The state Public Utilities Commission yesterday approved a request by Molokai Ranch to raise water rates for many Moloka'i residents by substantially more than the regulatory agency proposed in June.

Rate hikes of between 90 percent and 178 percent will go into effect Sept. 1 for at least six months, affecting roughly 1,200 customers in one of the state's most economically depressed regions.

The original proposal was to raise rates between 41 percent and 122 percent. Molokai Ranch, which operates the water utility, said the smaller increase wouldn't be enough for the financial losses it was suffering in providing the service.

"It's just unprecedented," said DeGray Vanderbilt, a 30-year Moloka'i resident and former chairman of the Moloka'i Planning Commission. "Here this big, billion-dollar company came in and said they were going to quit (providing water service) ... and the PUC caved in."

Vanderbilt said the increase in the residential area of Kualapu'u will mean a $50 monthly water bill will become $139.

For Carlana Cameros, 39, of Kualapu'u, her water bill of $26 a month will rise to $72 a month. "It's horrifying," she said. "I don't know how we can manage to live here with increases like that."

The rate decision followed a public hearing held by the PUC July 15 on Moloka'i to discuss the proposed rate increase.

The agency floated the idea as a way to force Molokai Ranch to continue service.

The ranch, a subsidiary of Singapore-based conglomerate GuocoLeisure Ltd. also known as Molokai Properties Ltd., had threatened to cease service Aug. 31 following the shutdown of ranch and resort operations in March that resulted in the company laying off more than 120 employees.

Molokai Ranch also told the agency in March that it intended to transfer the responsibility for providing utility within six months to a private or public entity, but was unsuccessful in negotiating for Maui County or any private entity to assume the service.

Before the hearing to consider the rate increase proposals, the Consumer Advocate said there wasn't sufficient time to carefully review the proposed initial increase to judge whether it was reasonable. So the Consumer Advocate in a position statement "reluctantly" didn't oppose the initial rate increase while acknowledging it was in a difficult position because ratepayers may lose water service if they can't afford it or if the ranch quits providing water.

The PUC had proposed raising rates by 122 percent for customers of Molokai Ranch affiliate Wai'ola O Molokai, which provides water to residential, commercial and agricultural users in Maunaloa, Kualapu'u, Kipi, Manawainui and the Molokai Industrial Park.

An increase of 41 percent was proposed for customers of ranch affiliate Molokai Public Utilities, which services Maui County parks in west Moloka'i and subdivisions such as Ke Nani Kai, Paniolo Hale Condominiums, Kaluakoi Villas, Kaluakoi Resort and Papohaku Ranchlands.

But the ranch said the PUC's proposed increases were insufficient to cover what it said were collective utility losses of around $580,000 in each of the past two fiscal years — a deficit that the ranch was willing to fund only while it had other business operations that needed water.

Despite general community opposition to any water rate increase, the PUC went along with higher rates Molokai Ranch said were necessary to cover losses.

"Under these dire circumstances, the commission has no choice but to approve the temporary rate increases as a stop-gap measure," Carlito Caliboso, PUC chairman, said in a statement yesterday. "We need to do what we can to require the utilities to keep operating, at least temporarily, for the sake of the health and welfare of the people of West Moloka'i."

Molokai Ranch has maintained that the government has a duty to provide citizens with essential services such as water when the private sector is unable to do so.

The PUC previously has acknowledged that as a practical matter, it can't compel Molokai Ranch to operate the utilities forever and has urged Maui County officials to acquire the water and wastewater systems.

Maui County officials have argued that the county can't take over Molokai Ranch water and wastewater utilities on such short notice and that it's not fair to dump the expense of operations on taxpayers.

Future operation of the wastewater utility affiliate of Molokai Ranch called Mosco is also at issue, though its rates are not being increased.