Water district officials not giving up on takeover

<www.santacruzsentinel.com/archive/2002/December/30/local/stories/03local.htm>

December 30, 2002
By JONDI GUMZ
Sentinel staff writer

BOULDER CREEK -- Local officials say they are still looking into buying
a privately run water company in Felton even though the state has
approved the sale of the company’s parent firm to a German
conglomerate.
At issue is control of a small water system with 1,315 customers
one small part of Connecticut-based Citizens Utilities, which was
swallowed up by New Jersey-based American Water Works, and now
RWE Aktiengesellschaft, of Essen, Germany.
“It brings a new party to the table,” said Jim Mueller, general
manager of the San Lorenzo Valley Water District, referring to the
German firm.
Directors of the water district, which serves communities from Scotts
Valley to Boulder Creek, agreed to investigate purchasing the Felton
system at the urging of Felton residents.
The district has hired an appraiser to put a value on the system,
which includes springs and a treatment plant. The district also has
applied to the Local Agency Formation Commission, which governs
boundary issues, to expand its sphere of influence.
“We’re trying to develop information,” said Jim Rapoza, newly elected
water board president. “That’s the first step.”
Felton residents are following in the footsteps of a handful of other
communities that have sought local control of their water system.
American Water Works spent $5.6 million in 1999 fighting off takeover
efforts in Peoria, Ill., and Chattanooga, Tenn., according to the
company’s annual report. Last year, under threat of condemnation,
the company sold a water system serving 3,000 customers in
Salisbury, Mass., to the town for $11.5 million.
California was one of the last to grant regulatory approval for the
sale of American Water Works, which has operations in 29 states.
Local residents were not allowed to speak Dec. 12, when the
California Public Utilities Commission took testimony on the acquisition
of American Water Works’ Cal-Am subsidiary.
That’s because county officials did not meet the deadline to respond
to the state notice about the acquisition many months ago. County
Supervisor Jeff Almquist tried to persuade PUC officials to make an
exception to the rules, but he was unsuccessful. The PUC approved
the sale Dec. 19.
However, residents will have a say on a proposed rate hike next
month. Hearings for public input are planned at 2 p.m. and 7 p.m. Jan.
29 at Felton Community Hall.
Harriet Burt, public adviser with the PUC, said the hearings give the
administrative law judge considering the rate request a chance to
hear from the public.
Evidentiary hearings, where evidence to back up the PUC decision
will be presented, are scheduled for March 24 through April 4 in San
Francisco.
Cal-Am requested a revenue increase of $542,400 from Felton
customers over the next three years, most of it in 2003.
Kevin Tilden of Cal-Am said the additional revenue is needed because
of improvements and higher operating costs, including property taxes
and power expenses, since the last rate request was filed five years
ago.
The company’s 2001 annual report described other costs that have
risen, specifically $36 million associated with a new customer-service
center in Illinois and consolidation of accounting and human resources
at a facility in Mt. Laurel, N.J.
The report indicated customer billing and accounting expenses
increased by 17 percent in 2001 but predicted that costs would drop
once services were shifted to the new centralized offices.
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Contact Jondi Gumz at jgumz (at) santa-cruz.com