James Hunter

Saturday, September 13, 2014

Mercury News, "Dry Times: An in-depth discussion about Bay Area water issues"

The Mercury News sponsored a public forum, "Dry Times: An in-depth discussion about Bay Area water issues", to review the current status of the drought affecting California. The moderator was Lisa Krieger, presenters were Paul Rodger (Mercury News), Jim Fielder (SCVWD) and John Tang (SJWC).

The focus was on the basic info concerning the drought and conservation efforts. Paul Rodger had some good points regarding the drought and historically what droughts and when had occurred, as well as general information. There was a bit of discussion covering the aquifers in the Santa Clara valley and the use for water storage, as well as the fact we are drawing heavily on our wells during the current drought.

The discussions avoided really addressing the tough economic questions that will affect consumers (ratepayers). The utility representatives presented slide presentation emphasising conservation, fixed costs and requirement to import water. This is understandable as SJWC and SCVWD are compensated by the state or by increases in our rates.

The reality can be simply shown by, the installation of a low-flow toilet. You can apply and get as much $150 rebate. Minimum your going to spend $500 total for toilet and installation. You use less water, but due to the MCRAMA, (Mandatory Conservation Revenue Adjustment) currently in effect. Our rates will be adjusted, to protect SJWC revenue/profits.

So what does the ratepayer get besides the satisfaction of being a good citizen-that doesn't pay any bills! We can hope that we reduce our water use so we can achieve a monthly water cost reduction sufficient to pay for the costs. The example, toilets use 22% of water use ($76 monthly was noted in the meeting, higher than most numbers showed in the recent GRC documents), if we reduce toilet water use by 50% we would save $8.35, so $350/$8.35 = 42 months, to breakeven. Unless the other shoe drops and it will, SCVWD increases it's charges for water, resulting in SJWC invoking their MCRAMA, (Mandatory Conservation Revenue Adjustment) and raising our water rates and the financial savings decrease and the breakeven point disappears into the future..

The question really avoided was what do we do in a protracted drought, 10 years? The water re-cycling seems to be the best approach, but will take 10 years and then only supply 5-10% of the needs.

So we are faced with conservation, as the fastest method, definitely cheapest for the utilities, of addressing the drought. Cheapest for the utilities because we are paying for it indirectly through out water rates and taxes, as I pointed out subsidizing the the cost of water conservation upgrades to our homes. We can only hope that as the water utilities and state government will make it more financially attractive for consumer (ratepayers) to install conservation upgrades in their homes.

I hope that the Mercury News conducts more meetings with a practical focus on consumer (ratepayer) water conservation. Addressing the very practical and economic matters that will affect the adoption of many of the ways to conserve. This would hopefully encourage more consumer conservation.

Blogger comment: John Tang wasn't very clear in his statements regarding WRAM, to clarify that:
Excerpt, SJWC Advice Letter No. 456 to CPUC
The decision of CPUC stated: As the current dry years persist, and the need for conservation of water resources continues, the Commission will consider in SJWC’s next GRC, if not before, whether SJWC’s current Monterey-Style WRAM is a useful water conservation mechanism that balances the risks of lost or increasing sales between the utility and its customers. In addition SJWC also requested and was granted an MCWRAM:The existing MCMA and MCRAMA were originally authorized by the Commission through AL 407-D in August of 2009 after significant vetting by DWA. The language for the accounts is still in SJWC’s Preliminary Statement. These memorandum accounts meet all of the requirements of the Drought Procedures, including: Maintaining separate memorandum accounts for tracking conservation expenses and lost revenues associated with reduced sales; Recognition that the memorandum accounts are opened in concurrence with SJWC’s  activation of the Rule 14.1.A voluntary conservation measures; and  Recognition that before seeking recovery of the memorandum account balance, the balance shall be reduced by an amount equal to a 20-basis point reduction in the utility’s most recently adopted return on equity. The Drought Procedures further specify that only companies without a full Water Revenue Adjustment Mechanism (WRAM) in place may request adding a memorandum account to track lost revenue associated with reduced sales as a result of activating either voluntary conservation under Rule 14.1 or mandatory rationing under Schedule 14.1. At this time SJWC does not have a full WRAM in place. SJWC does have a Monterey-style Water Rater Adjustment Mechanism (WRAM) in place at this time. The Monterey style WRAM currently in place for SJWC’s residential customer group is not a revenue decoupling mechanism but rather a price (rate) adjustment mechanism. As recognized by the Office of Ratepayer Advocates and SJWC in the Settlement Agreement regarding the implementation of SJWC’s Monterey WRAM ultimately adopted by the Commission in D.08-08-030: 
Basically  SJWC has Monterey-style Water Rate Adjustment Mechanism, in place. Earlier this year based on the Drought declaration SJWC submitted and was granted a Mandatory Conservation Revenue Adjustment Memorandum Account (MCRAMA). This provides additional protection to SJWC for revenues and profits, during a declared drought and further protect SJWCs revenue from conservation effects. In other words we the ratepayers are guaranteeing SJWC revenue and profits during the drought, even though CPUC didn't grant them a full WRAM in the recent GRC. I expect them to continue trying to get the full WRAM, as I'm sure the analysts that watch the SJW Corp. stock will take notice and the price per share is likely to increase.

If you appreciated the opportunity and have suggestions regards other drought related Mercury News Forums, send suggestions to:

Martin G. Reynolds mreynolds@bayareanewsgroup.com

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