The Public Utilities Commission has given final approval to transfer three public utilities on Lanai to the island’s new owner, billionaire and Oracle Corp. chief executive Larry Ellison.

The state agency that regulates utilities included several conditions in its approval, which was given last week after an interim but revokable approval that was granted in June to allow Ellison to buy 97 percent of Hawaii’s sixth-largest island from fellow billionaire David Murdock of Castle & Cooke Inc.

Commissioners found that the utility sale and transfer was reasonable and consistent with the public’s interest.

The state Consumer Advocate did not object to the transfer.

As part of the final order, Castle & Cooke has been relieved of any financial obligations to the utilities it included in the sale of the island to Ellison’s Lanai Island Holdings LLC.

The utilities handle Lanai’s water, sewage for the Four Seasons Resort and transportation services. Maui County provides waste water service for all of the island except the Four Seasons.

Ellison’s company had previously agreed to invest $10 million in the water and waste water utilities within five years. The PUC formalized that as a condition and also said Ellison won’t recover the investment from ratepayers.

Typically, a utility owner would be entitled to a fair rate of return on an investment in operations. But Ellison is willing to forgo a return in what the PUC characterizes as a "unique financial commitment."

However, the PUC is requiring that Ellison’s water utility file a new rate application within a year after he has completed the $10 million investment. The PUC wants Ellison’s rate application to include new rates that are aligned with costs.

Under Castle & Cooke, the water utility sold water to customers at a loss. The PUC wants the utility to plan for cost-based rates "to send the appropriate price signals to ratepayers to efficiently conserve Lanai’s water resources."

Another condition is for the water utility to work with Maui County to develop effective water

conservation and drought-response plans, and to submit those plans within a year and follow up with annual reports.

Lanai has limited potable water resources that became a contentious issue between Castle & Cooke and many Lanai residents. Ellison has mentioned an intent to develop desalination facilities to reduce dependence on water from wells.

The desalination plan is not part of the $10 million investment, according to the PUC’s order, which shows the investment primarily being made in wells and pipeline replacement.