Laie Water Company

Information re: Water Rate Case Application September 1, 2016

Laie Water Company, Inc. 55-510 Kamehameha Hwy.

Laie, HI 96762 (808) 293-7017

 August 31, 2016   

Re:   Laie Water Company Water Rate Case Application   Dear Laie Water Customer,  We are writing to inform you that the Laie Water Company (LWC) is submitting a rate case application to the Hawaii Public Utilities Commission (PUC) seeking, among other things, PUC approval for a rate increase. If approved, LWC rates could increase sometime in the first half of next year.  While we have not sought approval to raise water rates in the last ten years (since 2006), the combination of decreased usage and rising costs require that we raise rates to ensure we can continue to provide safe and dependable water service.  In the near future, the PUC will hold a public hearing on the application to receive input from LWC customers. In addition, the Division of Consumer Advocacy (aka, Consumer Advocate) is expected to participate in this upcoming rate case proceeding and the Consumer Advocate’s role is to represent the interests of LWC customers.  After the rate case application is filed, we will notify you of the date, time and location of the public hearing, as well as more details of the proposed rate increase and other changes to LWC’s rules and regulations. In the meantime, if you have any immediate questions please contact us at (808) 293‐7017.  We thank you for your patronage as we continue to protect and care for this precious resource.   Mahalo,  Laie Water Company  cc:   State of Hawaii Public Utilities Commission         State of Hawaii Division of Consumer Advocacy         Laie Community Association 

Laie Water Company, Inc.

55-510 Kamehameha Hwy. Laie, Hawaii 96762

(808) 293-7017

October 17, 2016 [Laie Water Customer Name & Mailing Address]

Re: PUC Public Hearing on Proposed Rate Increase, Frequently Asked Questions (FAQ)

Dear Laie Water Customer:

We are writing as a follow-up to our August 31, 2016 letter, to inform you that the Hawaii Public Utilities Commission (PUC) has scheduled a public hearing on Laie Water Company’s (LWC) application for a rate increase. If approved by the PUC, water rates could increase sometime in the first half of next year.

The PUC public hearing will be held:

Monday, November 7, 2016, at 6:00 p.m. Laie Elementary School Cafeteria 55-109 Kulanui Street, Laie, Oahu

While we have not sought to increase water rates in the last ten years (since 2006), the combination of decreased water revenue and rising operational costs has resulted in LWC operating at a significant loss in the last two years, requiring that LWC seek PUC approval to increase rates to ensure it can continue to provide safe and dependable water service.

We have attached for your information a Frequently Asked Questions (FAQ) document, and the PUC’s official Notice of Public Hearing, which describes in detail the proposed rate changes.

All customers are invited to attend the PUC’s public hearing to find out more about the proposed rate increase and provide their input. The Division of Consumer Advocacy (aka, Consumer Advocate), which represents the interests of LWC customers, will also attend the hearing and participate in the rate review and approval process.

We thank you for your patronage as we continue to care for and distribute this precious resource.

Mahalo,

R. Eric Beaver President, Laie Water Company

Enclosures

Revised Oct. 17, 2016

LAIE WATER COMPANY RATE CASE APPLICATION

DOCKET NO. 2016-0229 FREQUENTLY ASKED QUESTIONS (FAQ)

Q. WHY IS LAIE WATER COMPANY (LWC) SEEKING TO RAISE ITS WATER RATES? A. Over the last ten years operational costs such as labor, materials, and insurance expenses have continued to climb. At the same time, water revenue has decreased. The combination of rising costs and decreasing revenues has resulted in LWC operating at a significant loss in the last two years, requiring that LWC seek PUC approval to increase rates to ensure it can continue to provide safe and dependable water service.

Q. WHAT IS THE SCOPE OF LWC’s OPERATIONS? A. Laie Water Company provides water to all of Laie from a basal aquifer deep beneath the ground. Two pump stations draw approximately one million gallons of water per day from this pristine source for community use. The LWC crew installs, maintains and repairs approximately 120 fire hydrants, 750 water meters, six wells and four main pumps, two large water reservoir tanks, and approximately 49,000 linear feet of pipeline. LWC’s water quality has been consistently high and has met all Federal and State safe drinking water standards for all years of operation.

Q. WHEN WAS THE LAST TIME LWC WATER RATES WERE RAISED? A. LWC has not sought approval to raise water rates in the last ten years – since December 2006. That application was approved by the State of Hawaii Public Utilities Commission (PUC) and water rate increases were phased in on July 20, 2007.

Q. HOW MUCH WILL THE RATE INCREASE BE? A. If approved by the PUC, rate increases for users will depend on the amount of water used and water meter size. As an example for illustrative purposes, a single family household using 13,000 gallons per month with a ¾ inch size meter would be charged about $40 per month under current rates. If proposed rate increases are approved by the PUC, the charge for this same household would be about $93 per month. Please see the PUC’s Notice of Public Hearing for all proposed rate changes (attached).

Q. HOW DO LWC RATES COMPARE TO BOARD OF WATER SUPPLY RATES? A. Please see the graph below which compares rates for both systems over the last 12 years for a household using 13,000 gallons of water per month:

Revised Oct. 17, 2016

Note that for nearly all of the last 12 years, LWC rates have been lower than BWS rates.

Q. WHY DOESN’T LWC MIRROR BWS RATES? A. The LWC and BWS water systems are different in various ways and are not subject to the same ratemaking process and review. For example, they are regulated differently: BWS is part of the City government, is self-regulated (i.e., not subject to PUC oversight), and may raise rates at a constant amount each year; LWC does not have this option and is regulated by the PUC. Also, the two systems are vastly different in size and economies of scale: BWS has a huge user base (most of the residential and commercial water users on Oahu) over which to spread its operating costs; LWC’s user base is about 750 users.

Q. WHY DOESN’T LWC SEEK SMALLER RATE INCREASES MORE FREQUENTLY? A. The LWC’s last rate increase application was 10 years ago. While the trend line for water revenue has been downward for some of that time, there were a couple of previous years that showed upticks indicating that revenue was possibly stabilizing. Had revenues leveled out, there likely would not have been a need for a rate increase at this time. The need to seek a water rate increase became particularly apparent in the last two years as LWC experienced significant losses. LWC can only increase its existing rates if approved by the PUC. Too frequent rate increases through the PUC process can end up costing water customers more in the long run. Unlike BWS which may raise rates at a constant amount each year, LWC is required by law to seek PUC approval for a rate increase by means of a very costly application process. Much of the costs associated with filing and processing each rate increase application are generally included in LWC water rates. Consequently, frequent rate increase application costs would further increase water rates for LWC customers.

Revised Oct. 17, 2016

Q. ARE SIGNIFICANT RATE INCREASES FORECAST FOR THE NEAR FUTURE? A. We believe that rate increases will likely be more gradual in the near future. While a rate increase is now necessary to allow LWC to recover its prudently incurred expenses and an opportunity to earn a fair return on its prudently incurred investments, we believe that water usage for the LWC system is nearing stabilization. As a result, we anticipate that rates will likely increase more predictably in the future.

Q. WHO WILL DECIDE WHETHER OR NOT THE PROPOSED RATE INCREASE IS APPROVED? A. LWC is a public utility regulated by the PUC, which will investigate and ultimately decide whether LWC’s proposals in the application are just and reasonable. As a result, proposed rate increases and changes must be approved by the PUC. In addition, the Division of Consumer Advocacy (aka, Consumer Advocate) will participate in the rate case proceeding where its role is to represent the interests of LWC customers in the rate approval process.

Q. WHERE CAN I VIEW THE LWC WATER RATE CASE APPLICATION? A. The application is available for viewing on the PUC’s website at:

http://dms.puc.hawaii.gov/dms/, Docket Quick Link 2016-0229.

Copies of the application are also available for review by contacting:

State of Hawaii Public Utilities Commission 465 South King Street, #103

Honolulu, Hawaii 96813 808-586-2020

Division of Consumer Advocacy King Kalakaua Building, 335 Merchant Street, Rm. 326

Honolulu, Hawaii 96813 808-586-2800

Laie Water Company c/o Hawaii Reserves, Inc. 55-510 Kamehameha Highway

Laie, Hawaii 96762 808-293-7017

Q. WILL THERE BE A PUBLIC HEARING ON THIS PROPOSED RATE INCREASE? A. Yes, the PUC has scheduled a public hearing on the application and the notices are being mailed to all LWC customers. The hearing will be held:

Monday, November 7, 2016, at 6:00 p.m.

Laie Elementary School Cafeteria 55-109 Kulanui Street Laie, Oahu

DAVID Y. IGEGOVERNOR

Telephone: (808) 586-2020 Facsimile: (808) 586-2066

STATE OF HAWAIIPUBLIC UTILITIES COMMISSION

465 S. KING STREET, #103 HONOLULU, HAWAII 96013

RANDALL Y. IWASECHAIR

LORRAINE H. AKIBACOMMISSIONER

THOMAS C. QORAKCOMMISSIONER

website: puc.hawaii.gov e-mail puc@hawan.gov

October 7, 2016

Kent D. Morihara, Esq.Michael H. Lau, Esq.Kris N. Nakagawa Esq.Lauren M. Imada, Esq.Morihara Lau & Fong LLP 841 Bishop Street, Suite 400

Honolulu, Hawaii 96813

Dean NishinaActing Executive DirectorDepartment of Commerce and Consumer AffairsDivision of Consumer AdvocacyP.O. Box 541Honolulu, Hawaii 96809

Re: Docket No. 2016-0229 (Application of Laie Water Company, Inc. For Review andApproval of Rate Increases; Revised Rate Schedules; And Changes to its Tariff)

To the Parties:

The commission has scheduled the public hearing for this docket on Monday, November 7, 2016. The hearing is scheduled to begin at 6:00 p.m. at the Laie Elementary School Cafeteria, in Laie, Oahu. A copy of the “Notice of Public Hearing” is attached.

Sincerely,

Jessica R. Freedman Commission Counsel

JRF:ljk

Enclosure

Hawaii Distnct Office • 688 Kinooie Street, #106, Hiio, Hawaii 96720 • Teiephone: (808) 974-4533, Facsimile: (808) 974-4534 Kauai District Office • 3060 Eiwa Street, #302-C, Lihue, Hawaii 96766 •Telephone: (808) 274-3232, Facsimile: (808) 274-3233

Maui District Office • One Main Plaza, 2200 Main Street, Suite 540, Wailuku, Hawaii 96793 • Telephone: (808) 984-8182, Facsimile: (808) 984-8188

NOTICE OF PUBLIC HEARING

APPLICATION OF LAIE WATER COMPANY, INC.FOR APPROVAL OF RATE INCREASES,

REVISED RATE SCHEDULES, AND CHANGES TO ITS TARIFF

Docket No. 2016-0229

The STATE OF HAWAII PUBLIC UTILITIES COMMISSION (“Commission”),

pursuant to Hawaii Revised Statutes §§ 269-12 and 269-16, HEREBY GIVES NOTICE

that it will hold a public hearing relating to the Application of LAIE WATER

COMPANY, INC. (“LWC”), filed on September 1,2016 (with Errata to the Application and

Exhibits filed on October?, 2016), for Commission approval of rate increases, revisions

of rate schedules, and changes to its tariff. The public hearing will be held as follows:

Monday, November 7, 2016, at 6:00 p.m.

Laie Elementary School Cafeteria55-109 Kulanui StreetLaie, Oahu

LWC is a public utility that provides water utility services, including the gathering,

storage, transmission, distribution, and other provision of water, within its authorized

service area in Laie, on the island of Oahu.

LWC seeks the Commission’s approval for a January 1, 2017 through

December 31. 2017 test year net revenue increase of $901,953 for its water operations,

which amounts to an approximate increase of 79% over the pro forma revenue amount

of $1,145,913 at present rates for the 2017 test year. LWC states that the proposed

revenue increase would provide LWC with an opportunity to earn an 8.27% rate of return

on Its prudently incurred costs for utility assets and its prudently incurred expenses.

LWC seeks a rate increase to the fixed monthly charges and usage charges for its

current residential and non-residential customer categories. LWC’s proposed rates

combine the current residential and non-residential customer categories into a single

residential and non-residential customer category. LWC’s application states that it seeks

to put the proposed water rates into effect upon the date of authorization by

the Commission.

LWC’s present and proposed charges are as follows:

PRESENT RATES

Residential Service Present RatePer month or per 1000 gallons

Monthly Charge Per Customer $5.00 per month

Usage Charge - 13,000 or less gallons per month $2.66 per 1000 gallons

Usage Charge - Over 13,000 under 30,001 gallons

per month$3.20 per 1000 gallons

Usage Charge - Over 30,001 gallons per month $4.77 per 1000 gallons

Non-Residential Service Present RatePer month or per 1000 gallons

Monthly Billing Charge Per Customer $5.00 per month

Usage Charge - 13,000 or less gallons per month $2.66 per 1000 gallons

Usage Charge - Over 13,000 under 30,001 gallons

per month$3.20 per 1000 gallons

Usage Charge - Over 30,001 under 400,001 gallons

per month$4.77 per 1000 gallons

Usage Charge - Over 400,001 gallons per month $5.65 per 1000 gallons

PROPOSED RATES

Monthly Water Fixed Meter Charaes For All Customer

Classes (Residential and Non-Residential Classes) ProDOsed Rate

3/4” Meter $28.32 per month

1” Meter $46.10 per month

1 1/2” Meter - $90.54 per month

2” Meter $143.86 per month

4" Meter $446.04 per month

6” Meter $890.41 per month

8” Meter $1,423.66 per month

Monthly Water Usaae Charaes For All Customer Classes (Residential and Non-Residential Classes) ProDosed Rate

13,000 or less gallons per month $4.99 per 1000 gallons

Over 13,000 under 30,001 gallons per month $6.51 per 1000 gallons

Over 30,001 under 75,001 gallons per month $7.26 per 1000 gallons

Over 75,001 gallons per month $7.79 per 1000 gallons

LWC additionally requests that the Commission: (1) approve LWC’s proposed

revisions to its Tariff No. 1 (“Tariff”) by incorporating a new Section 7.2 of its Rules and

Regulations relating to the requirements for contribution-in-aid-of-construction (“CIAC”)

(the proposed new Section 7.2 replaces the current Section 7.2, regarding the Water

System Facilities Charge, and includes information about when, as a condition of

receiving service to a New Customer Facility or a Substantially Modified Customer

Facility, a customer or developer may be required to pay a nonrefundable CIAC);

(2) amend certain additional Rules and Regulations in its Tariff, including, without

limitation, updating the tap-in/connection charge from $3,100 to $4,200 for any new or

replacement connection; and (3) grant such other and further relief, including any

interim rate increase, as may be just, reasonable, and equitable. LWC is not seeking to

modify the flat monthly rate or tap-in/connection charge for its flat monthly rate customer.

The Commission will investigate whether the proposals in the Application,

including revisions to Its rate schedules, are just and reasonable. The total revenue

requirement for the 2017 calendar test year will not exceed the $901,953 amount over

revenues at present rates that LWC requests. However, the increase in rates and

charges to be finally approved by the Commission, if any, may be higher or lower than

LWC’s proposed rates and charges noted herein.

Copies of LWC’s Application are available for public review through

(1)the Commission’s electronic Document Management System, accessible at

http://dms.puc.hawaii.qov/dms/, Docket Quick Link 2016-0229, or (2) at Laie Water

Company, Inc. (55-510 Kamehameha Highway, Laie, Hawaii 96762). In addition,

copies of LWC’s Application are also available for review by contacting the

Commission’s Honolulu Office [(808) 586-2020], or the Division of Consumer

Advocacy [(808) 586-2800].

All interested persons are invited to attend the public hearing to state their views

on LWC’s Application. Statements may also be mailed to the Public Utilities Commission,

465 South King Street, Room No. 103, Honolulu, Hawaii 96813, or e-mailed to

Hawaii.PUC@hawaii.qqy. All written statements should reference

Docket No. 2016-0229. Special accommodations for persons with disabilities can be

made if requested reasonably in advance by contacting the Commission’s

Honolulu Office.

Motions to Intervene or Participate in this proceeding shall comply with

Subchapter 4, Rules of Practice and Procedure Before the Public Utilities Commission,

Hawaii Administrative Rules, Title 6, Chapter 61. A motion to intervene or participate in

this proceeding shall be filed with the Commission’s Honolulu Office by

November 17, 2016.

Randall Y. Iwa; Chair

Honolulu Star-AdvertiserOctober 15, 22, and 29, and Novembers, 2016