Los Osos ratepayers rebel against high water bills

nwilson@thetribunenews.comApril 28, 2014 

After comparing water bills with their neighbors, some Los Osos residents don’t like what they see — and they’re contemplating a takeover.

A grassroots group, Los Osos FLOW, is inviting residents to join them in opposing rates they say are too high from their private water provider, Golden State Water Company.

Los Osos FLOW will meet at 6:30 p.m. May 6 at the South Bay Community Center in Los Osos to discuss the idea of an eminent domain process to buy out the company that serves nearly 2,700 customers in the Los Osos area. The group’s name stands for Friends for Locally Owned Water.

“As far as I understand, buying them out is our only recourse,” said Naida Simpson, a Los Osos FLOW organizer. “They’re not acting in our best interest.”

The rates for Golden State Water Company are about 60 percent higher than those charged by the Los Osos Community Services District. The Los Osos services district, a public agency, serves about 2,750 customers, or about half of the community.

This year, the bimonthly bill for the average Golden State water user is $201. For the same level of water use, Los Osos services district customers would pay about $124. Both figures are based on a roughly 6,000 gallons per month.

But Golden State officials say the company generates nearly all of its revenues from customer billing and claim that the discrepancy comes from different funding mechanisms.

“We need to make sure we’re dealing with the facts,” said Pat Scanlon, Golden State’s vice president of water operations. “Our rates reflect the full cost of service, capital improvements and other costs. Other agencies like Los Osos CSD have other sources not on the water bill. Their sources of revenue include grants, loans and property taxes, which is how our rates differ.”

Throughout Los Osos, groundwater is the community’s sole source of water.

Golden State has increased its fees by about 50 percent over the past two years, including temporary surcharges to cover operational costs.

The company also relies on investors to fund some of its operational costs, and guarantees an 8.34 percent dividend.

Company officials say Golden State is making capital improvements worth $4.9 million to the Los Osos and Edna Valley systems, which are part of the same company service area and share costs.

Scanlon said this investment money is necessary to provide the “high quality of service” the company offers.

Golden State’s rate increases were approved by the California Public Utilities Commission, which oversees water rate increases by private companies. Typically the company applies for rate increases every three years to cover expenses.

In Los Osos, those costs include nearly $400,000 in pump and water treatment equipment; $186,000 improvements to meters and services; and more than $320,000 in piping installations.

In Edna Valley, they include a $545,000 land purchase; $2.1 million in drilling and equipment; and nearly $80,000 in lighting at a water treatment plant.

Los Osos FLOW, which consists of eight members, is seeking to organize and begin an eminent domain process.

“They’re not interested in our water supply,” said Al Barrow, one of the group’s founders, speaking of Golden State. “They’re interested in sales. Part of the problem is they need to make a profit for investors.”

The group believes it’s unfair to have to share payments for Edna Valley’s costs, though Golden State officials say Edna Valley’s 600 customers also help pay for expenses in Los Osos.

The buyout process would involve putting a bond measure on the ballot for voters to consider. If approved, it would pay for the assets owned and operated by Golden State after an appraisal.

Similar procedures have begun in Ojai, where rates increased 65 percent over three years. There, 87 percent of voters supported buying out Golden State.

The company has appealed a court ruling that decided in favor of opposition group Ojai FLOW’s actions to take over Golden State. The case is making its way through the legal system.

Residents in Claremont and the North Tustin area of Orange County also have united against Golden State, saying they support a lower-cost public agency.

Some representatives from Ojai FLOW will attend the May 6 meeting in Los Osos to explain the buyout process.

“Before we started, we asked questions of people who’d done this before from Felton (where a successful buyout of another company occurred),” said Pat McPherson, an Ojai FLOW organizer. “Seven of us sat with him for a full day asking dumb questions about how it all works, but that’s where you start. They told us the process would take three to four years.”

But for Denise Robson of Los Osos FLOW, the fight would be worth it. She pays about $400 on average and her lowest bill was $275, she said.

“I had one bill that was over $1,700 when I had a small irrigation leak for about a week,” Robson said. “My lowest bill in the last year was around $275. We never know what is coming in the mail.”

“By using eminent domain,” she added, “we can take our water back.”

Los Osos FLOW organizers said they haven’t yet decided whether they might try to merge with Los Osos CSD or form their own municipal water district.

Scanlon said that Golden State has heard from customers who have complained and “we’re doing everything we can to control the costs.”

“We don’t think Los Osos FLOW’s views are in the best interest of the community,” Scanlon said. “They’ll end up having to pay more than they do now.”

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