James Hunter

What is WRAM/MCBA? It can cost you more money!

WRAM is Water Revenue Adjustment Mechanism and it decouples a water companies (example SJWC) revenue from it's ratepayers water usage. We are guaranteeing the revenue of effectively a regulated water utility as well as the public company SJW Corporation that owns San Jose Water Company.

American Water Intelligence article "Decoupling (WRAM) gets mixed reviews in CA four years on", states "Our opinion in general is that these mechanisms give the investor-owned utilities too much protection,” Brooks said. “They go beyond removing the disincentive to conserve, but they are also shielding the utilities from declining revenues due to other factors like the economy or the weather.” This results in several questions:

  1.  Should Ratepayers guarantee the ROR of a regulated California water company subsidiary, in fact also guaranteeing the revenue of Public company which pays dividends and whose stock price can appreciate, by using a WRAM/MCBA?
  2. Will supporting SJWC result in changes in there operations? Efforts to improve efficiency?
  3. Should we the ratepayers guarantee SJWC water company revenues independent of sales during a drought? recession? depletion of ground water sources (whose problem?)
  4. Should we the ratepayers guarantee SJWC water company revenues independent of sales during a recession? Most other companies adjust expenses, SJWC talks at length on "Fixed Costs", the city of San Jose changed their fixed costs.  Other municipal water companies have effectively controlled costs, in California.  Why can't San Jose Water Company?
It should be noted that the Santa Clara County Water District did the following cost control efforts, they are a county government agency:

How has the Santa Clara County Water District cut costs?

The water district recently negotiated new agreements with its employee unions which will save $11.4 million over the next three years. Some of the cost reduction actions include:

  1. Starting in April 2012, employees will contribute 15 percent of their health care premiums.
  2. Union-represented employees will receive no cost-of-living adjustment in 2012.
  3. Employees will contribute a total of 11 percent of their salary toward the California Public Employees Retirement System, CalPERS.
  4. Reduced 92 postions, including seven top management jobs — nearly 11 percent of our workforce. This saves $14.7 million per year
  5. Reduced overtime by 51 percent compared to 2008, saving about $1.7 million per year.
  6. Reduced temporary staf fing costs by 24 percent compared to 2008, saving more than $1 million per year.
The DRA (Division of Ratepayer Advocates) recommended against providing a WRAM/MBCA to San Jose Water Company, in Section 16 of the DRA Report, for several reasons including

WRAM/MCBA is too broad

WRAM/MCBA is currently not set up to distinguish differences for loss in
revenue that may be attributed to reasons other than conservation such as weather,economy, foreclosures, bill adjustments, etc. The WRAM/MCBA was never intended to be a broad revenue guarantee for utilities to cushion themselves from the effects of a severe economic downturn and it is questionable that IOUs be given this level of protection from business risk. Under the (Note: current in use by SJWC) M-WRAM, SJWC is protected against changes in revenues resulting from moving to a tiered system. At the same time, the ICBA protects utilities from changes in costs of purchased power, purchased water and pump tax and encourages them to run their operations more efficiently.

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