January 5, 2012
Monterey Herald, Monterey, California

Local water costs continue to increase

By RON WEITZMAN
Guest commentary

By now, most Herald readers likely know that Monterey Peninsula residents pay more for each unit of piped-in water than people living almost anywhere else in the world pay for fresh or desalinated water Our cost per acre-foot for Carmel River water is almost $3,600, which includes neither the cost of our support of the water management district nor the additional $12 million annual rate increase that Cal Am is seeking.

The average cost of naturally potable water in the United States is $200 per acre-foot. The state Public Utilities Commission's Division of Ratepayer Advocates has recommended we should pay no more per acre-foot for desalinated water than $2,200, based on empirical data.

Meanwhile, Cal Am tells us to expect to pay upward of $4,000 per acre-foot for desalinated water produced in Marina.

So why are we paying so much and why do we face paying so much more? Why are we so different from people who live elsewhere on Earth?

I believe we all know the answer, but, like the emperor's new clothes, we do not wish to see it: conservation.

We have been exploiting our water shortage to provide a bulwark against over-development. Not only has that been costing us dearly, but if we do not find an equally effective alternative to protect our environment, we are going to drive ourselves down a path to local economic ruin. Unless we change course, we can expect our already unconscionably high water bills to rise well over 300 percent. See the WaterPluswebsite (www.waterplusmonterey.com) for details.

As I indicated in a recent Herald letter (Nov. 17), without timely and effective ratepayer action, we can expect to see desalination cause more than $1 billion in capital costs and interest to disappear from our community in the next 30 years with no increase in the amount of water.

Not only do we know the answer, but Cal Am knows the answer. In testimony before the PUC on March 22, Cal Am's rates and regulation manager, David Stephenson, said Cal Am was requesting removal of the cap on the lowest residential block rate, equal to 50 percent of the standard residential rate, because the 50 percent cap is "severely curtailing usage (while) subsidizing over 83 percent of (low-user) consumption."

In other words, Cal Am was seeking to increase the water rates of the consumers who conserve the most.

This request-and-receive process repeated over the years has resulted in water rates fast approaching untenable levels.

Our exceptionally high water rates of over $90 per month on average for all local Cal Am ratepayers, residential and commercial, have a substantial inflationary effect on Cal Am estimates of the local cost of desalinated water. Because desalinated water cannot cost less than natural fresh water, locally in the neighborhood of $4,000 per acre-foot, Cal Am's cost estimates for desalinated water must begin at that value, with each component cost based on it.

Along with vastly different interest rates, that is why the unit cost of the production of desalinated water by the Regional Desalination Project is so much higher than the corresponding cost of desalinated water that Nader Agha has estimated for his proposed Moss Landing desalination plant: $1,800 or under.

Agha has based his component costs on actual bids and added them up to reach his total estimate, including contingency components.

Because Cal Am's interest, profit, and tax margins are so great, the action that local ratepayers must pursue is to ensure not only that a public agency finance and own our local desalination plant, but that water produced by it exceeds the amount of water we receive from the Carmel River sufficiently to ease our historic and dangerous upward pressure on local water costs.

Weitzman, who lives in Carmel, is president of WaterPlus.

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