LUCERNE >> Coming on the heels of the last rate increase in late August, Lucerne residents recently received letters from their water company opaquely detailing a base rate change they can expect to see fluctuate on their bills.
Following the California Public Utilities Commission”s (CPUC) approval of the California Water Service Company”s 2014 general rate case, residents are now subject to a second mechanism created to maintain the company”s revenues when their consumers conserve water.
The first, created in 2008 and titled the Water Revenue Adjustment Mechanism (WRAM), is a surcharge applied 12 to 36 months following the loss of revenue and allowing the California Water Service Company (Cal Water) to recover the difference between actual revenues collected and the amount of revenue it was authorized to collect by the CPUC.
Cal Water explains WRAM fees are used to “encourage conservation.” Others say the fees aim to ensure a water provider doesn”t discourage conservation by merely raising rates to compensate for lost revenues when customers use less.
And while the Lucerne Friends of Locally Owned Water (FLOW) group, (which advocates for a publicly-owned water system amidst the highest water prices in the county), has rallied against the WRAM fees during the drought, they”ll have a new fight to pick with Cal Water”s new Sales Reconciliation Mechanism (SRM).
A sticking point of the 2014 general rate case, the addition of the SRM was strongly opposed to the end by both the California Office of Ratepayer Advocates (ORA) and The Utility Reform Network (TURN).
The mechanism is interlinked with the WRAM and WRAM surcharges will be affected by the revenue the SRM pulls in. Nevertheless, the SRM essentially addresses the same problem the WRAM was created to solve except it”s redundancy is excused by the drought specifically.
Instead of tacking on a surcharge after anticipated revenue falls short, the SRM preemptively “compensates for the inaccuracy of forecasting estimate of consumption of water which results in large WRAM balances,” according to the general rate case.
If recorded sales for the past year are more than 5 percent higher or lower than the adopted sales, Cal Water is authorized to adjust its base rates by 50 percent of that variation. Effectively, this means Cal Water is being allowed to change its base rates without needing explicit approval from the CPUC as it normally would under rate case applications.
ORA Program Manager Danilo Sanchez explained the ORA went so far as to lobby the CPUC to oppose the SRM following the CPUC”s approval but their efforts were to no avail.
His concern lies with the water company”s ability to permanently change rates through the new mechanism and the added layer of complexity that it adds to Cal Water”s already-convoluted revenue collecting system.
The ORA”s goal is to do away with the SRM during the next rate case, which will begin in July. If not then, Sanchez is hoping the end of the drought will compel the CPUC to toss the mechanism out.
At the very least, Sanchez said the ORA encouraged the CPUC to mandate a separate account be created to track the SRM”s changes to the base rate.
But in the end, “it”s a waste of time,” he said. “It creates more work for us and even for them (Cal Water). They have to file more advice letters and we all have to look at more calculations.”
Both quantity rates and monthly meter rates will be affected by the SRM, though the advice letter to notify residents of the changes does little to explain the changes in layman”s terms.
In the advice letter, the anticipated rate changes aren”t even compared with the current rates, nor is the percentage of the change provided. Instead, a resident can look for a small “(I)” next to each rate to signify there”s been an increase.
Gay Guidotti of Cal Water said residents can expect a message on their next bill explaining rates have changed but it will only refer back to the CPUC”s rate case decision and won”t explicitly detail how much rates have changed either.
Come Friday, residents” rates per 100 cubic foot of water will jump from $14.65 to $16.06 while the smallest 5/8 by ? inch meter monthly charge will jump from $50.26 to $51.39.
In addition to the notice of the SRM, residents also received an advice letter detailing increases to its loan repayment charges.
The company entered into a loan agreement with the state”s Department of Public Health for just over $7 million upon completion of a new water treatment plant in the community.
Since 2008, the Lucerne water district”s customer base has dropped by 73 spurring the company to increase its loan repayment charges for the first time. The increase varies with the size of a customers” meter.
According to Guidotti, Cal Water is making annual payments of $235,956 on the 0-percent interest loan and its remaining balance sits at just over $6.1 million.
In regards to these recent advice letters, multiple customers claim they received them far past the deadline to protest the changes. The letters allow 20 days to file a protest, although Guidotti said that was a typo and residents should have been allowed 30 days to file grievances against the changes.
Residents have also expressed frustration over the fact that, other than a mailing address, contact information for the CPUC was not provided in the letters.
Guidotti said the CPUC is “pretty good about entertaining comments any time,” however, and encouraged residents who still want to send in a complaint to do so.
The CPUC and TURN did not return calls by press time to provide comment on these issues.
