Are you willing to pay Cal Am 3400% more for desal water?

By Ron Weitzman

Reprinted from the Carmel Valley Association Newsletter ~ February 2011

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Contrary to some recently published scare rhetoric, a public agency buying Cal Am would not delay the desal project. It would only take Cal Amís place at the desal table and do the splendid job for its ratepayers that publicly owned Marina Coast is doing for its ratepayers: $148 per acre-foot for desal while Cal Am plans to charge its local ratepayers in the neighborhood of $5,000 per acre foot. Yes, you read that right!

WaterPlus is in business to move local ratepayers out of that neighborhood. But at what cost?

According to the CPUC, the Cal Am 2009 rate base was $102.5 million. That is the starting point for an appraisal. Assets would raise that value; liabilities (like San Clemente Dam) would lower it.

WaterPlus is taking that value as our current working assumption. About half that value is debt. The remainder, $49.2 million, is shareholder equity. Shareholders are currently authorized to receive 10.2% of that equity annually. That amounts to $10.45 on each monthly ratepayer bill.

The $49.2 million equity is also the incremental component that a public purchaser of Cal Am would have to pay to purchase it because ratepayers are currently already paying the debt component of the $102.5 million value of Cal Am. Financing the equity component, $49.2 million, for 30 years at 5% would raise a ratepayer monthly bill on average by $6.60. Subtract that $6.60 from $10.45, and you get a $3.85 water bill savings on average each month as a result of the public purchase of Cal Am.

Of course, the savings would be greater because a public owner would not have to pay taxes (about $5 on a monthly bill) and the relatively high interest rates on debt that a private owner does. Cal Am interest rates are elevated even further than the public-private difference by the requirement that they include a 10.2% return to shareholders on about half the debt if the debt finances a capital improvement, like removing the dam, replacing aging infrastructure, or ending illegal drawing from wells near the Carmel River. Clearly Cal Am is motivated to incur debt.

Ratepayers wishing to help WaterPlus in its effort to persuade or create a public agency to purchase Cal Am may reach us at 373-8450 or visit our Web site, www.waterplus.us

Help may take the form of donations by check to WaterPlus, PO Box 146, Carmel 93921, or volunteering in an upcoming petition drive seeking a vote to form a community water district to purchase Cal Am.

Ron Weitzman, who lives in Carmel, has been heavily involved in area water issues and is working with a new organization, WaterPlus, which is promoting a public takeover of Cal Am.

Ron Weitzman, who lives in Carmel, has been heavily involved in area water issues and is working with a new organization, WaterPlus, which is promoting a public takeover of Cal Am. Copyright © 2011 The Monterey County Herald.

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Carmel Valley Association
PO Box 157
Carmel Valley CA 93924
www.carmelvalleyassociation.org