Golden State's Water Rate Hike Approved

Judge gives nod to 35 percent hike

By Daryl Kelley
Water rates for Ojai residents would increase 35 percent next year if the California Public Utilities Commission upholds new rates adopted this week by a state administrative law judge. Critics said the hike shows the system serves private business, not the public.
The new rates would not be implemented until February, at earliest, after the PUC ratifies or rejects them.
Tuesday's ruling by Judge Regina DeAngelis adopted rates that would increase Ojai residents' water bills on a sliding scale, depending on use and size of meter.
For example, the monthly bill for a resident with a 5/8-inch line using 1,500 cubic feet of water a month, a modest amount, would increase from about $50 to about $68. A customer using 3,000 cubic feet, typical for Ojai, would see an increase from about $84 to $110.
The base service charge would also increase about $11, to more than $30 a month.
The ruling is an apparent victory for Golden State Water Company, a private firm with nearly 2,900 customers in the city of Ojai and vicinity, since the state office charged with protecting the public's interest in utility cases had initially recommended a 24 percent increase over the next three years.
Golden State had asked the Utilities Commission for an increase of about 43 percent by 2010, although its rates are already much higher than other local water agencies.
In her ruling, DeAngelis did not set rates for 2009 or 2010, saying they should be determined in the future based on “advice letters” from the water company about factors such as inflation.
That means Golden State's three-year increase could exceed the 35 percent granted for 2008i alone. With next year's hike, Golden State's rate increases in Ojai over the last two decades total 107 percent.
Kathy Couturie, who led an effort by residents to buy Golden State’s Ojai operation, said the whole process was a disservice to the residents of Ojai, but that she hopes water service will finally improve.
“I hope that this outrageous rate increase will bring some long needed positive change to the Ojai Valley,” she said. “I have learned that the PUC does not represent the interests of the public.”
Golden State, the subsidiary of a large corporation traded on the New York Stock Exchange, operates in Ojai under a long-standing, open-ended contract with the city. Its service cannot be discontinued since it owns the pumps and water lines that serve the community, unless local water users buy the waterworks — valued by owners at about $12 million.
Company officials have said Golden State's rates are higher than those at nonprofit publicly run water companies because it has no taxpayer subsidies, has to pay taxes and must return a reasonable profit to investors.
The return on base water rates under DeAngelis' ruling would be 8.87 percent a year, lower than the 9.41 percent requested by Golden State, but higher than the 8.80 percent requested by the PUC's independent Office of Ratepayer Advocates. Under the ruling, the return on company equity would be 10.2 percent, compared with a Golden State request for 11.25 percent and the ratepayer advocates' recommendation of 10.09 percent.
U.S. Supreme Court rulings have upheld a private company's right to a “reasonable” return on investment when operating a utility for the public, the judge noted.
At hearings this year, dozens of Ojai residents and city officials had asked DeAngelis to grant no rate increase until Golden State improved its service and water quality.
Victor Chan, an analyst for the ratepayer advocates office, said he was disappointed by the judge's decision, but that there is not much opportunity to block it now, because Ojai is so far into a yearlong rate-change process.
“As much as we don't like the decision, all we can do now is comment on where we think the judge might have made an error,” Chan said. “Obviously, we're not entirely pleased on the way she ruled on some issues, but our comment now has to be based strictly upon what's in the public record.”
Specifically, Chan said the judge allowed Golden State to spend more money more quickly to hire more employees and to repair and replace its aging waterworks than the water company proved was needed.
“She ruled against us saying that what is needed in Ojai is better reliability and water quality,” he said.
Indeed, city manager Jere Kersnar said the silver lining from DeAngelis' ruling is that she tied the steep rate increase to improved service, as he had requested at a PUC hearing in San Francisco.
“The judge did order Golden State to meet with the city to come up with a plan to fix these problems,” Kersnar said. “It's at least a recognition of our concerns and a means to communicate our ongoing concerns. It remains to be seen if this will be effective.”
In her ruling, DeAngelis wrote: “We direct Golden State to meet with the City of Ojai, at the City’s invitation, to discuss matters related to water quality and service reliability. Furthermore, we direct the City of Ojai to contact the (PUC) with any unresolved concerns regarding water quality and service reliability ... Then, the Director of the Water Division shall recommend a procedure to the Commission for investigating this matter further.”
Golden State must resolve “any outstanding disagreement on water quality and reliability” with city officials, she said.
A Golden State spokesman said the judge's approval of a 35 percent rate increase “is very good for the community of Ojai,” because it will allow the company to do much-needed repair to the city's water pipes, pumps, valves and other infrastructure. And it pays for additional workers to better serve the public.
“We're continually trying to improve service for the city of Ojai, and this decision will take us part of the way to do that,” said Patrick Scanlon, vice president of operations for Golden State.
In August, as required by the PUC, Golden State and the Office of Ratepayer Advocates conferred to see if they could resolve disagreements on how much of a rate increase the company deserved.
Compromise settlements were reached on several issues, but not all. DeAngelis used this settlement as one basis for her ruling.
But Chan, of the ratepayer advocates office, said that in some cases she opted for Golden State's position so the company would have enough money to improve service and water quality.
Indeed, in her ruling, DeAngelis wrote: “Where (ratepayer advocates) and Golden State failed to agree, we adopt Golden State’s requests for rate recovery for a number of capital projects and additional new positions. Overall, these capital projects and new positions will result in customers experiencing rate increases. However, the approved capital projects and new positions are needed ... to improve water quality, service reliability, and upgrade aging infrastructure.”
Specific improvements in Ojai over the next two years include Golden State's $320,000 contribution to establishing a “spreading grounds” along San Antonio Creek, where water may filter down into subterranean aquifers. About $170,000 for 1,000 feet of a new water main line is also included, as are numerous new valves and hydrants.
A big disagreement between Golden State and the ratepayer advocates was how much money should be passed along from Ojai operations to support the company's general office expenses in San Dimas. For the seven Golden State water districts included in the judge's ruling, including Ojai, the difference between the two sides was about $692,000.
In its report to the Public Utilities Commission earlier this year, the Office of Ratepayer Advocates concluded that Golden State had provided reasonably good service and water quality in Ojai.
The ratepayers advocate office said it reviewed various Golden State and state Department of Health Services documents and found that the Ojai water system had been in compliance with drinking water standards from 2004 through 2006.
And the lack of any formal complaints to the PUC’s public advisor’s office during a recent three-year period, and only six informal complaints, indicated Golden State “has generally been providing satisfactory service to the Ojai customers,” the report said.
Indeed, Chan said he was surprised by how many angry customers showed up at a public hearing in Ojai in May to voice their complaints about rates, water quality and service. At least 100 attended and more than 20 spoke. A petition signed by more than 500 upset customers was presented.
Couturie, who led the challenge to the rate increase, said the effort was for naught.
“Thousands of hours have been spent in vain,” she said, “and Ojai's citizens have once again been ignored.”
She recommended a visit to foodandwaterwatch.org to learn more about strengthening local democratic control of water resources.