LUCERNE — The investor-owned company that owns Lucerne”s water system, California Water Service Company (Cal Water), has asked the California Public Utilities Commission (CPUC) for an interim rate increase until the pending rate setting case before the CPUC is settled.
Last year, CalWater asked the CPUC, which regulates privately owned electric, telecommunications, natural gas, water and transportation companies to approve a 273-percent increase in water rates for Lucerne residents to pay for a new water plant.
In November, Administrative Law Judge James McVicar and the Division of Ratepayer Advocates (DRA), an independent department within the CPUC mandated to advocate on behalf of ratepayers, held two hearings in Lucerne to allow residents to voice their opinions.
Evidentiary hearings were held at the CPUC in San Francisco in January. Pro bono attorney Stephen Elias, representing the Lucerne Community Water Organization (LCWO) and intervening on their behalf, provided evidence that Lucerne residents could not afford such an increase.
Last month, McVicar released a draft of the proposed settlement for determining water rates in Lucerne, but has requested additional information before final rates will be approved.
Cal Water is asking the CPUC to approve an interim rate increase based on the current rate of inflation 4.2 percent according to their application, which is allowed under California law because the CPUC failed to make a decision by July 1.
CalWater”s rate setting manager, Tom Smegal, said there were two reasons for the delay in a final ruling, “conservation pricing” and revenue adjustment mechanism (RAM).
Conservation pricing, according to an Environmental Protection Agency (EPA) document, is using prices “to help modify customer behavior to use less water at the tap and to prevent leakage and waste, consequently generating less wastewater for treatment.”
Additionally, the EPA says that conservation pricing is used to “achieve significant conservation gains that might enable water system managers to postpone the need for new capital outlays… (by expanding) their toolkit to include the widest array of conservation-oriented initiatives, including measures like universal metering, water accounting and use audits, retrofitting and public education.”
Smegal explained that conservation pricing is not necessarily applicable to Lucerne, but to Cal Water”s other water systems, which also have rate-setting cases before the CPUC.
The RAM, Smegal said, “takes away the incentive to conserve, called decoupling in Water Action Plan.”
The CPUC adopted a water action plan in December which is based on four principles: safe, high quality water, highly reliable water supplies, efficient use of water and reasonable rates and viable utilities.
According to CalWater”s application for an interim rate, Lucerne”s rate setting case is part of the “first opportunity for the Commission to decide important policy issues related to the newly adopted Water Action Plan.”
“The Commissioner many need additional time to fully debate these issues, leading to a further delay in a final decision,” Cal Water”s application states.
During a symposium in March held in Sacramento on improving the efficiency of California water and energy systems and sponsored in part by the CPUC, independent consultant David Morse made a presentation on “water conservation rate making disincentives the case for decoupling sales from revenue.”
In it he states that the CPUC has said that water conservation will decrease water company revenues and profits and that the CPUC in their new plan endorses the concept of decoupling sales from revenue.
According to Morse, the first step of phase one is for the CPUC to adopt a revenue decoupling mechanism in the Cal Water rate case and other water utilities will follow.
The water action plan also has six objectives, three of which are to promote water infrastructure investment, assist low-income ratepayers and streamline CPUC regulatory decision-making.
The first two objectives were met in March when all parties in the rate case settled to establish a new rate support fund (RSF) to address the issues of who would pay for the upgrades to the water plant and how to give a subsidy to low-income residents.
“The new RSF settlement would … lower rates in (Lucerne) by spreading some of their costs across all 24 (CalWater) districts. It would also provide support for a new low-income ratepayer assistance program,” the proposal said.
The third objective, streamlining CPUC regulatory decision making, the CPUC feels will benefit both utilities and ratepayers by the “acquisition of small private water utilities by larger private or municipal water utilities may reduce regulatory burden.”
Which may not be good news for some Lucerne residents the members of Lucerne FLOW (Friends of Locally Owned Water).
Lucerne FLOW, the research and fundraising committee of LCWO that is preparing articles of incorporation to become a separate non-profit organization, is investigating alternatives to Cal Water”s control of their water system, including forming a special district.
“Given what”s at stake for Lucerne,” Elias said, “I”m not going to worry about a 4.2 percent interim increase.”
Contact Terre Logsdon at tlogsdon@record-bee.com.
