MONTEREY – A branch of a state regulator charged with protecting the interests of ratepayers has come down hard on California American Water Co.’s request for rate increases, at one point calling the investor-owned utility’s explanations “gimmickry.”
The Public Advocates Office, a legislative-established sector of the California Public Utilities Commission, is recommending to the full commission a significant curtailment of Cal Am’s rate increase requests – called General Rate Cases – that would cover the next three years.
“Cal Am’s proposed rates are developed using unreasonable methodologies and frequent ratemaking gimmickry,” the Advocates Office wrote to the CPUC commissioners in late January. “This includes seeking profit on assets that will not be in use, budgeting for items unrelated to the provision of safe and reliable water service, and requesting ratepayers repeatedly pay for previously funded but unbuilt capital projects.”
The Advocates Office is advisory only. The commission can adopt all or none of the Advocates’ recommendations. Because Cal Am is an investor-owned utility, it must receive permission from the CPUC before raising rates.
Cal Am is asking for increases of 17.2% ($63 million) in 2027, 5.1% ($22.1 million) in 2028 and 5.8% ($26 million) in 2029, plus $7.3 million in additional surcharges (to read more about these increases visit https://wp.me/paiZ5f-fCL8)
Cal Advocates recommends significantly lower increases: 3.24% in 2027, 3.75% in 2028 and 2.12% in 2029.
Cal Am cites a number of reasons for the need to increase rates. The main drivers are new capital investment, increased labor expense, operations expense and administration and general expenses.
Additionally, Cal Advocates is recommending to the CPUC that the ratemaking process should be transparent to decision-makers and ratepayers and that the commission must ensure that Cal Am does not abuse its position as a natural monopoly.
In a statement emailed to the Herald from Josh Stratton, Cal Am’s Central Division spokesman, the company said it “welcomes improving the public’s understanding of California’s complex regulatory systems and environment. Cal Am meets and exceeds the State requirements for rate reporting and disclosure.”
The Cal Advocates’ filing includes multiple technical reports – several hundred pages – covering operations, capital spending, depreciation, labor, taxes, rate base and customer service. Brian Yu served as the project lead for Cal Advocates and Prashanta Adhikari prepared the “results of operations” tables and provided other analyses.
“For every instance of unreasonable, imprudent or deceptive ratemaking identified in Cal Am’s application, Cal Advocates’ testimony provides the Commission with a remedial recommendation to protect ratepayers and the public interest,” Cal Advocates states in its filing.
Cal Am counters that the revenue request “includes important capital investments crucial to the continued delivery of safe, reliable water and includes an expanded benefit to our low-income customers,” Stratton wrote.
The company is in the process of making an official response, which is due March 24.
