James Hunter

SJWC Rate Increase ran into "Security & Terrorism" issues!


CPUC raised the issues of security, preparedness and terrorism for California Utilities, in the beginning of the year (2013). The memo re-opened the SJWC Rate Increase, based on CPUC requirements for safety and security issues  SJWC and their law firm responded within 3 hours and 40 minutes with an Emergency Motion.  This has resulted in a delay on the ruling of the SJWC (San Jose Water Company) Rate Increase. A separate section on the specific memos and specifics and current status of the GRC-SJWC Rate increase is included, in the blog.

The electric and gas utilities have potentially greater exposures, in particular exposure to terrorist and cyber-attacks. Water utilities are also subject to potential bio-terrorism. During the 3 years after 9/11 utilities were required to improve the security of their facilities, including water utilities. The SCVWD (Santa Clara Water District) participated and supported local water utility security efforts including SJWC.

SCVWD recently published recommendations for improving water utility security:, March 3, 2013:

SCVWD and all the private and publicly owned retail water agencies in the county are working with national, state and local intelligence organizations and law-enforcement agencies to safeguard the water supply. Acting upon recommendations from counter-terrorism experts and associations of water agencies the district implemented the following measures:
  • Around-the-clock presence of security guards at all water district treatment plants.
  • Video monitoring at all key facilities.
  • Intrusion detection and alarm systems at all key facilities.
  • Daily inspection of key facilities.
  • General increase in already heightened security procedures such as identification for employees and visitors.
  • Suspension of public tours at key facilities.
  • Continuing emphasis on security at staff briefings.
  • Revised security procedures, including district response to bomb threats.
  • Testing to ensure that water quality continues to exceed required federal and state standards.
Although intelligence information shows that the reservoirs are not likely targets for terrorism, the water district has increased its reservoir security patrols. The reservoirs are primarily used to replenish underground aquifers, so damage to them would have no immediate impact on customers. And because of the large amount of water in each reservoir, only an enormous amount of contaminant would cause any harm. 

This was published by SCVWD part of, Threats to Water Supplies, 2/13/2013. A key point was not explained, the definition of a "key facility"

It is also a significant concern that the SCADA (supervisory control and data acquisitionsystem that controls San Jose Water Company's wells, pumps stations and water processing facilities, is a potential area vulnerable to cyber attack. There is no mention of a third-party security audit being performed on the SJWC SCADA control system.

A typical  SJWC location is unattended and depends on a perimeter chain link fence, usually topped with barbed wire.  Internal security appears to consist of one or more TV surveillance cameras and remote process monitoring by SJWCs SCADA (supervisory control and data acquisition) system.  Most surface facilities are one or more artisan water wells, electric water pumps and a storage water tank. SJWC pumps water from the wells into the storage tank, during off-peak electric power usage hours. 

In the process of looking at the SJWC security systems, based solely on public domain available materials, a few discrepancies were noticed. There was also no indication of a TV surveillance camera, other than a slightly faded sign. 

SJWC has many facilities in Santa Clara county, the report  LAFCO OF SANTA C LARA COUNTY
How many are secure? Which facilities should be updated? Which should be considered a "key facility"? Was the security updated during the improvements paid for in 2002-2006, over $2.3 million plus an unknown amount spent annually in 2007-2012, but referenced in the SJW Corporation Annual Reports? 

The following is the SJW Corp. statement in the most recent Annual Report: (SJW CORP, 10-K, February 28, 2013).

In light of the threats to the nation’s health and security since the September 11, 2001 terrorist attacks, we have taken steps to increase security measures at our facilities and heighten employee awareness of threats to our water supply. We have also tightened our security measures regarding the delivery and handling of certain chemicals used in our business. We have and will continue to bear increased costs for security precautions to protect our facilities, operations and supplies. These costs may be significant. While some of these costs are likely to be recovered in the form of higher rates, there can be no assurance that the CPUC will approve a rate increase to recover all or part of such costs and, as a result, the Company’s operating results and business may be adversely affected. Further, despite these tightened security measures, we may not be in a position to control the outcome of terrorist events should they occur.

The paragraph above has been almost exactly the same in every annual report since 2009.  The annual report for 2008, page 13 also noted that over $2.3 million was spent on security and related improvements, completed by 2006. We should assume that SJWC will try to re-coup any security expenditures previously made by the company, as part of the extension to the GRC (General Rate Increase).

 SJWC General Rate Increase was Re-opened!

The following shows the events that have occurred and the upcoming scheduled hearings:
  • January 29, 2013, ALJ Wilson re-opens SJWC GRC (Application 12-01-003)  "only", to the extent of address security, preparedness and terrorism. Specifically what measures SJWC must comply with and to the extent what SJWC currently complies with.
  • January 29, 2013, SJWC replies with an Emergency Motion within 3 hours and 40 minutes
This exchange of memos resulted in a PHC (Pre Hearing Conference) that was held on February 19, 2013.
The transcript of the hearing is available, please click to view.

  • February 19, 2013, SJWC made an effort and argument in the hearing to bifurcate (separate) the security issues raised by CPUC and pressed for a resolution of the Rate Increase. Mr. Mattes representing SJWC made several statements regarding the confidentiality and sensitivity, of security information. An agreement was reached that the confidentiality would be extended to any such information released to DAR or CPUC. In addition since the GRC was open that DAR and SJWC would meet with a CPUC ADR (Alternative Dispute Resolution) judge, to reach an agreement on the GRC (Rate Increase and WRAM issues).
I was surprised by Mr. Mattes (SJWC Attorney) claims, of confidentiality, as shown in the transcript of the hearing. I agree to the extent that such information isn't already in the public domain, claiming information available to the general public on the internet is unreasonable. Confidentiality is a reasonable precaution for parts of the security information, not in the public domain and reasonable procedures are needed to protect sensitive information from being placed erroneously in the public domain..

There are two water processing facilities, SJWC’s Montevina Filter Plant and SJWC’s Saratoga Treatment Plant  for water treatment prior to entering the water distribution system, to ratepayers. The following information is available in the public domain. The names of both facilities are available, in documents available on the internet, as are the photos.

Please note many facilities have "signs" visible from the public right of way, as shown, minimal efforts are needed to identify San Jose Water Company facilities, in Santa Clara Valley. Are these "key facilities"?

Let Ratepayers know in general terms what are our money is being spent on? What are the SJWC security requirements? What organization/s define the requirements, DHS, EPA, CPUC, SCVWD?

What is the current status

Catherine J.K. Sandoval, CPUC Commissioner issued an Amended Scoping Memo and Ruling, on March 3, 2013.

The key points made were:

  • SJWC request to "bifurcate" the General Rate Case from the security issues was denied.
  • SJWC request to implement the new WRAM, replacing the current Monterry is undefined:

    Also, since SJWC already has a Monterey style WRAM and Incremental Cost Balancing Account in place, it is not apparent how instituting a new one at a later date (which may or may not occur) would complicate its institution. (Refer to page 3 of the Scoping Memo)
  • An updated schedule of hearings and activities:

The following was also posted in the CPUC schedule:

4/22/139:00 a.m.
ALJ Wilson
Comr Sandoval
A.12-01-003 (EH) - In the Matter of the Application of San Jose Water Company (U168W) for an Order  authorizing it to increase rates charged for water service by $47,394,000 or 21.51% in 2013, by $12,963,000 or 4.87% in 2014, and by $34,797,000 or 12.59% in 2015,
Commission Courtroom, San Francisco

What can you (Ratepayer-SJWC Customer do)?

Continue to express your opinion about the 44% Requested Rate Increase and WRAM requested by San Jose Water Company, as well as your opinion on the efforts to comply with security requirements. The Commissioner indicated on page 6 that the GRC would be decided by CPUC within 18 months, that is by the end of June 2013:

Consistent with Pub. Util. Code § 1701.5, the Commission anticipates that this proceeding will be completed within 18 months of the date of this scoping memo.

Time is running out Please do the following:

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