The first thing the Board of Water Supply will need to do in the coming months is to convince the city auditor that there’s a sound basis for its water rates. The second is to do far more outreach to its customers, primarily to convince them of the same thing.

Ernest Lau, manager and chief engineer, is leaving it to the agency’s consultant, the accounting firm Tokumoto & Co., to brief the auditor — and thus the City Council and public — about the mathematical calculations in its rate study. That study, released in June 2011, formed the basis of the rates that went into effect the following fiscal year.

Lau asserted before Council last week that he’s not an accountant and gave the committee only a broad outline of the rate-setting process. The Tokumoto accountant who headed the study was off island last week, he told the committee. But the sit-down with the auditor is forthcoming, he said.

He said he has faith that Tokumoto did a credible job, evidenced by the fact that projected revenues and costs have come in close to the consultant’s projections.

Lau recapped the rate study summary when asked by the Star-Advertiser for an explanation, adding that "inherently, the process is complex." The study is a 49-page document, including tables that allocate the various costs among the customer classes, which are essentially single-family residential, multi-family residential, nonresidential and agricultural.

Those costs include labor and other operation and maintenance costs and $340 million in capital improvement projects planned over the five years of the rate scheme. More of that cost is being underwritten by the rates than in the past because the board was trying to reduce its borrowing. And the overall CIP is high, he added, because of deferred maintenance in previous years, when there were budget shortfalls, Lau said.

The water board, a nonprofit agency, had some years when the rates weren’t raised enough to cover costs — a problem that led to the deferred maintenance and a hiring freeze, right before all the billing changes went into effect.

As for relations with ratepayers, Lau said the agency has staffed up, in April hiring Jennifer Elflein to head customer service. Elflein said she’s worked with staff to provide more online services and do a better job of answering customer questions.

Beyond that, Lau said he will be working with the auditor over the next year to address observations that ratepayers needed to be included in future rate and service discussions.

He’s not sure whether Council proposals to reform the agency governance will move.

"Hopefully not," Lau added. "We want to be able to work toward improving. We’re trying to get down and do our business here."