The Water Pricing Mess

The following has been quoted from www.americanwaterintel.com

It’s been four years since California began implementing decoupling
mechanisms to allow investor-owned water utilities to recover costs in light
of state-mandated conservation. Although there hasn’t been a comprehensive
review by the California Public Utilities Commission (CPUC) to evaluate
decoupling’s effectiveness, there is some concern that the benefits have
been too heavily weighted toward investor-owned utilities at the expense of
ratepayers.

Decoupling reconciles a utility’s actual sales and revenues with adopted
sales and revenues previously agreed upon with the public utilities
commission during rate cases. It was first introduced in California’s energy
sector in the 1970s as a way to reduce consumption without negatively
impacting the financial health of utility companies. The concept was carried
over to the water sector in 2008 via pilot programs and has been implemented
by California Water Service Group, California American Water and Golden
State Water. Revenues at California’s municipally owned water utilities are
not decoupled; instead, the utilities have rate stabilization plans based on
special financial reserves that can be tapped when sales decline.
 
Some in the commission’s Division of Ratepayer Advocates (DRA) believe
ratepayers have suffered because the program did not anticipate the economic
downturn that began late last decade. According to the U.S. Department of
Commerce’s Bureau of Economic Analysis, California’s GDP dropped 1.79
percent from 2008 to 2009.
 
The DRA’s Diana Brooks told AWI that under-collections since the start of
decoupling have been higher than expected – as high as 28 percent in some
cases. In addition, some of those under-collections have pancaked
year-over-year, resulting in unusually high surcharges to customers.
 
“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.”
 
Sales have indeed been down in California, and not just as a result of the
Water Conservation Act of 2009, which set a goal of a 20-percent reduction
in per capita urban water use by 2020. California Water Association
Executive Director Jack Hawks told AWI that virtually every water utility in
the state experienced double-digit sales declines between 2008 and 2011.
Much of that was attributable to the drought of 2007-2010 and to a lack of
new housing starts.

– See more at:
http://www.americanwaterintel.com/archive/3/2/general/decoupling-gets-mixed-
reviews-ca-four-years.html#sthash.nUH7KIUQ.dpuf

So, are we to understand if the per capita water use in SoCal goes from 150
gallons per day per person to 50, the rates will triple?
And none of these funds will go to fund recycling, only back to the investor
owned utilities?
Sounds like we need to change the formula, doesn’’t it.
The more water we save, the higher the prices go. WOW! Without monetizing
the water infrastructure for direct and indirect potable recycling. Although
the above addresses investor owned water utilities, publically owned
utilities get the same benefit, so where is the incentive to make San Diego
water independent?

Milton N. Burgess, P. E., FASPE
619-528-0316
Cell 619-985-7727

Author of “Water Shock, The Day Southern California Went Dry”
www.water-shock.com