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Wrung Dry 

How can a private water utility charge four times the going rate and get away with it? (Hint: PG&E's regulators are involved)

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"Once we tried to start a vegetable garden and got a bill that was over $600," he writes in an email. "That garden didn't last long."

McKelvey estimates that his average bill would climb to $375 under the proposed rate increase, which was the subject of a heated public meeting in Lucerne on April 12. Footage of the meeting, viewable on YouTube, shows townspeople lambasting Cal Water reps, accusing them of "raping" Lucerne. The owner of a local Foster's Freeze cites $1,600 bills, claiming her rates are going to force her to shutter her restaurant. Other residents talk about vacant storefronts and empty rental units, claiming the water bills were turning their home into a "ghost town." At one point, a local sheriff has to come to the podium to calm the room.

Gay Guidotti is the manger of Cal Water's Redwood Valley district, overseeing both Dillon Beach and Lucerne. She explains that costs spike for these small districts because the PUC regulates water utilities differently than power providers like PG&E.

"Their outlook is that each individual system should pay for the cost of service to that system," she says, adding that every community has unique sources of water—wells, lakes, etc.—and infrastructure for treatment and delivery. So while power companies can spread the cost of electricity and heat across a vast, sometimes-statewide customer base, utilities like Cal Water have to bill each community separately.

For Dillon Beach, that means spreading the cost of a treatment system and tank, pumps and maintenance across just 253 hookups, while public utilities like the NMWD have thousands. Guidotti says that Lucerne, though not as small, still only has 1,250 hookups to foot the cost of a $7 million plant to treat water from Clear Lake.

Unfortunately, this piecemeal approach means that the company's small, rural towns—many of which, again, have high poverty rates—get stuck with the steepest bills. The PUC's Division of Ratepayer Advocates (DRA), an organization within the regulation that is supposed to represent consumers, argues this in a document assessing Cal Water's latest rate hike proposal. It concedes that district size isn't the only factor driving customer bills above the company-wide average, but concludes that "there does appear to be a loose correlation between the size of the district and the average customer bill."

The utility provides low-income rate assistance to customers who qualify. However, the program's monthly discount peaked company-wide at $12 in 2012, an amount that makes only a small dent in places like Dillon Beach. At a meeting in Tomales on April 11, Christensen-Morris mocked the program, calling it a "pittance."

Cal Water also credits its higher paying districts with a small tax obtained from each customer, as part of its rate support fund. According to the rate calculator on Cal Water's website, this program does credit a Dillon Beach customer using NMWD's average CCF about $50 a month, or $100 a bill, meaning the bimonthly cost would likely be around $573 without it. Jeff Young is a Dillon Beach resident acting as an "intervener" in the current rate case, and he sees hope in this fund if the credit can be tweaked.

"The formula they're using is inequitable to Coast Springs [Dillon Beach's micro district]," he says, adding that telecommunications utilities never charge outlying ratepayers more than 150 percent of the average overall rate.

Young adds that many of the costs hitting ratepayers are fixed—infrastructure, salaries and administrative fees that are also thinly spread over the small ratepayer base, meaning that even conservation of water has its limits.

And then there are the other costs coming from Cal Water's central office.


In her Dillon Beach home on May 6, Christen-Morris handed off a three-page, typed letter to be used for this article in which she calculates the exact cost of washing a head of broccoli, and states bluntly, "I have grown afraid to use water."

Later in the letter, she writes, "I resent that each of [the] board of directors gets $2,300 to just show up at a meeting."

It sounds alarming: $2,300 just to show up at a meeting? But her figure checks out. In fact, a perusal of Cal Water's 2012 proxy statement "How Do We Measure Success?" reveals multiple expenses that, were this "publicly regulated" private company truly public, would surely raise taxpayer pitchforks. There are CEO Peter C. Nelson's total annual earnings—salary, stock awards and "other compensation"—of $2.09 million. There are the other four men on top, raking in annual packages between $730,000 and $1.2 million. And there are Nelson's pension and "supplemental executive retirement plan" with a total accumulated value of $11.6 million. (In fact, according to the DRA, this latter benefit exceeds "the amount allowed for in the qualified pension plan by the IRS.")

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