" - Guest commentary by RON WEITZMAN

 

May 3, 2015  
Monterey Herald, Monterey, California

Guest Commentary

 

We conserve, bills rise, Cal Am gains

By Melodie Chrislock

On April 21 The Herald reported that an appeals court ruling had deemed tiered water rates unconstitutional according to Proposition 218, unless they could be shown to reflect the actual cost of water.

What's amazing in this story is that San Juan Capistrano sued its public water company over a top tier rate of $9.05 per 100 cubic feet, because it was four times higher than their lowest rate of $2.47 per 100 cubic feet. But our top Cal Am residential rate, including surcharges, is $65 per 100 cubic feet! That's 15 times higher than our lowest rate of $4.29! Where's the outrage and political will in our community?

At an average of 55-60 gallons per person per day, the Monterey Peninsula is among the lowest water users in the state. In contrast, our water costs are some of the highest in the state and rising.

We've all heard that desalinated water is expensive, but compare our current average cost of $4,102 per acre-foot under Cal Am's ownership, to the cost of new desal water from the billion-dollar Carlsbad desal plant, which is projected to cost $2,257 per acre- foot.

We're already paying almost twice the cost of desal, with no desal. But the average cost per acre-foot doesn't tell the whole story. When you go to Cal Am's website and extrapolate the residential tier rate figures (with surcharges) you discover that some local users are paying as much as $28,519 per acre-foot for water usedin tier 5! That translates to monthly water bills in the thousands of dollars.

How much are you paying? Here's the breakdown of our Cal Am tier costs, with surcharges, for all five tiers. In tier 1 you'll pay $1,868 per acre-foot and in tier 2 $3,900 per acre-foot. But here's where the cost gets truly outrageous: in tier 3 users pay $9,638 per acre-foot, in tier 4 they pay $21,411 per acre-foot and in tier 5 they pay $28,519 per acre-foot!

About 80 percent of Cal Am's customers use water only in tiers 1 and 2, but about 20 percent use more water and pay tier 3,4 and 5 prices.

In order to provide lower-cost water to 80 percent of its customers, Cal Am charges extremely high rates to 20 percent of its customers.

It's clear, that because the majority of customers are subsidized by those in the higher tiers, they remain unconcerned about their water bill and the true cost of water on the Peninsula.

Keeping the rates lower for the majority means Cal Am can narrowly avoid rebellions like Measure O. But if everyone in the top three tiers cut their water use back to tier 1 and 2, all our bills would skyrocket. Why? Because no matter how much water we use as a community, Cal Am's revenue is guaranteed. As our overall usage falls, which it has, bills for all users must rise to meet Cal Am's guaranteed revenue requirement.

Consider that in most business models, revenue or gross reflects the demand for a product or service. If demand falls, so will revenue. But this is not the case with a utility company. Cal Am is a private for-profit company, but as a utility, its revenues are guaranteed by the state (CPUC). No matter how much water we use or how poor a job Cal Am does in managing our watershed or building a new desal plant, it will be rewarded with guaranteed revenue.

So here's our current dilemma: the more we conserve, the more our water will cost us, in order to protect Cal Am's revenue and profit. But if this were a publicly-owned water company, there would be no profit to protect and our costs would fall if we used less water. This is one of the major reasons that 85 percent of the communities in this country have publicly-owned water.

Of course you can argue the price of our water is so high because it is so scarce. But really, whose fault is that? And who profits from it?

Melodie Chrislock is on the board of directors of Public Water Now. She lives in Carmel.

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