San Jose’s largest privately held water utility, which was recently found to be overbilling customers by at least $1.8 million, is angling for yet another rate increase—this one tied to the company shareholders’ return on investment.
The California Public Utilities Commission (CPUC) will host a public hearing at City Hall on Monday, as San Jose Water Company is petitioning for an increase in its cost of capital and rate of return for infrastructure projects through 2020.
The request by San Jose Water is part of a joint petition with three other investor-owned utilities: Golden State Water, California American Water and California Water Service companies. According to the notice San Jose Water sent out to customers, the company wants to raise its cost of capital rate of return from 8.09 percent to 8.63 percent. That would account for a 10.75-percent increase in common equity costs and a 6.2-percent hike in the long-term debt rate.
If the CPUC approves the petition, San Jose Water would see an increase in revenues of nearly $7.6 million next year, which would cost the average customer about $2.14 more per month (or $4.28 per bimonthly billing cycle).
“[San Jose Water] believes it is necessary to attract capital in order to fund water system investments,” the company wrote in its notice to customers. “System investments allow the company to meet its obligations to serve its customers safely and reliably. [San Jose Water] believes this request will help in maintaining an investment-grade rating, reducing overall financing costs.”
In response to the San Jose Water’s petition, the Office of Ratepayer Advocates (ORA), a state watchdog agency affiliated with the CPUC, called for the company to lower its rate of return. That would align with an industry-wide trend, as reduced financing costs in the financial markets have led to lower return rates for regulated water companies throughout the nation.
A local grassroots group called WRATES—short for Water Rate Advocates for Transparency, Equity and Sustainability—also plans to challenge the rate increase. Rita Benton, one of the group’s lead organizers, called the rate increase unnecessary. Profits for the utility’s parent company continue to soar as executives rake in multimillion-dollar compensation packages.
All the while, customers have been saddled with unsustainable rate increases, Benton said. The city of San Jose—the company’s single largest customer—saw a 67 percent rate hike in the past four years alone.
To make matters worse, San Jose Water admitted to overbilling customers by $1.8 million this past year. WRATES is appealing that figure, claiming that the actual amount is several million more.
Come January, San Jose Water will also petition for a general rate increase, which would up the cost for customers by several million dollars. WRATES plans to oppose that, too.
Benton said she’s hopeful about Monday’s hearing, which will offer ratepayers a rare chance to speak out about the price hike in a local venue. Typically, these kinds of hearings take place in Sacramento or San Francisco. In the notice for next week’s meeting, San Jose Water Company listed information about a hearing in Monterey, which confused customers who got it in the mail earlier this week, Benton said.
“By attending the CPUC hearing on Monday, the customers of SJWC will finally have a chance to speak, on the record, to the CPUC decision makers to let them know that we have had enough of SJWC’s outrageous rate increases,” she told San Jose Inside. “We will actually see a reduction in our water rates come January if the CPUC lowers SJWC’s investment returns.”
WHAT: CPUC hearing on San Jose Water’s request for a return on investment
WHEN: 7:30pm Monday
WHERE: San Jose City Hall, 200 E. Santa Clara St., San Jose
INFO: CPUC, 866.849.8390, [email protected]