldn't be found to assume operations by August 2008.

As an emergency measure, the PUC initiated temporary rate hikes of between 90 percent and 178 percent for ranch utility subsidiaries Molokai Public Utilities and Wai'ola O Molokai.

The temporary rate hikes were instituted to let the ranch continue utility operations without either losing or making money.

Molokai Ranch agreed to that, but said it will not operate the utilities indefinitely despite an order by the state Health Department not to abandon operations.

Maui County has sued the ranch, arguing that the company is bound to maintain the utilities as part of agreements it made to obtain zoning changes and develop the arid uplands of West Moloka'i.

Now the ranch is seeking to keep the temporary rate in effect and increase that by another 60 percent to 74 percent, for a total increase of 202 percent for Molokai Public Utilities customers and 385 percent for Wai'ola O Molokai customers.

The ranch said it's seeking a "fair" 2 percent return on its utility business as opposed to a projected net operating loss of about $750,000 from July 1 to June 30, 2010, for the two utilities at present rates.

UNHAPPY CUSTOMERS

For many customers, the higher rates are shocking. Based on what the ranch said is Wai'ola O Molokai average customer use of 11,000 gallons a month, a typical customer's monthly bill would jump from about $41 before the temporary hike to $197. Another $32 in other charges also would be added to the monthly bill of most customers for meter reading and fire hydrant fees.

The ranch, in an effort to lessen the shock, has sought to raise rates in two steps, with the full increase in force after six months, but that hasn't appeased customers.

Gerald and Edith Anderson of Maunaloa called the proposed fees astounding. "As residents of the West End of Molokai for the past 22 years, we wish to express our grave concerns," they said in an Aug. 22 letter to the PUC.

Marlene Sproat, a Native Hawaiian homesteader whose family is in the ranching and rodeo business, said she believes the ranch is trying to punish the community for successfully fighting the La'au plan. "It feels like a vendetta," she said.

Sproat added that she thinks it's not fair that part of the reason the ranch is seeking drastically higher water rates is because its biggest customer — itself — is gone.

Molokai Ranch had hotel, golf course, ranching and other operations that represented the biggest users of water it supplied. The company previously said it historically was willing to subsidize its losses, but no more.

Spreading utility expenses over the customers who are left is wrong, Sproat and other customers say.

Local resident Pamela Hamamoto added in an Aug. 24 letter to the PUC that some of the reason ranch utility expenses are so high is because it neglected to maintain the system for many years.

"Why should their customers be penalized for their irresponsible actions?" she wrote.

Ranch officials didn't return calls seeking comment on the new rate increase proposal. In a letter to Molokai Public Utilities customers dated Aug. 12, the company said it needs the increase to eliminate losses and earn a small return.

"MPU is here to serve you," the letter said. "We believe this proposed rate increase will allow us to better serve you and the surrounding community."

OPERATING COSTS

Regardless of whether the higher rates are justified, if approved, they could be the highest in the state. In a sampling of several of the most recent rate increase requests among the state's 25 or so private regulated water utilities, the ranch's proposed rates were the highest.

By comparison, Kohala Ranch Water Co., with 400 customers, in June was allowed to raise rates 25 percent to $7 per 1,000 gallons, though it sought an increase to $8.49.

Hawaiian Beaches Water Co., with 1,100 customers in Pahoa, last month petitioned the PUC to charge customers $5.78 per 1,000 gallons plus $30 a month instead of a flat rate of $48 per month regardless of usage.

On Aug. 3, Kapalua Water Co., with 535 customers, was allowed to raise rates to between $3.53 and $5.05 per 1,000 gallons, depending on the quantity of use.

Customers of Maui County's water system pay $1.65 to $4.10 per 1,000 gallons, depending on quantity of use.

The varying rates allowed by the PUC for private systems largely have to do with characteristics of each system, such as the number of customers, length of the system and other factors that affect operating costs. That makes comparisons problematic.

Many Moloka'i residents want Maui County to take over the ranch systems. Gov. Linda Lingle also has urged the county to do so. But the county said it would be too much of an economic burden to bring the system up to county standards, the cost of which hasn't been fully studied.

Maui County spokeswoman Mahina Martin said county leaders are concerned about the effect on Moloka'i residents, but that it's the ranch's responsibility to take care of its customers.

The state consumer advocate's office, which is charged with representing utility consumer interests and ensuring they have reliable service at a reasonable cost, is reviewing the rate request and plans to submit an opinion to the PUC in part based on public testimony at Thursday's hearing.

Sen. J. Kalani English, D-6th (E. Maui, Moloka'i, Lana'i), said he's watched the issue closely, but that there doesn't seem to be a viable solution that would ensure that the utility remains in operation at prior rates.

"It's a quagmire," said English, who has family on Moloka'i. "We have to rely on the process and that the PUC, after all the input is received, will weigh it and make the right decision."