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I have been fascinated by elephants ever since I was a small child and my parents rewarded me for good behavior with a wonderful trip to the circus. They were huge and I was so excited to see such a large animal actually do tricks. There were other attractions that day but I couldn’t have ignored the elephants. They were just so damned big and different.

As history tells us, the Romans ignored elephants, only to get trampled by Hannibal. There should have been a lesson there for the ages but local politicians, the California Public Utilities Commission and Cal Am Water have blatantly ignored the elephant in the room of water politics.

“There’s an elephant in the room” is meant to identify a major element of an issue that is ignored or deliberately avoided while the issue is being discussed. During discussions of how the Monterey Peninsula is to come up with a reliable source of reasonably priced water, the invisible pachyderm has been the cost that eventually will be paid by Cal Am customers. Neither our local politicians, the CPUC or Cal Am has been publicly addressing the overall costs of future delivery of water. The total costs are not clear, but among the costs looming for the customers is at least $280 million for the desalination plant Cal Am plans to build and numerous other expenses to be billed later. That’s an elephant that doesn’t get mentioned during the ongoing and long-running debate over the size, design and location of the desal plant.

Instead, the politicians merely praise Cal Am’s progress on the project while the CPUC and Cal Am simply ignore the elephant. Whatever the cost, the CPUC will allow Cal Am to pocket the money from ever higher rates. All the while, the huge animal with a big trunk and big feet fills the room.

Even the best eye doctors could not open the eyes of the politicians. The CPUC and Cal Am, meanwhile, seem to have glasses that digitally erase the elephant’s image. And it will remain that way until the grassroots efforts now in progress restore the vision of the people in charge. Fortunately for the customers, the groups Public Water Now and WRAMP and others have been fighting the high costs and are making headway toward making sure everyone sees the elephant.

The CPUC’s mandate is that it treat ratepayers and utilities equally. But the commissioners don’t get it and our elected officials don’t seem to want to get it. If you, as a ratepayer, don’t want to get trampled even more than you already have, you should join your water activists as they ride the invisible elephants into the center of the public discussion for all to see.  Let the unseeing trio become like the Romans.  Get on board, see what you can do to open some eyes

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Ratepayers, let’s make this plain and simple: Cal Am has got to go and public water has to replace it.

“Where should Cal Am go?” Away from the Monterey Peninsula for good, that’s where.

“Why should it go?” The answer is simple and obvious. They’ve increased rates and fees, not only to cover water delivery costs but also costs arising out of their bad decisions and negligence. Those costs should not have been placed solely on your shoulder. Instead, Cal-Am should have borne their fair and equitable share, to say nothing about the almost 10% profit that is guaranteed by California regulation. The result is you, a customer innocent of any wrongdoing, has become the pot of gold at the end of Cal Am’s rainbow, to the tune of being hit with the highest cost of water in the entire country. If you are still asking if Cal Am should be be made to go away, consider:

Will Cal Am ever change colors like a salamander and rebate past unfair rate hikes back to you?

Second, will the local commercial customers who benefit from favorable rates not available to you change their colors, find a little equity and reason, and offer to use their influence to help you out of the deep rate abyss into which you have fallen?   I am not kidding, but I might as well be. It ain’t gonna happen.

Third, will your elected representatives, including city councils, mayors, supervisors and  those in Sacramento, come to their senses to understand they were elected to see the light and aggressively  protect your interests? Hasn’t happened yet, and such a sea change not likely in the cards.

“Why then, don’t our politicians understand the burden of very high and uncontrolled rate hikes on the average guy/gal?” Go figure – they don’t

“So what’s left? What WILL cause Cal-Am to leave town?”

Any realistic solution to  Cal Am must replace it with a workable public agency. You deserve an agency that represents all of you, not just some, that knows what it is doing, is transparent, is committed to working for you and that will deliver cheaper water.

Only one existing agency fills the bill — the Monterey Peninsula Water Management District. It far from perfect, but it’s the ONLY one with all the elements necessary to actually manage a water supply system.   Creating a new agency would be time consuming, and a waste of time without an assurance that what you need will be what you get. If you are unhappy with the decisions made by the district board, remember they are elected by you and if they can’t get their individual or collective acts together, you could vote them out and replace them with persons who will.

It may take time, but don’t minimize the importance of getting educated, and actually voting. A landswell of public support for public water can make it happen. It has happened elsewhere. No alternative option can realistically provide you the representation and accessibility and ensure your ability to be running the show with your votes. Strong and unyielding public pressure can turn the district around and it’s more than worth the effort.

Your last question should be “Where and how can I get on board?” Call Public Water Now. The first step toward success is that group’s effort to pass a ballot referendum to initiate the process. They need you and your support. If costs are a concern for you, PWN is your best option. Get going, get educated and get involved!

Hood, former executive director of the Association of Monterey Bay Area Governments, divides his time between Carmel and Columbus, Ohio.

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Friday’s Carmel Pine Cone contained two unvarnished attempts to vilify Public Water Now, the group leading the upcoming attempt at a public takeover of Cal Am Water. George Riley, the extremely water-savvy managing director of Public Water Now, usually doesn’t let the Pine Cone’s excoriations get to him, but this heavy-handed and apparently erroneous attack got under his skin.

In a letter to the Pine Cone and the rest of local press corps, Riley calls reporter Kelly Nix’s front page story on Public Water Now “appalling” and argues that the companion editorial on April 21 was “riddled with inaccuracies, misrepresentations and assumptions.”

Riley goes on to demand a retraction and clarification though he said he doesn’t expect either. Pine Cone Editor and Publisher Paul Miller has been an unquestioning promoter of Cal Am at least since the turn of the century, and Cal Am has been a significant advertiser in the weekly publication. Efforts to control Cal Am’s rapidly escalating price structure or to scrutinize the company’s flawed and increasingly expensive desalination project have been met with derision, even ridicule from Miller.

In the news article on Friday, Nix focuses on a letter to Public Water Now from the Peninsula mayors’ water committee, saying it had been signed by the committee chairman, Pacific Grove Mayor Bill Kampe. In his letter of response, Riley says the letter was not signed by Kampe or anyone else, was not approved by the mayors’ committee and was not even sent.

“People who were at the meeting confirmed that the letter under discussion was not approved,” Riley wrote. “I watched the tape of the entire meeting. The Pine Cone is dead wrong in its report.”

A draft of the letter was considered as a possible response to a March letter from Riley in which he criticized the desalination venture in general and its reliance on so-called slant wells. He correctly notes that the slant-well technology, despite being favored by regulators, has not been put to at any desalination plant in the world. Nix sought to rebut that by quoting Cal Am officials as saying their controversial testing of the technology is going well. The testing process was interrupted by disclosures of conflicts of interests involving the designer of the technology.

“It’s most unfortunate for readers when the Pine Cone reports unsubstantiated information as fact,” Riley wrote. The account “was NOT based on what the mayors said.”

“It must feel exciting for a small paper to believe it has a big scoop, then pontificate with an editorial,” Riley continued. “But it is a serious breach of journalistic ethics, and your responsibility to this community, to fail to verify, or to ignore that step altogether.”

Riley retired as chief housing officer for San Mateo County and ever since has led Peninsula efforts to control Cal Am’s water rates and to put the private company into public hands in hopes of controlling costs.

Direct links to the Pine Cone article and the editorial are not included in this post because the weekly newspaper’s technology does not accommodate linkage. Those wanting to read those pieces can, however, go to the Pine Cone’s online archive (Google Carmel Pine Cone archive or click here) and then click on the line labeled “download this week’s edition” and wait for a download of a facsimile of Friday’s paper.

Nix’s article gives no indication that he sought any comment from Riley before posting his piece and Riley says he was not approached. The Partisan sent an email to Nix before working hours Tuesday and had not heard back as of 11 a.m. This report will be updated if he responds.

Unlike Nix’s story, Miller’s editorial makes no pretense of objectivity.

“… This community’s water activists must be the dumbest people in the world,” he writes.

“Not only do they incessantly fight every single thing that might help eliminate our perennial water shortage, they simply won’t give up on the idea of a government takeover of Cal Am, no matter how many times the public tells them, ‘No.’”

It goes on like that for several more paragraphs. He says the activists are opposed to desalination, slant wells, pipelines and even water recycling “for utterly nonsensical and self-serving reasons,”none of which he mentions.

He writes that the activists “hate private business and have a deep narcissistic desire to get everybody else to hate businesses, too.”

He concludes, “The only intelligent thing for the activists to do would be to devote their energy to helping solve the Monterey Peninsula’s water problem, and stop pursuing their little takeover hobby until the shortage is gone.

“The problem is that little word, ‘intelligent.’ We don’t know how smart the activists are. But anybody can see how stupid they act.”

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The possibility of another attempt to put Cal Am Water in public hands prompts reflection over the history of major Monterey County ballot measures in which money and the big-lie technique prevailed. The first in recent history was Measure M back in 2000.

It was initiated by the Pebble Beach Co. with the aim of forcing the county and the Coastal Commission to allow it to build another golf course at the famed resort, but that’s not how it was sold to the voting public. Instead, the commercials and four-color fliers promoted the false notion that Measure M would stop development in the Del Monte Forest that surrounds the existing golf courses.

Measure M did contain a provision limiting the company’s ability to develop 425 acres that previously had been zoned for housing, but the company hardly needed a ballot measure to protect the property. The Pebble Beach Co. offered to permanently fallow the land for ballot measure purposes only after it had already shelved any plans to develop it. We hear a lot about Fake News. This was a Fake Ballot Measure. The campaign featured TV ads with popular actor Clint Eastwood, a Pebble Beach Co. principal, strolling through the trees and saying something like “if you love these woods as much as I do, you’ll vote yes on Measure M.”

The measure passed easily, helped by voters in the far reaches of the county who had no idea they were really voting only to add a golf course. Though the golf course deal was later scuttled by the Coastal Commission, Measure M demonstrated how moneyed interests could manipulate voter initiatives. Until about that time, the side attracting the most money had prevailed in every statewide ballot measure in California. Monterey County would prove to be equally fertile ground for deceptive politicking.

Other examples of dishonest but successful ballot measures include the 2016 ballot fight over the Monterey Downs horse race project and, of course, Measure 0 of 2014 in which California American Water twisted the truth to persuade voters not to move forward with a public takeover of the Monterey Peninsula’s privately held water system.

A giant anomaly, of course, was last year’s Measure Z, the anti-fracking measure approved by Monterey County voters despite a gusher of oil company money that paid for ads falsely charging that the initiative would shut down oil production in the area. But Measure Z’s success is no assurance that reality will trump money in the next big ballot showdown, which is likely to be another attempt to bring Cal Am under public ownership. If that ballot measure materializes in the coming, as expected, voters are likely to see another slick and misleading opposition campaign essentially paid for by the same ratepayers the measure would be designed to help.

Public Water Now, led by water activist George Riley, is believed to be on the verge of a decision to move ahead with a public takeover measure, which would be fueled in part by giant rate increases the company has imposed on its captive customers and the certainty that its struggling desalination project will lead to large additional increases.

The last time the issue made it to the ballot, in 2014, Cal Am prevailed by a count of 55 percent to 45 percent. But analysis of the vote showed that early, absentee voters who had been primarily exposed to Cal Am’s advertising voted against the measure while voters who waited for detailed information from the measure’s proponents voted for it. In other words, higher-information voters favored the ballot measure while those who were spun by Cal Am went the other way.

Cal Am’s anti-O campaign repeatedly described the takeover effort as a risky gamble. If O had passed, it would have required the Peninsula’s water management district to study the feasibility of a public takeover. The study wouldn’t have come cheap but it would have cost far less than Cal Am spent combating the ballot measure. Cal Am called Measure O “the risk we can’t afford.” What we can’t afford, Riley and a growing number of others believe, is Cal Am bills.

The Cal Am campaign also emphasized that negotiating a sale to the public would distract the company from developing a desalination plant – a plant that seems barely closer to reality even now, three years later. Cal Am also repeatedly mischaracterized attempts to takeover water systems elsewhere and the results of successful efforts.

A public takeover of Cal Am’s Peninsula water system would be an extremely difficult and expensive process and Cal Am can be expected to fight Public Water Now at every turn. The company has maintained through the years that the Peninsula system is barely profitable yet it has made it clear that it will fight any and all takeover efforts, which suggests the network of pumps and pipes is more profitable than the company lets on.

My own limited research  leads me to believe that in the short term, a public takeover would not result in lower water bills because a public agency would need to borrow sizable sums to complete the transaction. Dave Stoldt, manager of the water management district, once estimated that there would be no actual savings to the customers for as long as 30 years. Proponents disagree, saying savings would materialize much more quickly. Either way, I believe a takeover is worth pursuing because the savings to future customers, decades and decades of future savings, would make the effort worthwhile even if our bills didn’t immediately go down.

To me, the prospect of a takeover is an important public policy issue that should be decided by careful analysis and a considerable amount of professional cost accounting. The decision should not be based on a clever advertising campaign.

The way Cal Am conducted itself last time around was shameful but you didn’t hear a peep about it in polite Peninsula circles. As they did with the Monterey Downs ballot measures, pillars of the community knew that the side with the most money was cheating but they just looked the other way.

If Cal Am listens to anyone in public life on the Peninsula these days, those people should make it clear that the company should stick to the facts and the math and not create its own make-believe reality. The hospitality industry and other business interests have benefited in recent years from sweetheart rate arrangements with Cal Am. They should not let those short-term gains stop them from encouraging Cal Am to be the good corporate citizen it claims to be.

At the same time, Public Water Now and its supporters can and should be expected to play it straight. If buying out Cal Am is a good idea, the numbers should tell the story. If it doesn’t make financial sense, the idea probably isn’t worth pursuing no matter how much better off we would be with a water company run by an accountable local agency rather than for the benefit of distant shareholders.

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I read with great interest Royal Calkins’ post summarizing the efforts of Public Water Now members and supporters to work for public water to replace private water historically provided by Cal Am.  The comments I have seen thus far in response are from regular commenters on the blog, so not much new interest seems to have been ignited.

I have been an avid supporter of prior and current efforts by many to accomplish the demise of Cal Am on the Peninsula. The ratepayers of the Monterey Peninsula do not deserve to be the receivers of what is now considered the most expensive water rate in the country.   They deserve to have a public agency, which would, in theory, provide much less costly rates, real accessibility to the decision-makers, and the ability to remove from office at the ballot box those officials who don’t live up to the ratepayers’ expectations.

Trouble is, in order to determine the potential for those lofty and necessary goals and dreams, it is more than necessary to consider the entire context of the ongoing war, which has spanned over several decades and has been fought so hard by the few but incredibly committed and knowledgeable men and women on behalf of all fellow Peninsula ratepayers.

But before discussing the hurdles, this point is important.  George Riley, head of PWN, Ron Weitzman of the Water Ratepayers Association of the Monterey Peninsula, Marc del Piero, and dozens of other activists already are fully aware of the challenges. They have toiled long and hard with their own money and time on behalf of all of you who are affected by exorbitant unfair rates. Many people know of them, have read their commentaries and understand that a few people are fighting for all of them.  But I bet very few people realize all the hurdles that must be overcome.  It is my hope that when the public becomes aware of the scope of the effort they will want to join in the fight.

The hurdles are all known:  politics; the difficulties inherent in the process of acquisition, with all of its legalities and uncertainties; timing; gaining the vocal and active major support across the board from a strong majority of affected ratepayers; and, last but not least, money. And there is another important hurdle, the Monterey Peninsula Water Management District.

It is already known that the mayors, as nominal leaders of their cities, have thrown their support to Cal Am from the very beginning, starting with the formation of a joint powers agreement they formed to work “fairly and openly” to bring the most “effective and cost-effective” water supply to their constituents.  That hasn’t worked out. I am not pointing a finger at any individual but am looking at the wide picture. People who seek public office want to stay there, usually for very good and ethical reasons.  However, they find out immediately that, in order to do so, they need the support of the people who have the influence, time and money to promote those influences. Therefore, the heads of cities financially dependent on the hospitality industry are less likely to take public stances that are not favored by those who have influence in that industry. The cost of water is not so concerning to the industry as it has the means to pass on additional costs to their customers.  As we all know, residential ratepayers do not have that option.  But, probably in the minds of the mayors, the ability to keep the Peninsula’s economy humming trumps their willingness to go to the mat against the California Public Utilities Commission and Cal Am. During the past Measure O effort to acquire Cal Am, guess who dumped lots of cash to defeat the measure. Cal Am with support from hospitality big-wigs. Not a surprise.

There is more than one option for the acquisition process but only one is capable of success. California law gives the authority to local governments to acquire land and assets from private utilities, primarily by simple purchase of through eminent domain. The problem is Cal Am will not sell any of its land or assets. it will not be a friendly negotiator in the eminent domain process and it has publicly stated that it does not fear litigation. So, if even the new measure passes, the cost of acquisition would need to be studied, at a rather hefty price. If it clearly concludes that acquisition is feasible and will ultimately lead to a lesser burden on ratepayers, it could then lead to an acquisition process filled with hurdles.

Timing is critical.  If the process of retaining counsel, etc., is stretched out, the first election date might not be until next spring when other local issues and re-elections take place. That might work for the proponents, but any distraction is a problem.  The campaign needs to attract motivated and committed members of the public who will spend their time and money in full support of the measure. Working against that is the fact that the previous measure fell short in each city on the Peninsula.

Aiding the effort, Cal Am has shot itself in the foot with its outrageous rate increases. More and more people are expressing their anger for having to put up with rates that make water almost an unaffordable necessity.  But even so, a critical mass has not yet coalesced to provide PWN and its fellow activists necessary to make a much stronger statement at the polls. I am not sure if the response to Royal’s piece is indicative of that, but the commenters who posted were persons who regularly do so, and didn’t include any or many new names who are coming on board with their anger and concern.   More work needs to be done and it takes time AND money to do so – both hurdles in themselves.

Money. Cal Am has access to as much money as it needs to fight off its opposition.

Finally, there is the water district. There has been talk of creating a new joint powers agency to take up the mantle and provide public water once Cal Am is defeated.  That option is a hurdle by its very nature – joint powers agencies are formed by two or more local jurisdictions.  Given the political bent of current local jurisdictions (e.g., the cities), there is not much reason to believe that a new combination of the same parties would not end up same old same old.   A better choice is the MPWMD. After all, it is a water district with jurisdiction over the entire Peninsula. It has a large and capable staff and a proven leader in its general manager.  However, the district is not clean of internal hurdles either.  It has been incapable of implementing a solution to the long-standing water supply problem (although the voters rejected some options sought by the District). The makeup of its board and how it is selected need a new look.  Five members of the board represent five districts and are directly elected, and that is good.  However, two members are appointed, one by the county Board of Supervisors and other by a city committee.  The problem is that the statute does not dictate that the supervisor must be from a supervisorial district that represents at least part of the water district’s area of responsibility, and the method of appointing a city representative is completely inconsistent with the actual language of the statute.  More importantly, a supervisor from a district other than supervisorial districts 5 and 2 (the ones that cover part of the Peninsula) has never been appointed, but the statute allows for that not to happen.  And, with respect to city reps, while the illegality of the history of appointing a city rep (which nobody really cares about), there should be a separate agreement that the rep chosen should rotate on a regular basis among all of the six Peninsula cities.  As it has stood, one man, the mayor of the smallest city on the Peninsula, has represented all of the cities for decades. Those with more at risk should have the greater opportunity to sit in that seat.

No matter if the new measure is passed and the water district is named to succeed Cal Am, there are some procedural issues that need to be addressed if the public is going to have its expected access. The district board rigidly follows the three-minute speaking rule for public comment. Perhaps members of the public could petition for spots on the regular agenda rather than having to make a point in three minutes.

Further, no one should expect that a public agency would not raise rates. It would when necessary. Hopefully, that would only occur after hearings in which groups ratepayers with similar points to make could be agendized.

The bottom line is, for public water to really work, the board of the district has to be in full support of the effort and the process has to be transparent and accessible with real, not symbolic,  input from the public.

Bill Hood is the former executive director of the Association of Monterey Bay Area Governments. He is also a retired water lawyer and engineer who divides his time between Ohio and Carmel.

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Public Water Now, the activist group that has been pushing for a public takeover of Cal Am Water, is asking the various regulatory agencies to put the company’s desalination project on hold until it addresses two sticky and expensive issues.

And if the agencies, particularly the California Public Utilities Commission, do agree to a timeout, look for Public Water Now to use some of that time to launch a renewed effort toward a public takeover of the privately owned utility.

In its campaign against the Measure O takeover initiative in 2014, Cal Am argued that it could not move ahead with the complex desalination project while also having to combat a takeover campaign.

Public Water Now leader George Riley would not comment on that possibility this week though there has been talk of a new ballot measure at the group’s most recent meetings. Others involved in the group have hinted at another takeover measure and have said a decision should occur within months.

In a statement attached to the letter to the public agencies, Riley wrote, “Public Water Now continues to focus on the high cost of a new water supply. PWN knows from experience that ratepayers will pay for Cal Am success, delay or failure. PWN continues to believe there will be litigation on Cal Am’s desal proposal. PWN hopes that public officials will pay astute attention to the potential for delay, and possibly failure, from litigation.

“Meantime, the need for a reliable water supply continues. And Cal Am costs continue to pile up. PWN believes that the potential for complete financial disaster to ratepayers can be reduced, if not avoided altogether, if two important issues were addressed soon: 1. the weak science surrounding the test slant well. 2. the lack of water rights.”

Cal Am’s long-delayed desalination project depends on slant-well technology that aims to reduce the impact on aquatic life. For various reasons, including conflicts of interest involving experts involved in the testing, the company has had difficulty demonstrating that planned technology can work here. In its letter, Public Water Now notes that the technology is not in use anywhere.

The letter also points out that as part of its project, Cal Am intends to use water from the Salinas Valley aquifer though it has no rights to the water.

A Cal Am takeover has been the subject of two previous ballot measures, which both went down to defeat. The first was simply advisory. The second, in 2014, would have required the Peninsula water management district to conduct a feasibility study and then to proceed with a takeover if it was deemed feasible.

The measure received 45 percent of the vote, short of a majority. Cal Am hailed that as proof of public indifference to a takeover but supporters of Public Water Now argued that it was a strong showing considering that the water utility had spent millions of dollars on deceptive advertising to combat the effort. The group’s polling showed that absentee voters who voted early, at the height of the Cal Am advertising blitz, favored Cal Am’s position while those who waited to hear response to the advertising heavily favored the takeover.

Likely a significant factor in Public Water Now’s thinking is the fact that Cal Am’s rates have risen dramatically in recent months, in large part because the state Public Utilities Commission is allowing water agencies to charge customers now for water that wasn’t used because of conservation measures during the recently ended drought.

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Thirsty bird.WATER RATES RISE WHILE WATCHDOG WHISTLES

An open letter to the California Public Utilities Commission, Cal Am Water and those who support Cal-Am:

The CPUC, according to Commissioner Mike Florio, has approved a rate increase for Cal Am to make up for revenue lost due to herculean conservation efforts on behalf of the utility’s Monterey Peninsula ratepayers, revenue that he characterizes as “equity” for ratepayers as well as for the utility. Really?

Cal Am’s local manager is also quoted as saying that, in essence, we’ve still gotta maintain our pipeline system regardless of whether we’re pumping more or less water through it.  Sweet.

I understand that maintenance costs are constant, but I would not have a problem with reimbursing Cal Am for those costs  only if the following information was made known.

(1)  To what extent is the money funds sought by Cal Am and approved by the CPUC needed to cover on-oing and past operational and maintenance costs?

(2) To what extent are those same funds dedicated to the historic profit margin Cal Am has gained through several years of CPUC approvals?

(3) Did the CPUC rely upon a full and complete audit of the bases claimed by Cal Am in order to ensure they were accurate and legitimate, or were they supported by clear facts on the record?

The answers to the above questions are important and not covered in any way by the Monterey Herald’s article on this matter and by any public statement by Commissioner Florio.

No matter, those areas of inquiry are complicated and unfortunately have the potential for even more unfair treatment of ratepayers.   Remember, the CPUC has a legislative mandate to protect the interests of both its regulated utilities and their ratepayers.

So, unless clarified and corrected by information not publicly stated, we could conclude as follows:

(1) It is no secret that Cal Am has not always had  a sterling record of maintaining its infrastructure in sound and working condition.  Failure to keep up usually results in higher costs in the long run.

(2) Seeking reimbursement for maintenance costs is meritorious but only to the extent that the costs involved are meritorious themselves, as to amount and necessity and so long as they are not being incurred because of prior failures or negligence.

(3) If an audit was undertaken by the CPUC, why wasn’t that information made public so the public can fully understand the relative elements of the claimed reimbursements?

The conclusion is this:  If, in fact, the rate increase approved by the CPUC includes costs that are not clear or fully fact-supported and, if, in fact, the increase includes the profit historically obtained by Cal Am in prior rate cases, then there is no equity whatsoever in the decision characterized by Commissioner Florio.

In fact, that would mean that Peninsula ratepayers who suffered by undertaking significant conservation efforts will have to suffer for their honorable actions by paying higher rates.   At the same time, Cal Am will come out at least even – costs covered, profits ensured.  One party wins, one party loses. Is that equity in action?

It’s time to take a closer look at the CPUC.  It would seem to not be living up to its mandate.

Hood is a retired water lawyer and engineer who divides his time between Carmel and Ohio.

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????Ready for Cal Am’s 40% rate increase over the next three years, plus another 60% increase for the cost of desal?

Please show up Thursday and take your three minutes to let the California Public Utilities Commission know this is UNACCEPTABLE!

CPUC Public Participation Hearing on
Cal Am’s Water Supply Project
2 p.m. Thursday, Sept. 1
Carpenter Hall in Sunset Center, Carmel

It’s time to make it clear to the CPUC  that its protection of Cal Am’s revenue is excessive, unjustified, and wrong. Ratepayers and their conservation efforts are being penalized to ensure Cal Am’s profits. Residential ratepayers bear the largest burden because of the extreme tiered rate structure. Cal Am is a showcase for investor profit, and the CPUC is complicit.

Here’s what Cal Am wants and what it has already received:

• $100 million ($50 million plus $50 million in interest) for water we didn’t use due to our conservation efforts. This would be an 6% increase in Cal Am rates.

• $51 million in General Rate increases for 2017 to 2020. This would be a 16% increase.

• $130 million ($50 million plus $80 million in interest) for the new Monterey Pipeline. This is a piece of the Pure Water Monterey project. This would be another 8% increase in rates.  An alternative route for a base cost of about $15 million was rejected by Cal Am.

Just these first three total an increase of 30% and that’s with no new water! What other business can get away with this?

• $84 million for the Pure Water Monterey reclamation project that will provide new water. This would be a 10% increase in rates.

• $32 million for failed Cal Am projects from 2004 to 2011 was approved by the CPUC and has already been paid by ratepayers.

• 15% increase for the next 27 years is on current bills to cover the San Clemente Dam removal. This charge will move from a surcharge into the rate base, where Cal Am adds to its asset base. But remember, this was an asset that was removed.  So Cal Am can tear down the dam, but add the removal cost as an asset.

• 60% increase for Cal Am’s desal plant IF it ever gets approved.

• Cal Am has escaped any penalty for failing to meet the December 31, 2016 Cease and Desist Order (CDO) by agreeing to a series of milestones.  If Cal Am misses any milestone, ratepayers will be punished with rationing.

Riley is managing director of Public Water Now.

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Clean Drinking WaterI was breezing through the local daily the other day when I came across an editorial that put forth a peculiar proposition. It was a response to the Monterey City Council’s resolution in opposition to Cal Am’s request for a $50 million rate increase to compensate itself for water it didn’t sell because its customers were being good citizens and conserving water.

The editorial noted that the City Council had asked the Monterey Peninsula Water Authority to join in the opposition. The water authority, which is made up of the Peninsula mayors, was formed primarily to provide some level of oversight to Cal Am’s ongoing desalination venture.

The editorial’s thrust was that the water authority should stay out of the rate increase controversy because it would distract it from its main focus, helping to get the desal plant built. That’s the part I found peculiar.

The desal project, and its companion projects like groundwater replenishment, are in the design and planning stages. Ground has not been broken. There is no welding going on, no trenches being dug, no machinery bulldozing the sand. In other words, there is not an awful lot for the water authority to do day-to-day, not a lot to monitor or even watch between meetings. The mayors for the most part are an able lot and I for one think they could ably do more than one thing at a time.

The mayors’ group represents each of the cities and, by extension, the residents of those cities. Its job is not to be a cheerleader for Cal Am or the desalination project but to protect the public interest, to help control costs and make sure the construction contracts are proper and not awarded to the project manager’s cousin. Heck, even the hotel industry, usually one of Cal Am’s coziest bed partners, is opposing this rate increase. If the authority helps control costs on the desal plant but just looks the other way while Cal Am wins obscene rate increases for other elements of its enterprise, the mayor won’t really have accomplished all that much.

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Richard Rauschmeier of the PUC’s Division of Ratepayer Advocates addresses about 100 people at Cal Am’s rate hearing Wednesday. At the rear, left, is W. Anthony Colbert, administrative law judge for the PUC.E

EDITOR’S NOTE: Testimony at Wednesday’s PUC public hearing on Cal Am request for 40 percent rate increase indicates the company wants to charge its customers 8.4 percent interest to reimburse the company for loans that cost it 5.4 percent. See story below and additional information from Jane Haines in comment section below. Also, for a different take on the numbers, look for Ron Weitzman’s comments  below Jane’s.

 

 

Public hearings on utility rate increases usually are as predictable as Sandra Bullock movies. Alarmed residents stand up to complain that their rates are too high already and the hearing officer maintains a blank expression throughout.

The Wednesday afternoon hearing on Cal Am Water’s latest increase proved the exception when the hearing officer, a Public Utilities Commission judge, asked Cal Am officials a basic question they couldn’t answer.

Some background.

Cal Am proposes to raise residential water rates on the Monterey Peninsula by 40 percent to make up for money it lost out on over the past five years because its customers did such a good job conserving water. Its view is that its costs remained the same even as usage went down so it is essentially being punished for promoting conservation. Cal Am argues that it was  authorized by state regulators to collect $40.6 million more than it actually collected and it wants to start collecting that money now. It proposes to have its customers pay that off over the next 20 years, plus 8.4 percent interest, for a total of $80 million or so.

Speaking in between a long lineup of angry customers, Cal Am officials on Wednesday told PUC Administrative Law Judge W. Anthony Colbert that the company had been required to borrow money to finance its operations over the past five years because it had not collected the entirety of its “revenue entitlements.”

That’s when Colbert lost the blank expression. He had some questions. He presided over Cal Am’s last general rate case and he indicated that he was somewhat confused by the current request. First addressing Eric Sabolsice, Cal Am’s local operations manager. Colbert wanted to know what the interest rate was on the borrowed money. In a long and winding answer, Sabolsice suggested it was 6.6 percent, but he allowed that he wasn’t entirely sure.

He was quickly replaced at the podium by Jeff Linam, Cal Am’s director of rates. He, too, had a lot to say but none of it included the interest rate.

Colbert repeatedly asked Linam if he knew what the rate was. Linam, hemming and hawing more than a little, finally said he did not.

“We have another hearing at 7 o’clock tonight,” Colbert directed. “Make some calls.” It was not a suggestion.

(The Partisan wasn’t able to  attend the evening session but attorney Jane Haines provides detail on the interest rate in comment section below.)

Other than that, the afternoon session was a model of a public hearing on a utility rate except that the speakers were an unusually well informed group, conversant on the ratemaking process and many of the other water-related issues that have dominated public debate on the Peninsula for the last several years.

Charles Cech is the retired engineer who discovered a severe conflict of interest that forced Cal Am to postpone important testing related to its proposed desalination plant. He told the hearing officer that he had gone back through Cal Am’s filings with the PUC and determined that it had enjoyed a profit margin of roughly 30 percent over the past five years, a total of some $100 million.

Among those able to put the current rate issue in perspective was Melodie Chrislock. She lives on an acre in the Carmel Valley, and, therefore, is a relatively heavy water user. Cal Am’s rate structure is meant to promote conservation by charging significantly higher rates for heavy users. Cal Am says the average residential customer will see the monthly bill go from $45 to $63 if the request is granted in full. Chrislock is above average.

She said her highest bill in the summer of 2008 was $184. This past summer, she used considerably less water but was billed $784. Now, she faces a retroactive charge for the water she didn’t use.

Defenders of Cal Am have noted repeatedly that other water agencies throughout California are raising rates for the same reason but they fail to acknowledge that the rates in those other places are generally much lower. They are mostly silent, too, on whether the other agencies propose, as Cal Am does, to simultaneously reduce rates for commercial customers at the expense of residential customers.

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It is an intriguing announcement from Public Water Now publicizing a Jan. 12 presentation on the Cal Am test well now in use in Marina.

“Cal Am’s Test Slant Well: Facts, Fictions and Questions.” That’s the name of the event.

The news release goes on:Public Water Now (PWN) has researched this for more than a year.  There is much that Cal Am is not reporting.  Neither are the media. We have facts. We will expose what we have, where it differs from Cal Am’s version, why it is important, and what we can do about it.

Come for the unreported story.  It is overwhelming.”

Quite a bit has been reported, of course. After delays of various sorts, Cal Am is testing a so-called slant well drilled at the site of the Cemex plant on the shore north of Marina. It is slanted so it could pump water from beneath the floor of the bay, turning the ocean bottom into a filter of sorts to limit the amount of sea life suck into the proposed desalination plant.

Sounds simple but the associated issues include the amount of sea water pulled into the pipes, the salinity, the amount of ocean life included, the impact on the groundwater supply both near and far and the economic viability of the process.

From the news release, it appears that Public Water Now and water activist George Riley have come up with more to be concerned about. I know they have my attention.  It’s at 7 p.m. Tuesday Jan. 12 at the Unitarian Universalist Church, 490 Aguajito Road, Carmel. From Highway 1, take Aguajito east off the freeway, away from the ocean, and you’re almost there.

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newsOpen letter to Sen. Bill Monning and Assemblyman Mark Stone

Re: Suggestions Regarding Changes to CPUC Composition and Process

 

Recently, I forwarded to each of you a copy of a letter that I wrote to Robert MacLean, president of California American Water Co. In that letter, I pointed out some of the serious issues that ratepayers have with the company, and I provided him some suggestions that, if adopted, could help both Cal Am and its Monterey Peninsula ratepayers.

However, there is another equation that, in my opinion, should be considered side-by-side with any analysis of Cal Am’s actions if one is to determine if there are fixes that could result in a future water supply for the Peninsula that would be reliable, affordable and acceptable from all regulatory standpoints. It involves the California Public Utilities Commission. I am sure you know of the problems that have surfaced recently with allegations of conflicts of interest and biases and the resulting great loss in the credibility of the commission and its system of regulating private utilities.

With respect to the CPUC and its relationship with Cal Am, the issues are more localized, but are every bit as concerning as the more global issues that have been making the news. The problem with the CPUC, as far as most Peninsula ratepayers will tell you, is that the agency tends to bend over backwards to approve rate increases for Cal Am, irrespective of certain facts that, on their face, would indicate the applications do not merit positive results for Cal Am.

In my letter to Mr. MacLean, I cite the San Clemente Dam rate case as a terrible example of how the commission disregarded the recommendation of its Division of Ratepayer Advocates, as well as the administrative law judge who actually heard the case, and voted instead for a recommended decision that, for all the world, looked like it was drafted by Cal Am itself.

So here is what I see. The CPUC and its process has several flaws. First, persons appointed as commissioners are not required to have any specific experience in areas that are critical to the making of decisions on complex issues that will come before them.

Second, ratepayers really have no agency or external group that has the power and authority to come to their aid when the commission has stepped over the line with respect to reasonableness and fairness. The Division of Ratepayers Advocates has a very competent and experienced staff, and they frequently analyze and point out many issues in rate cases that bear full attention. Unfortunately, they have no authority beyond making recommendations, and the full commission can accept or reject as it wishes, and it does.

Third, rate cases are most often heard in San Francisco, which does not provide significant access to and participation in the process for ordinary ratepayers. Most ratepayers are unable to participate as parties, which usually requires retention of legal counsel, time and travel costs to San Francisco and back to their homes. In addition, the three-minute rule, while I understand its adoption, works as a further limitation on the ability of most ratepayers to participate and have their serious concerns heard.

I am proposing a general outline of what would be a legislative, and regulatory fix for these issues, and am forwarding them to you in hopes you will give them serious consideration as to changes that should be pursued

In the State of Ohio, where my wife and I have a part-time home, a person appointed as a commissioner to the Public Utilities Commission must have experience in one or more of the following areas: economics, law, accounting, finance, natural and physical science, natural resources, or environmental studies. Presently, under California law, there are no such qualifications required and this should be changed.

An independent body, such as the Ohio Consumers Council, needs to be established, one that undertakes the same roles as the DRA, but one that has the ability to bring suit on behalf of ratepayers, not just one that can make recommendations that can be ignored. In Ohio, for example, the most comparable entity has a staff of about 15 professionals, including attorneys, analysts and public outreach specialists, and has an annual budget of $8.5 million.

If this option is not feasible, for whatever reason, I would recommend that the Commission, if voting to adopt a decision opposed by the DRA, must address each and every point of opposition expressed by the DRA.

With respect to access, I would recommend that a commissioner assigned to a rate case schedule several public meetings in a location that is most favorable for attendance by ratepayers potentially impacted by the outcome. The times would be also set reasonably to promote maximum attendance. In order to get around the three-minute rule, a process would be created whereby ratepayers could identify a limited number of representatives who would speak on behalf of those persons. Such named representatives would be identified to the CPUC and the sitting commissioner would grant such representatives up to 15 minutes to state their positions, plus reasonable time to respond to questions/comments that are raised. If time permitted, the commissioner could also allow individuals to speak, but they would be limited by the three-minute rule.

The ex parte rules currently in use by the CPUC probably present the most significant potential for abuse and the creation and continuation of the perception that regulated utilities have a path, hidden from view, to exert undue influence on the decisions of the commission. This is a sensitive subject, but recent disclosures surrounding the past chairman and his relationships with certain utilities strengthen the need for a close analysis and the implementation of changes that will bring the process more out in the open. If and when there would ever be an intent and agreement between a utility and a commissioner to abuse the system, the ratepayers who bear the brunt of such an action, under current ex parte rules, would have little or no access to protect themselves. So here are my suggestions.

1. Commissioners would not be allowed to meet privately with anyone representing a former employer or anyone with whom they had been associated with as a representative or consultant or anyone who had made contributions of more than $___ to any political campaigns engaged in by said commissioner.

2. In the event of any ex parte meetings, the commissioner shall be required to comply with the existing disclosure requirements and prepare a bullet summary of the key points that were discussed at the meeting for distribution to all parties to the case within three days. The petitioner shall agree to provide be cross-examined, under oath, with respect to the content and nature of the meeting if called for by any party to the case, and shall respond to all relevant questions that are not rejected for cause by the sitting ALJ.

My preference would be to ban all ex parte meetings in a rate case. In lieu of that, my preference would be that all communications between the parties and the commissioners be in writing and directly distributed or made available to all parties. A completely open process, while not infallible against those who want to circumvent it, still provides a stronger potential that behind-the-scenes communications will not be factors that wrongly influence the decisions of the commission in a rate case, where millions of dollars can be on the line.

This is not an indictment of the integrity of anyone. However, events of the past have led to a widely held belief that behind-the-scenes contacts have resulted in unfair results and have caused significant damage to the credibility of the CPUC.

It is clear to me that the CPUC needs to be reprogrammed in such a way that its deliberations and decisions are perceived as fact-based and fair and reasonable to both the utilities that they regulate and the public. Right now, that perception is almost entirely the opposite – that politics and back-door influences are involved, and, as a result, ratepayers cannot rely upon the agency to protect their interests.

In my career, I have drafted proposed regulations and legislation and would be pleased to provide you with a working draft, should you have any interest in pursuing this matter.I can be reached by email at wshood37@yahoo.com.

Hood is a retired lawyer and engineer and former executive director of the Association of Monterey Bay Area Governments.

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????Two items in the Pine Cone today could not help but pique my curiosity. Perhaps the Partisan readers can join me in asking the Mayors’ Authority and the Pine Cone a few questions to ask their interviewees the next time they discuss water projects with them:

1. Cal Am will now miss the August Coastal Commission meeting, and is shooting for September. Fair enough, but how does the conflict of interest investigation by the Public Utilities Commission enter into the discussion regarding restarting a well that relies upon audit results of the person being investigated?

2. Deep Water Desal has announced that it can have desalinated water produced for distribution by Fall 2017. They have not yet even started the EIR process, in fact, their public partner, the California Lands Commission, has not even started the process of obtaining a consultant. The Moss Landing Harbor District has been very clear that Deep Water’s plan to punch a hole under Highway 1 and under the Harbor District’s property is a non-starter. So, Deep Water, how do you plan such an aggressive schedule when you do not currently possess an intake option for your 25 MGD (25 million gallons per day) plant?

Steve Collins is an accountant and former chairman of the Monterey County Water Resources Agency board of directors. He helped lead the county’s efforts to develop a desalination plant in partnership with Cal Am and was prosecuted for a conflict of interest that he maintains was encouraged and approved by top county officials. He has worked as a consultant for Nader Agha, who is pursuing a separate desalination project.

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Closeup portrait unhappy, angry, mad, pissed off woman, giving thumb down gesture with hand looking with negative facial expression, disapproval, isolated orange background. Human emotion attitudeRMC Water and Environment, the company that was Cal Am’s project manager for the first attempted desalination project, has found itself in hot water again in San Jose.

Two recent news reports focus on a $4 million contract that was awarded to the San Jose company without competitive bidding by the Santa Clara County Water District even though one of the district’s top officials is married to one of RMC’s owners.

The new reports, on the San Jose Inside website and on NBC Bay Area, said the district’s board wasn’t aware of the relationship when it approved the contract on a 5-2 vote. The dissenting voters, including the board chairman, have called for a formal outside investigation.

The contract is one of several the district has awarded to RMC over the past several years. It calls for the company to draw up plans for a water-recycling project.

In Monterey County, RMC was accused in 2011 of making $160,000 in under the table payments to county water official Steve Collins while he and the company were working on Cal Am’s first effort at a desalination plant for the Peninsula. Collins pleaded no contest to conflict charges but RMC was never charged. The criminal case played an important role in ending the project, but Cal Am is attempting to move forward with a different plan. The current project has stalled, also because of conflict of interest concerns, this time involving a hydrologist who had been retained by the water company and the Public Utilities Commission to analyze water well technology for which he holds the patent.

According to the news reports, Melanie Richardson, deputy director of the Santa Clara water district, reported in a statement of economic interests filed in 2010 that she held stock in RMC worth between $100,000 and $1 million through her husband, RMC principal Tom Richardson.

Melanie Richardson and RMC have denied any wrongdoing. The district’s top official, Beau Goldie, told NBC Bay Area that the district had looked into the relationship several years ago and determined there was no conflict. He said Melanie Richardson has no role in awarding contracts to RMC.

The contract awarded to RMC without competition involves design work for a recycling plant that could cost as much as $800 million. District insiders told reporters they feared that RMC would have an inside track for that contract as well. Goldie said it was decided to hire RMC without seeking bids in order to expedite the process in response to the drought, but district critics said it would be at least four years before the plant could be operational.

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Vote no campaign and protest signs for a political or social issue in an election resulting in a group demonstration protesting to stop a law  or policy made by a politician on an isolated white background.BILLS FOR SOME HOMES WOULD JUMP 43 PERCENT

Public Water Now is launching a protest to Cal Am’s recent request for a rate increase. Although Cal Am may feel under-funded, we ratepayers are under-represented and under-appreciated.

Public Water Now has settled into the role of watchdog, but now feels the need to pursue action with a stronger and stronger voice. Because we were relentless in seeking a review of the water rate structure, Cal Am recently acquiesced.  Our main interest was to compare and understand the significant differences between residential and commercial rates. We are not convinced that things are fair. And so far, neither Cal Am, nor the commercial interests, has been able to explain how the stark differences are fair.

We did get a meeting with Cal Am officials a few weeks ago on the new rate design. We were told to expect 1) removal of the allotment system, 2) a compressed rate structure, and 3) a shift of costs to the fixed meter charge and away from volume and usage charges. The community’s success at conservation has Cal Am in a tizzy. When the Herald carried the news of the specifics, I was stunned because only days earlier Cal Am had not shared with us the size of the increase (averaging 29% for residential), nor the commercial decrease (averaging 14%), nor the short time period for protest, ending on Aug. 12.

I remember a California Public Utilities Commission workshop in 2012 where Cal Am proudly announced its research showed that higher rates would not cause reduced use. The Peninsula was different, Cal Am said. Cal Am’s view of price elasticity was the opposite of other research Cal Am shared that was unanimous in concluding that the higher the price, the lower the demand. I remember calling Cal Am out on this, in front of about 25 interested and mainly local parties, about its counter-intuitive statement. I was criticized by Cal Am for doing so. It seemed wrong then, and it surely has proven that Cal Am’s research expert was totally wrong.

Cal Am has a serious under-collection of revenue because it misjudged the elasticity of demand. For a protected utility without competition, it has no experience in the business of economic dynamics. Why so many seemingly savvy local business people support Cal Am is mysterious. It boggles the mind to witness such corporate incompetence.

Cal Am’s current rate request is on this link.

My conclusions and the points of protest are these.

  1. Cal Am is using conservation, and the cease-and-desist order and drought crises, to piggyback its under-collection performance. The underlying pitch is to shore up its revenue stream. Guaranteed revenue is the point. This is an inappropriate rationale, timing and method to restructure Cal Am’s entire revenue picture.
  1. The proposed protest period is excessively short, ending Aug. 12
  1. Cal Am has called for workshops, but none has been scheduled by Cal Am or the water management district. This shortcoming undermines the deadline.
  1. The residential rate for Tier 1 users goes up 43%, far exceeding the reported average of 29%. This is where the main water conservers have ended up, so now Cal Am will get its piece of gold from them. It is also where most voters will begin to feel the heat of Cal Am costs. The more we conserve in the public interest, the more we serve the corporate interest.
  1. The commercial rate decrease is not explained, which calls into question if the commercial rates still create an incentive for conservation as advertised.
  1. The fact of under-collections proves Cal Am has not had a rational revenue structure, or it proves Cal Am is inefficient in its management.  Both should be evaluated.
  1. Cal Am revenue reports, contained in its application (link) shows plenty of income after expenses.  Where and how is Cal Am under-financed?
  1. Cal Am claims, but does not explain, how it is less costly to have these new rates.

Protests can be filed by email (below).  In correspondent to the PUC and the Office of Ratepayer Advocates, you should refer to the case number, which for now is  A.15-07-?  (The question mark is correct for now)

Public Utilities Commission: public.advisor@cpuc.ca.gov

Office of Ratepayer Advocates: richard.rauschmeier@cpuc.ca.gov

Monterey Peninsula Water Management District: arlene@mpwmd.net

Monterey Herald: mheditor@montereyherald.com

Monterey County Weekly: mail@mcweekly.com

Monterey Bay Partisan: calkinsroyal@gmail.com

Riley is managing director of Public Water Now.

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