Cal Am wants to go back on desal ratepayer agreement.
Thursday, March 24, 2011
At a time when Cal Am ratepayers deserve clarity, they’re getting a glassful of silt, and it seems they’re being asked to gulp it down all at once.
Last week the Weekly reported Wedbush Securities, an investment bank being vetted to underwrite the $400 million (if we’re lucky) regional water project, says that as currently structured, the project’s water purchase agreement doesn’t support financing and the ultimate monetary risk will drip directly onto the heads of ratepayers. News reports elsewhere say a second investment bank, Citigroup Global Markets, reported the project won’t get an investment grade bond rating until the county successfully tests brackish water sources that will help feed the desalination project, and until the Coastal Commission gives the project its blessing.
The two reports were enough for the California Public Utilities Commission’s Department of Ratepayer Advocates to send off a document demand letter to Cal Am on March 18. Cal Am now has until March 25 to produce, among other relevant paperwork, all documents provided by Wedbush in response to the RFP; all documents reviewed by Cal Am pertaining to the total amount of debt projected to be financed – and the interest rates associated with that debt; Cal Am’s understanding of when a financing plan will be completed; and all analysis of whether the regional project can still be completed in three-and-a-half years.
But wait, it gets better. Cal-Am went back to the California Public Utility Commission on March 22 and is trying to stick its hands back into the pockets of those ratepayers who, by conserving the most water, are spending the least on it – homeowners and residential users.
According to the DRA, Cal Am ratepayer design manager David Stephenson is asking the commission to consider specific rate design changes to the Monterey County District, rates that were ostensibly locked in under the court-approved desal agreement. Under that settlement, Cal Am, the Marina Coast Water District and the Monterey County Water Resources Agency agreed that rates for the so-called first tier customers – the lowest users – wouldn’t change, and that any subsequent rate design would be dealt with in a specific desal proceeding.
But Cal Am now wants the CPUC to remove the current restriction on changing the low block rate for residential customers. And Stephenson also says CPUC brought it on themselves.
Last year he warned the commission if it did not get its act together and set a schedule for the next phase of the Coastal Water Project that would allow a new rate design by the end of 2011, Cal Am would “seek to have certain Monterey County District rate design issues resolved as part of [its] general rate case.”
So much for court orders and the concept of binding agreements.
DRA policy analyst Max Gomberg has spent the past five years immersed in all-things Monterey County water. He says Cal Am’s move is “an inappropriate way to address rate design issues,” and the change is being sought at the behest of the hospitality industry, which “realized late, in my opinion, that the cumulative impact of the desal project means Cal Am is looking to put surcharges on to customer bills.”
The residential customers are doing their part, Gomberg says. Consumption by that sector has dropped off significantly.
“Legally, I don’t see how they can come and say, ‘We need to deal with the rate design here,’ unless they go into the desal proceeding and file a motion to modify the settlement,” Gomberg says. “They’re worried if they don’t put more cost into the lower use tiers, they have nobody to pay for it.”
Cal Am’s general rate case proceeding is going on right now. The Monterey rate design was not addressed “because it was understood it would be handled in a desal proceeding,” Gomberg says.
It would be cynical to suggest Cal Am is trying to do an end run around the settlement agreement, not only by asking for what they’re asking, but also asking for it after rate testimony is complete.
Or maybe it’s the move itself that’s cynical.
Monterey County Supervisor Jane Parker believed the agreements struck last year were binding. “In terms of operating in good faith, this disturbs me,” she adds. “I find the whole thing to be in bad faith and lacking in integrity.”
At their March 22 meeting, the supes agreed to allow the MCWRA to tap into a Cal Am-backed, $286,000 line of credit to help finish the desal financing plan, pay for an independent review and finish litigating a lawsuit brought by Ag Land Trust. MCWRA general manager Curtis Weeks had asked the board to allow it to take an $8 million line of credit from Cal Am. The board showed remarkable restraint in denying that, and they should go a step further.
Cut off the flow of money until Cal Am and our own water agencies prove they’re willing to engage in a fully transparent process.
The Weekly didn’t get those Webush documents from the county despite requesting them; we got them from someone with access who doesn’t want to see ratepayers get screwed.