Water Industry News

Massive water rate hike proposed

September 13, 2005
John Jensen - Record-Bee staff

LUCERNE -- A triple-digit water rate increase may soon have a severe effect on Lucerne if the California Public Utilities Commission (CPUC) approves a California Water Service Co. (CWSC) request.

If the increase is approved, Lucerne water bills in mid-2008 would be more than $300 monthly.

Tom Smegal, CWSC rates manager, said rates are going up at a number of the company's water plants around the state.

The highest increase requested, Smegal said, is at Dillon Beach, where a proposed 322-percent increase will increase the average bill to around $95.

Lucerne's increase, which is a lower percentage, will bring the average bill to $227.62 in mid-2006 if approved by the CPUC. After that, scheduled increases would raise bills to $275.50 in mid 2007 and $324.38 in 2008.

Smegal explained, with qualification, that two factors could "draw down the cost considerably."

The first would be a revolving loan fund from the state which CWSC has been working on for the past few years, he said. However, he noted CWSC has had "no confirmation that all or any of the costs will be covered."

Said Smegal, "We don't know if that will benefit our customers."

The second possibility Smegal identified is a rate base equalization method among all of CWSC's customers. The company has approximately 440,000 customers, Smegal said, and the plan would spread the costs of expensive plant improvements across the entire rate base.

That method, he pointed out, has been used in both the power and telephone industries but never with water plants.

Regardless of whether one or both plans succeed, a steep rate increase is inevitable, Smegal said.

The best case scenario would mean that both the revolving loan fund and the rate base equalization took effect, but even then customers should expect monthly water bills averaging more than $100, Smegal said.

District 3 Supervisor Gary Lewis said he is concerned about the affects a large rate increase will have on his constituents and their property values.

Lewis reported that he met with CWSC representatives last week to discuss the increase and what the implications are for the residents.

"I told them their rate increase would create a public lynching," Lewis said. "It would be total chaos. People can't pay those increases."

In Lucerne, many of Lewis' constituents are retirees living on fixed incomes, relying on Social Security as their sole source of income, he said. "They ought to do that over a long period of time," he said. "It's ridiculous. That's a dream to think that people can pay that. They can hardly pay their rent and gas at three dollars a gallon."

Another issue for the small town is property values, Lewis said. "It's gonna kill it until they get this straightened out."

Lewis is meeting with County Counsel Cameron Reeves to determine what options exist to mitigate the gargantuan rate increase.

The rates will also have effects on local business, including real estate.

Real estate broker Lowell Grant was incredulous at the rate increase prospect. "That's absolutely shocking to me," he said. "I hope there is some sort of regulation.

"Their request seems to be cold-hearted, outrageous and rapacious," Grant added.

After railing against the toll to the people living in the town, Grant considered what it might mean to Realtors attempting to sell property in Lucerne.

"If you were to allow somebody to buy a home and not tell them, I think you would be liable for trouble down the road," he said of the potential real estate nightmare.

"It's gonna be a ghost town. It's either a typo or they hired a crack addict to do the typing," he said of the rate-increase notice.

Bill Koehler, manager of CWSC's Lucerne plant, said the increases are necessary to keep the plant running. "This system has not been worked on for years and needs to be upgraded badly," he said.

The plant is running at more than capacity to keep the precious liquid flowing, Smegal said. "We're asking the plant to produce water at levels it was not designed for," he said. "It's more than maxed out."

Besides Lucerne, surface water plants around the lake are having problems with demand and growth, said Ray Oliva, president of Riviera West Mutual Water Co., where production issues have resulted in a building moratorium in that area.

"Whether Lucerne bites the bullet with a moratorium is another matter," Oliva said. "Lakeport is maxed out, my plant is maxed out, Bill's plant is maxed out."

Koehler referred to not just the water production system the plant but also to the distribution system as being in need of massive repair.

The galvanized pipes that bring water to homes in Lucerne were installed in the 1920s and 1930s, he said. The entire system is in need of repair or replacement, and some of the original pipes could not be replaced in their original locations because of the logistics of getting large equipment near the pipes, Koehler said.

Some of the pipes would have to be moved into the streets, he added.

The increase, as proposed, does not specifically discuss replacing the town's aging pipes; rather it details a larger storage tank and rebuilding the plant to meet state requirements.

Contact John Jensen at jjensen@record-bee.com.