On Feb. 6, city planners
sent a letter to the California Utilities Commission protesting the
company’s 43.95 percent rate increase, which would hike a typical
customer’s monthly quantity charge up $26.68 to about $86.95
and increase the monthly service charge for a 5/8x-by-3/4 meter from
$19.55 to $28. That would make the average monthly bill for a single
family home more than $100 altogether.
In 1998, the company, then called Southern California Water Company
proposed a 28 percent rate increase that was negotiated down to 16.9
percent. That hike came after a series of increases since 1991 that
totaled 53.3 percent. That would mean the newly proposed 43.95 percent
increase would bring the total increases since 1991 to 113.25 percent,
more than doubling the rate within 16 years.
A comparison sheet provided by city manager Jere Kersnar shows the
water rates from various local companies, for single families that
use 1,500 cubic water feet, slightly less than the average provided
by Helbman. His findings showed that 1,500 cubic water feet provided
by Golden State Water after the rate increase, without the service
charge, would cost $71.95 per month, while Casitas Municipal Water
District customers would pay $34.71, Meiners Oaks County Water District
customers would pay $18 and Ventura River County Water District customers
would pay only $16.25 for the same amount of water.
The company serves 2,850 Ojai connections through wells and through
connections with the Casitas Municipal Water District.
In addition the city, which pays approximately $53,200 annually to
Golden State Water to serve public properties, would have to pay an
annual $23,400 more after the increase.
In his presentation, Heldman said that the reasons for the rate increase
proposal was to recover operating costs, facility-related costs, and
to provide an opportunity to earn a fair rate of return on investments.
The cost of group health insurance, security expenses, property insurance
and maintenance had all increased in the past years, he explained.
He also outlined several improvements to water quality and pipes,
but did not give the exact costs for those improvements.
Heldman listed a number of capital projects that had been completed
during the year including the Fairview Reservoir renovation, the construction
of the new San Antonio Well and some well renovations and connection
improvements.
Though various improvements had been named, the total amount that
GSW spent on capital projects in 2006 was about $1.56 million, even
less than the $2.09 million spent in 2005.
If there was roughly the same amount spent in the past two years,
and there was already an increase in rates to account for capital
projects the year before, that doesn’t justify a need for more
money toward capital projects this year, said Kersnar. “I don’t
think you’ve made your case very well, frankly,” he said.
Though Heldman’s response was Ojai’s property costs were
rising and the company was attempting to make up for that loss. “We
are attempting to gain funds that we have already expended,”
he said.
Victor Chan, the Public Utilities Commission’s project coordinator
for the Golden State Water rate increase application, said that the
reason was partially because rate increases don’t cover the
total funds for capital projects all in one shot. The old expenses
roll over and the costs build up, he said.
Council Member Sue Horgan wondered if some of the rate increases could
be alleviated by giving a slightly lesser return to shareholders.
“If the shareholders benefit from some of these costly improvements,
why can’t they take some of the costs?”
Heldman responded that the returns to investors were regulated by
the company.
Investors of the company receive between an 8 and 10 percent return.
That’s a really good return, said city attorney Monte Widders.
As the costs Helbman mentioned were mostly ordinary operational costs
and basic improvements Council Member Steve Olsen had to ask. “Your
rates are so much higher than other companies, why?
Helbman responded that other water companies were government agencies
and thus qualified for various tax breaks and exemptions. GSW is privately
owned. “You’re looking at the real cost of water here,”
he said.
Council members were not satisfied.
But with an indeterminate term franchise agreement with the company
that has no expiration date, ousting Golden State Water would be a
long expensive route, said Widders.
“What happens if we want to take over and have our own water
company,” asked Ojai Mayor Carol Smith.”Would we have
to condemn the system by eminent domain?”
Widders replied that such a move in Big Bear took the city through
years of litigation and millions of dollars in attorney fees.
“The corporate culture at Golden State Water is to never voluntarily
sell a water company. They would fight us legally and put such a high
value on it that the acquisition would be out of sight,” said
Council Member Rae Hanstad.
Hanstad offered that the proposed 27 percent rate hike in 1998 by
the same company was knocked down to 16.9 percent after Andy Belknap,
city manager at the time, and Nina Shelley, the mayor in Ojai in 1998,
went to the California Public Utility Commission in San Francisco
to complain.
Council members agreed that such action might be necessary in this
case. In the meantime, they asked Helbman to pass their questions
on to management.
Golden State Water, founded in 1929, is the second largest investor-owned
water company in California. It is owned by American State Water Company
which also owns Chaparral City Water Company in Arizona and American
State Utility Services which provides water to U.S. Army forts and
Air Force bases in Virginia. Texas and Maryland.
The company provides water
to 254,000 customers in 10 counties and 75 cities in California.
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