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WRAMming it down our throats...Article written by Councilman Pedigo

This article should give everyone who reads it some food for thought, especially going into an election year. 

The State of Drought

As the State of California is recovering from one of the greatest economic downturns, our leadership has turned a blind eye to the plight of the average Californian. As our congressional, state and local leaders statewide wringtheir hands on the issue of drought and ask us to conserve, they remain silent on the plight of over 1.5 million Californians. We have families barely getting by; seniors on fixed incomes; and businesses struggling to stay afloat; and yet there is no relief for them. These are the citizens, businesses and cities whose water needs are served by “private for profit water companies”. These companies are regulated by the California Public Utilities Commission, which is supposed to look out for the best interests of the citizens of California, but in the case of water, it has failed miserably in its charge. The commissioners are appointed by the Governor and are not directly beholden to the voters. The ratesetting process needs reform. The CPUC commissioners need to know that they can and will be held accountable by the citizens for their decisions.

Private for-profit water companies that serve over 1.5 million Californians under the current CPUC system of regulations, have two major areas that deeply impact the average citizen and beg for reform. The private for-profit water companies are guaranteed a rate of return on Equity and the Water Revenue Adjustment Mechanism. The WRAM surcharge is a built in mechanism that allows these companies to recoup costs in economic down times or periods of conservation. The WRAM surcharge is based on the water company's projections of water use and the cost of delivering that water to the customer. This surcharge kicks in when the customer uses less water than projected, allowing the water company to recoup the lost revenue from water not sold versus their projected water sales. We understand the cost of doing business, paying for infrastructure and the delivery of safe clean water to their customers, but to charge them more for using less water is wrong! A Return on Equity is defined as the amount of net income returned as a percentage of shareholders equity. Return on equity measures a corporation's profitability by revealing how much profit a company generates with the money shareholders have invested. The shareholders have a guaranteed rate of return!

The Governor of our great state calls upon the citizens to reduce their water usage by twenty percent on one hand but allows his own Public Utilities Commission to create a subsidy for private for profit water companies for conservation. They allow the private for profit water companies a guaranteed rate of return on their Equity, keeping in mind these companies are publicly traded on the stock exchange. Secondly, the built in WRAM surcharge mechanism that allows them to recoup costs and for the customer using less water flies in the faces of common sense. Also, keep in mind that the WRAM surcharge was a negotiated deal between the Public Utilities Commission and the private for profit water companies. If this situation doesn't scream for the need for reform, I don't know what does. So now, we have a situation where the entity charged with regulating public utilities and looking out for the citizens of California, is negotiating guaranteed return on Equity and a surcharge that guarantees their costs be recouped on less than projected water use and the cost to deliver that water.

So, in a nutshell the private for profit Water Company is guaranteed a rate of return on investment, a surcharge to cover costs associated with using less water and they are publicly traded on the stock market. Sounds like a system ripe for reform!! The Public Utilities Commission is broken and needs reform through legislation at the state level. The plight of over 1.5 million Californians that are impacted by this issue has brought startling silence from many leaders at the state level. Also, as many cities and counties declare water emergencies and mandatory reductions in water usage, have we seen private for profit water companies rolling back WRAM surcharges and tightening their belts in economic down times like the average citizen has to do? The answer to that is NO! They ask for escalating rate increases statewide; charges for reduced use of water; and are still guaranteed a profit to their shareholders by the California Public Utilities Commission.

You would like to believe that leaders on both sides of the aisle would jump on this issue, but yet the silence is deafening. As one side of the aisle screams the evils of Wall Street and corporate greed, they stand by silently as the California Public Utilities Commission allows private for profit water companies guaranteed a rate of return on investment and surcharges for using less water. The other side of the aisle screams of over-regulation and big government interfering with the free market and yet the stand by silently as the California Public Utilities Commission as created for all intents and purpose a subsidy for private for profit water companies in California. It is time for our leaders at the state level and the Governor's office to take notice of the plight of over 1.5 million Californians impacted by this issue.

We raise this issue because it not only impacts the average citizen, but it also impacts City and County budgets served by private for profit water companies. The California Public Utilities Commission needs reform and the Governor needs to take executive action to suspend the WRAM surcharge state-wide especially after asking the citizens to reduce their water usage by twenty percent. Many politicians over the years have discussed and been quoted on the idea of the "Great Silent Majority of Americans", in this case its over 1.5 million Californians affected statewide by these issues that seem to have no voice. As this cause gathers momentum I caution the politicians who stand by silently to remember that like the biblical reference to the battle of Jericho the citizens of California rise up and take down the walls that protect the politicians who claim to serve the citizens but stand by silently as their constituents cry out for their help. 

Christopher M. Pedigo

City Council Member 

City of Marysville California

Citizen of the Great State of California

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  • commented 2014-08-28 19:01:32 -0700
    Very timely posting. Thank you. Members of Lucerne FLOW are currently studying the WRAM process with a view to calling for a statewide moratorium on WRAM fees until the drought is over and until the workings of the CPUC have been thoroughly investigated and reformed.