New water plan could make public buyout even more impossible.

A new Water Action Plan issued by the California Public Utilities Commission (CPUC) may make it more difficult for communities like the Monterey Peninsula to buy out private water systems.

The plan is intended to guide the state’s PUC in regulating investor-owned water utilities. The commission is slated to vote on the water plan at its Dec. 15 meeting in San Francisco. The public can comment on the plan at the meeting.

About 80 percent of water systems in California are publicly owned, and the CPUC has jurisdiction over the remaining 20 percent.

The draft plan lists several objectives—maintaining high water quality standards, strengthening water conservation programs, promoting water infrastructure investment and assisting low-income ratepayers, among others—and then outlines key actions the CPUC will take to achieve these objectives.

Attorney Ed O’Neil, who used to work for the CPUC and later helped the San Mateo County coastal community of Montara acquire its water system from the California American Water Co., says the plan contains “a gaping hole.”

“The objectives look fine,” O’Neil says. “But the real problem with the Water Action Plan is that it appears to totally ignore opportunities to improve water services in certain local areas through the public acquisition of investor-owned systems.

“It makes no mention of circumstances where the costs of needed improvements can be lowered through pubic acquisition. And there are lots of other benefits that the Water Action Plan ignores.

“It’s the PUC’s job to ensure that the public interest in the state of California is protected and promoted for the good of all citizens. Where there are better solutions for local problems through local acquisition, I think the PUC should be taking action to promote it.”

Just about everyone agrees the CPUC’s objectives are admirable—everyone from Cal Am officials to local voters who want to buy out Cal Am’s water system. Indeed, it’s difficult to argue with goals such as conserving water, helping low-income ratepayers and improving infrastructure.

“The Commission’s draft Water Action Plan contains many innovative proposals that will help utilities deliver safe and reliable water to their customers at reasonable rates,” writes Cal Am President Paul G. Townsley, in a letter to the CPUC.

But it’s those same policy proposals that concern some people on the other side of the public-versus-private-water debate.

Manuel Fierro, a member of the local group Citizens for Publicly Owned Water, says he is dismayed that the proposal seems to provide incentives to large utilities to take over smaller systems.

“It really isn’t the size for the water company as far as we’re concerned,” Fierro says, “it’s that they can provide quality water and reasonable prices.”

Citizens for Publicly Owned Water is working with the more business-oriented group Monterey FLOW to acquire Cal Am’s water system on the Peninsula. (Despite the defeat, by a huge margin, of Measure W, the public ownership study initiative on the November ballot, the groups say they will continue to pursue a public buyout.)

O’Neil says that a seemingly harmless proposal, which would encourage private companies to invest in existing infrastructure, could, in fact, make it more difficult for a public entity to buy Cal Am’s local water distribution system.

“The money that’s spent by an investor-owned utility, either constructing or planning a new facility, in the case of a public acquisition, the utility will claim that as value and that has to be compensated for,” O’Neil says. “For example, let’s say Cal Am has spent $25 million in planning studies for its desal plant. They will want compensation for those studies, and that inflates the cost of a public acquisition. If there’s a better alternative, that is really an imprudent cost that the public really shouldn’t have to incur, which makes that acquisition much more costly and much more difficult.”

TO VIEW THE WATER ACTION PLAN, VISIT HTTP://WWW.CPUC.CA.GOV/STATIC/HOTTOPICS/3WATER/051109_WATERACTIONPLAN.HTM