LUCERNE, Calif. – A water rate case for the town of Lucerne still has not been settled, with current rates to continue until the matter is finalized in 2014.
In July 2012, California Water Service Co. – which serves Lucerne and 33 other districts – applied to the California Public Utilities Commission to raise rates, as Lake County News has reported.
Late this past October, Cal Water, the Office of Ratepayer Advocates, the county of Lake and other parties that had participated in settlement discussions in the general rate case reached a settlement agreement, which was filed with the administrative law judge overseeing the case.
However, the settlement agreement still has not been finalized by the judge, who on Dec. 19 issued a ruling granting Cal Water's motion for interim rates, according to Lake County Counsel Anita Grant.
Grant said the ruling gives Cal Water permission to continue existing rates as of Dec. 31 in its 23 districts as interim rates beginning Jan. 1, with a provision to “true up” the difference between current and new rates through a tariff and a retroactive credit via its Low-Income Rate Assistance – or LIRA – program.
In November 2012, the county of Lake and Supervisor Denise Rushing applied to become parties in the proceeding on behalf of Lucerne, which has seen its rates climb since Cal Water purchased the system in 1999.
Rushing told Lake County News that following a closed session at its meeting this past Nov. 12, the Board of Supervisors voted to sign onto the settlement agreement on behalf of Lucerne, which is one of more than half a dozen “Rate Support Fund” districts – meaning that its rates are so high that other districts pay into a fund to help cover high costs.
The board also issued a statement to the CPUC noting that while it approved the settlement agreement, “it should be noted that settlement on these issues does not directly address the general affordability concerns caused by the successive water rate increases on Lucerne residents.”
“We've done our best to make the case for Lucerne, and have held our own, but it is clear to me that real progress cannot happen in the context of a rate proceeding at the CPUC,” Rushing said.
Craig Bach, president of Lucerne Friends of Locally Owned Water, or FLOW, credited the work of Grant and one of her deputy county counsels, Lloyd Guintivano, for work in the case.
“Luckily we had county counsel on our side. I think that made a significant difference in our lives,” said Bach, adding, “Without it we would have been down the creek without a paddle.”
Rushing, who has worked on Lucerne's water issues since she took office in 2007, said she wished she had better news about the outcome of the proceeding. “It's just heartbreaking what people have to face in the way of water rates. It’s causing economic devastation of a whole community.”
Terms of proposed settlement
Lucerne is part of Cal Water’s Redwood Valley District, one of 34 districts across the state. The Redwood Valley District has 1,900 connections and serves a total of 3,600 people in Lucerne and parts of Duncans Mills, Guerneville, Dillon Beach, Noel Heights and Santa Rosa.
In its initial filing in 2012, Cal Water was seeking a 77-percent rate increase over three years, beginning in 2014, as Lake County News has reported.
Rushing said Lucerne's rates are among the highest in the Cal Water system. While not the highest of all the districts, Lucerne's rates are far higher than more affluent areas like Burlingame, which has rates of about $30 a month, Rushing said. That's about half of what an average Lucerne customer pays.
She said historically most jurisdictions fight hard to avoid paying into the Rate Support Fund, with the process essentially pitting one jurisdiction against another.
In the recent settlement hearings, that's just what happened, with other districts fighting “tooth and nail” against having to put any money into that fund, “and that’s what we were fighting for,” said Rushing.
Justin Skarb, Cal Water's government and community relations manager, said the corporation's LIRA, which provides qualified customers with a discount on their monthly service charge, currently has a maximum monthly benefit of $12, which if the settlement is approved will increase to $30 or half of the monthly service charge, whichever is less.
In addition, Skarb said the settlement agreement authorizes Cal Water to restructure the Rate Support Fund and increase the benefit customers in Lucerne receive.
Currently, customers are charged about $7.71 for each CCF – or 100 cubic feet – of water they use in a month. Under the revised program, customers would be charged $4.52 per CCF up to 10 CCFs, or 7,480 gallons, Skarb said.
He said the typical single-family residential customer in Lucerne uses 5 CCF, or approximately 3,740 gallons of water per month, and currently has monthly water utility charges totaling $61.11, which includes service charge plus quantity charges, minus a Rate Support Fund Credit of $24.
If the settlement agreement is adopted as submitted, that customer would have monthly water utility charges of $72.86, an increase of 19.2 percent, according to Skarb.
Currently, the same customer enrolled in Cal Water's LIRA program has monthly water utility charges (service charge plus quantity charges, minus a Rate Support Fund Credit of $24, minus a LIRA discount of $12) of $49.11, Skarb said. The settlement agreement would modify those charges to $47.73, a decrease of 2.81 percent.
According to the settlement's terms, Lucerne customers' monthly service charge will increase from $46.11 to $50.26. It's also anticipated that a CPUC fee calculated as a percentage of the total of the monthly service charge and quantity charge will increase due to the new rates, Skarb said.
As for the number of customers that would exceed the 10 CCF threshold, Skarb said that based on the consumption history from Cal Water's single-family, residential customers in Lucerne from November 1, 2012, to this past Oct. 31, about 107 of Cal Water's 1,151 customers in Lucerne – or approximately 9.3 percent – used, on average, more than 10 CCF per month.
Based on the new rates, there will be a charge per CCF for any usage over 10 CCF of $14.63, Skarb said.
The settlement agreement also covers several water system improvements, including the replacement of aging water mains and electrical equipment, installation of seismic upgrades at a storage tank and the construction of a tie-in to a neighboring water utility, Skarb said.
Gay Guidotti, the Lucerne District manager, said there are two capital improvement projects approved for Lucerne, including replacement of 1,080 feet of water line and two hydrants on Country Club Drive between 12th and 14th avenues, and an enhancement to the current treatment process to meet new monitoring standards to remove DBP, a disinfection byproduct cause when chlorine reacts with organics.
Explaining the settlement; options ahead
According to the proposed settlement, Cal Water was approved for a 51-percent revenue increase for the Lucerne District, the highest increase of any of the districts. Initially, Cal Water had sought a 57-percent revenue increase.
Pat Ma, a senior utilities engineer for the CPUC's Office of Ratepayer Advocates, Water Branch, told Lake County News that Cal Water was trying to make up for lost water sales in seeking the revenue hike.
“Customers are not going to see a 51-percent increase in their bill,” according to Ma.
As for who will pay for that increase ultimately, Ma said it's picked up by customers from other districts that do not have either the Rate Support Fund or aren't in the LIRA program, both of which are helping buffer Lucerne customers from the full impact of the revenue increase.
The settlement also will increase low income ratepayer assistance, she said.
While Cal Water is seeking to raise the LIRA cap from $12 to $30, the applicable monthly discount for Lucerne is $25.13, Ma said.
She said that without the Rate Support Fund, residential customers in Lucerne would pay $14.65 per CCF, while now they are paying $7.71. That will drop to $4.52 per CCF less than 10 CCF if the settlement is approved.
The lost revenue that Cal Water was seeking to recoup with the rate hike was due to inaccurate calculations in the last general rate case, Ma said.
“We overestimated sales. We set the rates too low,” said Ma. “So this general rate case is sort of a catch up.”
She said they attempt to provide the most accurate sales estimates, which in the case of Lucerne were based on the Office of Ratepayer Advocates' estimates. Around 2009, there was a conservation rate design that depressed sales. She said it was difficult to fault Cal Water in the process.
“Generally, it's just really difficult to forecast sales. We use historical data,” she said.
In projecting the anticipated sales for 2014, Ma said historical data for 2011 and 2012 were used.
“It's not an exact science. It's the best guess,” she said.
There also is a separate ratemaking effort under way at the CPUC in order to implement “postage stamp” rates; in other words it would make water rates like electricity rates, and even out rates across districts.
“It's an open proceeding,” said Ma, with no resolution yet, adding that it's unclear if costs actually would go down.
The county also is a participant in that proceeding. “The County hopes to address and resolve these general affordability concerns through this Rulemaking proceeding,” the board said in its November statement to the CPUC.
“I think there may be a lot of political pressure this year to make that happen,” Rushing said of the proceeding.
“As I see it, the underlying affordability issues need to be addressed both in the CPUC rulemaking procedures and through the California legislature with other mechanisms,” Rushing said.
Rushing said there have been other developments that might help address Lucerne's water rates in the future, including a new state law – which hasn't yet been used – that says all water must be affordable.
In addition, Gov. Jerry Brown has asked the Legislature to create a water infrastructure fund – which is “going to take some time to do,” according to Rushing – that would allow communities to form districts and purchase water systems.
Bach said Lucerne FLOW has been talking to the Local Agency Formation Commission about what would be required to form a new water district.
“We don't have any immediate solutions. We just know what we’re going to try to do,” he said.
Rushing pointed out that communities next door to Lucerne are paying half as much for water.
“It's it’s not fair, it’s not right, and it needs to change,” she said.
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