More than a million people in and around San Jose could soon see a large increase in the price of water if a private utility that controls service for 80 percent of the city gets its way.
The San Jose Water Company wants to raise rates by 44 percent over the next three years, bringing the average monthly water bill from $67 to $96 when the final increases go into effect, and overall revenue to just over $47 million.
Although the request went to the California Public Utilities Commission a full year ago, it took editorials, public meetings and community organizing before more than 700 outraged residents fired off petitions to state regulators protesting the rate hike. Some took to Yelp, bringing the water company’s rating down to two stars.
A state watchdog’s 280-page report fueled the fire. The California Division of Ratepayer Advocates called the utility company’s request unreasonable, suggesting instead that they raise fees 10 percent to pay for new infrastructure, rising retirement and operating costs, and a drop in water use because of the public’s conservation efforts.
Plus, the report notes, customers who conserve water shouldn’t be punished just because it cuts into the bottom line—especially when the company has promoted water-saving measures to its customers for decades.
Who knew saving could cost so much?
John Tang, the company’s spokesman, says he can’t remember a time when the public reacted so strongly to a proposed price change. It’s also the first time in his memory that the courts held up a decision this long.
“This is probably the most dramatic increase we’ve proposed,” Tang admits. “But it’s important to remember that this is just a proposal, every rate increase has to be justified. ... The state will decide what’s fair and equitable.”
Every three years, the San Jose Water Company—like hundreds of other public utilities in California—files a request for rate increases with the CPUC. The ratepayer watchdog group analyzes the request and compiles recommendations of its own, usually advising lower rates than those requested. But for decades now, the price of water has consistently ticked up. Almost as consistently, the company’s executives, some of whom already receive half-million dollar salaries, buy up stocks months before those rate increases take effect.
The company has already announced a higher annual dividend for stockholders than expected, and it will release its 2012 full-year and fourth quarter financial results Tuesday, Feb.19.
Market analyst Bryan Murphy explains the conflict of interest that comes with privatized water in a prescient 2010 column for Smallcap Network:
“Though they’re ‘public’ utilities and publicly traded, water utilities are privately managed, and subject to regulations—primarily rate regulations—established by state and regional overseers. Such an arrangement leaves one to wonder how any of these companies could ever make a dime. The reality? Making money, and making more money from one year to the next, has disturbingly not been a problem for many of these organizations.”