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Richard Hajas of Ojai gives some tips to Peninsula folks about how to take over a water utility

Corrected Ojai takeover figure below

 

Public Water Now Holds Forum on the Feasibility of a Cal Am Buyout

PWN’s guest speaker, Richard Hajas, spoke from experience Monday night. Former general manager of the Casitas Municipal Water District in Ventura County, he was the key author of the feasibility study for the community of Ojai in its recent successful buyout of the private Golden State water system.

Hajas worked as a volunteer with Ojai Flow, the citizens group seeking to municipalize Ojai’s water system. He did the feasibility study pro bono. “Our Feasibility Study was our bible—it had all the facts we needed to argue for local public control,” he told the audience.

To determine if such a takeover is affordable to ratepayers, Hajas explained that the rate base is critical to the cost estimate. A reasonable estimate must also include the fair market value of the system, the costs of a 30-year bond to cover the purchase, the legal costs, and the costs of getting the public agency prepared to take over the operation.

Why did Ojai want public ownership of their water? Hajas said, “The cost of water from the private provider was the big problem. Our costs were more than twice as much as our neighbors and Golden State Water was taking $6 million a year out of our small community.”

The Monterey Peninsula has the most expensive water in the country. The audience could definitely relate to Ojai’s motivation! Although Ojai has a much smaller water system than the Monterey Peninsula, the community successfully fought the corporate Goliath’s legal onslaught and publicity campaign and won public ownership.

Hajas cautioned that the current private water owner will do everything possible to discourage the public from such an undertaking. “Water is a very profitable business,” he said, “and the private owner will definitely not go away quietly.”

It took seven years and cost a total of $60 million for Ojai to buy out Golden State Water. When it came to a public vote Hajas felt confident in the outcome. (Article originally said, incorrectly, that the total was $44 million.)

“I’m a numbers guy. Voters approved the process to purchase the Golden State water delivery system with an 87% majority.”

Under public ownership long-term savings for small usage customers is project to amount to hundreds of dollars per year and much more for larger customers. For the Ojai community of 5,000 to 6,000 people, the total savings over the first 10 years could reach $25.8 million.

Asked if it was worth it, Hajas said, “Yes, because it will cut the annual cost increase to ratepayers in half, from 8% per year to 4%, over a 20-year period, saving many millions of dollars. And I stress the importance of looking at such a project over the long term. It’s long-term savings. My kids and grandkids will see the greater benefit”.

George Riley, director of Pubic Water Now, ended the meeting saying, “PWN wants to make the public aware of the problems and costs related to private water systems. Their motivation is profit, they’re answerable to their shareholders, not us. It easy to see why 87% of the water systems in the U.S. are publicly owned and operated for the good of the communities they serve. I don’t like to be the bearer of bad news, but more water rate increases are coming from Cal-Am. We need to take action!”

Public Water Now will begin collecting signatures in October to qualify municipalization of our water system for a vote on the November 2018 ballot.

Melodie Chrislock, the communications director for Public Water Now, can be reached at MWChrislock@redshift.com

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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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