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Judge favors Golden State Water Company in fight for water system

The eminent domain case against Golden State Water hit a major roadblock today after Los Angeles Superior Court Judge Richard Fruin decided it’s in the best interest of the city of Claremont for the water system to remain under a private, investor-owned utility.

The city has 15 days to submit comments arguing against the tentative decision, according to a press release from the city of Claremont.

The trial, which began June 13, lasted more than six weeks. Because the decision is tentative, both parties will have 15 days to submit comments on the decision. A final decision will be issued once Judge Fruin considers the remarks submitted by both parties.

At that point, should Judge Fruin’s final decision be against the city, City Manager Tony Ramos said he will forward a recommendation to the city council to begin the appeal process.

Claremont has seen consistent rate hikes from the privately owned water company, with increases in from 2008 to 2011 leading city staff to finally say, “Enough is enough.”

As reported by the COURIER in 2008, Golden State Water Company applied for a 37 percent increase in water rates for Claremont customer over a three-year period. The California Public Utilities Commission routinely approved the increases.

Then, in 2011, Golden State instituted at three-tier billing system, which the company said was created in an effort to “encourage more conservation.” Golden State customers are charged by CCF or one unit, which is equal to 748 gallons of water.

For the first 13 CCF (9,742 gallons), a customer is charged at the cheapest rate, Tier One. Tier 2 rates (14 to 21 CCF) are 15 percent higher than Tier One. Tier 3 customers are then charged an additional 15 percent for every unit of water above 22 CCF. 

Alongside the tier system, the company went from a bi-monthly to monthly billing cycle.

In 2009, Golden State pushed for a 37 percent rate increase over three years. Company officials argued at that time that the increased rates would fund $100 million in infrastructure improvements, with about $7.5 million in improvements in the city of Claremont.

GSW approached the CPUC in July 2011 to request a rate increase of more than 24 percent to take effect in 2013 with additional, smaller increases to be added in 2014 and 2015.

The appeal was followed by a series of protests from the water company’s customers, many here in Claremont, upset about yet another set of rate hikes. After several public hearings held in November 2011 and negotiations the following spring, the CPUC was left to deliberate the final rate.

A settlement was reached over the summer of 2012, when the water company and ratepayer advocacy groups agreed on an increase of 15.1 percent in 2013, a 2 percent increase in 2014 and 1.8 percent in 2015.

After public outcry and town hall meetings packed with hundreds of angry customers, Golden State Water Company took a more conservative approach to rate hikes. In July 2014, they applied for an order to decrease water service rates by 0.50 percent in 2016, only to increase rates by 3.21 percent in 2017; and increase rates again by 3.12 percent in 2018.

“We have seen increases in our bills from 60 to 70 percent in just the past five years,” City Manager Tony Ramos told Administrative Law Judge Rafael Lirag in December 2014. “It is fundamentally unfair for residents of Claremont to pay significantly more for our water service than the ratepayers in surrounding municipally-involved service areas. I implore you to analyze this rate application with its impact on ratepayers and take into consideration the concerns of this community.”

Escalating water rates from Golden State is not new to Claremont. In February 2005, the company filed a general rate increase of 27.24 percent over a three-year period. The CPUC eventually approved a lower rate increase of 11.54 percent over three years.

This was after a 1996 effort by the water company to implement a 56 percent rate increase. Three years later, they filed an increase request of 19.37 percent and again in 2002, GSWC asked for a 43.84 percent rate hike.

In January 2011, again with approval from the CPUC, customers saw a 20.7 percent increase in water rates in Claremont.

Golden State Water Company, which files for rate increases every three years from the CPUC, has repeatedly said the increases are necessary to address infrastructure needs. Their next application will be in 2017.

American States Water Company, the parent company of GSW, achieved a consolidated return on equity of 12.4 percent for 2015. This is good news for shareholders who, according to ASWC, have received roughly $90 million through Golden State Water and American States Utility Services, a second subsidiary of ASWC.

In its 2015 annual report, American States noted that total employment at GSWC had declined by approximately 8 percent since 2011. Further, the company reports that Golden State “recovers its capital expenditures from customers” through depreciation expense and water rates.

 “Over the past five years, GSWC’s net utility plant has increased from $851.4 million at the end of 2010 to $1.056 billion at the end of 2015,” the annual report to shareholders also noted.

For more than 30 years, the city has consistently opposed Golden State's applications for increases through public hearings, where ratepayers enter testimony to administrative law judges from the CPUC. Filing the formal eminent domain lawsuit was Claremont's last ditch effort to finally put water system management in the city's hands.

On November 4, 2014, Claremont voters passed Measure W with a 71 percent approval, which authorized the city to issue water revenue bonds up to $135 million to take over and set up management of the water system.

No bonds have been issued yet. But, as of July 2015, the city had spent approximately $2.2 million on issues related to the water system acquisition. The Claremont City Council appropriated an additional $1 million from the city’s Water System Acquisition Reserve in 2015, which were funds from the 2013-2014 General Fund surplus that were set aside in October 2014 for water-related expenses.

The council adopted a reimbursement resolution in December 2014, which enabled the city to be paid back from the proceeds of revenue bonds. In mid-2015, about $300,000 in reimbursable expenses had been incurred.

Should an appeal case go forward and, if the city wins, all reimbursable expenses up to $5 million will go back to the general fund through repayment from the Measure W bond sales.

Current city expenses are unavailable as city hall is closed Fridays. Expenses incurred by the city will be updated as soon as possible. See the Friday, November 18 edition more on this development.

—Kathryn Dunn

editor@claremont-courier.com

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