LIOB Update: Low-Income Water Issues July 10, 2012 Carolina Contreras Division of Water and Audits

Issue Update Bill Watch: Human Right to Water Bills Bill Watch: Human Right to Water Bills California Water Service Request to Increase Low-Income Surcharge California Water Service Request to Increase Low-Income Surcharge Data Sharing Update Data Sharing Update Current GRCs: Current GRCs: –Park Water Co. –Golden State Water Co. –California American Water Balanced Rates OIR Balanced Rates OIR

Bill Watch Human Right to Water Package

2011 Human Right to Water Package First package of bills signed into law by Governor Brown in October 2011: First package of bills signed into law by Governor Brown in October 2011: –AB 54 by (Solorio) – Drinking water. –AB 938 by (Pérez) – Public water systems. Requires drinking water alerts to be translated when 10 percent or more of water district customers speak a second language. –AB 1194 by (Block) – Drinking water. –AB 1221 by (Alejo) – State Water Quality Control Fund: State Water Pollution Cleanup and Abatement Account. –AB 1292 (Hernandez) – Safe Drinking Water State Revolving Fund: revenue bonds. –SB 244 (Wolk) – Local government: land use: general plan: disadvantaged unincorporated communities.

2012 Human Right To Water Bills Package AB 685 (Eng) – Human Right to Water: AB 685 (Eng) – Human Right to Water: Would establish the human right to water as a statewide policy priority; Passed Assembly June 1,2011; Pending In Senate Appropriations Committee. AB 1669 (Perea) AB 1669 (Perea) - would create a Nitrate At-Risk Area Fund, which would be used to develop and implement solutions for low-income communities that are at risk of nitrate contamination. Status: held in Assembly Appropriations Committee. AB 1830 (VM Perez) – Protections for Mobile Home Park Residents and Water Rates. AB 1830 (VM Perez) – Protections for Mobile Home Park Residents and Water Rates. Intends to provide residents of mobile home parks and manufactured housing communities the same rights and protections as "stick-built" housing residents enjoy when they purchase water services through investor-owned utilities. It clarifies the Public Utilities Code on the matter of "rate relief" for park or community residents in instances where water rates charged by mobile home parks and manufactured housing communities are found to be unjust and/or unreasonable. Such relief could include restitution of funds to residents who have been overcharged. Status: Pending the Senate of Energy, Utilities and Communications Committee AB 2238 (Perea) – Consolidation. AB 2238 (Perea) – Consolidation. require the State Department of Public Health to promote the consolidation and merger of small community water systems that serve disadvantaged communities. Status: Passed Assembly. Pending Senate Committee on Environmental Quality. AB 2334 (Fong) Water Affordability - AB 2334 (Fong) Water Affordability - would require the Department of Water Resources to conduct an analysis of water affordability every five years; Status: held in Assembly Appropriations Committee.

California Water Service Request to Increase Low- Income Surcharge

California Water Service (CalWater) Largest CPUC regulated Water Utility. Largest CPUC regulated Water Utility. Serves over 450,000 customers. Serves over 450,000 customers. Fig. 1 CalWater Districts and Map, 2010 Annual Report California Water Service Group

Low-Income Program D D – Authorized implementation of Low-Income program. Enrollment increased significantly since inception of program: Enrollment increased significantly since inception of program: – January 2007: 2,734 participants –December 2011: 49,381 participants Non-participating customers fund program via a surcharge of $0.01 per CCF of water. Non-participating customers fund program via a surcharge of $0.01 per CCF of water. Average per customer discount in 2011= $6.13 (Discount is fixed, but amount varies per ratemaking district). Average per customer discount in 2011= $6.13 (Discount is fixed, but amount varies per ratemaking district). Current surcharge is inadequate to fund program. Current surcharge is inadequate to fund program. –In December 2011, company-wide LIRA subsidies in the amount of $312,786 were provided to LIRA customers, but only $102,937 in LIRA surcharges were collected. Funding disparity is expected to increase with Data Sharing requirement. Funding disparity is expected to increase with Data Sharing requirement.

Low-Income Surcharge Increase Request Feb. 9, 2012: Among other requests, CalWater requests authority to increase surcharge to fund low-income program. Feb. 9, 2012: Among other requests, CalWater requests authority to increase surcharge to fund low-income program. May 25, 2012:DRA and CalWater settle issues including: May 25, 2012:DRA and CalWater settle issues including: –Increase surcharge to $0.06 per CCF –Assume 75% penetration rate at end of 2012 due to Data Sharing. –Established a mechanism to annually adjust surcharge to actual levels. –Surcharge is calculated to fund only estimated subsidies and not any expenses to operate program. Next: CPUC to issue Decision on Settlement Agreement Next: CPUC to issue Decision on Settlement Agreement Annual surcharge adjustment mechanism could become a tool available to other water utilities. Annual surcharge adjustment mechanism could become a tool available to other water utilities. Table 1. Rate Impact of CalWaters Original Request, Petition of California Water Service Company to Modify D Authorizing a Low-Income Ratepayer Assistance Program filed February 9, 2012

Data Sharing between Water and Energy Utilities Update

Current General Rate Cases Park Water Co. Golden State Water Co. California American Water Co. California Water Service Co.

R Balanced Rates OIR Update

OIR to Assist High Cost Service Areas OIR Objective: OIR Objective: –To consider adopting new or revised guidelines for consolidation of districts, some variation of a high cost fund within multi-district utilities and another mechanism or a combination of them to as means to advance the Commissions Water Action Plan objective of setting rates that balance investment, conservation, and affordability. Low-Income customers in both high and low cost areas may be impacted. Low-Income customers in both high and low cost areas may be impacted. May 25, Pre-Hearing Conference held. May 25, Pre-Hearing Conference held. June 20, 2012 – Scoping Memo Issued. June 20, 2012 – Scoping Memo Issued. –Clarifies that mechanisms may not be limited to consolidation and a high cost fund variant; and –Intra-company mechanisms alone should be considered.

Possible Pros/Cons Single Tariff Pricing/Consolidation PROS. Achieve greater economies of scale for small high cost systems by distributing costs across a larger customer base. Achieve greater economies of scale for small high cost systems by distributing costs across a larger customer base. Improve service affordability for customers in high cost areas. Improve service affordability for customers in high cost areas. Mitigate rateshock to utility customers. Mitigate rateshock to utility customers. Greater revenue and rate stability. Greater revenue and rate stability. Increased bill predictability for customers. Bill predictability is especially important for low- income households who generally operate under restrictive budgets. Increased bill predictability for customers. Bill predictability is especially important for low- income households who generally operate under restrictive budgets. May greatly improve investment and affordability issues faced by many of the small water utilities. May greatly improve investment and affordability issues faced by many of the small water utilities. Facilitate compliance with water quality regulation. Facilitate compliance with water quality regulation. Encourages investment in water supply infrastructure. Encourages investment in water supply infrastructure. Achieve possible cost savings (regulatory and others). Achieve possible cost savings (regulatory and others). Can allow for a more standardized low-income assistance program. Can allow for a more standardized low-income assistance program.CONS. Undermine efficient water use and conservation efforts by weakening price signals in high cost areas. Undermine efficient water use and conservation efforts by weakening price signals in high cost areas. Breaks connection between cost and rates. Breaks connection between cost and rates. Encourages growth in high cost areas. Encourages growth in high cost areas. Potentially costly long-tem impacts on water supplies of high cost systems with scarce sources of supply. Potentially costly long-tem impacts on water supplies of high cost systems with scarce sources of supply. May result in subsidization of customers in high cost areas by low-income customers in lower cost areas. May result in subsidization of customers in high cost areas by low-income customers in lower cost areas. Encourages overinvestment in infrastructure. Encourages overinvestment in infrastructure. Focus on local water system issues may loose emphasis if rates are addressed at a higher company-wide level. Focus on local water system issues may loose emphasis if rates are addressed at a higher company-wide level.

Next Steps Workshops scheduled for July 17 and 18, 2012 Workshops scheduled for July 17 and 18, 2012 Tentative second set of Workshops scheduled for September Tentative second set of Workshops scheduled for September Proposed Decision anticipated in February, 2013 Proposed Decision anticipated in February, 2013