LUCERNE, Calif. – A state agency tasked with advocating for low rates for utility customers has released its proposal for Lucerne water rates, who are facing another potentially large rate hike over the coming three years.
However, the California Public Utilities Commission’s Division of Ratepayer Advocates proposal comes in not very far below the proposal California Water Service Co. submitted last summer to the commission.
“They’ve been more more aggressive in the past,” said Lake County District 3 Supervisor Denise Rushing of the DRA’s proposal.
Rushing, who along with the county of Lake is an intervenor in the latest general rate case, added, “It doesn’t look like there is much fight in them.”
Another party to the case is The Utility Reform Network, whose telecommunications director, Regina Costa, attended the April 12 hearing the CPUC held at the Lucerne Alpine Senior Center.
Costa said TURN is looking at the DRA’s proposal and researching additional areas where cuts can be made to benefit customers.
“Lucerne is the poster child for having high rates and a lot of people with low incomes,” said Costa.
Cal Water is seeking a revenue increase in 2014 of 57 percent or $818,041 for Lucerne, according to DRA documents. The DRA said it is recommending an increase of 46.1 percent, or $673,753.
According to the DRA’s breakdown, they are proposing total operating revenues of $2,134,000, or 6 percent less than the $2,254,000 sought by Cal Water.
Proposed operation and maintenance costs are $778,400, compared to $813,000 sought by Cal Water, with DRA also proposing to give the company $272,300 for general office expenses. Cal Water had requested $326,300.
Ting Yuen, a DRA staffer, had appeared at the April 12 hearing, telling the group of more than 200 Lucerne residents that the DRA was proposing rates that would amount to less than half of what Cal Water as seeking for plant upgrades.
Regarding plant additions, DRA is proposing approximately $579,628 from 2013 to 2016, as compared to the $850,172 Cal Water requested.
Upgrades to the new plant are important because, according to Cal Water, it’s very challenging and expensive to treat water from Clear Lake.
Yoke Chan, a senior utilities engineer with the DRA, said that one of the key areas of reduction was related to Cal Water’s request for $150,000 to implement a disinfection process at its new plant. She said the DRA recommended instead $20,000 for a pilot test program.
As for administrative and general expenses, Cal Water had asked for $307,100 and DRA is suggesting giving the company a larger amount – $318,200 – due to an incorrect Cal Water calculation for nonspecific expenses, Chan explained.
For Cal Water’s entire Redwood Valley District – which serves Guerneville, Duncan Mills, Santa Rosa, Lucerne and Dillon Beach – the DRA said it is disallowing 20 new employees Cal Water asked to add, as well as 35 requested vehicles and related transportation costs.
It’s also removed costs included in the pension component for the Supplemental Executive Retirement Plan and removed an expense included by Cal Water in its administrative and general salaries for stock awards granted to executive officers.
Company officials told Lake County News that they are proposing to raise assistance from the low income rate assistance fund and a rate support fund to help Lucerne customers. The LIRA would go from $12 to $14 per month.
Costa pointed out that more than a third of Lucerne households are eligible for the low-income rate, yet the town has some of the highest rates in the entire company. “That low income rate doesn’t help them very much.”
Cal Water also had asked to offer a “balanced payment plan” to customers, which the DRA suggests the CPUC should only approve if it’s offered to all Cal Water customers.
Despite Lucerne’s high rates, Cal Water reported that its rate of return on the system was -8.8 percent in 2010, 4.5 percent in 2011 and 1.17 percent in 2012.
Rushing, in her review of the proposal, said there are important issues not being dealt with in the document. “Nobody seems to be pushing hard on the affordability issues, which is really key here.”
She suggested there also is a morality issue, when people who only make $800 a month are expected to pay $300 a month for water. Similarly situated county water systems don’t cost that much for customers, she said.
Rushing has faulted state officials for allowing Cal Water to require customers to pay $8 million for its new plant, which had three redesigns and should only have cost a third that amount.
That would be a huge amount for the entire county of Lake to have to pay, much less Lucerne alone, Rushing said.
Costa agreed, saying the town shouldn’t have to pay so much for the plant, and suggesting that someone at the CPUC was “asleep at the switch” when it was approved.
The town, which has about 1,200 connections, has a rising vacancy rate and has been in a downward economic spiral, Rushing said.
“They are serving a community that can’t afford their product, and their answer is to raise rates,” Rushing said of Cal Water. “I don’t know the sense in that.”
Said Costa, “The rates in Lucerne are ridiculously high,” which she added is true in a few places in Cal Water’s service area, including Antelope Valley and Tomales.
There also is the matter of inequality in rates. Communities like Los Altos, where Rushing estimated the median income is 10 times that of Lucerne, monthly water rates are about $25 a month. The population of Los Altos was estimated at 28,976 in 2012.
Company officials reported that water rates, unlike power rates, are set up on a cost of service basis, with each district paying different rates accordingly. They also acknowledge that, in the case of Lucerne, the costs are paid by a smaller customer base.
Cal Water has estimated an average customer in Lucerne pays about $62.85 for 500 cubic feet of water, but the County Administrative Office and Cal Water disagree on that amount, with the county asserting that an average bill is around $158 a month.
Currently, because of reduced water sales, Cal Water customers in Lucerne are paying a surcharge to raise the company’s rate of return, because less water is being used than the company anticipated in its last general rate case.
That level of sales is determined based on a five-year historic average, according to company officials. If sales are below the predicted level, a water revenue adjustment mechanism goes into effect. If water usage were to suddenly go up above predicted levels, customers would get a credit.
Costa suggested that the company’s sales forecasts were messed up, but regardless it is allowed to recover the money lost due to the bad estimates. Meanwhile, she said customers already are paying rates they can’t afford.
“It’s a broken system,” she said, adding that the CPUC realizes it and is trying to fix it.
Costa and Rushing said there is a CPUC proceeding relating to making rates more fair across the board, and Lucerne is part of that statewide proceeding. TURN also submitted testimony in that case, Costa said.
For those who attended the April 12 hearing, Costa said it was a worthwhile exercise. “The testimony at the public participation hearing was very, very important,” and can be used by the DRA and TURN in the fight to reduce rates .
The ratemaking process soon will move to meetings of the involved parties, including Cal Water, DRA and the county.
“We will have a settlement meeting with the company in May,” said Chan.
Costa said no dates had been set yet for the hearing.
During the settlement talks, the parties will consider Cal Water’s rebuttals to the DRA proposal, and if no settlement can be reached, the matter will go to a judge, Chan said.
At that point, only intervenors can make comments. Chan said they will be invited to the settlement meeting.
Rushing expects to take part in those settlement hearings along with other county officials,.
Costa said Lucerne’s situation has resonated with TURN, and they’re going to try to get a better rate proposal for the town.
Lucerne’s high rates and economic challenges “are going to be front and center in these talks, as far as we’re concerned,” Costa said.
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