Forum: Water plant takeover not ‘beneficial'

Willows residents say they are not looking forward to paying more money to private investors for their water.

Although only a small crowd turned out at a California Water Co. workshop on Wednesday, the consensus of those present said they will sacrifice their lawns if push comes to shove.

The workshop was planned well in advance of the presidential debate, which may have kept even the most staunch opponents of the proposed rate hike at home.

Even those who recently bombarded City Hall with requests for a public takeover of the privately owned water system didn't show up as they had earlier indicated.

It's not an unheard of practice. The people of Felton successfully wrested control of their water from the clutches of a large private corporation in 2008, but it is something that makes Willows officials pretty nervous.

"I don't believe it is beneficial to the ratepayers of Willows," said City Manager Steve Holsinger.

Holsinger attended the workshop Wednesday, but didn't get a clear answer from Cal Water officials as to what the water infrastructure would be worth if the city wanted to take that route.

John Graham, Cal-Water's water-quality project manager, said it would be up to the city to hire someone to do a comprehensive study to determine the fair market value.

"We could probably tell you what we have invested," Graham said.

CalWater has owned the Willows system since 1927, when it bought it from Pacific Gas and Electric Co.

Ratepayers pay for costs associated with water delivery, and share the cost of services provided by corporate offices in San Jose — such as billing and engineering — with about 25 other water districts in the state that are owned by the company.

People in the Bakersfield district — the company's largest — pay the highest rates, Graham said. Willows ratepayers are among the lowest.

Holsinger said he has worked with staff in the city's Finance and Public Works departments to come up with some kind of estimate, and believes it could cost as much as $70 million to take the company by eminent domain, which would require voter approval for the sale of bonds.

The 3,000 households in Felton paid approximately $11 million to American Water for its system at a cost of about $600 a year in new taxes.

Graham agreed with Holsinger that the risk to Willows could be great.

"Even if it was $30 million, the ratepayers could end up paying more than $50 a month for water, but still have to pay the property taxes," he said.

While publicly owned utilities have the advantage of not having to pay taxes and have access to grants, privately owned companies have the capital and the ability to make immediate infrastructure improvements and respond in an emergency, he said.

"In this economy, some municipalities are trying to sell out," Graham said.

On the other hand, a private company does have to please its stockholders.

CalWater is asking for the rate increase to be phased in over three years to help pay for upgrades to its water mains and to eliminate flat rate service by installing water meters, which is a state requirement, Graham said.

He also said the increase is needed to cover higher expenses related to meeting strict water quality standards and environmental regulations.

Rates for typical metered customers would increase by $5.80 per month in 2014, and go up $7.83 per month in 2015 and another $2.54 per month in 2016.

The typical metered residential customer who uses an average of 11,000 gallons a month will see an increase from about $55.32 to $61.12 on Jan. 1, 2014.

People attending Wednesday's meeting said they apparently aren't typical, and they don't know anyone who is paying $50 a month for water.

"My water went from $68 at the flat rate to $120 when I got a meter," said Joe Hinton.

Water customers complained they also lost pressure when they got meters, which is something the company agreed to investigate.

As for the rate increase, even Cal Water officials admitted it is something that is tough to get past the state Public Utility Commission.

Cal Water asked for a 14 percent rate increase in 2001, but got 5.5 percent. The company asked for a 50 percent hike in 2006, and was granted 19.9 percent. In 2009, Cal Water asked for a 58 percent increase, but got only 31.3 percent.

Graham said the Utility Commission will hold a public hearing in early 2013 on this new proposal.

If approved, the new rates would go into effect Jan. 1, 2014.

"They may be different, or they may be the same as what we requested," Graham said.

CONTACT Susan Meeker at 934-6800 or smeeker@tcnpress.com.