San Marino Eyes Water Rate Hikes Up to 16%

In the weeks following a presentation by California American Water on proposed water rate hikes, city officials await further developments in the rate decision process.
Despite a combined result of lower customer water usage across the board and also the consolidation of water rates among local systems, CAW officials said they are proposing a 16% water rate hike for the San Marino water system, which would become effective next year. This proposal has yet to go before the California Public Utilities Commission, which acts as a moderating arm for the water companies that operate under a monopoly.
Asked this week about increased rates despite lower water consumption, Interim City Manager Cindy Collins said it was “a tough pill to swallow.”
“It doesn’t change their operation that we’re using less water,” she explained. “Nothing goes down in costs.”
Collins said the city has long held lawyer Tilden Kim on retainer to watch the water rate process and pay attention to any red flags that show up as they relate to the city’s interests.
“We continue to have him monitor the case,” said Collins in a follow-up interview. “Right now, nothing substantial has happened.”
CAW first applied to CPUC last July regarding the 2018 water rate changes and, now that it has developed its proposal, is in the resolution period with the agency.
As Brian Barreto, external affairs manager for CAW, stressed during his presentation to the City Council in February, this means the 16% proposed hike will, in all likelihood, be negotiated to a smaller increase, perhaps even by half. In lieu of an actual free market to regulate costs, CPUC acts as the check against the providers.
“Should everything go well and should the Public Utilities Commission follow its proposed timeline, we anticipate rates to be implemented as early as January 2018,” Barreto said at the Feb. 24 meeting. “But, I can tell you from historical practices, that doesn’t always happen.”
Essentially, the slow-turning wheels of bureaucracy could delay rate-implementation by a full three months.
The San Marino water system serves around 45,000 people on 14,000 metered connections not only in San Marino city limits, but also in portions of San Gabriel, Temple City, Rosemead, El Monte and unincorporated county.
Barreto and his colleague, CAW Operations Manager Monica Na, drew attention to that fact when they presented the average May 2016 water bill in the system as being $34 and used that to illustrate that a 16% water rate increase would amount to $5 more each month.
However, residents in San Marino are accustomed to using and paying for substantially more water, not least as a result of the larger lots that require regular irrigation as a result of the still ongoing drought that has afflicted Southern California.
“How many of you in the room pay $34 a month for water?” Mayor Dr. Richard Sun asked at the presentation meeting, almost scoffing. “I don’t pay that.”
Chimed Councilman Steve Talt, to the amusement of the audience: “I pay that for one of my kids.”
Na explained CPUC is encouraging rate consolidation in observance of the fact that Southern California’s districts largely draw from the same sources of water (which is almost invariably bought from a third party) and that more customers should pay a rate that reflects the scarcity of water for the time being.
“In the LA area, you have a customer in Duarte and a customer in San Marino who pay very different rates,” Na explained. “The idea is that this would equalize that.”
San Marino’s and Duarte’s water systems also will presumably share a consolidated rate with that of Baldwin Hills.
Because the water itself is seen by CAW as a “pass through” cost (in other words, the customer pays exactly what the cost of the water is), an initial assumption could be that the charge per volume of water would not substantially change.
However, increasing fixed costs due to capital improvements to infrastructure are driving the rate increases, in addition to variable costs like fuel for delivery and the cost of water itself also increasing.
Given that CPUC’s threshold for what constitutes a “rate shock” is no more than a 50% increase, CAW argues that 16% is a more acceptable starting point to address the deficits. The rate would likely rise annually through 2020, when the rate schedule is due to revisit this process.
Again, Talt had balked at this argument.
“There is nothing about a 16% increase that is graduated,” he said.
Talt also pointed out that, because San Marino’s system is the largest of CAW’s districts in the Los Angeles area and because consolidation is supposed to prevent substantial year-to-year increases for smaller districts, San Marino in theory should have logically had a smaller increase. But, again, Na turned to the general increase of all expenditures as the justification for wanting to raise revenues to accommodate that.
The CAW last passed a water rate increase on San Marino in 2015, in line with its every-three-year water rate review process.

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