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Home News Latest Cal Water officials meet with unhappy Lucerne residents over proposed 77-percent rate hike

Cal Water officials meet with unhappy Lucerne residents over proposed 77-percent rate hike

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Tom Smegal, California Water Service Co.’s vice president for regulatory matters and corporate relations (at right), led a sometimes contentious meeting with residents of in Lucerne, Calif., regardinga potential rate hike on Wednesday, October 24, 2012. Photo by Elizabeth Larson.

LUCERNE, Calif. – California Water Service Co. representatives faced a group of unhappy and sometimes angry Lucerne residents at a Wednesday night meeting on the company’s proposal to raise water rates 77 percent.

More than 30 people attended the meeting, which ran just under an hour and a half at Lucerne Elementary School’s multipurpose room.

Ratepayers complained about already struggling to pay their water bills after several large increases in the decade Cal Water has run the system.

Tom Smegal, Cal Water’s vice president for regulatory matters and corporate relations, led the meeting.

He found himself frequently interrupted by questions and comments, and at one point told the group, “If I can’t answer the questions, I’ll just stop,” leave and return to San Jose.

Also in attendance were representatives from the California Public Utility Commission’s Division of Ratepayer Advocates, County Deputy Administrative Officer Alan Flora and Jeff Tyrell of state Sen. Noreen Evans’ office.

Cal Water is asking for a 77-percent increase over three years, beginning in 2014. The corporation submitted the generate rate case application for the increases in July, as Lake County News has reported.

Community members at the Wednesday night meeting were told that it will take the CPUC about 18 months to make a final decision, and to expect a decision in January 2014.

Lucerne is part of Cal Water’s Redwood Valley District, which 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.

Smegal said the corporation has seen a 25-percent increase in costs and a 32-percent decrease in water sales.

Community members pointed out to Smegal during the meeting that one of the reasons water sales were down was because people couldn’t afford their rates and were moving away.

Smegal said the Division of Ratepayer Advocates is “continuing to investigate” Cal Water’s rate hike request.

“Do they drink the water?” one woman asked from the audience.

As the result of the application process, Smegal said the commission will determine the costs to operate the water system and set rates accordingly. He said the CPUC likely will set a rate lower than Cal Water requested.

He said if community members did not like the process, they should tell that to the CPUC.

“A regulated utility only has its customers as a source of revenue,” Smegal said.

When asked why Lucerne can’t get help from the rest of the system, Smegal said the community already is being subsidized by other ratepayers to the tune of $24 a month.

A woman asked why water ratepayers across the state weren’t all paying the same rates. Smegal said water is set on local costs, and state rules have always set that rule for water, while for electricity customers all pay the same rates.

One woman told Smegal that she lives by herself and can barely afford to do one load of laundry a week or to shower regularly. She said she paid more for water than for her medical bills, asking if that was right.

Smegal said he didn’t know if it was right. “You know it’s not,” said a man from the audience.

As he continued to be interrupted, Smegal responded, “You want to hear from me or do you want to bicker?”

When asked why other local water districts had lower rates, Smegal said county-owned districts were subsidized and added, “Water systems are all different.”

Another audience member asked Smegal at what point the system would become so unprofitable that Cal Water would be interested in selling it.

“I really can’t answer that question,” replied Smegal.

Asked about the potential impact on water rates when Marymount College completes the process of opening its new campus at the Lucerne Hotel, Smegal said it could have positive impacts on rates, adding that the college’s presence wasn’t included in the corporation’s general rate case predictions.

Smegal told the group, “I don’t like asking for rate increases,” and doesn’t like to have to defend his company.

Other questions for Smegal included how much of the town’s 17-mile system of pipes had been replaced in the 12 years Cal Water has run the system. The answer: about two miles.

Smegal said the company wanted to replace all of the aging pipe but it’s very expensive.

Cal Water’s representatives were told that it was starting to feel like they had no plan for upgrading the system, with repairs largely being “knee jerk.”

Smegal also couldn’t provide a bottom line number on what was needed to fully upgrade the system’s infrastructure, explaining that in the past the CPUC has told them to not pursue some projects in order to keep rates down.

Lake County Deputy Administrative Officer Alan Flora reads a letter the Board of Supervisors sent to the California Public Utilities Commission during a meeting on a proposed rate hike in Lucerne, Calif., on Wednesday, October 24, 2012. Photo by Elizabeth Larson.

A struggling community

Lucerne resident Frank Hodges told Cal Water’s staff that the community was in bad shape.

“We’re hurting. Period. That’s all there is to it,” Hodges said.

Smegal said Cal Water had no power to set the water rates.

“Oh, give me a break,” said Hodges.

Cal Water’s presentation included a slide showing where ratepayers’ payments go.

Six percent covers water supply; the largest amount, 35 percent, goes to capital improvement; 1 percent goes to conservation; 28 percent to district payroll and benefits; 16 percent, other district expenses; and 14 percent, capitalized services, including water quality, engineering and administration.

County Supervisor Denise Rushing could not attend the meeting, so Flora attended in her stead.

“She is doing a lot of work behind the scenes right now,” including working with state representatives, Flora told the group.

Flora thanked Smegal for coming to Lucerne and facing the barrage. “This is a very sensitive issue for some very legitimate reasons.”

Flora read from a letter the Board of Supervisors sent to the CPUC this summer, which stated that since January 2009, 92 homes in Lucerne had been lost to foreclosure, and Cal Water’s estimate of average bills – about $62 per month – didn’t tell the whole story.

The letter said the community had a 25-percent vacancy rate, and even vacant properties the county owned showed monthly bills of between $80 and $90.

The board suggested Cal Water was using “creative math” to show a lower average water rate.

Altogether, the board’s letter said that water users can expect to pay at least $735 more a year.

“The entire ratemaking process does not take into effect this destructive cycle,” said the letter, which asked if there were only two residences, would they share the water system’s entire cost?

The board said both Cal Water and the CPUC had a responsibility to address the inequality in ratemaking.

“We are skeptical of the motivation behind the rate increase,” the board’s letter said, pointing out that it included $108,000 for salary increases and additional funds to cover a remodel at the corporation’s San Jose office.

The board asked the CPUC to deny the rate increase in Lucerne, which pays the second-highest rates in Cal Water’s 34-district system.

Flora also told the group that Rushing was set to attend a meeting with CPUC representatives next week.

Tyrell told the group that Evans, along with Assemblyman Wes Chesbro and Assembly member Mariko Yamada – whose redrawn district includes Lake County – has been following the rate proposal. Community members thanked him for coming and gave him a round of applause.

Smegal encouraged community members to sign up for Cal Water’s Low-Income Rate Assistance program, .

He also said community members need to get involved if they want the CPUC to set lower rates.

Community members can band together and petition for party status with the CPUC by contacting the CPUC Public Advisor’s Office, 505 Van Ness Ave., San Francisco, CA 94102; email, ; telephone 415-703-2074 or 866-849-8380.

Smegal said community members should expect to receive a notice for a CPUC meeting on the proposed rates that will take place next January of February in Lucerne.

Email Elizabeth Larson at . Follow her on Twitter, @ERLarson, or Lake County News, @LakeCoNews.

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Comments (7)Add Comment
Jan at SD
written by a guest, October 30, 2012
We would like to clarify a quote attributed to Mr. Smegal in this article about County-owned water systems. Water districts that are managed by the county, (Special Districts) are not subsidized. All expenses for every system, are paid by the ratepayers within that system. The county has provided emergency loans when a system is in dire need, but the fees to repay those loans are included in the customer’s bills. Thank you Laconews!
Mark Dellinger, Administrator and Jan Coppinger, Deputy Administrator-Fiscal
written by jmadison, October 25, 2012
My bill in Lakeport, during the summer, is 250$/month for a family of 4. My 13 year old daughter takes longer shower than she needs and I do have 2 dogs that may drink a lot, but 250? 250? is that normal?
cut sarery in half?
written by anonymouse, October 25, 2012
You first "Big Jerr"
bankrupt cal water so we can take our water company back
written by bigjerr67, October 25, 2012
cal water is the second biggest water company in ca. and they are greedy crooks they have an eight story office building in sanjose and they give their selves pay raises quite often but they say their broke and need money to replace our water lines they should cut their salary in half and put that towards our water company and save our ratepayers some money
couple of questions
written by anonymouse, October 25, 2012
1: Where was "FLOW" 2: What did "FLOW" ever accomplish? 3:What happened to the thousands of dollars that that the county gave :FLOW" to work for the citizens of Lucerne?
written by a guest, October 25, 2012
Nobody answered the question about is it drinkable?
Tom Smegal
written by a guest, October 25, 2012
Hey! I just thought of something, Smegal, isn't that the name of Gollom before he found the ring of power? smilies/grin.gif


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