Dillon Beach residents were incensed this fall when
CalWater, one of the town's water utilities, proposed to increase rates
by 314 percent to pay for a new water treatment facility.
The California Public Utilities Commission, which
regulates utility companies, will hold public hearings on the proposed
increases at its San Francisco office from Jan. 24 to Jan. 27. Jeff
Young and Marcos Pareas of Dillon Beach will argue, as public interveners
representing their community, that the proposed improvements are overpriced
and that tripling the price is unwarranted.
An Administrative Law Judge will rule on a final rate
increase which will likely be less than those initially proposed by
CalWater.
Rate shock
Under the current proposal, Dillon Beach residents
in the village and in parts of the Oceana Marin development that are
serviced by CalWater would see their average monthly bill shoot from
$23 to $95 in mid-2006. Average rates are heavily skewed by the high
percentage of vacation homes, however.
Marcos Pareas is a full-time resident whose $70 water
bill could soar to $300. Pareas, who lives in the Oceana Marin development,
said he could ultimately afford the increase, but that village residents,
mostly retirees living on fixed incomes, would be destroyed by the added
expense.
One villager quipped that the price of everything
but her social security benefits was increasing. She and her husband
have lived in their home since 1950. "We don't waste water, we don't
even have a yard. There's just two of us." She considered her current
monthly bill of $56 to already be expensive. "Raising rates is very,
very difficult."
Small community, big expense
The new filtration facility and other improvements
are needed to comply with water quality standards, said Stan Ferrraro,
CalWater's VP of Regulatory and Corporate Relations, but residents Young
and Pareas say the rate increase could have been far less. Pareas said
that Dillon Beach's other water utility performed similar upgrades for
$180,000 instead of the nearly $900,000 claimed by CalWater. Even accounting
for different circumstances, he believes that the facility could probably
be built for $250,000.
According to Young, CalWater's problem "is that they
spend money in Dillon Beach like they spend money in the rest of the
state." But he said that the community could not afford the best of
everything.
PUC mandates that utility rates should reflect the
costs of providing service to those being served. Small service areas
have special difficulty affording infrastructure investments, which
must be shouldered by a small customer base.
"There's no question that the amount of increase that's
involved is significant for such a small system," said Ferraro of CalWater,
who acknowledged the economic hardships that may result. For that reason,
CalWater has submitted an alternative proposal to the PUC that would
allow Dillon Beach to subsidize infrastructure costs.
Suspicious of subsidies
In a turn that may test the patience of affected residents,
the Division of Ratepayer Advocates, the branch of the PUC charged with
protecting utility clients' interests, is recommending that the commission
decline CalWater's proposed subsidy for Dillon Beach. Subsidies are
said to reduce incentives for cost-control and limit accountability
and oversight.
Under CalWater's rate-base-equalization plan, a surcharge
covering costs for Dillon Beach and other small systems would be billed
to all 400,000 of CalWater's customers. Proposed rate increases for
Dillon Beach would drop from 314 percent to 92 percent.
The DRA instead recommends a limited subsidy for
areas that cannot bear the economic impact of a price hike. Dillon Beach,
however, did not meet the economic qualifications, and the DRA advocates
a graduated price increase to cushion the blow.
Thanks to their audit of CalWater's proposal, DRA
Project Manager Yoke Chan said that the basis for rate increases had
been reduced enough to recommend a rate increase of 149 percent for
Dillon Beach, even without any subsidy.
This recommendation will carry weight with the PUC,
but local opinion has yet to be voiced. The last time CalWater tried
to raise rates, Young and Pareas helped convince the Commission to reverse
the proposal and to institute rate cuts instead.