RESPONSE FOR MOTION TO DISMISS Below you will see the response to Cal Waters Motion to Dismiss and their answers. It is important to note that we do not have the advice nor the services of an attorney. The response is a collaborative effort of many. The DRA that you will see throughout the response is the Division of Ratepayer Advocates. The response is long, but worth reading. This is YOUR fight!! BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA Connie K. Walczak, et al., Complainants vs. California Water Service Company (U60W), C.13-08-017 Defendant (Filed August 14, 2013) RESPONSE TO MOTION OF CALIFORNIA WATER SERVICE COMPANY (U-60-W) TO DISMISS C.13-08-017 AND ANSWER OF CALIFORNIA WATER SERVICE COMPANY TO COMPLAINT 13-08-017 Rule 11.1 – Subsection (e) It is important to note that I, Connie K. Walczak, was not “served” by California Water Service on October 4, 2013. The email address that was used by Cal Water was incorrect. When I discovered that another Complainant was served via email, I immediately emailed everyone on the service list (however, it was after the deadline set by CPUC for the Cal Waters’ response). I did not receive a response from anyone when I pointed out that I was not served. Please also note that the physical addresses for the other two primary Complainants, listed on the Cal Waters’ responses, are also wrong. The certification of “service” to all Complainants states that the date of service was October 4, 2013, when in fact their documents were mailed on October 7, 2013. Because the Complainants were not properly served within the time limits set by CPUC, we are asking all responses and motions from Cal Water be ignored. The Formal Complaint (C.13-08-017-Connie K. Walczak vs. California Water Service) is the result of a grassroots effort. A large majority of the residents in our city (Marysville, CA), are supportive of this movement. While the California Water Service is represented by an attorney (that we will clearly pay for through our water rates) we are not financially able to retain the services and/or advice of an attorney. But, that nevertheless, because of the fact we are NOT represented by legal counsel does not makes our complaint less credible. Consumers that file complaints with CPUC should not be required to have an attorney; nor does it take an attorney to know that Marysville cannot afford another increase. Water rate increases are out of control. The CPUC is a regulatory agency established by the California Legislature to oversee the safe and effective delivery of various utility services. A public entity, the CPUC operates under the auspices of the executive branch of government of the State of California. It is entirely funded by taxpayer dollars levied on the citizens of California. The home page of the CPUC website states: “The CPUC regulates privately owned electric, natural gas, telecommunications, water, railroad, rail transit, and passenger transportation companies. The CPUC serves the public interest by protecting consumers and ensuring the provision of safe, reliable utility service and infrastructure at reasonable rates, with a commitment to environmental enhancement and a healthy California economy”. Cal Water’s response is that the “Complainants’ requests for relief are not appropriate for a formal complaint in this case. In addition to lacking merit, the Complaint is defective on procedural, substantive, and legal bases”. As consumers/ratepayers, CPUC is the only recourse, which we are aware of, to submit challenges/complaints available to Complainants’ concerning the challenges to these ongoing and outrageous rate increases proposed by Cal Water. All charges demanded or received by any public utility must be “just and reasonable” Pub.Util.c. Page 451.” The claims made in Cal Waters’ motion to dismiss are reprehensible statements that attack the integrity the competence and the motives of the Complainants’. These statements show a complete lack of professional courtesy and are nothing more than an attempt to justify another outrageous rate increase by devaluing the Complainants’ ability to formulate a written complaint that has substance and determination. If CPUC is not the correct venue for this, please advise us as to the proper venue what is? TIMELINE OF COMPLAINT: Cal Waters’ motion to dismiss states, “Complainants have thus had ample notice to address their concerns in a procedurally proper manner-by seeking intervention. “ Our Formal Complaint was filed in May of 2013. It took several months for our complaint to move through the CPUC’s process. It was not filed at the eleventh hour, as suggested. There were residents (Complainants) that did attend the meeting on April 8th. They did speak up about the large proposed rate increases. A group did meet with Mr. Skarb, Mr. Seidel and Mr. Townsley from Cal Water. In the transcripts from the CPUC public participation hearing on October 28, 2005, residents and an Attorney for the Yuba/Sutter Legal Center for seniors spoke. Obviously, the public input had no effect as to the outcome. Marysville received a 55.3% increase in that GRC for their efforts. So much for public input! There are approximately 24 District within Cal Waters’ service area ranging from Antelope Valley to Willows that feel the impact of these out of control water rates increases. The question is; how have these self-initiated workshops and this alleged continual communication with the parties helped the rate payers? The rates continue to escalate out of control. TAKEOVER OF WATER SYSTEM: It is unclear why, in the response from Cal Water to our Formal Complaint, which includes over twenty pages regarding “take over” of the water system in Marysville. In reviewing our complaint, you will find that there is no mention of a “take over”. It appears that the implication of a “hostile takeover” would be the fatalistic consequences if this complaint were to move forward. Cal Water commissioned a review/report of a “takeover” by Rodney T. Smith, Ph.D. Please note that the same report and finds (a near carbon copy) was commissioned by Cal Water for the City of Claremont. This is a “paid for” report for the desired results. This was a waste of time and money (that hopefully is not passed on to the ratepayers). There is a statement in this response: “Marysville’s pursuit of Cal Water’s Marysville System is not prudent”. This statement is factious; it implies that Marysville has pursued the takeover of the water system. That has not happened! We will say that the “trend” of taking back water systems from private water companies is growing. With the escalating water rate increases, ratepayer’s backs are against the wall. THE COMPLAINT IS LEGALLY IMPROPER: “The Complaint is improper because it is a collateral attack not only on the outcome of A.12-07-007, but on past Commission decisions and the Commission’s Rate Case Plan. If this Complaint is allowed to go forward, it would upend the work in A.12-07-007.” We ask, why would ANY complaint be legally improper? Does Cal Water interpret “legally improper” mean a complaint cannot exercise their first amendments right to free speech? We, the ratepayers have every right to file a complaint that is impacting our lives and the community/city that we live in. This is not an attack on anyone, except for the ratepayers. CPUC serves the public interest by protecting consumers. The complaint was filed only after numerous attempts by residents/ratepayers via email and telephone calls to CPUC to find remedies to Cal Waters’ continual proposed rate increase CPUC’s predicable approvals. The phone messages were never returned by CPUC. The emails were never answered. In 2011, the Marysville ratepayers received a devastating 55.3% increase by Cal Water. That was only two years ago. And, when this GRC was filed, Cal Water was asking for another 47% increase, plus an additional $518,000 to phase in the increase. In our complaint, we did ask for a review of the 2011 increase. It is a sorry testimony when a public agency fails to respond to citizens inquiries. We are chastised within Cal Waters’ Motion to Dismiss for not choosing a parallel procedural “Why by not choosing a parallel procedural is the formal complaint mechanism inappropriate?” – The formal complaint is a procedural mechanism to be used if needed to get a response and possible relief from these every three (3) year rate increases which incidentally for Marysville total 121.8% in the last ten (10) years. Filing a formal complaint is the only alternative available to rate payers trying to stop or at least slow down these continual water rate increases. ALLOWING THE COMPLAINT TO CONTINUE WOULD BE AGAINST THE PUBLIC INTEREST: Cal Water states: “As a practical matter, allowing the Complaint to go forward would result in continued uncertainty for Marysville customers”. Small, rural communities often cannot reach the economies of scale to pay the forever escalating water rates. For example, one Central Valley community was forced to shut down a newly updated water treatment facility because the 400 to 600 low-income residents were unable to pay the rates necessary to cover the cost of operation and maintenance. Even though this example is about a water treatment plant it illustrates the growing inability for citizens to absorb escalating cost associated with of public for profit utilities companies. The ongoing, escalating Cal Water rate increases are the real uncertainty for the ratepayers in Marysville. The complaint was filed because of this uncertainty and the outrage by ratepayers. A majority of the ratepayers (the public) in Marysville are behind the efforts to stop the water rate increases. In a three week span, a group of residents (after work) walked the streets of Marysville with information and petitions. Most residents did not know that Cal Water was proposing another large rate increase. During those three weeks we gathered over 1200 signatures to oppose the water rate increases. Without exception the citizens expressed grave concerns over Cal Waters’ proposal to increase water rates. There were many people that who panicked, wondering how they are going to pay this increase. HEALTH BENEFITS: California Water Service Group and its subsidiaries offer medical, dental, and vision insurance to employees. California Water Service Healthcare Plan (self-insured and self-funded), Calendar year deductibles: $100 per person $300 per family As we stated in our Formal Complaint, the increasing costs for health benefits is a fact of life. Many residents in Marysville (and across this country) have no health benefits. With the “Affordable Care Act” at our doorstep, those that are uninsured, will be required to buy health insurance. Depending on the plan; one example is a woman, under the age of 30; a policy with a $5000 deductible will cost her over $300 per month in California. Others that are lucky enough to have health coverage through their employer pay dearly out of their own pockets. There is usually a cap on what the employer pays. The employee is paying the escalating costs to keep that health insurance. Ratepayers cannot afford to pay their own increasing health care coverage, plus the increasing costs for the Cal Water employees. Per the DRA review and recommendations: “Under CWS’ current plan, employees pay a net fixed rate of $16 toward the health care insurance while CWS funds the remaining portion. As responded in data request VCC-5, CWS has historically provided group health insurance without a monthly employee contribution. In 2006, CWS instituted a $16 per month employee premium. In 2007, CWS increased this premium to $125 per month while at the same time increased its employee salaries by $109 per month and initiated a Section 125 plan so employees could pay premiums on a pre-tax basis. However, requiring its employees to pay a net fixed rate of $16 is not reflective of recent trends in which employees are being held responsible for increasing percentages of the health insurance costs. Within California, employees of other Class A water companies are required to pay a much bigger share of their health care costs. For example, Golden State Water Company employees contribute 15% toward their health insurance, Suburban 16% and Valencia ranges from 20% to 30% depending on the type of plan. Clearly, CWS’ employees pay a much lower amount toward their health care cost. Instead of asking ratepayers to assume a greater risk of health care cost volatility, CWS should ask its employees to fund a bigger share of the health care costs that are more comparable to other water utilities and industry norms. Doing so would help CWS to minimize the rate impact to its ratepayers.” RETAINING EMPLOYEES: A big fish in Californias water industry pond, California Water Service Group is in the swim in three other states. It appears that with 1,865 Employees: and an Employee growth: 64.8%, Cal Water Services is not a problem with employee retention. Cal Water’s GRC proposal is asking $34,000 to retain quality employees in the district, and an additional $42,000 to retain the same level of employee benefit package. Having a good paying job, with liberal health care benefit, paid sick time, pensions, and 401K and a great area to raise a family is plenty of reasons for employees to with Cal Water Marysville. We have asked on several occasions what this cost is? As yet we have not received a response. In today’s economy, is it really prudent to increase rates for retention of employees? INVESTER OWNED PUBLIC WATER RATES: History seems to show that the Private For-Profit water company’s rate increases have become more aggressive over the past few years. When reviewing the last few GRC applications, Cal Water asks for a large increase. DRA makes a recommendation of a much smaller increase. The actual increase ends up somewhere in the middle. The ratepayers, basically, have no voice in the rates that are bestowed upon them. In all of our research, we cannot find a rate increase that was denied by CPUC. Has anyone ever really asked “what is reasonable to ratepayers”? We submit Reasonable is relative and the maximum cost of basic water service depends on individual income. International standards indicate that total expenditures on water and sanitation services together with any needed alternative source of clean water should not exceed 3 to 5 percent of household income. That is reasonable. As the DRA stated in their review, “The Commission should require greater utility accountability for customer rate changes – not less. A common complaint amongst California’s non-investor-owned public water utility is the difficulty that can be experienced when attempting to increase customer water rates. With voter passage of California Proposition 218 (Proposition 218 requires voter approval prior to imposition or increase of general taxes, assessments, and certain user fees). Eight (8), municipal water utilities have had to face the prospect of a simple majority of customers protesting and therefore blocking increases in water rates. However, for California’s investor-owned utilities, the regulatory process that has evolved in the last several decades appears to have created an equally—if not more—troubling situation where customer rates can too easily be automatically adjusted with little notice or accountability.” Cal Water often refers to the State Mandates as a reason for rate increases. Why can municipal water districts, who must meet those same requirements, keep rates much, much lower? They have a water system to maintain; payroll for employees, employee benefits come out of their budget; water treatment; facilities; utilities etc. FEES/SURCHARGES Over the past few years the fees and surcharges on our water bills have increased. The fees and surcharges, to a ratepayer, represent a higher water bill. The WRAM (Water Revenue Adjustment Mechanism) is one of the larger surcharges that a ratepayer is forced to pay. Our efforts to clarify exactly what the WRAM charges are for, have failed. In our research, the best definition of the WRAM charges is to; shift risk from shareholders to ratepayers and to increase profits when water is conserved. One of CPUC’s mandates is conservations. It insane to comply with California State law to install water meters to conserve water and then charge the conservation minded rate payer for saving water. That is exactly what the WRAM does. By linking the sale of water with customer revenue from customers will harm conservations efforts. It does not make sense to make money on conserving the product that you sell. When taking the economy and what ratepayers can afford, all of the fees and surcharges must to be taken into consideration. DRA review of the WRAM Surcharge in 2009 states: “Yet, as a result of the WRAM/MCBA, ratepayers are currently bearing the full cost of the economic downturn. This issue must be addressed immediately. Therefore, until the impacts of conservation efforts can be better quantified, DRA recommends that the Commission modify the WRAM so that if there are reductions in consumption, rather than ratepayers being required to pay the full difference between the authorized quantity revenue and actual quantity revenue, ratepayers and shareholders split this difference equally. This will ensure that ratepayers and shareholders are proportionally affected under the WRAM/MCBA decoupling mechanism, when conservation rates are implemented in accordance with the settlement.” “This issue should be examined in the next GRC, when over three years of consumption information will be available after the implementation of the WRAM/MCBAs and conservation rates. However, it is clear at this time that the WRAM/MCBA mechanisms have led to an unintended consequence: the WRAM shields shareholders from all financial consequences of the severe economic downturn, while ratepayers bear the full cost of the economic downturn. This is an unintended consequence of the WRAM/MCBA trial program, not one of the goals of the program.” SHAREHOLDERS Does Group pay dividends? Yes. The Company has a long history of paying dividends, having paid a dividend every year since 1945 and increasing the dividend every year since 1967. When has Groups stock split? How many shares are outstanding? The Company has 20.83 million shares of common stock outstanding, which are traded on the New York Stock Exchange under the symbol CWT. The most recent stock splits, each two-for-one, occurred in 1984, 1987 and 1997 Sales: $560.0M One year growth: 11.6% Net income: $48.8M Income growth: 29.5% CAL WATER OVERSPENDING/LACK OF BUDGET CONTROL A ratepayer must live within their budget. The review by DRA below confirms that Cal Water Services has no real budget restrictions. There is no real incentive to control costs. For the past ten years, Cal Water Services has overspent by millions of dollars. They are rewarded for “bad behavior” by more and more rate increases. The ratepayers are punished by the rate increases, for the overspending by Cal Water Services. The DRAs team of engineers, auditors, analysts and consultants reviewed the filing of Cal Waters General Rate increase application Below is a portion of their findings: DRAs review of past budgeted and expended amounts indicates Cal Waters historical over spending of its budgeted and authorized amount. “A look at the company-wide dates between 2002-2011 shows that Cal Water consistently and continually over-spent by as much as 116%. Some districts do under-spend their budgets, but these occurrences are rare.” Table 7-C. Company Wide Historical Non-Specific Budget and Expenditure Company-wide Non-specific Budget Year Expenditure Budget % Overspent 2002 $27,547,755 $12,756,327 116% 2003 $19,047,725 $13,112,419 45% 2004 $23,600,627 $13,908,189 70% 2005 $25,909,741 $15,809,932 64% 2006 $26,531,862 $16,318,715 63% 2007 $23,039,408 $18,065,465 28% 2008 $27,492,773 $17,159,074 60% 2009 $26,382,679 $18,672,715 41% 2010 $23,776,404 $18,390,922 29% 2011 $33,808,900 $17,011,721 99% Average 10- Yr. $25,713,787 $16,120,548 60% DRA stated that the purpose of setting a budget in a business is to establish targets and standards and control expenditures. By allowing its districts expenditures to consistently and continuously exceed the established budget, Cal Water has exhibited no desire to control costs or improve efficiency. It states that it is blatant disregard for the budgeting and General Rate Case application process. Perhaps it is time that the private water companies change the way that they do business. Cal Water has stated that CPUC rules will not allow the private water companies to “carry” funds forward to plan for emergencies and or expenditures that were not previously approved. Long term water system planning (and setting aside funds) should be a priority. Instead, they are asking for more and more increases. Cut costs; work more efficiently: review their business practices to reflect the economy and the impact that the constant rate increases has on the rate payers; to look at how they are affecting the local economy. CPUC must initiate the changes. ECONOMY The economy has not recovered for most of our country. Marysville, in particular is in an economic crisis. The City of Marysville (due to water rates) has stopped watering most of the parks in town. City and County services has been cut. The unemployment rate in Yuba County is nearly 23%. 30% of our children in Marysville live under the poverty level. Senior citizens, on a very fixed income, represent over 20% of the residents. As you drive through town, more and more lawns are brown. Residents cannot afford to water their landscape. If you drive over the bridge to Yuba City, parks are green. Lawns are green. Water rates are less than half of what Marysville pays. It is impacting real estate values. The City of Marysville has lost all car dealerships (the last one is moving soon). “D” Street, the main street in Marysville, once a thriving business district, has numerous vacant stores. The City of Marysville has been working on a city “Bounce Back” program in an effort to attract businesses and economic redevelopment. It has been stated many times: “If a restaurant or business is planning to open a new business or to relocate, would they open here in Marysville and pay twice the water bills or open over the bridge and pay less than half for water?” The residents in Marysville have their backs against the wall. In Cal Water’s response, this was referred to as a “simple rate increase”. A simple rate increase is 3%, 4% or 5%. Not 47% or even 35%. Marysville cannot afford another large rate increase by Cal Water. IN CLOSING: Again, we are not attorneys and do not have the ability to retain legal services. We, the Complainants’ respectfully submit the Formal Complaint is justified, that it is not deficient in merit, nor is it flawed on procedural, substantive, and legal bases, and we respectfully request that the California Public Utilities’ Commission deny the motion to Dismiss on the bases of the DRA report and recommendations. It is in violation of the intent and the letter of AB 685, California’s Human Right to Water Bill and International Humans Rights. Governor Jerry Brown signed Assembly Bill 685, the “Humans Rights Bill” on September 25, 2012. Section 106.3 states “It is the policy of the state that every human being has the right to safe, clean, affordable, and accessible water adequate for human consumption, cooking, and sanitary purposes.” The operative words within this historic legislation are “human right to safe, clean, affordable and accessible water…” “While specifically refers the Department of Water resources (DWR), State Water Control Board (State Water Board), and the California Department of Public Health (CDPH), all agencies engaged in activities that impact quality, affordability or accessibility are obligated to comply with AB 685 the legislation.” International law provides an authoritative definition of affordability; defined within the International Human Rights Law Clinic, University of California, Berkeley, School of Law, May 2013 as; “Clean water should be affordable for all. Affordability means that direct and indirect costs related to water, including both connection, and delivery cost must not pose a barrier to access. Water costs should not compromise the ability to pay for other essential items, such as food, housing, and healthcare.” “Affordability is relative and the maximum cost of basic water service depends on individual income”. “International standards indicate that total expenditures on water and sanitation services together with any needed alternative sources of clean water should not exceed 3 to 5 percent of household income.” We the complainants’ do not have a quarrel with human safety, clean, and accessible water issues; however, it is our contention that the increase proposed by Cal Water in any stretch of one’s imagination does not conform to the definition of affordable. Cal Water states in the answer to our complaint: “Cal Water is keenly aware, for its staff, these are people with whom they work and live among every day. Far from faceless”. Too many times over the past few months, Cal Water has tried to make this “personal”. This is about water rates. We want to state it again: “the Marysville Cal Water employees are community members, neighbors and friends and not only do they contribute to the community because of the employment, but also their involvement in community affairs, service clubs and churches.” We know that in some cities/communities that the California Water Service pays for water. That is not the case in Marysville. California Water does not pay for water here. Yet, our rates continue to climb. The ratepayers in Marysville have secured resolutions expressing concern/opposition to the Cal Waters’ proposed rate increases (below): 1. Marysville City Council 2. Yuba County Supervisors 3. Marysville Joint Unified School District 4. Yuba/Sutter Democratic Club 5. Villa East Senior Housing Cal Water has taken every opportunity to state that they operated the water system serving Marysville since 1930. As stated in an article in the Territorial Dispatch, “If that is true, then why do they blame the condition of the water system for rate increases?” Regardless of whatever what the rates have been, the CPUC has always insured there was more than enough budget to sustain a functional updated water delivery system’s infrastructure. That is their job that’s what we pay for and we will accept nothing less! We are asking that CPUC review the 2009 Cal Water GRC application. There are areas of concern, such as the DRA review: “The Marysville District has recorded $808,300 in average gross plant additions during the past five years (2004-2008).28 The district’s average gross plant addition request for the period of 2009-2012 is $2,549,400 which represents an unprecedented 215% increase over historical recorded plant additions. It should be emphasized that the recorded plant additions themselves have exceeded the Commission authorized gross plant addition budgets during 2004-2007 by $2,194,200 which represents an 82% budgetary overrun of authorized additions for that period.29 In the years since the last GRC (2006-2007 data), CWS has recorded $2,112,700 more gross additions than authorized, not including 2008 which is difficult to quantify due to interim rates. Because these additions have not been authorized (they are only mentioned once in a misleading sentence next to an unexplained table comparing authorized to recorded capital additions” “DRA issued multiple data requests investigating the significant mismatch between authorized and recorded capital additions for the last five years.30 In its responses, CWS did not offer any meaningful explanation of the differences other than the fact that contributions and advances are estimated in the authorized additions column, while they derive from actual figures in recorded additions. DRA considers this level of recorded plant additions excessive, not compliant with previous Commission orders, and therefore recommends a systematic audit of actual capital additions and authorized budgets in the subsequent GRC, as was ordered in D.03-09-021 for all future CWS general rate cases.” “In terms of the new customer service center, CWS purchased a lot at 2nd and D Streets for $291,000 in 2008, $48,000 over the advice letter cap. DRA requested information on the customer service center that was mentioned in the project justification but was missing from the attachments. CWS was unable to provide the attachments which included “a detailed room by room analysis of the new building and a comparison of the space currently utilized in Marysville’s existing Customer/Operation center.” CWS stated that this information was provided in the 2005 GRC, but that it was no longer readily available.34 If CWS cannot keep and track important files for its proposed capital improvement projects that are still in progress, DRA cannot evaluate their reasonableness. In the last GRC, DRA and CWS agreed that in connection with the advice letter project for the land purchase, CWS would, “prepare a detailed justification for the new operation center in its next GRC filing to address DRA’s concerns that are expressed in its report.” Those concerns included the 357 sq. ft. per employee that CWS was planning for the new customer service center, and the existing building’s 200 sq. ft. per employee, which both exceed the 100 sq. ft. per employee industry standard cited by CWS. DRA also mentioned that CWS should present a formal cost-benefit analysis since CWS was paying a very low rent for its existing customer service center (about $1,000 per month). None of these items were addressed in the project justification submitted by CWS. Therefore, DRA recommends disallowing all projects (17829, 13316, and 18844) related to a new customer service center, including the advice letter carryover, due to insufficient need, lack of justification, and failure to comply with Commission requirements.” 1. We are asking for a denial to dismiss our complaint. 2. We are requesting a review and adjustment to previous GRC’s. 3. We are asking for no rate increases for Marysville.
Posted on: Tue, 15 Oct 2013 11:39:22 +0000
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