Golden State Water Company seeks new rate hike

By Daryl Kelley

The monthly water bill of the typical Ojai customer of the Golden State Water Company would be hiked 4.38 percent on top of a 35 percent increase granted earlier this year under a new proposal by the San Dimas-based water firm.
Ojai customers were notified of the proposed increased this week. They may file protests with the California Public Utilities Commission's Public Advisor's Office. The address is 320 W. Fourth St., Suite 500, Los Angeles, CA 930013 or e-mail, public.advisor.la@cpuc.ca.gov.
The new increase is couched as a means to promote water conservation, not as a way to increase revenues, because it would reduce the basic monthly service fee by about $5 while charging customers who use little water lower rates than those who use more.
The net effect, however, would be to increase the typical monthly bill of an Ojai resident by $4.83, the water company reported. That would mean the monthly bill of a typical resident with a five-eighths- or three-fourths-inch meter would rise from $110.25 to $115.08 unless that customer cut water use.
"The proposed rate design will result in monthly bill reductions for low usage customers and monthly bill increases for those customers who do not conserve," Golden State said in its notification letter to customers.
"The proposed conservation rate design is intended to support and encourage water conservation and will not increase net revenues to (Golden State)."
Golden State said its proposed rate changes are intended to meet the state utilities commission's objectives for water conservation.
But to reap the financial rewards of water savings, an Ojai customer's use would need to be extremely frugal, according to Ojai Valley News calculations based on rate information provided by Golden State.
For example, not only would the typical Ojai customer see a nearly $5 monthly increase, a customer who uses only two-thirds of the water of the typical customer would also see an increase of about $1 a month. The lower user's monthly bill would be $81.58 compared with $80.49 under current rates, despite a reduction in service charge from $30.45 to $25.25.
City manager Jere Kersnar said he had not yet reviewed the proposed rate increase in detail, but that he knew the proposal was presented as a way to save water.
"I do know the PUC has been encouraging utilities to have more of a tiered system of rates to encourage conservation," he said. "But the devil is always in the details."
Ojai water customers already operate under a three-tier system, and the new proposal would increase water rates at every level of use. And even with a reduction in the service charge, water bills would drop only with a sharp reduction in usage.
The city of Ojai has no control over water rates, but it filed a protest letter during the review of Golden State's previous request for a rate increase. And state officials, as part of its ruling, directed Golden State to provide the city with a detailed analysis of water quality and service reliability in Ojai.
"We still haven't seen that report," Kersnar said. "We've talked about it with them, but we still haven't seen it."
The proposed new rates would augment a steep rate hike approved early this year for Golden State's 2,860 customers in and near Ojai.
The Utilities Commission in February ratified an administrative law judge's decision that a 35 percent increase was justified for 2008 alone and that additional increases should be granted to cover hikes in the cost of living in 2008, 2009 and 2010.
That could mean that Golden State could get all of the 43 percent three-year increase it requested in 2007, prompting a firestorm of protest. Angry customers showed up at a public hearing in Ojai. At least 100 attended and more than 20 spoke. A petition signed by more than 500 upset customers was presented.
But the water company prevailed.
Last December, state Administrative Law Judge Regina DeAngelis adopted the 35 percent rate increase for Ojai residents. And the PUC adopted her ruling almost exactly.
Under the ruling, Ojai residents' water bills have increased on a sliding scale, depending on use and size of meter.
For example, the monthly bill for a resident with a five-eighths-inch line using 1,500 cubic feet of water a month, a modest amount, increased from about $50 to about $68. A customer using 3,000 cubic feet, typical for Ojai, increased from about $84 to $110.
The base service charge also increased about $11, to more than $30 a month.
Even before the rate increase this year, Golden State's rates were much higher than other local water agencies.
With this year's hike alone, Golden State's rate increases in Ojai over the last two decades total 107 percent.
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 was 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 Ratepayer Advocates Office.
Under the ruling, the return on company equity was 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 the hearings last year, Ojai residents and city officials asked DeAngelis to grant no rate increase until Golden State improved its service and water quality.
But the PUC found compelling DeAngelis' argument that the steep increase was needed to upgrade the Ojai water delivery system and water quality.
A Golden State spokesman said then that 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.