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Water Industry News

Oct. 04, 2005 

California American Water asks for 100% rate increase
citing future desal plant costs

California American Water plans to request a rate hike for its customers in the Monterey Peninsula. The company says that the additional revenue would offset costs of a $191 million desalination project planned for Moss Landing.

The rate increase is proposed as an "interim rate relief."  The public utilities commission will address this request from California American at an upcoming public hearing in San Francisco. If the PUC approves the request rates could more than double.  

California American says the increased rates will pay for fees to engineers to work already completed and for that expects for the Coastal Water desalination project. By raising rates a little now, they say, they can avoid rate shock later when the full impact will be felt.  

But ratepayer advocates and local county officials claim the project may never see fruition and therefore they should not be forced to pay for it. 

Before the desalination plant can be built the PUC must review full environmental impact reports to evaluate various alternatives, according to Michelle Cook PUC's administrative law judge. 

If the rate increase is approved customers would be charged an estimated $5.25 per month per meter to recover what it calls its "existing pre-construction cost memorandum account," a $2 per unit "high block surcharge" until the water project starts producing water and a connection fee of $12,000 per acre foot of water on new connections. It would also surcharge $2.20 per 750 gallons, initially,  increasing to $3.83 in 2008.

According to the California American's  application to the PUC, the increases would raise monthly rates to average residential customers from almost $30 to between $50 to $70.

The "interim rate relief" to reimburse its desalination project is separate from a general rate increase the company requested of the PUC.