Water customers in Imperial Beach and Coronado were at risk of a suspect pricing mechanism, according to a ratepayer watchdog, until state regulators stepped in late last month.
There’s a lot to unpack, so let’s dive into one of the wonkier features of the state’s water market.
After the 2008 recession, California decided to experiment with a new water pricing mechanism to promote conservation. Typically, water utilities set water prices a year in advance by trying to predict how much people will need.
Weather is usually a factor. Recall San Diego County Water Authority raised the coming year’s prices by about 5 percent, but not because water is scarce and therefore expensive. In fact, San Diego was blessed with a wet winter, which left the ground saturated for longer, and so people needed to use/buy less from their provider. But lower water sales also means less money to support the authority’s needs. Badda bing, badda boom. Rate hike.
But a dozen years ago regulators allowed a handful of water utilities to retroactively charge customers for the water the agency thought would be used but wasn’t.
Are you staring blankly at your screen yet, just a slim trail of drool from your chin to the floor?
Put another way, instead of asking a utility to set its budget based on predicted water sales, the California Public Advocate’s Office, a state-funded utility watchdog, believes the 2008 mechanism made some utilities immune from the pressure of forward-thinking.
The watchdog said it found evidence of false forecasting, meaning utilities were overstating how much water would be sold, and, when that didn’t pan out, the company could go back and tack on a surcharge.
The Public Advocate’s Office brought California American Water — a utility that serves Imperial Beach and Coronado — before the CPUC in 2016 over what it saw as deliberate attempts to manipulate the forecast, said Richard Rauschmeier, water branch manager for the Public Advocate’s Office. The case focused on alleged water rate abuse in Monterey.
“This mechanism operated in the background and provided customers and decision-makers with a false sense of where rates (were) going,” Rauschmeier said.
California American Water improperly recouped $40 million under this rate scheme when it should really have been more like $17 million, the Public Advocate’s Office alleged in a 2016 filing with the CPUC. And the utility did this, according to the state watchdog, by inflating the number of people living in the Monterey district, one of its service areas. The U.S. Census reported the area had 102,000 full-time residents at the time, according to the filing, but California American Water’s books reported 178,103.
In one instance, the company reported 900 people were living in a single Monterey residence, Rauschmeier said.
California American Water said it was actually the customers who “rigged the system” by over-reporting the size of their household, said Kevin Tilden, a spokesman for the company.
“We mailed surveys to customers to say how many occupants or livestock. We did not go and inspect our customers’ houses,” he said.
The company switched to household size-based billing in Monterey during a severe water shortage and that kind of issue didn’t crop up for San Diego area customers, Tilden said.
Still, all of the company’s customers and others using this pricing mechanism were subject to such volatility.
The state’s watchdog, however, argued that the company could falsely spread its rates over a fake population, giving the illusion that customers were getting a cost cut. But the company could later report it collected less revenue from the true population and charge customers for the difference.
“At that point it became clear … (the mechanism) was not operating as intended,” Rauschmeier said.
The CPUC agreed, voting 4-1 on Aug. 27 to eliminate this Water Revenue Adjustment Mechanism statewide. Now everybody has to play the same rules under a system that tracks how much water a company bills as revenue versus their actual water sales over a calendar year.
California Is on Fire
Over 3 million acres have burned so far in California, and fire season has just begun. The Valley Fire southeast of Alpine is San Diego’s closest active fire. As of Monday morning, Cal Fire reported it was 87 percent contained.
Firefighters are mopping up hot spots and securing a perimeter, but a high pressure system is expected to return to the area by midweek bringing warmer temperatures with it.
San Diego Gas and Electric took me on a virtual tour of its emergency operations center late last month before the Valley Fire broke out. The company operates a fire behavior modeling system that can simulate 10 million virtual wildfires across the region every day using predictive forecasts.
Using this tech, the utility can hone in on which peaks and valleys from backcountry mountain ranges are prone to high wind speeds. The models then show how different wind speeds and direction push or pull a fire over a given area based on what kind of fuel lives there or how saturated the ground might be.
It’s kind of amazing, if you’re a nerd like me, that SDG&E knows which way the wind might blow a whole week in advance.
“As a utility and organization, we’re already preparing for these events before the National Weather Service has put out advisories,” said Brain D’Agostino, the utility’s director of fire science and adaptation.
Customers are given about 48 hours’ notice, at the most, that their power will be cut — known as a public safety power shutoff.
D’Agostino said the utility brought in social scientists to try and get a better gauge on how people react to different kinds of warnings.
“The issue I think is, for instance, if the Forest Service is saying something different than weather.com … it’s created a space where a lot of folks get so many mixed messages they listen to the one they want to hear,” D’Agostino said.
The same problem persists over messaging on human-caused climate change. Ninety-seven percent of climate scientists agree human-caused global warming is happening, and this information was better received even in traditionally dismissive parts of the country when it’s presented as a consensus, writes Yale University’s program on climate change communication.
“It’s important for us to be able to be on the same page in terms of risks and threats (of wildfire),” D’Agostino said.
Trump’s EPA Came to Town
President Donald Trump’s Environmental Protection Agency appointee made his debut on a U.S. Coast Guard tarmac in San Diego last week – promoting the agency’s newfound devotion to the Tijuana River sewage crisis.
Andrew Wheeler announced a stream of funding to help fix a pipe that collapsed in 2017 and caused millions of gallons of untreated sewage to spill from Tijuana into San Diego. The reason? Nobody paid to keep the pipe in good shape afterward.
While the fed’s newfound interest in throwing money at a one-time fix for the decades-long problem is much celebrated among local leaders these days, the important question remains: Who’s in charge of ongoing upkeep?
EPA local Region 9 Administrator John Busterud assured me that “it’s a very important issue that will be addressed.”
In Other News
- A California Public Utilities Commission stalled a vote on a 12-mile power line project from San Marcos to Escondido after wildfire-fearful residents in opposition flooded the agency with phone calls.
- After a board member of the California grid operator declared it would be “moving forward with a low carbon grid … and we’re not going back,” the State Water Resources Control Board breathed a few years’ extra life into natural gas power plants that would have been retired had the grid not suffered an alleged power shortage triggering rolling blackouts earlier this month.
- Apparently Watusis, zebras, camels and ostriches that lived in San Diego’s backcountry now need help after being evacuated from the Valley Fire zone recently.