November 6, 2012
Claremont Makes Offer to Purchase Golden State Water Operations
City Offers $54 Million for Water System that Serves Claremont
The City of Claremont today transmitted an offer to Golden State Water Company to purchase its water delivery system and assets in Claremont for $54,067,000. Golden State Water is part of a privately-owned, publicly-traded company that serves water to residents and business owners in Claremont.
"The offer made by the City is based on an inspection of the Claremont water system and an independent appraisal that was prepared in accordance with State law and accepted appraisal procedures," said Claremont Mayor Larry Schroeder. "The offer made to Golden State Water is for the full amount of the current fair market value of the utility system and its assets."
The Claremont City Council unanimously approved making an offer to Golden State Water based on the appraisal. The water system services all of Claremont, as well as small portions of the cities of Montclair, Pomona, Upland, and adjacent areas of unincorporated Los Angeles County.
"Our Council remains committed to ensuring that Claremont ratepayers are treated fairly when it comes to water service and rates. As we move forward, City staff will continue to evaluate and examine a variety of options to cost-effectively manage and finance the potential water system purchase," said Mayor Pro Tem Opanyi Nasiali.
The offer transmitted to Golden State Water includes a state-mandated provision permitting them to be reimbursed up to $5,000, if they choose to have a separate independent appraisal conducted.
"We are looking forward to meeting with representatives from Golden State regarding our offer. It's time for a meaningful discussion regarding the future of water service in Claremont," said Councilman Corey Calaycay. "To merely claim the water system is not for sale will not serve the best interests of ratepayers in Claremont."
Also included in the offer is information on California's eminent domain process. Notably, however, the appraisal of the water system and offer made to Golden State Water does not trigger the eminent domain process which would require separate Council authorization.
"Our entire Council is committed to ensuring that ratepayers in Claremont have access to water at rates that are fair, transparent and reasonable. The offer to purchase Golden State Water is a key step in ensuring that Claremont residents will have control over the future of water service for their community," said Councilman Sam Pedroza.
Golden State Water recently submitted a rate increase application to the California Public Utilities Commission (PUC) seeking a 24.54% increase in 2013 with additional increases in 2014 and 2015. The PUC enables private water companies to receive a rate of return on their investment. Such profit guarantees are not available to municipally-owned water systems, nor do they pay dividends to stockholders.
"Today is an exciting day for current and future generations of water users in Claremont. I believe that decisions regarding water rates and system maintenance should be made locally, not by corporate executives interested only in maximizing the rate of return for private investors," said Councilman Joe Lyons.
On July 21, 2011, Golden State Water Company filed a plan with the California Public Utilities Commission (CPUC) to establish rates for 2013, 2014, and 2015 for Region III which includes Claremont. GSWC is requesting a 24.54 percent increase for the average customer using 12 Ccf or 8,976 gallons per month(excluding credits or surcharges).
According to Golden State Water, the proposed capital projects in the Claremont Service Area include various upgrades to plants, such as installing a new chlorine building, seismic upgrades, and replacing a well. Golden State Water has also stated it plans to install nearly six miles of new distribution pipeline, primarily to reduce leaks and enhance fire protection. A portion of the Company's new billing system will be paid for with the proposed rate increase.
The increases in 2014 and 2015 would be much smaller based primarily on inflation. The exact impact on customers in the final two years would be determined at a later time after the CPUC reviews additional filings near the end of each year.
The City of Claremont began protesting the proposed rate increases in July of 2011 when it retained legal counsel to represent the Claremont in the General Rate Case.
The interests of the ratepayers were represented in the General Rate Case proceedings by the Division of Ratepayers Advocates, the advocacy arm of the California Public Utilities Commission. Because of the significant impact to their citizens and local businesses, the cities of Claremont, Placentia, Cypress, Stanton, Apple Valley, and Barstow intervened in the proceedings.
In December of 2011, a public hearing with the administrative law judge was held in Claremont. Over 400 residents attended and presented their comments to the judge. On January 5, City Council held a special meeting to discuss water issues with the public. Funds were appropriated to protest the rate increase and research aquisition of the Claremont portion of the water system.
During the rate case proceedings, the City submitted testimony and rebuttal evidence. City staff, with the assistance from Claremont OUTRAGE, also collected residents' protest letter and copies of their water bills that were sent to the PUC commissioners.
In addition to particpating in the rate case, the City of Claremont supported legislation by Senator Huff that provides more oversight of water companies. The legislation was passed unanimously.