Hearing Set as San Jose Water Company Requests Rate Hike; Overbilling Questions Still Linger

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.

Source: Office of Ratepayer Advocates

Source: Office of Ratepayer Advocates

If the CPUC approves the petition, San Jose Water would see an overall increase in revenues of nearly $7.6 million, 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]

Jennifer Wadsworth is a staff writer for San Jose Inside and Metro Newspaper. Email tips to [email protected] or follow her on Twitter at @jennwadsworth.

13 Comments

  1. Over the last three years, the percentage of m,y water bill which goes to various fees and charges – everything EXCEPT the actual cost of water – has ranged from 50.1% to 64.7%. Les than half of what I pay goes to actually paying for the water we use.

  2. Yes, in the middle of the drought it was plotted. We pay an unusually high bill and ship a lot of water
    down South, sold to them by the water company.

    • > We pay an unusually high bill and ship a lot of water down South, sold to them by the water company.

      This is new news to me. Can you say a little more about shipping water down South?

      Alarm bells go off when I learn about “public” agencies and institutions engaging in “trade” which potentially could generated “profits”.

      Public entities, by definition, are monopolies and have the capability of imposing monopoly effects on the market place.

      Who’s “shipping” the water. Who’s water are they shipping. Did they pay for the water they are shipping. Are they getting paid for the water they’re shipping. Are they making a profit? Are they jacking up prices for local customers so they can limit local demand and have more water to sell to “down South”?

      I think we deserve some accountability on the part of those we are paying to be accountable.

      • @sjoutsidethebubble: San Jose Water Company is not a public institution. It’s a for-profit company that’s listed on the NY Stock Exchange. They have investors that have to be satiated. So yes, they are after profits like any other publicly traded company.

        Regarding the comments from Dinah Cotton, she’s probably mixing things up. I see her talking about how water from northern California is shipped to southern California via the California Aquaduct.
        https://en.wikipedia.org/wiki/California_Aqueduct

      • Good questions all. Investment in utilities has always done well for stockholders and mutual funds. Fees which vary (or increase) over time, from 50.1% to 64.7% (figure courtesy of Will of the Glen–great screenname!) seems to be a sign of mismanagement.

        I just don’t think we ought to be responsible for maintaining their profits: they have no incentive for better management when we are.

        For any utility, where customers are asked by it or by governments, to conserve usage for a particular period, does not justify an increase in rates. If they haven’t planned ahead, that’s their problem: squeezing more money out of ratepayers is too close to extortion. We all notice that once the crisis is passed, the rates do not go down…leading many to believe the true crisis was just a serendipitous excuse for them to raise rates.

  3. This rate increase upon rate increase and over billing must stop…….San Jose Water Company may be the most profitable water utility in the entire USA……It is dramatically impacting seniors on fixed income and low income homes trying to keep their heads above Water…..San Jose Water just raked in more than 70 million dollars for its real estate in downtown San Jose that the rate payers paid for.
    They have admitted to over billing rate payers they say 1.8 million more like 7 million dollars…..San Jose water has squeezed and squeezed the rate payers in San Jose using every excuse conceivable for rate increase on top of rate increase……..DEMAND the CPUC deny any further rate increase. Demand the CPUC and citizen watch dog committee be able to audit San Jose Water’s books ….Demand that San Jose Water Company and its Officers return the money they illegally took from Rate payers or face prison time for corruption.

    • C. L. James says, and I agree:

      Demand that San Jose Water Company and its Officers return the money they illegally took from Rate payers or face prison time for corruption.

  4. San Jose Water Company is charging me 300% more for water here than I’m paying at my new home in Arizona.
    Your getting screwed as usual San Jose !

  5. Hi All, not sure what I am mixing up about Northern CA supplying water to Southern CA? Our fees are outrageous and we will be attending the meeting tonight. The current Greed of SJWC is beyond absurd.

  6. I attended the hearing and 100% of attendees were against any rate hikes. The key suggestions made were :-
    1) Bring the ownership back to the public, i.e. to the SJ municipality.
    2) De regulate and consumer choice.
    3) Most secured investments i.e. Bank Savings and US Govt bonds don’t get a rate more than 2-3% , then why should SJWC expect a rate of 10% while the CPUC who seem to be suggesting 8.3% raise.
    4) 90% of the pipes are 90 years or less old while the SJWC claimed they are 150 years old, some fudging going on.
    5)The execs get 1.32 million dollar salaries while the residents pay through their nose.
    6)While residents reduce consumption and install efficient water management, causing blocked sewers, burnt landscape, dried trees and parks, rich golf clubs get the water.
    7) Coyote creek gets flooded, because SJWC could not store excess water and divert to other reservoirs.
    8) Comparison of a dwelling of 6 residents in Riverside,CA paying $185 , where as dwelling of 2 residents costs $500+
    9)CPUC is negligent towards customer / resident plight.
    10) Families living on fixed income are having a really hard time.
    11)SJWC profits have nothing to do with infrastructure upgrades, the stock investors returns are very small, all the proceeds go towards paying fat salaries.

    • One thing to note is that SJWC is not in the business of capturing or storing water. They are a retailer of water. They buy it from the water district and other suppliers then ship it to your home or business, and do the billing. Therefore, item 7, about the Coyote Creek flood is not relevant in this discussion.

      Regarding the age of the pipes, I think that 90 year old pipes are pretty darn old! And I also wonder if they have lead in them, which leaches into the water. Think about what’s been going on in Flint, Michigan.

      I agree that execs should not be getting seven figure salaries. This kind of service would be much more appropriate to be run by the municipality (yes, the local government!).

      Thanks for the notes, Pranabh.

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