Punishing Water Penalties Unconstitutional

"Rejecting the pleas of California officials worried about water conservation, the state Supreme Court on Wednesday left intact a lower court ruling that makes it tougher for cities and water districts to impose punishing higher rates on water wasters. 

In its weekly closed-door conference, the Supreme Court refused to soften the statewide impact of an April appeals court ruling that found the city of San Juan Capistrano's tiered water rates -- common in the Bay Area and elsewhere in California -- were unconstitutional because they charged more for water than it cost the city to provide the service."  excerpt San Jose Mercury News, Howard Mintz, 07/23/2015

We in San Jose have a Municipal Water District, City of San Jose and a Public Utility Company, San Jose Water Company. It's obvious the state Supreme Court ruling applies to the Municipal Water District rates and as the case in San Juan Capistrano, the city San Jose may have to make a refund to its' water customers.

The case is a bit different and I'm sure the legion of Water Lawyers is very happy that we also have many Public Water Companies in California. The structure of reporting, auditing for government water districts is to the city council or county council. These folks sell water to the public - important - get direction from the State Board of Water Resources, who reports to State Governor. San Jose Water Company is a wholly owned subsidiary of SJW Corp. who is "Publicly Traded Stock" company. SJWC reports, audited and requests tariff approvals from CPUC.

This raises interesting questions: 

• Will San Jose Water Company have to change their tiered tariff structure and the punitive usage penalties currently in effect and approved by CPUC? 
• CPUC ORA is supposed to be pursuing a CPUC Commission hearing about SJWC discriminatory application of the drought regulations, as they exempt certain classes of ratepayers (I got an email indicating they were from an ORA staff member)?
• Further will the current tiered tariffs result in refunds to SJWC customers (ratepayers)?
• The really underlying question is will CPUC apply the state Supreme Courts ruling to regulated Public Water companies (currently 10 class A water utilities) and require they request new tariffs that reflect actual costs of water and remove the punitive penalties, used to affect social change and reduce use of water?

"California may be thirsting for water, but water utilities in the state—and elsewhere—are an overlooked niche that investors should be eyeing for steady earnings growth and dividends that can keep pace with rising bond rates. 

Water utilities have traditionally been regarded as a sleepy stock backwater, churning out dividends for widows and orphans and no more. But that's changing. Analysts say the utilities—though still regulated monopolies—are in growth mode, snapping up acquisitions, forging agreements with friendly regulators and, in some cases, moving into unregulated markets." excerpt from CNBC article 

The statewide question is,  "how friendly the regulators (CPUC and the Division of Water & Audits) are with the 10 class A water utilities"? Remember the quote from the CPUC Director of Water & Audits , "More than 1,000 people sent the PUC protest letters claiming the rules were unfair, said Rami Kahlon, director of the PUC's Division of Water and Audits in San Francisco. Kahlon said the PUC staff denied the protests because it's giving the private water companies it regulates wide latitude crafting the rules, with the main goal being that they hit water conservation targets the state has assigned them.".

Blogger comment: I'm flush with anticipation waiting for the CPUC ruling to drop!

Why does SJWC really want WRAM (Water Rate Adjustment Mechanism)

San Jose Water Company (SJWC) has tried very hard to justify why they really badly need to fully decouple revenue from sales. This means that the price we pay for water will be adjusted to insure that SJWC gets its CPUC approved profit percentage, presently 8.08%. We find ourselves in a major drought and as the cost of water purchased by SJWC, from SCVWD or pumped from the Santa Clara Valley aquifer our cost of each unit CCF (CCF-100 cubic feet), of water will increase, not including any penalties for water usage above the published monthly rations.

The latest filing (OPENING BRIEF OF SAN JOSE WATER COMPANY, GRC1501002) from SJWC to ALJ Pat Tsen, argues based on many of the same terms as GRC1201001 (General Rate Case 1201003). 

SJWC wants from WRAM (excerpts from 2 and 3, SJWC Opening Brief)

"Revenue Decoupling: In this time of severe drought, public attention is focused on the need for all users to limit water consumption, but Commission policy and state legislators have wisely focused on water conservation as a long-term policy goal. Now is the time for the Commission to enable SJWC to align its business incentives with its conservation goal by implementing a WRAM/MCBA that will decouple utility revenue recovery from water sales. Experience with other water utilities’ WRAM/MCBAs has demonstrated that these mechanism perform as intended if water sales forecasts are realistic. In the present GRC, the Company and ORA have cooperated to develop a sales forecast that properly reflects anticipated customer response to the drought and to drought-related water conservation mandates. In this context, authorization of a WRAM/MCBA as proposed by SJWC will benefit the utility, its customers, and the state’s water conservation goals."

That's a lot of generalizations, especially the undefined "benefit to customers", in the late 1980 ERAMs (Electric Rate Adjustment Mechanism) based upon what we ratepayers have seen a lot of issues (dare we say problems) that related to the potential misuse, of funds collected from ratepayers. SJWC also points out that "other water utilities" have been allowed by CPUC during Mr. Peevey's terms as President, since the other guys got it why can't we have it to? Pointing to the obvious, Mr. Peevey and his replacement are under investigation, by State and Federal Authorities.

So, in the Blogger's opinion let's do something different tell the ratepayers what's in the approval, of the WRAM,  for SJWC and the ratepayers! It sure looks like we would be giving SJWC something for really doing their job, as required already by CPUC!

"WRAM-Related Conservation Programs: With its incentives properly aligned through adoption of a WRAM/MCBA, SJWC seeks to pursue ambitious water conservation programs that will assist customers in achieving the water use reductions envisioned by the Governor’s Executive Order and the implementing regulations of the State Water Board and this Commission. Mandates to cut water use will be better accepted and more effective if they are accompanied by programs that enable residential and business customers to make better, more efficient use of the water they still must use. That is what SJWC’s WRAM-related conservation programs will help its customers to do."

The twisting of the english language to justify what they really want, apparently very badly, is not saying what is really happening or why they SJWC wants the WRAM approved. SJWC increased our required rationing to 30% from 20%, as required by the State Board of Water Resources, based on a request by the SCVWD (Santa Clara Valley Water District) who is a water reseller and does not legally control SJWC a publically owned company. Based on a ground water level decrease which may cause, subsidence, if the water level continues to decrease. The City Council of San Jose jumped on the bandwagon as well. See my blog or go to the SCVWD report to see the graph showing historical ground water levels, in Santa Clara Valley.

The blogger would like to point out that the rationing effects only metered residences, 60% of the SJWC ratepayers, resulting the financial burden being levied in a discriminatory manner, since the other 40% are exempted. SJWC then increased the financial burden, by 50%, on the group already being discriminated against. 

The next question is what are the "SJWCs' WRAM-related conservation programs will help its customers to do". Being a ratepayer I tend to start reading things very closely when effective monopoly companies say they want to help me. The "SJWC’s WRAM-related conservation programs" are shown below and the question asked is how much do they cost me?

• SJWC requested $12,138,200 increase in projects associated with conservation, based on getting approval for the WRAM, ORA recommends 40.25% reduction and to deny the WRAM and associated conservation expenses. So wants to pay $4 million more and they get the WRAM. Hmm, It's obviously a win-win for SJWC, but it seems to be a lose-lose for us (ratepayers). The question is where does the $4 million per year come from and who really pays for it?
• Let's see in more detail what the $4.2 million dollars, contingent on WRAM, are:
  -Ultra-High Efficiency Toilet, Showerhead and Aerator Direct Install Program. SJWC proposes to replace, 2,000 per year, old toilets with UHET units, at no charge to ratepayers. Since there's 100,000 or more toilets in the SJWC, so the program would take 50 years as proposed (ignoring population growth). The second issue is how participants are selected? A non-discriminatory selection method of proposed participants? Financially SJWC says in Exhibit E that it would cost them $236,841 revenue annually, if the UEHT toilet replacement is approved it would reduce the cost of water potentially purchased by $157,000 vs. the claimed revenue loss of $236,841 annually. Wow, they didn't teach me that accounting method when I got my BSBA and if I used misleading measurements of gallons, vs. CCF vs. acre foot, as it appears to have been convenient, I would have lost points on my grade.Oh, the cost per toilet installed is estimated at $320 each, so 98% of ratepayers would effectively pay the $640,000 annual cost plus make up the lost SJWC revenue? please tell me I'm wrong. Oh yes, SJWC revenues are guaranteed so ratepayers water rates would be increased.
  -Waterfluence Landscape Budget Program-Home User Water Reports, I thought Santa Clara Valley Water District was responsible for this program? is SJWC going to start paying SCVWD for this service?
  -CII (Commercial, Industrial, Institutional) Survey Program, focused on high volume users Discriminates against small businesses and residential ratepayers who are not included.
  -School Education Kit Program, Single Source (RAP), 100 fifth grade classes, estimated cost $106,200, water savings for SJWC is estimated at $43,000 (43 acre feet at $1000). Where's the $63,000 going?
  -Landscape Education Class Series, a modest cost estimated at $9100 per year, for residential and Landscape contractors, saving estimated at 20% of what? cost savings? How are participants selected? Is there a non-discriminatory method to select participants? or will there be a charge to attend?

It really doesn't appear to me, after reviewing Exhibit E sections referring to additional conservation programs contingent on CPUC approving SJWC be allowed to implement a WRAM/MCBA fully decoupling revenue from sales, that SJWC is actually offering ratepayers any significant benefits. 

The blogger has to wonder whether Exhibit E was not placed online, so ratepayer access was effectively limited and effectively stifle dissent? and prevent or control ratepayer  complaints?

The apparent cost of the conservation programs contingent on the approval seem to be actually covered by the ratepayers, in any case it appears the existing "Monterey Style WRAM" protects SJWC by raising the costs of water to ratepayers, if the drought persists and SCVWD raises rates. 

The SJWC "incentive" doesn't represent an obvious non-discriminatory benefit for ratepayers. I oppose providing SJWC a full decoupling of sales and revenue, using the proposed WRAM/MCBA, as a purported incentive.

Please send email, 
make your opinion heard!

 If you are concerned about these issues, send email to CPUC at: District 5 United eForm eMail  Simply click on the "eForm eMail" and you will get a page to fill out the information and specify the reason for your opposition to the discriminatory nature of SJWC Drought Allocations and continuing requests to de-couple their revenue from the requirement to do business efficiently and your concern about their lack of openness and transparency. 

Please consider pasting the following when you fill in the eForm:

"The contingent extensions of the conservation programs do not seem to provide SJWC Ratepayers specific benefits, of value, in a non-discriminatory manner. Rather the conservation measures are either, offered contingent on CPUC approval, of the WRAM, are already provided by SCVWD, are applicable to specific group of ratepayers (discrimination), are likely really paid for directly or indirectly by us (the customers/ratepayers). I OPPOSE providing SJWC with a WRAM separating revenue and water sales, effectively guaranteeing SJWC profits."

You can also send an email to CPUC Public Advisor public.advisor@cpuc.ca.gov  The Public Adviser will insure your email will be sent to all the appropriate CPUC staff members.

Other people to drop an email (note) and express your opinion are:

• Scott Herhold, San Jose Mercury News, sherhold@mercurynews.com

• Julie Putnam, NBC Channel 5, julie.putnam@nbcuni.com

Water Thieves, Rustlers and Vandals!

Update July 15, 2015 Tom Sellek apparently resolved the water theft issues, as a long-time fan of his glad to here this has been cleared up.

Update July 12, 2015 It seems to be getting a bit like the wild west, folks are stealing water trucks then stealing water to fill them. A local Santa Clara nudist camp owners were arrested for stealing water, but they thought they were "grandfathered" into having rights to the water. Are they all wet?

Update July 10, 2015 I was wrong in how long it took! A well know actor has been incriminated in "Water Rustling (Theft)", SoCal.  In another incident vandahls opened hydrants and wasted 6 million gallons.

It may be fiction today, but what about next year?

It's bound to show up, if it hasn't already, water being stolen or exposed water pipes and spigots (outdoor faucets) being vandalized. The high water rates plus drought surcharges means the cost of water has tripled or more, in a short period of time. We're lucky in that stealing water is not quite practical this year a CCF (hundred cubic feet, 748 gallons) is a bit heavy and bulky. The most likely thing happening is a neighbor notices you're gone for the weekend, really simple to run a hose and top off a pool or a spa quickly and quietly or water their shrubbery, on your buck. Since it's hard to check your meter (San Jose Water Company), so you find your water has been rustled when you get your next bill (bi-monthly, every other month). I can easily imagine the call to customer service.................... Can you prove someone stole water from you? It doesn't have a serial number, it looks the same as your neighbors water? An interesting problem, as SJWC would hold you responsible for water use, when it goes through their meter it's your water and your responsibility!

The next and more likely problem is vandalism. We all have seen the graffiti a spray can of paint, can cost hundreds of dollars to clean up or paint over.  A malicious key scratch on a car door can cost the owner a couple of hundred dollars, to fix. Why, someone doesn't like Prius Hybrids, the color of you or your car, your pants don't sag and your hat is the wrong color? You did something that someone remembers as a criticism or a slight. So, when you not home they turn on your water and let it run, it's your water and you're going to pay for it. It can get worse a simple swing of a large hammer can break the outdoor faucette and to stop the water flow you would need to shut the water off at the water meter. The vandal does a gratuitous bit of economic harm to you, for some unknown reason and collects a bronze/cooper faucette, yours. Again it's unlikely the local police will want to do anything, which gets you back to calling, SURPRISE, your local water company customer service agent. Who will be "sympathetic" if you're lucky and who will remind you that when the water goes through the water meter you own the water!

If you're lucky the the local water cop (actually your local water company water repairman or meter reader) will notice the water running down the street, to the storm sewer. They'll simply report your watering your yard at the wrong time and are wasting water, you'll get a warning........one step away from your local water company, in my case SJWC, putting a flow restrictor on my meter that I would have to pay to have removed.

You can in fact at least take a picture of the broken faucette to show your local water company that you were the victim of vandalism. Attach it to the email you should send describing date and times of the incident. If this is your first case and you get the one supportive customer service agent, I'm sure there is one, they may recommend your paying them for all the water that went down the storm sewer.

The typical 5/8 or 3/4 inch faucet will provide a flow at the faucet of 15-30 gallons/minute. Using the lower figure 15 gal/min. x 60 = 900 gallons per hour, if your in the 100% plus usage you'll be paying $12-$14 an hour or if it runs for a day your water bill could see a surprise $288 to $576, in a day. Oh, when you call to report the problem that occurred be sure you took the kids to DisneyLand, don't mention Las Vegas, you'll possibly get a small bit of sympathy for the kiddies at Disneyland or the sick relative in Phoenix.

If you've been rustled or vandalized there are some low cost solutions, besides having security cameras on the outdoor faucets:

CPUC, More Search Warrants issued! June 6, 2015

More Search Warrants issued......................How much has CPUC actions cost us (ratepayers)?

Utility Company	Project	Total Cost	Cost to Ratepayers
PG&E	San Bruno pipeline failure	2.2 billion	$1.6 billion
SDG&E, SCE	San Onofre Nuclear Plant shutdown	4.7 billion	$3.3 billion
Total		6.9 billion	$4.9 billion

It appears that ex-President Peevey has tried to give the utilities $4,900,000,000 windfall by charging ratepayers, for their mistakes. Another way to view this is $4,900,000,000 / 37,000,000 million California population or:

$132.50 

for every man, woman and child in California. 

Keep in mind we already paid for maintaining the nuclear plant and the pipeline, now they want us to pay again to fix them again? PG&E wanted a tax break in addition on the "penalty that was imposed". What other utility "friendly" terms been privately been negotiated between CPUC and the Utilities? Don't forget the 10 class A Public Water Utilities are also supposed to be "regulated by CPUC", including the San Jose Water Company.

Another example of how the CPUC management and Commissioners continue to respond was the discrimination inherent in the drought rules, approved for San Jose Water Company

"A state agency representing consumers (ORA Office of Ratepayer Advocates" said Tuesday that it will try to overturn strict water conservation rules that took effect this week for 1 million residents of San Jose and neighboring Silicon Valley communities, on the grounds that they violate state law by imposing penalties on homeowners but not businesses or apartment owners."

"We think they are discriminatory, unfair and unreasonable," said Danilo Sanchez, program manager at the Office of Ratepayer Advocates. "They need to put some kind of burden on their commercial and industrial customers. We want to make sure that all customers are treated in a fair and equitable way."

You should be aware that over a 1,000 protests were sent by SJWC customers, which the Rami Kahlon, Director of Water & Audit division admitted were ignored.

"More than 1,000 people sent the PUC protest letters claiming the rules were unfair, said Rami Kahlon, director of the PUC's Division of Water and Audits in San Francisco.Kahlon said the PUC staff denied the protests because it's giving the private water companies it regulates wide latitude crafting the rules, with the main goal being that they hit water conservation targets the state has assigned them." 

Blogger comment: Reality is the State Board of Water Resources recommended SJWC and San Jose City Water require a 20% reduction in water use. The 30% was somewhat arbitrarily decided by Santa Clara Valley Water District as the required reduction, based on concerns about ground subsidence, of 17 feet water level drop at a measurement well. 

In addition Mr. Danilo Sanchez, CPUC ORA responded in an email, to me:

"Hi Mr. Hunter, you have 10 days from the date you received the disposition letter from the Division of Water and Audits.  The Office of Ratepayer Advocates will be submitted a request for review.  However, we don’t know how long it will take the Division of Water and Audits to draft a resolution that would be put forth to the Commission for a vote."

CPUC ex-President/Commissioner Peevey left his position in December 2014, but his legacy apparently lives on and on!. His departure was closely followed both the State of California and Federal Attorneys offices launching an investigation into Mr. Peevey's activities related to PG&E (San Bruno gas pipeline) and other CPUC staff. The investigation also searched his Mr. Peevey's home office removed computers, notes and accessed his email. Several senior management staff were terminated by PG&E. To date the public announcements have indicated a serious bias appears to have tainted CPUC decisions, in favor of the utilities needs, rather than ratepayers.

On July 6, 2015 search warrants were served on both CPUC, San Francisco office and Southern California Edison, office outside Los Angeles. Click to see search warrants and list of individuals email and other sources of information regarding the unpublished ex parte "private discussions ex-President Peevey had with Edison management about having ratepayers pay 70% of SONGS (over $3.3 billion), San Onofre Nuclear Plant shutdown costs.

Since Mr. Peevey's departure his Chief of Staff Carol Brown apparently reverted to her position as an ALJ (Administrative Law Judge), then moved to the Division of Water & Audit and has apparently retired, but is also named in the search warrant served on CPUC. Current commissioner and and senior management are named, read the search warrant and see over two dozen who are named.

The dance goes on at CPUC, how long is it going to be and how many more dollars will it cost us?

"For many years before scandal broke, the PUC under Peevey and several predecessors maintained a steady pattern favoring the interests of regulated, privately owned corporations over those of the consumers they serve.This pattern extended from pricing to maintenance and safety concerns, from easy OKs of power plant siting to lack of concern over nuclear safeguards at the now-closed San Onofre Nuclear Generating Station and the Diablo Canyon nuclear power station. It has cost consumers billions of dollars over decades, costs that climb each day.This has been achieved via a sort of kabuki dance, where utilities routinely ask far more in rate increases than they know they’re entitled to. The PUC responds by cutting the requests, still giving utilities larger increases than reality justifies. Then both the commission and the companies brag about being “consumer-friendly.”The dance went on unchecked for decades, legislators paying virtually no heed. The lawmakers also routinely rubber-stamped appointees to the commission named by current Gov. Jerry Brown and predecessors like George Deukmejian, Pete Wilson, Gray Davis and Arnold Schwarzenegger."

The initial issuance of search warrants and the subsequent second round of warrants is the opportunity to push Sacramento to re-organize CPUC, so that it represents it's customers, us the ratepayers and regulates in a fair and ethical manner the utilities. It's taken decades to reach the current state of loss of public trust in CPUC. It's probably also impossible to completely re-coup or reverse the excessively favorable decisions biased, in favor of the regulated utilities.

Several suggestions have been made to institute an Inspector General function or a separate consumer oversight committee, in either case making ORA stronger to better represent ratepayers, with reporting outside CPUC management would be a really good starting point.