WAILUKU — An attorney for three Molokai utilities told 2nd Circuit Judge Joel August on Thursday that water and sewage operations will be continued while they seek an extension on a temporary rate increase at the Public Utilities Commission, The Maui News reported today.

The utilities had asked August to dismiss the county's suit against them, which seeks a court order to require the utilities or Molokai Properties Ltd. to continue to provide water and wastewater services to residents in the west Molokai communities developed by the ranch or taken over by the ranch.

August declined to dismiss the suit. Attorney Margery Bronster, a special counsel representing the county, said that allows the county to pursue discovery, including details on the relationship between Molokai Properties and the three utility companies.

Molokai Properties in May claimed it is not responsible for the operation of the water and wastewater companies that were set up to provide the utility services for the towns of Kualapuu and Maunaloa, and the Kaluakoi Resort. All three regions were developed on Molokai Ranch lands.

The county's lawsuit says the companies are obligated to provide utility services to the houses and commercial facilities they were involved in developing as part of the land-use permitting process.

Molokai Properties shut down the ranch and its related operations in April after its proposal to develop a 600-acre rural-residential subdivision overlooking Laau Point stalled before the state Land Use Commission.

After the ranch closed, Molokai Properties Chief Executive Officer Peter Nicholas, as director of the three utilities, sent letters to the PUC saying the utilities would be shut down at the end of August if no other company could be found to take them over.

Nicholas said Molokai Properties had covered $1.2 million in losses in the utility operations but would no longer do so, and that Molokai Properties was not obligated to subsidize the utility operations.

While August made no decision on whether Molokai Properties is responsible for the services established by its predecessor companies, his denial of the motion to dismiss keeps the issue alive. Deputy Corporation Counsel Jane Lovell said the ruling was also important because "it keeps it here so the judge can deal with the entire case."

The utilities, represented by Andrew Beaman, had asked August, if he didn't dismiss the case, to allow administrative proceedings to run their course before he takes up the suit.

The utilities - Wai'ola O Molokai, Molokai Public Utilities and Mosco - have proceedings pending before both the PUC and the Department of Health.

After the court hearing, Beaman said the utilities will soon apply for a permanent rate increase with the PUC, as they were required to do if Molokai Properties was unable to find a buyer for them. He said that he anticipates that the temporary rate hearing could last beyond the six-month period during which the interim water rates will be in effect. But he said the utilities will be operated to the end of the process.

"They recognize that the PUC will require some additional time beyond the six months of the temporary order," he said.

"The court today recognized that the … PUC should have an opportunity to decide the matters before it."

He added, "We look forward to the PUC hearing."

Bronster said that besides keeping the county's suit alive, "I think also the court showed understanding about our pleading that the (parent) company is responsible to operate and maintain the water."

"It was a definite victory for us," Lovell said.

The dispute now will enter a period in which "a lot of paper" will be moved, said Bronster. There is no deadline or indication of when the next milestone could be reached.

She was pleased that "they said they would seek an extension of the rate increase," which had been promised by Nicholas in a letter to PUC but not made to the court before.

The PUC granted the interim water rate hikes in August as part of the order to the companies to continue services. The massive increases in water rates went into effect Sept. 1 and prompted protests from affected residents, who said it is unfair for the PUC to grant rate increases to Molokai Properties without a full review of the finances and operations of the utilities.

Maui County has set aside a $100,000 grant to Maui Economic Opportunity to assist low-income residents in the west Molokai communities facing higher water bills.

For consumers on the Wai'ola O Molokai system, the rates went from $1.85 per 1,000 gallons to $5.15. Consumers with Molokai Public Utilities saw rates go from $3.18 to $6.04.

In its lawsuit, the county is also battling a state edict that it should be responsible for taking over the utility systems that Molokai Properties no longer wants to operate. Gov. Linda Lingle has insisted that the county should take over the systems, while the Department of Health issued an order to the county to plan to take over the utilities.

The county challenged the Department of Health order, which was revised by a hearings officer to require the county to plan only for an emergency if Molokai Properties did shut down - in defiance of another Health Department order that it must continue to provide the services.

Mayor Charmaine Tavares denied the county was obliged to take over the private systems and the suit was filed on Aug. 29 arguing that Molokai Properties' threat to stop services is a breach of contracts with the county in land-use permitting for the developments.

More Maui News at www.mauinews.com.