MEMORANDUM OF UNDERSTANDING BETWEEN GOLDEN STATE WATER COMPANY AND CLAREMONT AFFORDABLE WATER ADVOCATES

Transcription

1 MEMORANDUM OF UNDERSTANDING BETWEEN GOLDEN STATE WATER COMPANY AND CLAREMONT AFFORDABLE WATER ADVOCATES TWENTY COMMITMENTS TO SAFEGUARD CLAREMONT S WATER SYSTEM, LIMIT WATER RATES, ENHANCE PUBLIC INVOLVEMENT, AND AVOID COSTLY EMINENT DOMAIN LITIGATION I. Background Statement of Reasons and Intent A. Since 1929, Golden State Water Company (Golden State Water) and its predecessors have owned and operated the water system serving the City of Claremont. Since 2000, Golden State Water has invested over $20 million in infrastructure upgrades to the Claremont water system. B. At various times over the past decade, officials in the City of Claremont have expended public resources toward legal steps designed to seize the water system using the power of eminent domain, and then convert the water system to a municipal utility that is controlled (and possibly operated) by the City of Claremont. Since 2004, millions of dollars in public funds have been spent on the City s plan to seize the water system. C. The most recent eminent domain effort began in late 2011 or early The City s eminent domain litigation attorneys commissioned an appraisal of the water system, and in November, 2012, sent a formal offer under the eminent domain law to purchase the water system from Golden State Water for the sum of $54,076,000. Claremont residents were not given the opportunity to vote on whether to make such an offer, and there is no indication that the City had available the funds to complete the transaction had Golden State Water accepted the offer. Golden State Water rejected the offer, confirming that its water system was not for sale. D. In December 2012, a study Golden State Water commissioned by Claremont water economist Dr. Rodney Smith was released. The study found that a purchase of the water system for $54 million by the City would cause water rates for Claremont residents to increase by approximately 30 percent. All of the calculations on which the findings were based were set forth in the study. The City of Claremont was provided with the full study, and to this date has not provided any facts or analysis that call into question any of Dr. Smith s findings. E. On October 3, 2013, the City s eminent domain litigation attorneys sent a revised eminent domain offer in which the City offered to purchase the water system from Golden State Water for the sum of $55,094,000. As before, Claremont residents were not given the opportunity to vote on whether to make such an offer, and there is no indication that the City had available the funds to complete the transaction. Golden State again rejected the offer.

2 Page 2 of 8 F. On November 6, 2013, Claremont s eminent domain litigation attorneys made a public Town Hall presentation concerning seizure of the water system. The City refused to allow Golden State Water to participate. In the Town Hall presentation, the City s attorneys and consultants claimed that a feasibility study prepared at the direction of the attorneys proved the City could purchase the water system for as much as $80 million without increasing the water rates charged to Claremont residents directly contrary to the findings stated in Dr. Smith s report. However, the City did not reveal any calculations or data that would allow examination of the differences between Dr. Smith s findings and the feasibility study findings. Golden State Water therefore demanded under the Public Records Act that the City make the feasibility study available for public review. The City refused, claiming the right to keep the feasibility study secret. To this date, the City continues to refuse to provide the financial calculations or feasibility information to residents, media or Golden State Water. Residents will be asked to tax themselves to pay for massive municipal borrowing without any information regarding the viability of the expenditure. G. In the November 6, 2013, Town Hall meeting, Claremont City Manager Tony Ramos stated I have no intention of establishing the City of Claremont water department. He explained that after seizing the water system, Claremont would contract out the operation of the system to some identified public or private operator. Claremont has entered into a MOU with the City of LaVerne to conduct an operational study to determine if the City of LaVerne could operate the Claremont system. Details surrounding this study and its findings are being withheld from the public, and residents may only receive a summary of the review instead of full and comprehensive details with which to make an independent evaluation. H. On November 19, 2013, Golden State Water conducted its own public Town Hall meeting. Dr. Smith spoke, reviewed the analysis in his report and invited any member of the public to question him about the findings in his report; he offered everyone the opportunity to ask questions during the meeting, or later at his private office at any time. Golden State Water s manager Ben Lewis spoke and explained that the replacement cost of the Claremont water system exceeds $200 million. Golden State Water Senior Vice President Denise Kruger introduced the wide array of water service experts the company employs, and took questions from the public on any topic. I. On March 10, 2014, the City sent official notice that on March 25, 2014, the City Council would vote on whether to adopt a Resolution of Necessity that would trigger the filing of an eminent domain lawsuit against Golden State Water. If the Resolution were to be adopted, the City would be required to file the eminent domain lawsuit against Golden State Water within six months. However, a week before the March 25 hearing the City reversed course and withdrew the Resolution from its agenda without explanation. J. At its March 25, 2014 meeting, instead of considering adoption of a Resolution of Necessity, the Claremont City Council instructed its staff to create the paperwork to allow the City to borrow as much as $120 million to seize the water system by eminent domain. Further, the City Council instructed that the public should be permitted to vote on only $40 million of the new borrowing package. Under City staff s proposal, $80 million in borrowing is to take place 2

3 Page 3 of 8 without a vote of the people. There is no public information available to disclose whether or not the City of Claremont would pursue an acquisition if the price were determined to be more than $120 million, or how a price in excess of $120 million would be funded. K. Golden State Water contends that the City s effort to seize the water system is badly misguided. The City has no current funding to prosecute an eminent domain lawsuit, no experience or capability in operating a water system, and its plan to allow a vote on only a portion of the necessary borrowing threatens to mislead residents. Moreover, because the City would have to pay Golden State Water for the full value of the water system, in cash, an eminent domain seizure would result in higher water rates in Claremont for at least 30 years. Golden State Water also believes that the service it provides specifically, a safe and reliable water supply would not be matched by some unidentified party that contracts with the City to operate the system. L. Claremont Affordable Water Advocates (CAWA) is a group of Claremont residents who are deeply concerned about the City s ongoing, expensive effort to seize the water system through eminent domain. CAWA has conducted its own analysis of local water issues and believes that cooperation and collaboration is better for residents than an eminent domain fight. CAWA intends to advocate that the City abandon its plan to seize the water system, and instead engage Golden State Water cooperatively to solve any issues regarding water supply or cost that the community wishes to examine. M. Golden State Water has been asked by CAWA to support its public outreach efforts, and to set forth its own ideas about possible commitments that address the issues that City officials have raised concerning Golden State Water s operation of the system and rates charged to Claremont residents. N. Golden State Water has worked cooperatively with CAWA to address water concerns and the two partners jointly believe that there are a range of measures which could be undertaken that represent a much stronger solution than any result of the City of Claremont s attempt to seize the system through eminent domain and contract with a third-party entity for operations. II. Twenty Proposed Commitments By Golden State Water to Claremont Residents CAWA and Golden State Water have developed twenty commitments that Golden State Water will strive to implement if the Claremont City Council abandons its efforts to seize the water system by eminent domain. These commitments are designed to achieve the following objectives: Continued water quality, customer service, operational, finance and infrastructure professionals available to serve Claremont. Continued access to capital that will ensure any catastrophic or other unforeseen service issues can be swiftly addressed. 3

4 Page 4 of 8 Continued development of ongoing immediate and long-range infrastructure plans to protect and preserve the water system for current and future generations. Conservation and community involvement to achieve measurable outcomes in terms of lower reliance on imported water. Transparency to customers in terms of financial information and water system management. Direct involvement by the City, CAWA and local stakeholders in the ratemaking process, including the development of proposals and direct intervener status to ensure a higher level of accountability than is provided through the municipal process and so-called Proposition 218 protections. No future tax increases or public borrowing to fund any part of the provision of water service, freeing municipal funds for other community priorities. The twenty specific commitments that Golden State Water will use its best efforts to pursue if the City abandons its seizure effort, are as follows: 1. Lower water bills for residential customers. Golden State Water will propose a new rate structure for residential customers in its upcoming rate filing scheduled for July, The rate proposal, which includes a proposal to convert the existing three-tier rate structure for residential customers to a four-tier rate structure, will result in lower monthly water bills for residential customers in the Region III ratemaking area. In addition to the implementation of a four-tier rate structure, Golden State Water will propose to segregate the districts within Region III for the purposes of establishing the size of the tiers in the new four-tier structure. Golden State Water shall support the continuation of this rate structure unless otherwise agreed by the City of Claremont and subject to approval by the CPUC. 2. Funding of Feasibility Study and Potential Construction of Reclamation Plant. Golden State Water will fund the preparation of a study concerning the feasibility of constructing a water reclamation facility to serve the City of Claremont. In the event the facility is deemed feasible, Golden State Water will include the plant in its Urban Water Management Plan and seek approval from the CPUC. 3. Mitigation for water supply costs. Golden State Water will continue to apply a lower water supply cost structure that reflects the Region as a whole, to the benefit of Claremont customers. Currently, Region III rates reflect a 66 percent groundwater/34 percent imported water usage, while Claremont alone was forecasted to use 47 percent groundwater/53 percent imported water, and had an actual usage in 2013 of 41 percent groundwater/59 percent imported water. This results in lower water supply costs for Claremont customers as compared to Claremont s actual costs. 4

5 Page 5 of 8 4. Continuation of policy resulting in lower monthly service charges. In 2009, Golden State Water implemented the tiered rate structure for residential customers. A key aspect of that change in rate design was a reduction in the monthly service charges. That change in rate design reduced monthly service charges by approximately 5 percent. (For example, the monthly service charge in Region III for a 1 meter was reduced from $40.30 to 37.95, a decrease of 5.8%). In its upcoming 2014 General Rate Case filing ( 2014 GRC ), Golden State Water s proposed rate structure will continue the policy implemented in 2009 resulting in lower monthly service charges. This structure provides customers with the greatest ability to control water bills based upon actual water usage. 5. Limitation on future revenue increases. Golden State Water s requested revenue requirement increases in the 2014 GRC will not exceed three (3) percent annually for the period Golden State Water will work with the City, CAWA and local stakeholders on the General Rate Case filing for the years to maintain the same three (3) percent requested revenue increase cap for the filing. The parties acknowledge, however, that environmental, regulatory or other circumstances could arise that would prevent Golden State Water from maintaining reliable quality water service at this revenue level. 6. Alternatives to the WRAM/MCBA. Golden State Water shall not object to or obstruct any party from seeking to remove or modify the WRAM rate adjustment from rates applicable to the City of Claremont within the context of the CPUC process so long as the alternative ensures that Golden State Water can meet its fixed cost obligations, accounting for water supply costs regardless of sales levels. Golden State Water reserves the right to present evidence regarding the pros or cons of any such modification, and reserves the right to advocate in favor of the existing WRAM if, in its opinion, no better alternative is submitted. Further, Golden State Water will cooperate as necessary to timely provide data and other information on the water system costs and revenue to any interested party through the CPUC s ratemaking process to determine if there is an alternative mechanism that rewards customers who meet agreed-upon per capita usage levels while at the same time allowing the company to meet its revenue requirement and cover fixed costs. 7. Credit for grants or other outside supplementary funding for water service. Customers shall continue to receive full benefit for any supplementary public funding, disaster relief funding or other infrastructure grants made to the company applicable to the term of the Agreement no matter when received. 8. Advocate for lowest possible imported water costs. Golden State Water will actively represent Claremont customers in rate increase requests from Three Valleys Municipal Water District and Metropolitan Water District of Southern California to minimize pass through water supply costs that affect Golden State Water. Golden State Water will support efforts by CAWA and the City of Claremont to join this effort to minimize external potential rate increases arising from the cost of imported water. Golden State Water shall inform CAWA and the City of the comment and / or participation period as such become applicable, to the extent known by Golden State Water. 5

6 Page 6 of 8 9. Support for CAWA Intervener Status. Golden State Water shall support CAWA s direct involvement in the ratemaking process. This includes the following: o CAWA to determine who participates in its effort. o Golden State Water will provide CAWA with references for expert legal counsel to provide independent guidance and support to CAWA s involvement. o Golden State Water will not oppose CAWA s request for reimbursement of CPUC eligible expenses accrued as part of their good-faith efforts to impact the process in a meaningful and consumer-focused way. o CAWA will be empowered to address any proposed charges for ongoing service or system improvements to ensure Claremont customers are protected. 10. Benefits of Regional Organization. By October 31, 2014, Golden State Water would host a local meeting and provide a report and public presentation to residents detailing the benefits to Claremont of being part of a regional structure. CAWA will maintain its ability to protest this structure within the CPUC process as an intervener. 11. Collaboration in the Development of General Rate Case Filings. Consistent with federal and state laws governing water utilities and federal Securities and Exchange Commission regulations, Golden State Water will work with the City and CAWA on future rate case filings, including development of Urban Water Management Plans (which contain long-term capital investment summaries that affect water rates) and recommendations for future rate designs to maximize the financial benefit to customers who are using water most efficiently. 12. Ongoing accounting of system improvements. Golden State Water shall provide to CAWA, the City and post publicly online a report of all capital projects identified in a General Rate Case or supplementary filing that have been constructed and included in customer rates. The initial report will go back to January 1, 2000 and will be updated annually. 13. Information transparency. Golden State Water shall provide the City of Claremont and CAWA with copies of any studies, reports or other documents with respect to Claremont agreed to in the or General Rate Case, including settlement agreements, and all future settlements and General Rate Case orders simultaneously with providing said documents to the CPUC, Office of Ratepayer Advocates (ORA), The Utility Reform Network (TURN) or other organizations identified on the service list. 14. City Participation in PVPA. The Pomona Valley Protective Association (PVPA) controls over 600 acres of land in Claremont, including the spreading grounds for the Six Basin aquifer that supplies approximately 60% of the water used in Claremont. Golden State Water will invite City personnel to all PVPA meetings as its guest, and in the event of objection by any PVPA member Golden State Water will collaborate with the City to respond in the most effective manner to achieve the City s attendance. 6

7 Page 7 of Assistance and Access regarding CPUC Filings. Golden State Water will, at all times, maintain in its San Dimas offices a full copy of the current rate case filings for public inspection and photocopying. Golden State Water will provide on its website a link by which any member of the public can make an appointment to view such documents, and will designate a knowledgeable company representative to be available by prior appointment to meet with residents to address questions about the contents of the filings. (Reasonable restrictions as to duration and frequency of such appointments will be determined.) 16. Report to the community. Upon not less than 15 days notice, Golden State Water will present an official report to the community at a publicly noticed City Council meeting, at the City Council s discretion. Golden State Water will address all community and council questions, directly at the meeting or within one month of the meeting. The responses will be made public through Golden State Water s Claremont customer website. 17. Regular meetings and report to the Community. Golden State Water will organize and facilitate periodic meetings with Claremont residents and CAWA as may be necessary to implement the intent of this Agreement. These meetings will address all local concerns including those raised during the report to the community. Golden State Water s District Manager will lead the meeting, and appropriate company officers will also be directly engaged in the process. 18. Conservation partnerships and programs. Golden State Water will work with the City, CAWA and local stakeholders to create, fund and sustain water conservation programs. The specific programs would be developed collaboratively, detailed in the General Rate Case application and subject to final CPUC approval. 19. Development of a water conservation and STEM curriculum for use in Claremont schools. Golden State Water will fund the development and maintenance of an ongoing water conservation curriculum for use in the Claremont Unified School District, subject to appropriate state academic standards, the District s policy and CPUC approval. Additionally, Golden State Water will support the District s ongoing science, technology, engineering and mathematics curriculum to encourage students to maximize these skills, which are critical to water resource management and ongoing water service. 20. Dismissal of Litigation. Currently there are two pending lawsuits that arise from the City s preparartory steps to seize the Claremont water system from Golden State Water: the Public Records Act lawsuit to compel the City to disclose its feasibility study concerning the costs and projected water rates under the City s seizure plan (Golden State Water Co. v. City of Claremont and Tony Ramos, et al, Los Angeles Sup. Ct. No. BS ); and 7

8 Page 8 of 8 the CEQA lawsuit alleging that the City s purported environmental review of the seizure plan is faulty and premature without a clear commitment as to what entity would operate the Claremont water system if it is taken by the City (Golden State Water Co. v. City of Claremont, et al, Los Angeles Sup. Ct. No. BS ). As to each of the pending actions, if the City abandons its effort to seize the water system before a trial or other dispositive hearing on the merits is conducted in the Superior Court, Golden State Water will dismiss the pending action and will not seek recovery of any attorneys fees or other litigation costs from the City. Term of Agreement. The initial term of this MOU is from June 1, 2014 to December 31, 2018 (the initial term ). Following the intitial term, this MOU will automatically extend for three additional three-year terms (for a total of 13 years, ending December 31, 2027), provided however that either party may terminate the MOU in its sole discretion, and thereby extinguish all commitments and covenants herein, by giving the other party written notice of termination no later than six months prior to the start of a new three-year term. (For example, if either party wishes to terminate the MOU following the intial term, written notice shall be delivered to the signatory below by no later than June 30, 2018.) This MOU may be modified or amended only by written agreement between the parties. Irrespective of any other provision herein, this MOU is deemed terminated immediately upon the filing by the City of an eminent domain lawsuit seeking to condemn the Claremont water system. CPUC Compliance. Golden State Water will continue to comply with all California Public Utilities Commission (CPUC) rules and directives, and where there may be a conflict with any potential commitments set forth above, Golden State Water will follow CPUC requirements except insofar as Golden State Water shall take all steps reasonably necessary to obtain CPUC approval or consent necessary to implement such commitments where applicable. IT IS SO AGREED: GOLDEN STATE WATER COMPANY Denise Kruger Digitally signed by Denise Kruger DN: cn=denise Kruger, o=golden State Water Company, ou=regulated Utilities, =denise.kruger@gswater.com, c=us Denise Kruger, Senior Vice President Date Date: :25:28-07'00' 6/9/2014 CLAREMONT AFFORDABLE WATER ADVOCATES Donna Lowe, 6/9/2014 Date 8