James Hunter

Friday, June 12, 2015

Response to SJWC Letter to Rami Kahlon, Director, Div. Water & Audits CPUC

The following is a response to a SJWC letter regarding the protests of SJWC Ratepayers, regarding the changes in the process and procedure as well as the modified content of Rule 14.1 the Drought Regulations CPUC will consider on 6/15/2015 - this coming Monday

If you agree or disagree send a note to the CPUC Public Advisor with your position. Take 1-2 minutes and send an email to:

"Public.advisor" <public.advisor@cpuc.ca.gov>  

Let CPUC know your opinion!

(Blogger , for easier reading SJWC and other organizations are in "BLUE" smaller text, Blogger reply in larger black text, suggestion from Juan Estrada, District 5 United, thanks.)

_____copy of the letter sent ____

from:James Hunter j88hunter882@gmail.com
date:Fri, Jun 12, 2015 at 4:54 PM
subject:Response to SJWC Letter of 6/5/2015, to CPUC Rami Kahlon, Director

The following is a response, clarifications and rebuttal of the assertions of the letter of June 5th, 2015, to Rami Kahlon, Director, Division of Water and Audits, Public Utilities Commission of the State of California (CPUC), from STEPHEN OWENS, Manager of Regulatory Affairs, San Jose Water Company (SJWC).

Page 1, excerpt from SJWC letter

On May 11, 2015, SJWC filed ALs 472 and 473 with the California Public Utilities Commission (CPUC). AL 472 seeks CPUC authority to modify the existing Rule 14.1 to reflect the example Rule 14.1 provided in the CPUC’s Drought Procedures as well as to more closely match the drought restrictions of local government agencies. AL 473 seeks CPUC authority to add and activate Schedule 14.1: Water Shortage Contingency Plan with Staged Mandatory Reductions and Drought Surcharges to SJWC’s authorized tariffs and to implement Stage 3 of that Schedule 14.1 in order to achieve a 30% water use reduction in line with the requirements of the City of San Jose and the Santa Clara Valley Water District. Both Advice Letters were filed as Tier II advice letters with proposed effective dates of June 15, 2015.

The 30% was based on the recommendation of the Santa Clara Valley Water District (and the consent of the San Jose City Council. not “requirements”. This follows the historical pattern found in the California drought of 1988-1992, SCVWD requested an increase from 20% to 25%.

This appears to be a pattern of action unfair to the affected ratepayers and increases the potential they will suffer financial penalties (drought surcharges and fees), compared to the State Water Board recommended 20%.

Page 3, excerpt from SJWC letter

6) The relief requested in the advice letter is unjust, unreasonable, or discriminatory (provided that such a protest may not be made where it would require relitigating a prior order of the Commission).

This was the grounds for protest used by the vast majority of protesters. Protestors typically addressed five issues that they considered unjust, unreasonable, or discriminatory: i) SJWC’s use of the average residential usage to determine the monthly allocations is unfair; ii) SJWC’s exclusion of non-residential customers if unfair; iii) SJWC’s conservation goal of 30% is unreasonable; iv) SJWC’s proposed water use restrictions are unreasonable; and v) SJWC’s use of the program to create excess profits is unjust. These issues are addressed below.

Historically in the drought of 1988-1992 SJWC did in fact used the 1988 monthly usage by each ratepayer as a basis for the Drought Water Allocation by each user. Please refer to SJWC Monthly Allocation, water banking/roll-over, on the Blog :
Appendix B, attached to the June 2010 document, SJWCs' Water Shortage Contingency Plan (January 1992) has some interesting information.

Further individual ratepayer monthly 2013 actual usage is apparently used by California Water Systems and Great Oaks Water Company.

Page 4, excerpt from SJWC letter
i. SJWC’s use of the average residential customer usage to determine monthly allocations is unfair.
Protests in this regard typically suggest that SJWC’s use of the average usage for all residential customers to determine the monthly drought allocation is unfair to customers who have historically had usage levels much higher than the average residential customer. Protestors consider this to be the case because customers who have historically consumed water at levels much higher than the average residential customers will need to cut back usage beyond 30% to reach the drought allocation. Typically, protestors want SJWC to use individual usage from 2013 as a baseline to determine allocations. Additionally, many protestors want a “banking” system wherein usage under the allotment can be “banked” and carried over to the next month.

I would take exception to the use of “protestors”, do we magically change from customers and ratepayers when we disagree? Are we only ratepayers and customer when we do agree?

The basic premise, of the SJWC argument, is that all the ratepayers should drive the same manufacturer model car, the same color and this would be a fair distribution of goods and services. This appears to have an historical precedent, but doesn’t apply to Santa Clara County. We drive many different models of cars and they are in a wide range of colors. Compare this to the comparison to usage used in the SJWC arguments.

The basic minimum allocation per month based on the overall average consumption, does not take into account differences between ratepayers, basically some ratepayers annual earnings are greater, obviously. Some ratepayers proactively conserved water starting before 2013, obviously. A much fairer algorithm would be:
  • minimum state health minimum for everyone
  • rather than 2013 we should choose 2011, remember in 1992 it was based on 1988, as a baseline year
  • the monthly allocation by ratepayer is based on a 20% reduction in usage
  • an appeal program for number of people per residence, health related issues and add an appeal based on historical water usage, for the ratepayers that were conserving for many years.
Page 4, excerpt from SJWC letter
SJWC used an individual usage baseline program with banking during the early 1990s drought. At that time customers complained that the program was unfair to customers that had already cut back and that they would prefer an average usage baseline. In the local region both California Water Service Company, in their Los Altos District, and Great Oaks Water Company, which serves a portion of San Jose, are proposing individual usage allotments. Representatives from both companies noted that at their public meetings customers were complaining about their use of individual allotments versus an average usage allotment. Thus, it is fair to assume that that some part of the customer base will be unhappy no matter what program is chosen.

“Trust but verify”, while this is not a court of law I’d like representatives to identify themselves and submit a statement for the record. Also that statement seems at odds with SJWC’s implication that ratepayers with a higher earnings are opposed to actual usage per ratepayer vs, a fixed amount.

Page 4-5, excerpt from SJWC letter
ii. SJWC’s exclusion of non-residential customers from the Drought Surcharges is unfair, unreasonable, and discriminatory.

Protests in this category are most succinctly stated in the protest of the CPUC’s Office of Ratepayer Advocates (ORA): “The proposed water allocations and surcharges for usage
above the allocations are discriminatory in that they are unjustifiably applied to only residential and “landscape services” customers. Additionally, “water dependent businesses” would be inexplicably exempted from the proposed Stage 3 restrictions on water waste. Finally, surcharges collected exclusively from residential and “landscape services” customers would be used to offset costs that would have been the responsibility of all customer classes.” ORA goes on to request that “The Commission should direct SJWC to amend its Rule 14.1 and Schedule 14.1 filing to extend its restrictions to all customers and to incorporate a Monthly Drought Allocation and Drought Surcharge Program that more equitably distributes the responsibility of conservation and the monetary burdens of the failure to conserve across all of its customer classes.”

I agree with ORAs’ statement, no class of ratepayer should be excessively burdened by drought surcharges, more than any other, simply because it’s easier to penalize and monitor their usage.

The Great Oaks Water Company did get some things more right, published a letter concerning the meeting, kept a written record of ratepayer comments, recognized not all ratepayers are equal economically, but that everyone does have certain rights. I’d like to see a more proactive approach renters and others, but a better starting point.

Great Oaks is cognizant that renters and others who do not have individually-metered services could potentially see Schedule No. 14.1 surcharges passed through in the form of higher rents or other common area charges. Great Oaks urged persons or businesses in that situation to work with their landlords or homeowners association (the actual Great Oaks customer) to avoid those pass-through costs by conserving and complying with the allocations.  

Page 6, excerpt from SJWC letter
Additionally, any major revisions to SJWC’s proposed program would be no small matter with SJWC’s billing system. Major changes could take weeks, if not months, to implement. Compliance with the water use restrictions adopted by the State Water Resources Control Board and the CPUC in Resolution W-5041 is effective June 1, 2015. Delaying Schedule 14.1 implementation allows the traditional high water usage months with the most conservation potential to pass without any drought surcharges. Therefore, SJWC urges the CPUC to approve the proposed program as submitted and SJWC commits to make any experience based necessary program revisions in the most expeditious manner possible.

It appears to me that SJWC can in a very short period of time get a new surcharge on ratepayers bills, but suddenly it has changed to weeks and months, if they don’t agree with or want the change. SJWC has both surcharges and a few surcredits, as well as a complex accounting system that gets apparently every penny due them under the CPUC rulings and regulations.

They also in 1992 they were able to offer monthly allocations to ratepayers, based on each ratepayer's historical usage in 1988.
Page 6, excerpt from SJWC letter
iii. SJWC’s conservation goal of 30% is unreasonable.
Several protestors noted that the SWRCB placed SJWC in the 20% reduction tier and used this as a basis to argue that SJWC’s 30% conservation goal is unreasonable. As noted in SJWC’s AL 473 filing, due to local water supply conditions and to alleviate the threat of subsidence, the Santa Clara Valley Water District (SJWC’s wholesale water provider) as well as the City of San Jose have established a 30% reduction goal. Therefore, to protect against subsidence and to minimize customer confusion SJWC is requesting a 30% reduction from 2013 usage as well. SJWC’s call for 30% reduction is well founded and reasonable.

It seems that SCVWD was the primary factor in common with the 30% reduction, in usage. Since most other counties/districts are requesting the reduction by State Water Board Tier, the request seems tied to the concern for “ground subsidence”. The SCVWD published a document:

The Santa Clara Valley Water District has released its 43rd Annual Report on the Protection and Augmentation of Water Supplies, which documents the water district’s efforts to ensure a reliable water supply for Santa Clara County. The report presents the basis for the recommended groundwater production charges for fiscal year (FY) 2014-15 and is posted on our website, www.valleywater.org.  Page iii
The vertical red line was inserted to assist readers in seeing roughly where we are in relation groundwater elevation, it appears that historically SCVWD has done well so we find ourselves with a reasonable amount of groundwater. It’s obvious the next dip (left from the red bar) appears to be the 1988-1992 drought. SCVWD also has 350,000 acre feet banked in the Semitropic Water Bank in Kern County (it would be expensive to retrieve  apparently on the order of $1,000 acre foot, but the latest increase by SCVWD raises the cost to SJWC, very close to that price level).

Santa Clara County’s groundwater basins are the largest local “reservoir” of water, and the water district works aggressively to protect these resources. With less water available to replenish groundwater basins in Santa Clara Valley, the increase in conservation is critical. Decreasing demand by cutting water usage will help protect groundwater storage and lessen the risk of subsidence.

Subsidence is the sinking of the surface of the land that occurs if too much water is drawn from the aquifer beneath it. Subsidence can damage canals, levees, roadways, or sewer and storm water systems, and can also lead to flooding and to salt water entering the aquifers. The water district closely monitors groundwater conditions, and found that groundwater levels approached subsidence thresholds in several monitoring wells in 2014.

Since February 2014, the district has had a standing call for 20 percent water use reductions over 2013 usage levels, and between February and December 2014, water use was reduced by 13 percent. The board hopes the call for a 30 percent reduction, as well as the limits on watering, drive home the significance of the drought and spur even more cooperation from local water providers as well as residents and businesses.

The water district, as a water wholesaler for most of Santa Clara County, calls for local water providers, including municipal water utilities and investor-owned utilities, to implement whatever mandatory measures are necessary to reach the 30 percent target in their service area. The district will encourage local water providers to adopt specific water use restrictions that are as consistent as possible, throughout the county.

It should also be noted that a similar reason was used to justify a 5% (25% increase) over the State recommended level, in 1992. Now we are seeing a 100% increase requested above the State recommendation. Possibly this is an excessive increase above the State recommendation given the current state of the ground subsidence and a consistency in the application of the State Water Board and CPUC requirements would be appropriate, for all ratepayers.

Page 7, excerpt from SJWC letter
v. SJWC’s use of the program to create excess profits is unjust.
Several customers, both in the protests and at SJWC’s public meeting, suggested that SJWC created the program in order to create excess profits. As noted in AL 473 – the proposed Schedule 14.1 further provides that all monies collected by the utility through surcharges or fees shall be booked to the MCRAMA, with any balance disposed of via surcharge or surcredit at the CPUC’s direction at a future date. Thus, there will not be “excess profits” from the drought surcharges.

The Public hearing showed a high level of mistrust of both the utility and CPUC in the statements of the ratepayers attending and speaking. The quote above was exactly the statement by SJWC representatives, it didn’t help they tossed part of issue into CPUCs’ area of responsibility.

6. All monies collected by the utility through surcharges or fees shall be booked to SJWC’s existing Mandatory Conservation Memorandum Account (MCRAMA) or a similar memorandum account to offset lost revenues.

7. All expenses incurred by the utility to implement Rule 14.1 and Schedule 14.1 that have not been considered in a General Rate Case or other proceeding shall be recoverable by the utility if determined to be reasonable by Commission. These additional monies shall be accumulated by the utility in a separate memorandum account, for disposition as directed or authorized from time to time by the Commission.

For some reason many ratepayers have difficulty seeing beyond, “they get more money for less water and less work”. CPUC, SCVWD and SJWC likely should consider the need to work on this area.

Page 7, excerpt from SJWC letter
Responses to the Filing
SJWC received 35 responses to the filing that did not necessarily protest the request, but rather asked for clarification regarding the program or provided an appeal of the customer’s allocation. These responses were provided to SJWCs’ Customer Service Department who will reach out to the customers to provide further information.

SJWC appears to have significantly made an error estimating the number of ratepayers (not protesters please, although there seemed a bit of “booing” and heckling at the Public Hearing) that felt that the SJWC Advise Letters implementing 14.1 were unfair and the effort they made to provide public input was wasted as noted by the SJWC representatives, attitudes and actions. The number of ratepayers was much closer to the following:
  • 35 responses to SJWCs’ Customer Service Department
  • ~ 600 email petitions by ratepayers, District 5 United, San Jose
  • ~ 350 attendees at Public Hearing, 60+ spoke in the Q&A
  • ~ 229 page views of sjwc-rate-increase,blogspot.com past 4 weeks, relevant
The simple statement of 35 responses by SJWC was likely grossly understated.

Thank you,
James Hunter

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