MOU Comments

COMMENTS on the GSW/CAWA MOU                                     August 4, 2014

by members of Claremont FLOW (Claremont Friends of Locally Owned Water)

Golden State Water and a local group called CAWA (Claremont Affordable Water Advocates) developed an MOU between them which they hoped would be adopted by the City of Claremont as an alternative to the City purchasing its water system. This MOU was presented to the City of Claremont by GSW on July 8, 2014. After legal analysis and discussion with GSW, the City council declined to move forward with the MOU, in large part because the agreement is not enforceable (see last part of the MOU).  The twenty ‘commitments’ specified in the MOU can be found below with some comments (regular print is text of the MOU; bold italics are commentary in response.)

1. Lower water bills for residential customers. Golden State Water will propose a new rate structure for residential customers in its upcoming rate filing scheduled for July 13, 2014. The rate proposal, which includes a proposal to convert the existing three-tier rate structure for residential customers to a four-tier rate structure, will result in lower monthly water bills for residential customers in the Region III ratemaking area. In addition to the implementation of a four-tier rate structure, Golden State Water will propose to segregate the districts within Region III for the purposes of establishing the size of the tiers in the new four-tier structure. Golden State Water shall support the continuation of this rate structure unless otherwise agreed by the City of Claremont and subject to approval by the CPUC.

There is no information about how this might work to the benefit of customers. It would need to be approved by the CPUC (California Public Utilities Commission), and approval is not guaranteed. The CPUC has a history of rulings which benefit GSW.

2. Funding of Feasibility Study and Potential Construction of Reclamation Plant. Golden State Water will fund the preparation of a study concerning the feasibility of constructing a water reclamation facility to serve the City of Claremont. In the event the facility is deemed feasible, Golden State Water will include the plant in its Urban Water Management Plan and seek approval from the CPUC.

There are many unknowns here. There is no guarantee that a feasibility study would recommend a reclamation plant or that the CPUC would approve it. As of now, GSW claims any water supplied to their customers by recycling belongs to GSW, or requires an additional fee because it reduces their market for water. It isn’t clear if that would change.

3. Mitigation for water supply costs. Golden State Water will continue to apply a lower water supply cost structure that reflects the Region as a whole, to the benefit of Claremont customers. Currently, Region III rates reflect a 66 percent groundwater/34 percent imported water usage, while Claremont alone was forecasted to use 47 percent groundwater/53 percent imported water, and had an actual usage in 2013 of 41 percent groundwater/59 percent imported water. This results in lower water supply costs for Claremont customers as compared to Claremont’s actual costs.

The current water supply cost structure is not clear and information is subject to frequent change, so continuing as in the past does not suggest an improvement. GSWC has not been diligent in saving storm water or maximizing use of local well water. Nearby cities import much more water yet have lower rates. 

4. Continuation of policy resulting in lower monthly service charges. In 2009, Golden State Water implemented a three-tiered rate structure for residential customers. A key aspect of that change in rate design was a reduction in the monthly service charges by approximately 5 percent. (For example, the monthly service charge in Region III for a 1” meter was reduced from $40.30 to 37.95, a decrease of 5.8%). In its upcoming 2014 General Rate Case filing (“2014 GRC”), Golden State Water’s proposed rate structure will continue the policy implemented in 2009 resulting in lower monthly service charges. This structure provides customers with the greatest ability to control water bills based upon actual water usage.

When GSW went to tiered rates they sharply increased water costs so that heavy users pay far more than before. Meter charges are fixed, usage charges are based on gallons of use. GSW did reduce meter fees for a time but the 1” meter fee was back up to $40.40 as of May 2013.

5. Limitation on future revenue increases. Golden State Water’s requested revenue requirement increases in the 2014 GRC will not exceed three (3) percent annually for the period 2016-18. Golden State Water will work with the City, CAWA and local stakeholders on the General Rate Case filing for the 2019-21 years to maintain the same three (3) percent requested revenue increase cap for the 2019-21 filing. The parties acknowledge, however, that environmental, regulatory or other circumstances could arise that would prevent Golden State Water from maintaining reliable quality water service at this revenue level.

This rate reduction is for a very short period only and is dependent even for this short period upon the CPUC approving it next time GSW requests a rate increase. GSW also clearly will not guarantee reliable quality service at lower rates.

6. Alternatives to the WRAM/MCBA. Golden State Water shall not object to or obstruct any party from seeking to remove or modify the WRAM rate adjustment from rates applicable to the City of Claremont within the context of the CPUC process so long as the alternative ensures that Golden State Water can meet its fixed cost obligations, accounting for water supply costs regardless of sales levels. Golden State Water reserves the right to present evidence regarding the pros or cons of any such modification, and reserves the right to advocate in favor of the existing WRAM if, in its opinion, no better alternative is submitted. Further, Golden State Water will cooperate as necessary to timely provide data and other information on the water system costs and revenue to any interested party through the CPUC’s ratemaking process to determine if there is an alternative mechanism that rewards customers who meet agreed-upon per capita usage levels while at the same time allowing the company to meet its revenue requirement and cover fixed costs.

This says that GSW will not object to removing or replacing the WRAM (Water Revenue Adjustment Mechanism) charges as long as they get the same amount of money even if water use goes down. It’s not clear how this would be a benefit.

 7. Credit for grants or other outside supplementary funding for water service. Customers shall continue to receive full benefit for any supplementary public funding, disaster relief funding or other infrastructure grants made to the company applicable to the term of the Agreement no matter when received.

This is a continuation of existing policy.

8. Advocate for lowest possible imported water costs. Golden State Water will actively represent Claremont customers in rate increase requests from Three Valleys Municipal Water District and Metropolitan Water District of Southern California to minimize “pass through” water supply costs that affect Golden State Water. Golden State Water will support efforts by CAWA and the City of Claremont to join this effort to minimize external potential rate increases arising from the cost of imported water. Golden State Water shall inform CAWA and the City of the comment and / or participation period as such become applicable, to the extent known by Golden State Water.

This is a continuation of existing policy since low cost for imported water is beneficial to GSW.

9. Support for CAWA Intervener Status. Golden State Water shall support CAWA’s direct involvement in the ratemaking process. This includes the following:

  • CAWA to determine who participates in its effort.
  • Golden State Water will provide CAWA with references for expert legal counsel to provide independent guidance and support to CAWA’s involvement.
  • Golden State Water will not oppose CAWA’s request for reimbursement of CPUC eligible expenses accrued as part of their good-faith efforts to impact the process in a meaningful and consumer-focused way.
  • CAWA will be empowered to address any proposed charges for ongoing service or system improvements to ensure Claremont customers are protected.

The City already has Intervener Status. As the City is the body that represents the residents, the value to the rate-payers of adding an unelected group to advocate for lower rates is unclear.

10. Benefits of Regional Organization. By October 31, 2014, Golden State Water would host a local meeting and provide a report and public presentation to residents detailing the benefits to Claremont of being part of a regional structure. CAWA will maintain its ability to protect this structure within the CPUC process as an intervener.

This states that GSW will continue to promote the idea of regional rates. The regional rate structure is one of the contested items so it is not clear that protecting it would be desirable.

11. Collaboration in the Development of General Rate Case Filings. Consistent with federal and state laws governing water utilities and federal Securities and Exchange Commission regulations, Golden State Water will work with the City and CAWA on future rate case filings, including development of Urban Water Management Plans (which contain long-term capital investment summaries that affect water rates) and recommendations for future rate designs to maximize the financial benefit to customers who are using water most efficiently.

GSW and the City working together as partners would be a sound and beneficial policy, but CAWA has no authority to make decisions for Claremont residents.

12. Ongoing accounting of system improvements. Golden State Water shall provide to CAWA, the City and post publicly online a report of all capital projects identified in a General Rate Case or supplementary filing that have been constructed and included in customer rates. The initial report will go back to January 1, 2000 and will be updated annually.

Rate case filings are public information and are already supposed to be available, although they often have not been.  If carried out, this would be a benefit.

13. Information transparency. Golden State Water shall provide the City of Claremont and CAWA with copies of any studies, reports or other documents with respect to Claremont agreed to in the 2010-2012 or 2013-2015 General Rate Case, including settlement agreements, and all future settlements and General Rate Case orders simultaneously with providing said documents to the CPUC, Office of Ratepayer Advocates (ORA), The Utility Reform Network (TURN) or other organizations identified on the service list.

Since CPUC filings are public documents, already legally required to be made available to the City and any citizen or organization who requests them, this is not a change.

14. City Participation in PVPA. The Pomona Valley Protective Association (PVPA) controls over 600 acres of land in Claremont, including the spreading grounds for the Six Basin aquifer that supplies approximately 60% of the water used in Claremont. Golden State Water will invite City personnel to all PVPA meetings as its guest, and in the event of objection by any PVPA member Golden State Water will collaborate with the City to respond in the most effective manner to achieve the City’s attendance.

 The benefit of being a “guest” is unclear. (Note: here GSW says our aquifer provides 60% of water used in Claremont, while Item 3 earlier cited 51% for 2013.)

15. Assistance and Access regarding CPUC Filings. Golden State Water will, at all times, maintain in its San Dimas offices a full copy of the current rate case filings for public inspection and photocopying. Golden State Water will provide on its website a link by which any member of the public can make an appointment to view such documents, and will designate a knowledgeable company representative to be available by prior appointment to meet with residents to address questions about the contents of the filings. (Reasonable restrictions as to duration and frequency of such appointments will be determined.)

This is already a legal requirement.

16. Report to the community. Upon not less than 15 days notice, Golden State Water will present an official report to the community at a publicly noticed City Council meeting, at the City Council’s discretion. Golden State Water will address all community and council questions, directly at the meeting or within one month of the meeting. The responses will be made public through Golden State Water’s Claremont customer website.

This would be beneficial if it improves GSW’s willingness to be forthcoming with information and to listen.

17. Regular meetings and report to the Community. Golden State Water will organize and facilitate periodic meetings with Claremont residents and CAWA as may be necessary to implement the intent of this Agreement. These meetings will address all local concerns including those raised during the report to the community. Golden State Water’s District Manager will lead the meeting, and appropriate company officers will also be directly engaged in the process.

There was one such meeting in 2014, which was well-attended. More meetings, with increased time for Q and A about local concerns would be helpful.

18. Conservation partnerships and programs. Golden State Water will work with the City, CAWA and local stakeholders to create, fund and sustain water conservation programs. The specific programs would be developed collaboratively, detailed in the General Rate Case application and subject to final CPUC approval.

GSW already presents conservation and education programs, but conservation still incurs WRAM charges.

19. Development of a water conservation and STEM curriculum for use in Claremont schools. Golden State Water will fund the development and maintenance of an ongoing water conservation curriculum for use in the Claremont Unified School District, subject to appropriate state academic standards, the District’s policy and CPUC approval. Additionally, Golden State Water will support the District’s ongoing science, technology, engineering and mathematics curriculum to encourage students to maximize these skills, which are critical to water resource management and ongoing water service

There is no indication that this is something CUSD is seeking. Support for current efforts in the STEM curriculum might be welcomed. The CPUC would need to approve any expenditure.

20. Dismissal of Litigation. Currently there are three pending lawsuits that arise from the City’s preparatory steps to seize the Claremont water system from Golden State Water: study concerning the costs and projected water rates under the City’s seizure plan (Golden State Water Co. v. City of Claremont and Tony Ramos, et al, Los Angeles Sup. Ct. No. BS 146523); and the CEQA lawsuit alleging that the City’s purported environmental review of the seizure plan is faulty and premature without a clear commitment as to what entity would operate the Claremont water system if it is taken by the City (Golden State Water Co. v. City of Claremont, et al., Los Angeles Sup. Ct. No. BS 148759). As to each of the pending actions, if the City abandons its effort to seize the water system before a trial or other dispositive hearing on the merits is conducted in the Superior Court, Golden State Water will dismiss the pending action and will not seek recovery of any attorneys’ fees or other litigation costs from the City.

If Claremont abandons all efforts to acquire the water system, GSW will dismiss its suits related to the possible acquisition. Although coverage of GSW litigation costs would not be sought specifically, there is no indication that they would not be figured into the rates.

Term of Agreement.

The Initial term of this MOU is from June 1, 2014 to December 31, 2018. . . provided, however that either party may terminate the MOU in its sole discretion, and thereby extinguish all commitments and covenants herein, . . by giving the other party written notice of termination. . . .

This paragraph removes any usefulness that might exist in the MOU since an agreement could be ended at any time.

Signed by Denise Kruger, Senior Vice President, Golden State Water Company            6/9/2014

Donna Lowe, Claremont Affordable Water Advocates                                       


Comments CFA / MKS / SMS    8/4/2014