Molokai Ranch has lost a round in its battle to shove responsibility for its West Moloka'i water utilities onto Maui County, though many residents on The Friendly Isle are facing a second large water rate increase in two years under a proposal by the company.

A state Circuit Court judge issued an order last week affirming that Molokai Ranch and its utility subsidiaries are one in the same when it comes to obligations of the private water systems serving roughly 1,200 customers.

The ranch, also known as Molokai Properties Ltd., had tried to claim that it wasn't responsible for its utility subsidiaries after it shut down its resort and ranching businesses in March 2008 and proclaimed it would cease water service.

An administrative hearings officer for the state Department of Health rejected the company's defense, and Molokai Properties appealed to First Circuit Court in Honolulu. Judge Eden Hifo last week upheld the administrative hearing decision.

Maui Mayor Charmaine Tavares said the legal responsibility for the private utilities belongs to Molokai Properties, which itself is a subsidiary of Singapore-based conglomerate GuocoLeisure Ltd.

"By hiding behind the legal fiction that MPL and its wholly owned utilities were separate corporations, MPL was trying to free itself from the utilities' liabilities while keeping all of its valuable (real estate) assets," Tavares said.

A representative of Molokai Properties could not be reached for comment yesterday.

The ruling could be a factor in another legal fight over the utilities. Maui County filed suit in Second Circuit Court on Maui a year ago alleging Molokai Properties is bound to run the water systems under agreements the company or its predecessors made to obtain government approvals to develop homes, resorts and other projects on its property.

In that case, which is still pending, Molokai Properties made a similar claim that it was separate from its subsidiaries.

"We believe that other courts called upon to address the same issue would give appropriate deference to the hearing officer's and Judge Hifo's decisions," said Jane Lovell, Maui County deputy corporation counsel.

Meanwhile, Molokai Properties has asked the state Public Utilities Commission permission to sharply increase customer water rates for the second time in two years.

The PUC initially floated the idea of raising rates as a way to force Molokai Properties to continue service by eliminating the company's argument that it couldn't afford to continue losing money operating only a utility business.

The company received PUC approval last year to raise rates by 90 percent to 178 percent as a way to continue service without losing or making money.

The increases were particularly painful for many residents in one of the state's most economically depressed regions, and now those customers could soon be paying much more.

Molokai Properties in March petitioned the PUC to raise rates by an additional 60 percent to 74 percent from July 1 to June 30, 2010.

The price per 1,000 gallons of water before the first increase was $1.85, then rose to $5.15 last year and would rise to $9 under the latest proposal for customers of the Molokai Properties utility serving residential, commercial and agricultural users in Maunaloa, Kualapu'u, Kipu, Manawainui and the Molokai Industrial Park.

For customers of a sister utility serving Maui County parks in west Moloka'i and subdivisions such as Ke Nani Kai, Paniolo Hale Condominiums, Kaluakoi Villas, Kaluakoi Resort and Papohaku Ranchlands, the rate was $3.18 then rose to $6.04 and would rise to $9.61 under the latest proposal.

The company in its petition said the proposed increase would provide it a "fair return" of 2 percent on its utility investments. At present rates, the company projects a net operating loss of about $750,000 from July 1 to June 30, 2010, between its two water utility firms.