LIOB Update:LIOB Update:Low-Income Water Low-Income Water

IssuesIssuesJuly 10, 2012July 10, 2012

Carolina ContrerasCarolina ContrerasDivision of Water and AuditsDivision of Water and Audits

Issue UpdateIssue Update

Bill Watch: “Human Right to Water” BillsBill Watch: “Human Right to Water” Bills California Water Service Request to California Water Service Request to

Increase Low-Income Surcharge Increase Low-Income Surcharge Data Sharing UpdateData Sharing Update Current GRC’s:Current GRC’s:

– Park Water Co.Park Water Co.– Golden State Water Co.Golden State Water Co.– California American WaterCalifornia American Water

Balanced Rates OIRBalanced Rates OIR

Bill WatchBill Watch

““Human Right to Water” Human Right to Water” PackagePackage

2011 “Human Right to Water 2011 “Human Right to Water Package”Package”

First package of bills signed into law by First package of bills signed into law by Governor Brown in October 2011:Governor Brown in October 2011:– AB 54AB 54 by (Solorio) – Drinking water. by (Solorio) – Drinking water. – AB 938AB 938 by (Pérez) – Public water systems. Requires by (Pérez) – Public water systems. Requires

drinking water alerts to be translated when 10 percent drinking water alerts to be translated when 10 percent or more of water district customers speak a second or more of water district customers speak a second language. language.

– AB 1194AB 1194 by (Block) – Drinking water. by (Block) – Drinking water. – AB 1221 AB 1221 by (Alejo) – State Water Quality Control Fund: by (Alejo) – State Water Quality Control Fund:

State Water Pollution Cleanup and Abatement Account. State Water Pollution Cleanup and Abatement Account. – AB 1292 (AB 1292 (Hernandez) – Safe Drinking Water State Hernandez) – Safe Drinking Water State

Revolving Fund: revenue bonds. Revolving Fund: revenue bonds. – SB 244 SB 244 (Wolk) – Local government: land use: general (Wolk) – Local government: land use: general

plan: disadvantaged unincorporated communities.plan: disadvantaged unincorporated communities.

2012 “Human Right To Water” Bills 2012 “Human Right To Water” Bills PackagePackage

AB 685 (Eng)AB 685 (Eng) – – Human Right to Water: Human Right to Water: Would establish the human right to water as a statewide policy priority; Passed Assembly June 1,2011; Pending In Senate Appropriations Committee.

AB 1669AB 1669 (Perea) (Perea) - would create a ‘Nitrate At-Risk Area Fund,’ which would be used to develop and implement solutions for low-income communities that are at risk of nitrate contamination. Status: held in Assembly Appropriations Committee.

AB 1830 (VM Perez) – Protections for Mobile Home Park Residents and AB 1830 (VM Perez) – Protections for Mobile Home Park Residents and Water Rates. Water Rates. Intends to provide residents of mobile home parks and manufactured housing communities the same rights and protections as "stick-built" housing residents enjoy when they purchase water services through investor-owned utilities. It clarifies the Public Utilities Code on the matter of "rate relief" for park or community residents in instances where water rates charged by mobile home parks and manufactured housing communities are found to be unjust and/or unreasonable. Such relief could include restitution of funds to residents who have been overcharged. Status: Pending the Senate of Energy, Utilities and Communications Committee

AB 2238 (Perea) – Consolidation. AB 2238 (Perea) – Consolidation. require the State Department of Public Health to promote the consolidation and merger of small community water systems that serve disadvantaged communities. Status: Passed Assembly. Pending Senate Committee on Environmental Quality.

AB 2334 (Fong) Water Affordability -AB 2334 (Fong) Water Affordability - would require the Department of Water Resources to conduct an analysis of water affordability every five years; Status: held in Assembly Appropriations Committee.

California WaterCalifornia WaterService Service

Request to Increase Low-Request to Increase Low-Income SurchargeIncome Surcharge

California Water Service California Water Service (CalWater)(CalWater)

Largest CPUC regulated Water Utility.Largest CPUC regulated Water Utility. Serves over 450,000 customers.Serves over 450,000 customers.

Fig. 1 CalWater Districts and Map, “2010 Annual Report” California Water Service Group

Low-Income ProgramLow-Income Program D.06-11-053D.06-11-053

– Authorized implementation of Low-Income program. Authorized implementation of Low-Income program. Enrollment increased significantly since inception of Enrollment increased significantly since inception of

program: program: – January 2007: 2,734 participantsJanuary 2007: 2,734 participants– December 2011: 49,381 participantsDecember 2011: 49,381 participants

Non-participating customers fund program via a surcharge Non-participating customers fund program via a surcharge of $0.01 per CCF of water.of $0.01 per CCF of water.

Average per customer discount in 2011= $6.13 (Discount is Average per customer discount in 2011= $6.13 (Discount is fixed, but amount varies per ratemaking district).fixed, but amount varies per ratemaking district).

Current surcharge is inadequate to fund program.Current surcharge is inadequate to fund program.– In December 2011, company-wide LIRA subsidies in the In December 2011, company-wide LIRA subsidies in the

amount of $312,786 were provided to LIRA customers, but only amount of $312,786 were provided to LIRA customers, but only $102,937 in LIRA surcharges were collected.$102,937 in LIRA surcharges were collected.

Funding disparity is expected to increase with Data Sharing Funding disparity is expected to increase with Data Sharing requirement.requirement.

Low-Income Surcharge Increase Low-Income Surcharge Increase RequestRequest

Feb. 9, 2012: Among other Feb. 9, 2012: Among other requests, CalWater requests requests, CalWater requests authority to increase surcharge to authority to increase surcharge to fund low-income program.fund low-income program.

May 25, 2012:DRA and CalWater May 25, 2012:DRA and CalWater settle issues including:settle issues including:– Increase surcharge to $0.06 per CCF Increase surcharge to $0.06 per CCF – Assume 75% penetration rate at end Assume 75% penetration rate at end

of 2012 due to Data Sharing.of 2012 due to Data Sharing.– Established a mechanism to annually Established a mechanism to annually

adjust surcharge to actual levels. adjust surcharge to actual levels. – Surcharge is calculated to fund only Surcharge is calculated to fund only

estimated subsidies and not any estimated subsidies and not any expenses to operate program.expenses to operate program.

Next: CPUC to issue Decision on Next: CPUC to issue Decision on Settlement AgreementSettlement Agreement

Annual surcharge adjustment Annual surcharge adjustment mechanism could become a tool mechanism could become a tool available to other water utilities.available to other water utilities.

Table 1. Rate Impact of CalWater’s Original Request, “Petition of California Water Service Company to Modify D.06-11-053 Authorizing a“Low-Income Ratepayer Assistance” Program” filed February 9, 2012

Data Sharing between Data Sharing between Water and Energy UtilitiesWater and Energy Utilities

UpdateUpdate

Current General Rate Current General Rate CasesCases

Park Water Co.Park Water Co.Golden State Water Co.Golden State Water Co.

California American Water Co.California American Water Co.California Water Service Co.California Water Service Co.

R.11-11-008 Balanced R.11-11-008 Balanced Rates OIRRates OIR

UpdateUpdate

OIR to Assist High Cost Service OIR to Assist High Cost Service AreasAreas

OIR Objective:OIR Objective:– ““To consider adopting new or revised guidelines for To consider adopting new or revised guidelines for

consolidation of districts, some variation of a high cost fund consolidation of districts, some variation of a high cost fund within multi-district utilities and another mechanism or a within multi-district utilities and another mechanism or a combination of them to as means to advance the combination of them to as means to advance the Commission’s Water Action Plan objective of setting rates that Commission’s Water Action Plan objective of setting rates that balance investment, conservation, and affordability.” balance investment, conservation, and affordability.”

Low-Income customers in both high and low cost areas may Low-Income customers in both high and low cost areas may be impacted.be impacted.

May 25, 2012 -Pre-Hearing Conference held.May 25, 2012 -Pre-Hearing Conference held. June 20, 2012 – Scoping Memo Issued.June 20, 2012 – Scoping Memo Issued.

– Clarifies that mechanisms may not be limited to consolidation Clarifies that mechanisms may not be limited to consolidation and a high cost fund variant; andand a high cost fund variant; and

– Intra-company mechanisms alone should be considered.Intra-company mechanisms alone should be considered.

Possible Pros/Cons Single Tariff Possible Pros/Cons Single Tariff Pricing/ConsolidationPricing/Consolidation

PROS.PROS. Achieve greater economies of scale for Achieve greater economies of scale for

small high cost systems by distributing small high cost systems by distributing costs across a larger customer base. costs across a larger customer base.

Improve service affordability for Improve service affordability for customers in high cost areas.customers in high cost areas.

Mitigate rateshock to utility customers.Mitigate rateshock to utility customers. Greater revenue and rate stability. Greater revenue and rate stability. Increased bill predictability for Increased bill predictability for

customers. Bill predictability is customers. Bill predictability is especially important for low-especially important for low-income households who generally income households who generally operate under restrictive budgets. operate under restrictive budgets.

May greatly improve investment and May greatly improve investment and affordability issues faced by many of affordability issues faced by many of the small water utilities. the small water utilities.

Facilitate compliance with water Facilitate compliance with water quality regulation.quality regulation.

Encourages investment in water Encourages investment in water supply infrastructure. supply infrastructure.

Achieve possible cost savings Achieve possible cost savings (regulatory and others).(regulatory and others).

Can allow for a more standardized Can allow for a more standardized low-income assistance program.low-income assistance program.

CONS.CONS. Undermine efficient water use and Undermine efficient water use and

conservation efforts by weakening price conservation efforts by weakening price signals in high cost areas.signals in high cost areas.

Breaks connection between cost and Breaks connection between cost and rates.rates.

Encourages growth in high cost areas.Encourages growth in high cost areas. Potentially costly long-tem impacts on Potentially costly long-tem impacts on

water supplies of high cost systems water supplies of high cost systems with scarce sources of supply.with scarce sources of supply.

May result in subsidization of May result in subsidization of customers in high cost areas by customers in high cost areas by low-income customers in lower low-income customers in lower cost areascost areas..

Encourages overinvestment in Encourages overinvestment in infrastructure.infrastructure.

Focus on local water system issues may Focus on local water system issues may loose emphasis if rates are addressed loose emphasis if rates are addressed at a higher company-wide level.at a higher company-wide level.

Next StepsNext Steps

Workshops scheduled for July 17 and Workshops scheduled for July 17 and 18, 201218, 2012

Tentative second set of Workshops Tentative second set of Workshops scheduled for Septemberscheduled for September

Proposed Decision anticipated in Proposed Decision anticipated in February, 2013February, 2013