Water utilities across California, including those serving Monterey County, have collected an estimated $1 billion in surcharges slapped onto the bills of ratepayers since 2008.
The surcharges are part of a pilot program intended to promote conservation – but the program has failed and should be replaced, according to California Public Utilities Commissioner Martha Guzman Aceves. She is proposing a change that will come to a vote at the CPUC meeting on Aug. 6.
If approved, the new policy would mean a reduction of 10-15 percent on water bills for customers of California – American Water on the Monterey Peninsula, where bills are among highest in the country, and those of California Water Service in Salinas, according to an analysis by CPUC’s Public Advocate’s Office.
“Aceves should be applauded for placing the well-being of Californians above utility profits,” says Richard Rauschmeier, a water analyst at the Public Advocate’s Office.
Originally, the idea, known as “decoupling,” was to shift incentives so utilities won’t seek to sell more water. Instead, they would collect a surcharge to account for any drop in water usage.
In CPUC-speak, this new way of calculating water bills was called a Water Revenue Adjustment Mechanism, or WRAM. The WRAM surcharges account for about 10 percent of revenues of participating utilities over the past decade, which comes out to an estimated $1 billion. The effect has been especially pronounced on the Peninsula, Rauschmeier says: “Monterey is the poster child for WRAM surcharges in California.” A 2015 analysis pinpointed $40.6 million in surcharges paid by local Cal Am customers.
For various reasons, some utilities signed up for WRAM and others didn’t, and the divide has provided the CPUC a natural experiment with which to analyze the effects of the incentives.
“There is limited to no effect on conservation when comparing companies that have this mechanism and those that don’t,” Rauschmeier says. “It was put in with the best intentions, but it’s clear that the effects are very one-sided. The evidence shows that the customers operate the same but they wind up paying a heck of a lot more.”
Part of the problem is the program conflated conservation with consumption, according to Rauschmeier. When water use has dropped due to economic factors, the revenues of utilities are protected. “Insulating companies from normal business risk is nonsensical,” Rauschmeier says. “It is a model that has shifted the risk onto ratepayers.”
The position of Aceves and the CPUC’s consumer-advocacy arm put them at odds with the water utility industry, which has mounted a public relations campaign to argue the proposed policy change would lead to higher rates and less conservation. The new policy proposal is portrayed as a product of “faulty analysis.”
The PR campaign spreads its message on social media under the moniker Stop Water Waste and Higher Bills, and it includes Facebook ads. An affiliated Twitter account, created in July, claims it is the voice of “a broad coalition of environmental and low-income organizations, consumer groups, and water conservation experts.”