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County objects to Felton water rate hike, gears up to kick out Cal-Am

Priming the Pump

County objects to Felton water rate hike, gears up to kick out Cal-Am

by Laurel Chesky

The community of Felton’s bid to buy its water system flowed forward last week. On April 2, the Santa Cruz LAFCO (Local Agency Formation Commission) commissioners voted to prioritize an application from the San Lorenzo Water District to fold Felton into its sphere of influence.
LAFCO approval, which would give the water district jurisdiction over Felton’s water-delivery operations, moves Felton closer towards a proposed eminent domain case in which either the county of Santa Cruz or the water district could force California-American Water Company to sell its Felton assets. Cal-Am delivers water to about 1,300 customers in Felton. A LAFCO decision on the sphere of influence amendment is expected to take six months.
Outraged over the water company’s plan to jack up rates, Felton residents have rallied to take over their water system. Cal-Ama private water company and subsidiary of American Water Works, which is owned by German company RWE, applied to the California Public Utilities Commission to increase its revenues in Felton by 56 percent this year, and an additional 9 and 2 percent over the following two years.
In addition, county government and county Supervisor Jeff Almquist are officially opposing the rate hike. Almquist, acting as an individual ratepayer, and the county have submitted legal briefs objecting to the rate increase to the administrative law judge overseeing the case. An evidentiary hearing on the rate case is scheduled for April 21, after which the judge has 30 days to make a recommendation. His recommendation will be submitted to the utilities commission, which will ultimately decide whether or not Felton’s rate will jump, and by how much.
Almquist, who has led the effort to shift the water system from private to public ownership, held a town meeting on Wednesday, April 2, to update Felton residents on the progress of the rate application and the eminent domain case. About 100 residents attended.
The eminent domain process involves assessing the value of Cal-Am’s Felton assets, including pipes, pumps and the rate base, coming up with the money to pay the company fair market value, and convincing a judge that the sale will serve the greater good. Cal-Am has indicated it will not be a willing seller.
The water district took on the first step. The district has a draft appraisal of Cal-Am’s assets in Felton, but that document is sealed to the public because it will be part of future negotiations.
That second step, finding the money, was discussed at Wednesday’s meeting. A ballpark analysis conducted by Almquist estimates that the water system could be purchased for $250 to $500 per residential user per year over the next 30 years.
In the best case scenario, Felton customers would actually pay less than they do now. The purchase would eliminate a current $23 a month ($276 annually) surcharge Cal-Am adds on to water bills to pay for a new water treatment plant. Plus, if the community owned the water system, current rates would remain the same or “would probably go down,” says Scott Millar, an aide to Almquist. “At the lower end of the scale, it’s a pretty good deal.”
At Wednesday’s meeting, Almquist’s office presented possible avenues to finance the buy-out.
Over the next month, Almquist’s office will be forming a focus group of 30 to 50 Felton water customers, who will study the different funding options and report back to the community with a recommendation.
“We’re going to do what the community wants us to do,” Millar says.

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