LUCERNE – County officials are opposing California Water Service's proposed rate hike for Lucerne customers, with the Board of Supervisors – sitting as the Redevelopment Agency Board of Directors – unanimously passing a resolution on Tuesday against raising the rates.
Last July, Cal Water applied to the California Public Utilities Commission to raise rates for all of its California customers, numbering just under 450,000 in 24 districts, according to commission documents.
Those raised rates will pass on costs for “centralized services” – payroll, water quality systems, information systems, engineering, maintenance and conservation programming – from its San Jose headquarters to its various districts, including Lucerne.
The rates would bring in millions of additional dollars to the company, which is the largest investor-owned water utility in the western United States.
If granted in total, Lucerne's rates would jump 21.3 percent on July 1 and go up another 3.4 percent the following year, totaling $309,218 in additional charges to the small Northshore town's customers.
The average Lucerne residential water customer, using 5,236 gallons of water monthly, would find their monthly bill rising a total of $17.07 by the time the second hike was phased in, according to numbers provided in a Cal Water notice.
Cal Water received a 121-percent rate increase in the summer of 2006 after requesting a 246-percent increase, as Lake County News has reported. Steve Elias, an attorney who assisted community water groups in that case, said the actual rate increase is much lower for many people due to the rate reductions for low-income residents and reductions possible through conservation.
Last January, the company applied for another 14-percent increase.
Redevelopment Agency staff took the board a staff-written resolution on Tuesday, which said the rate hike is “excessive, unnecessary, and is not supported by a credible justification.”
Kelly Cox, who serves as the county's chief administrative officer and the executive director of its Redevelopment Agency, said the rate issue in Lucerne is impacting the agency's ability to carry out its programs, which are meant to fight blight and improve the economy.
The resolution also pointed out that the rate increase won't be used to improve Lucerne's aging water system.
Supervisor Denise Rushing, whose district includes Lucerne, said she had concerns about those town residents who can't afford to pay for the increase. She wondered if Cal Water can simply cut them off.
The concern was shared by Supervisor Anthony Farrington, who felt state legislators need to get involved in the matter. “People shouldn't have to choose between food and water.”
Cox said the basis “for much of this increase was just outrageous,” adding that the company had been “busted” on some of their requests.
The Public Utilities Commission's Division of Ratepayer Advocates issues a voluminous report analyzing Cal Water's requests. In particular, the agency criticized Cal Water's requests for its San Jose office, including $50,000 in patio furniture, $38,000 for media furniture, $22,500 for a lounge kitchen remodel. The Division of Ratepayer Advocates disallowed those expenses in its proposal to the commission.
“We want to do everything we can to keep the rates as low as possible,” said Cox, who added that he understands they can't prevent rates from rising entirely.
Supervisor Rob Brown suggested that the county should begin getting ready now for the next rate increase the company will put through.
Lucerne resident Donna Christopher called Lucerne “Death Valley north” when it comes to water. She said she can no longer even afford a lawn.
Craig Bach, president of the Lucerne Community Water Organization, called Cal Water's justifications for the current rate hike request “a wonderful wish list.”
He cited a speech titled “Play the Rate Hike Game” given by Cal Water President and Chief Executive Officer Peter Nelson at a conference.
“They game us,” Bach said, and the company usually gets what it wants because of the close relationship between its executives and state regulators.
Louise Talley, a former county supervisor, told the board it's a disgrace to see Lucerne's lawns drying up when the county is trying to build tourism
“Redevelopment needs to have a beautiful area to bring those tourists in,” she said. “That's so important to us.”
Talley said that her own water bill has risen to $200 for a family of four. “Something has to be done.”
Following the board's unanimous vote to support the resolution, Board Chair Ed Robey said he wished the board could do more.
“The ultimate solution would be to buy this water company and make it a publicly owned water company, but where to find the money, that's the question,” he said.
Rushing said the county's budget does contain money to analyze such a move, but there's no guarantee of success. “These water companies do not surrender territory easily.”
Responded Robey, “That's OK, we're here and they're not.”
Two sides reach settlements
The timing of the county resolution is important, as the California Public Utility Commission is hosting hearings on the request this week.
Cal Water and the Division of Ratepayer Advocates have also reached some settlements on the more controversial issues, said Tom Smegal, Cal Water's manager of rates.
One of the most contentious points is the Division of Ratepayer Advocates' allegations that in Cal Water's last rate hike, it had requested a hike to cover a large number of new employees, much as its current request does.
The Division of Ratepayer Advocates said the company didn't actually hire those new employees the last time, but actually turned around and passed on the payroll expense to its shareholders in a “significant windfall.”
Smegal responded by saying, “The statement is not correct.”
He said the company did not earn the amount of money the commission allows for in the period of the previous hike, so there was no windfall.
Just as the Division of Ratepayer Advocates faulted Cal Water for numerous accounting errors in justifying its rates request, Smegal faulted the division for its own misunderstanding of the documents.
In the current application, the company wants to add 148 employees to its staff of about 240, a 62-percent staffing increase from 2007 to 2009. The Division of Ratepayer Advocates proposes only allowing the company to add 40 new positions.
In the hearings going on this week, the Division of Ratepayer Advocates and Cal Water have settled many of their differences, including those over employment positions, said Smegal. He added that the positions allowed will be much closer to what the division's proposals are.
“The biggest dollar issues to our customers would be those payroll issues,” said Smegal.
All of the terms of the settlements haven't yet been put into a written document, said Smegal. The judge in the hearings has asked Cal Water for a status update on producing the document by Feb. 28.
More rate hikes on the horizon
Rushing told fellow board members that “the other shoe is going to fall” when Cal Water finishes its water plant upgrade in Lucerne, at which time the company is entitled to seek another rate increase. Bach confirmed that the next hike application is “already on the books.”
Smegal said the plant is costing $7.44 million to build, and is being funded through a no-interest loan through a state revolving fund program.
Cal Water has applied to charge its customers to repay the loan, which is a loan requirement, said Smegal.
The Cal Water application summary on the request explains that all customers will receive a surcharge on their meters, not on usage. A normal residence would see an additional monthly charge of $17.37.
Gay Guidotti, a Cal Water customer service representative for Lucerne, said the surcharge will apply to all customers, even those who are low income and who have been protected from higher rates by the Low Income Residential Assistance Program.
There is no mechanism in place to change the assistance program to compensate for the surcharge, Guidotti added.
Cal Water has continued to show strong earnings and greater demand, with its profits rising consistently in recent years.
Late last month, California Water Service Group's Board of Directors announced the company's 41st consecutive annual dividend increase, from $1.16 to $1.17.
E-mail Elizabeth Larson at
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