TIME IS RIGHT TO LOOK AT CAL AM TAKEOVER

Monterey County Herald Editorial 12/09/2010

It may not seem like it, but if there ever was a right time for residents of the Peninsula to take a serious look at a public takeover of the local California American Water operation, this is it.

The water company received California Public Utilities Commission approval last week to build a $300 million-plus desalination plant to help solve the region's water shortage. The company is about to embark on a $130 million project to remove silt-clogged San Clemente Dam from the Carmel River.

Because of these projects, and others, the cost of water on the Peninsula will be going up, up and up. As it does, a public takeover almost certainly becomes more feasible. That is because the Public Utilities Commission allows Cal Am to recapture virtually all of its growing costs and to collect, as profit for its shareholders, an extra 8 percent of the value of its expanding infrastructure.

As Cal Am's capital improvements and debt grow, so does the amount that Peninsula water users must send to Cal Am shareholders. As that amount grows, it becomes more likely that the time, effort and expense needed to put together and finance a public takeover will become financially prudent.

While water infrastructure and politics become increasingly complicated on the Peninsula over time, numbers will be tossed around faster than water escaping from a collapsing dam.

The number for us to focus on will always be the return to the Cal Am shareholders. That figure long ago topped $5 million annually. The larger it gets, the more money Cal Am customers will be paying shareholders to sell us some of the most expensive water in the world.

Previous efforts to mount a takeover campaign sputtered after Cal Am mounted well-financed counterattacks.

A new effort led by community activist Ron Weitzman and an assortment of community leaders calling themselves WaterPlus will run into sophisticated opposition capitalizing on the complexity of the issues. But the community should get behind the WaterPlus effort early on and should push, also early on, for a serious examination of the feasibility.

Weitzman, a statistician, crunched the numbers repeatedly, and his work strongly suggests water bills would go down, at least slightly, if the public owned the water system. That is not the only potential benefit, of course. While there always will be those arguing that private companies operate more efficiently than public concerns, some 85 percent of the drinking water in this country is processed and distributed by public systems, largely because the public is uncomfortable giving control of a public necessity to profit-driven outsiders.

What we would like, much sooner than later, is for a highly qualified consultant to crunch the numbers as well and offer an expert opinion of whether WaterPlus is correct.

We would support a decision by the water management district to take the lead, without the necessity of a ballot measure, or for supporters of WaterPlus to write the check themselves.

Five years ago, the community said no to a ballot measure that would have required the water management district to conduct a $500,000 study of the feasibility of a takeover. Rather than welcome the opportunity for an objective analysis, Cal Am spent $300,000 in a successful effort to persuade voters not to support the study, which might lead one to suspect that Cal Am understands the numbers quite well.

The alternative to exploring takeover is to accept the status quo, in which Peninsula water and related issues, including the scope and location of new development, are essentially controlled by an unholy alliance of the three key players in the desalination project — Cal Am, the Marina Coast Water District and Monterey County government.

This is the time to start exploring options again — not later, when the water bureaucracy is larger and more entrenched and has even more resources to fight off a takeover.

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