Recent comments

As a water utility professional who represents 2,800 investor-owned water utility employees in California, I was troubled by the inaccuracies in this blog post, especially since the segment of the water utility industry it was denigrating – investor-owned water companies (IOWCs) – is leading the industry in making the necessary infrastructure investments to ensure that water moves safely from its source to your tap. The old expression, “You may be entitled to your own opinion, but not to your own facts,” is still true, and here are a few facts to consider: *Private-public partnerships continue to thrive in the United States. More than 2,000 facilities from New York to California are operated in mutually beneficial public-private partnership contract arrangements. These partnerships allow municipalities to maintain a critical role in their water services, yet they take advantage of the extensive benefits that come with a private operator. And these contracts are renewed at an impressive rate — more than 93 percent — precisely because of this mutually beneficial arrangement. *In communities everywhere, people are realizing that the essential infrastructure of pipes, wells, reservoirs and treatment facilities must be protected. Professional water companies, whose sole business is to provide safe, reliable drinking water, have an outstanding track record for doing this. *In California, Public Water Now has made no compelling case for “public control of the [Monterey] Peninsula’s scarce water sources”. The local water utility, California American Water (CAW), is an integral part of the community and has owned and managed the region’s water system responsibly for nearly 50 years. The “failed efforts to secure new water resources” alluded to in the blog are the result of individuals trying to derail CAW’s efforts to secure a long-term water supply. The time and money wasted in the original desalination project stemmed from these delays and the inability of the public partners to effectively manage the development of this large-scale infrastructure project, not CAW. *Moreover, the assertion that CAW makes 30 cents profit on every dollar collected from ratepayers is inaccurate. All IOWCs are subject to close regulation and constant scrutiny by a state regulator (and usually an independent consumer advocate) that carefully balances customer and utility interests. CAW’s rate of return (profit) for the period in question was 7.93 percent, a far cry from 30 percent. Utility profit is the opportunity to earn a regulated rate of return on only the capital invested in the water infrastructure. The way to look at utility “profit” is to compare it with paying back the interest on a loan, except in this case the creditors are shareholders who own stock in the company and receive dividends instead of interest. It's also important to understand the true story in Felton, Calif. Consider this: *Even though the original amount proclaimed by takeover proponents for the Felton system was $2 million, the final purchase amount was $13.4 million, more than six times what takeover supporters promised the community. That amount was spread over Felton’s 1,300 customers, who obligated themselves to 30 years of higher property taxes. *Just before the eminent domain case went to trial, the water system was sold to a neighboring public water district and the guarantee of lower rates evaporated almost immediately. Shortly after the takeover, the new water provider announced plans for substantial rate increases. Customers got a 12 percent increase in 2009, an 8 percent increase in 2010 and a 15 percent increase in 2011. Each year’s rate increase was based on the previous year’s rates, with the compounding effect making the hit even more significant. *The increases haven’t stopped. This past summer, five more years of compounded rate increases were proposed: 16 percent in 2014, 13 percent in 2015, 8 percent in 2016 and 9 percent in 2017 and 2018. A $50 monthly water bill in 2008 will become a $117 bill, plus 20 years of paying an additional $41 per month in property taxes. In short, government takeovers don’t do customers any favors. Finally, it’s important to put the notion of “local control” into perspective. The Monterey water system is managed locally by a group of 85 expert water professionals who have lived on the Monterey Peninsula for generations. CAW’s District Manager there has years of experience in water utility operations, and he is credited with helping turn around a troubled desalination plant in another part of the country. This level of expertise and experience is extremely valuable to Monterey water customers. The quote in the blog about the new desalination plant that $300 million “will be sucked off the peninsula and sent to New Jersey never to be recovered” is false. In fact, the $300 million for the new water supply project will stay on the Peninsula, as does most of the money CAW receives in revenues from customers. A more accurate assessment of CAW’s “local control” comes from the mayor of Carmel, Calif., Jason Burnett, who was described October 24th on Central Coast Public Radio KUSP* as “one of the key players in crafting a water solution” on the Monterey Peninsula. Although not a big fan of desalination, Burnett said, “Desal should really be your last option because it has a larger environmental imprint and it’s more expensive. So I am not an advocate of desal per se. But when you’ve exhausted all your options, it is what is left.” And Burnett says CAW’s new desalination project meets the four criteria [he] and his fellow mayors insisted on in exchange for their support. “First of all, we said project economics must be competitive,” he said to KUSP. “Second, we said a project must have suitable public governance, public accountability, and public transparency. Third, we said a project must have a clear path towards being permitted and built as near as possible to the cease-and-desist order [a 2016 deadline imposed by the State Water Resources Control Board]. [A]nd fourth, we said a project must have contingency plans because failure is not an option.” Clearly, a partnership between CAW, Monterey Peninsula residents and community leaders that works to achieve these four goals is the best solution for the region. An expensive, hostile government takeover is more likely the worst solution.