An unfriendly takeover?

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Water board to look into acquiring Cal-Am

Dec. 15, 2002
By DENNIS MORAN
dmoran (at) montereyherald.com

Even those sympathetic to the embattled water board were
stunned at the timing.
Less than two weeks after voters overwhelmingly said the Monterey
Peninsula Water Management District should not exist, the district’s
board last month took steps to expand its powers. The board gave
initial approval to regulating single-family wells in the hills over
Carmel Valley and, even more surprising, decided to look into
acquiring the water company it regulates, California-American Water
Co.’s Monterey division.
On Monday the board will follow up on both issues, with a final vote
on regulating the wells and a decision on whether to proceed with
studies on the feasibility of using eminent domain powers to acquire
Cal-Am’s local facilities.
It would have to be an unfriendly takeover. “Not for sale,” said
Steve Leonard, general manager of Cal-Am’s Monterey division.
The first step in a takeover would be to determine how much water
bills in the district would need to be raised to pay for it. The district
staff will have some figures available for Monday night’s meeting.
Water board critics wonder if the issue is just a defiant response to
district voters - or at Cal-Am, which donated $10,000 to the
campaign in favor of November’s non-binding ballot measure asking
whether the water district should be dissolved.
The takeover idea was raised by water board member Alexander
Henson, part of an environmentalist-leaning board majority that
critics feel is using water policy to limit growth on the Peninsula.
Henson said he surfaced the idea out of frustration with Cal-Am for
not taking the lead on the state’s recommendation that a seawater
desalination plant be built in Moss Landing to help solve the
district’s water shortage.
“It certainly is true that my timing in bringing this up is from
frustration that Cal-Am is not leading us in terms of making a
decision” on whether to support the state recommendation, Henson
said last week.
Cal-Am officials say the proposal, released in August, has
complicated ramifications that need thorough study. Leonard said
the company hopes to weigh in on it very soon.
Henson said he had wanted to study the idea of taking over the
Cal-Am operations for some time.
Ownership of the local water system also is an issue in other areas
served by Cal-Am.
The communities of Felton in Santa Cruz County and Montara in San
Mateo County are exploring the idea of taking over local Cal-Am
properties and operations by eminent domain, a process by which
communities can buy private properties deemed vital to the public
interest.
In both of those communities, Cal-Am’s parent company, American
Water Works, acquired the public water systems and then set about
obtaining large rate increases. Some officials and activists in those
communities aren’t happy about losing local control over water to a
huge private company that’s in the process of being purchased by
an even bigger multinational conglomerate based in Germany.
Some of those same concerns motivate Henson’s interest in having
a local public agency, the water district, take over water distribution
from a private company that must cater to stockholders.
“Should (local water facilities) belong to a company in Germany or
should they belong to the ratepayers?” Henson asked. While some
raise the specter of a foreign company owning local water facilities
as worrisome in and of itself, Henson said, “I’m not xenophobic.”
But, he said, decisionmakers in Germany aren’t close enough to see
and respond to local needs.
Cal-Am officials say that all local management and service structures
will remain in place even after the sale of American Water to the
Essen-based RWE conglomerate is complete.
State regulators in many of the states American operates in must
approve the sale, and the California Public Utilities Commission is
expected to rule on it early next year.
Henson said Cal-Am isn’t doing all it could to provide a quality
product - some of its facilities are “decrepit” and in some areas the
water tastes horrible.
He mentioned a stretch of water pipe in Carmel Valley that has
sprung numerous leaks.
Cal-Am’s Leonard acknowledged that stretch of pipe has sprung 19
leaks this year. Replacement will require disruptions to Carmel
Valley Road traffic and nearby property owners but is planned for
next year, he said.
Money for the multimillion-dollar project is not a problem, he said,
and it’s a top priority for the company.
The deterioration of the pipe and the inconsistency of the taste of
water have similar causes, Leonard said.
Since a state order in 1995 diminishing Cal-Am’s draw from the
Carmel River, the company has had to vary its sources more. The
aged, leaky pipe has been stressed by alternating pressures and
flow directions as water flows through it from the San Clemente
Dam during the winter when Carmel River flows are high enough,
and at other times from wells farther down the valley.
Cal-Am must balance its water take from those sources and also the
Seaside aquifer. Leonard said that water from the varying sources
have slightly different tastes, and it’s change from a taste that one
has become accustomed to another that typically generates
complaints.
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Dennis Moran can be reached at 646-4348.