Claremont and Its Water Company

By Llewellyn "Lew" Miller

The price of "imported" water is being pushed upward by the demand resulting from a steadily growing Southern California population. All the other costs are subject to inflation rates that are probably higher than the Consumer Price Index. Unfortunately, Claremont's choices are among various rising rate scenarios.

Llewellyn Miller July 13, 2004

"I would support buying the water company if I could be guaranteed I would pay lower water rates." For some Claremonters, that's the way to decide about buying Claremont's water facilities.

But for lots of reasons, water rates in Claremont are unlikely to go down regardless of who owns or operates the water works. Of all the obvious cost components of our water--local ground water, water imported from upstate or the Colorado River, pipes, pumps and other hardware, and labor--only that of local ground water has a chance of staying constant.

The price of "imported" water is being pushed upward by the demand resulting from a steadily growing Southern California population. All the other costs are subject to inflation rates that are probably higher than the Consumer Price Index.

Unfortunately, Claremont's choices are among various rising rate scenarios. Our alternatives are the forms of ownership and operation that will provide a rate structure that helps meet environmental and equity goals - probably a multi-tiered structure that makes the big water users pay their fair share.

Hypothetically, any form of ownership could provide what we decide we really need. But, under City ownership, the negotiations would leave out two parties we live with today + Southern California Water Company (SCWC), and the California Public Utility Commission (CPUC).

It would be a mistake to see resistance by SCWC and CPUC to our agenda necessarily as evidence of ill will, incompetence or greed. It's mostly that, in the case of SCWC, our goals differ. In addition to us, they have other clients and shareholders to accommodate. SCWC is operating in areas with growing populations and demand, facing higher costs of meeting regulatory requirements. As the stock market's perception of water companies transforms from stable utilities to growth stocks, the pressure on SCWC to deliver higher earnings growth will show up in our water bill. That's just business.

The Utility Commission is supposed to regulate the behavior of a natural monopoly - for example, where two water companies in the same location wouldn't make sense. They referee the situation when the divergence between Claremont's interests and SCWC actions get too big.

Unfortunately, the Commission's decision process is so obscure that we cannot really count on them as a reliable advocate.

All these external pressures - increasing water demand, pressure on water imports, increasing valuations applied to water company stocks - make time our enemy. Some regret not trying to acquire the water works about 15 years ago when that possibility came up. What thoughts will be running through our heads 15 years from now?