City of Visalia ponders public ownership of their water system

Erma Bombeck said, “The grass is always greener over the septic tank.” She meant, be careful when something looks good, you better know what’s under it.  As I’ve studied the process by which our utility rates are increased, I’ve begun to think about public ownership. It sounds like a simple solution to the ever-increasing rates,  but I’m wondering – is there a cesspool under that lush, green grass? Sometimes it’s a good idea to take a long look and a good sniff.

Recently the city of Visalia, at the direction of their city council, began to investigate the possibility of taking ownership of it’s water system from Cal Water. Having gone through the CPUC rate increase process with past cases, Mayor Steve Nelsen explains in a letter to the Visalia Times Delta, “we realized just how little impact a local government can have on its water supply when the delivery system is provided by a for-profit, investor-owned utility, that is traded on the New York Stock Exchange, managed from their corporate office in San Jose, and governed by the CPUC in San Francisco.”

I hear that. While I’m thrilled that the city of Chico and County of Butte have decided to formally protest this latest Cal Water rate increase, I’m worried the system is very heavily stacked against them. I hope they are ready to take it all the way to San Francisco. I believe they can beat back this latest proposal somewhat, but at this point, our rates are already onerous, and Cal Water wants more.

Mayor Nelsen describes how this process will be an opportunity for the public to learn more about utility ownership.  “Recently, the City of Visalia requested an appraisal of the water system in Visalia owned by a Bay Area firm, California Water Service Company (Cal Water). Once we have that information, sometime around the first of the year, the City Council will consider if the City might benefit from owning and operating its own water system. If it could make sense financially, there will be opportunity for public discussion about whether or not the City should pursue acquisition of the system. Our City Council firmly believes the citizens have a right to information about how a city-owned water system would affect them. Getting the appraisal is only the first, but necessary, step.”

Yes, the citizens have a right to information, but it is obviously not in Cal Water’s best interest to share this information. They don’t want the ratepayers to know the real reason behind rate increases – here Nelsen explains the relationship between rate increases, increased earnings per share, and larger dividends.

“What became abundantly clear is that Cal Water’s primary allegiance is to its stockholders: to improve the stock value and to pay out large dividends to shareholders…To that end, the corporate officers at Cal Water have done a good job managing profits: they have had five consecutive years of increased earnings per share, and have given larger dividends each year since 2010. The market price has increased more than 32 percent, and the net income has increased more than 50 percent in that same time period. Of course, we should not be surprised. Cal Water asked for 89.9 percent rate increases for 2011-2015, and the CPUC approved half of the requested increase — 44.1 percent. These rates have actually increased much more due to automatic increases that the CPUC has authorized Cal Water to make, such as the Water Rate Adjustment Mechanism (WRAM). Cal Water is guaranteed to meet its revenue requirements as approved by the CPUC, creating a situation of little or no incentive by Cal Water to inform or educate citizens about conservation. When Visalia conserves, meaning Cal Water sells less water in the Visalia district, Cal Water is automatically allowed to increase rates. Increase rates they have, every year, automatically — on top of the CPUC approved rate increase.”

Another interesting point Nelsen makes, and I agree – Cal Water, despite warnings, does not really seem serious about stopping water waste. 

“Though rates are important, water supply and conservation are critical. In April of this year, the Governor of California issued the mandate to Visalia to reduce water consumption by 32 percent, or face up to a $10,000-per-day fine. Cal Water is responsible for establishing and implementing a plan that will result in the mandated reduction. Unfortunately, there has only been a 26.1 percent composite reduction in Visalia. Cal Water has specific data on water use by household, business, and neighborhood, but they have been either unable or unwilling to share that information with the City. They have also failed in aggressively using the data themselves to target high water users. From July to September, the company reports issuing only 190 warnings and no penalties. During the same time, the City of Visalia could only directly address the issue through windshield surveys and citizen complaints. The City warned 1,222 citizens not to over-water, and issued 170 citations to citizens who continued to waste water. And, if a citizen does get a citation, the City implemented a program where they can avoid first-time fines by attending the City’s water school. The program was initiated by the City in order to inform and educate citizens about conserving one of our most vital resources, water.”

Chico did an excellent job of cutting back – Cal Water reported we cut usage by 43%.  Still we were penalized with onerous tiered rates and fines for going over budget? And if you stay at or below your budget, you get a WRAM charge. 

The CPUC reacted to our complaints about WRAM – they have instituted statutory rate increases that will bypass public participation. 

So, Visalia feels they have nowhere to go but public ownership. I think we should pay attention to this conversation. 

http://www.visaliatimesdelta.com/story/opinion/2015/11/23/visalia-need-calwater/76234252/