San Jose group fights water company over rate hike
Some San Jose residents will soon pay more for their water. Photo courtesy of Pixabay.

    A small group wants to stop San Jose’s main water retailer from changing its rate structure, arguing this will potentially remove an incentive for conserving water.

    Water Rate Advocates for Transparency, Equity and Sustainability (WRATES)—a group that advocates on behalf of water customers—challenged San Jose Water Company’s proposed rate hike and is currently in litigation before the California Public Utilities Commission (CPUC). The group claims San Jose Water Company’s proposal would not just increase water bills, but also reduce an incentive to conserve water—a serious issue in Silicon Valley where ongoing drought is exacerbating water shortages.

    San Jose Water Company (SJWC) is waiting for the commission to approve a 13.35% rate hike on its customers, which would apply retroactively for the first months of 2022. The utility also wants to change the way customers are charged. SJWC is the largest water retailer in San Jose, serving more than a million customers in the city and surrounding cities such as Cupertino, Campbell, Monte Sereno, Saratoga and Los Gatos.

    The proposed change addresses the two things a water customer is billed for: how much water they use—also known as a “volumetric” charge—and the “connection” charge, which is essentially a cost for service. The connection charge is fixed—it doesn’t change. The water usage changes depending how much water a household uses.

    Right now, 54% of a customer’s bill covers how much water they use. The remaining 46% reflects the fixed connection charge. That means if a person conserves water—like using a low flow toilet and letting their lawn die—they can theoretically cut down a significant part of their water bill.

    WRATES member and Monte Sereno Mayor Pro Tempore Bryan Mekechuk said SJWC wants to flip the ratio. According to records filed with the CPUC, the proposal would result in customers paying 55.4% for connection charges and 44.6% water usage charges. Mekechuk said this will give SJWC a more stable and predictable stream of revenue, but it will make it harder for customers to save a buck by conserving water.

    “The importance of that is you can’t reduce your water bill by reducing the amount of water that you use,” Mekechuk told San José Spotlight. “Your bill is going to go up and there’s nothing you can do about it.”

    John Tang, vice president of regulatory affairs and government relations at SJWC, said even with the changed ratio, SJWC would still incentivize people to conserve water. The company uses a tiered rate system, which charges higher-volume users more depending on how much water they consume. He added that a higher fixed rate will help the company pay for critical infrastructure projects, such as the routine replacement of pipes.

    “There’s no finish line here,” he told San José Spotlight. “You put in that pipe today and 100 years later somebody else is going to replace it.”

    How the water flows

    To get approval for this change, SJWC filed an application last year with the California Public Utilities Commission. If the commission gives its blessing, SJWC will be able to implement a series of rate hikes over the next three years that will bring in additional $87.7 million in revenue.

    “Bills are just going to skyrocket if it’s approved,” WRATES member Patrick Kearns told San José Spotlight.

    Many San Jose households are ill-equipped to handle even a small additional increase in their water bills. Last November, San Jose auditors reported at least 1,160 customers in the San Jose Municipal Water System were behind on their bills. They owed $1.1 million—an amount 18 times greater than the amount owed in December 2019, which the audit described as a testament to the pandemic’s financial impact on residents. San Jose Water Company wouldn’t say how many of its customers are behind on bills.

    Tang told San José Spotlight any rate change will likely happen at the end of the second fiscal quarter, which is months from now. He explained the proposed rate increase reflects an industry-wide problem as water utilities grapple with costly infrastructure replacement projects and stringent regulations. He also noted San Jose Water Company purchases more than 90% of its water from the wholesaler Santa Clara Valley Water. When Valley Water raises its rates, SJWC must follow suit.

    WRATES members argue San Jose Water Company also hasn’t been transparent about its financial reasons for requesting a significant rate increase. For example, Mekechuk requested SJWC’s audited financial statements to help him evaluate the proposed rate increase. Mekechuk said the company told him the documents were confidential and he’d have to sign a non-disclosure agreement to review them. Mekechuk later learned the documents were available on a public website.

    Tang said this was SJWC’s mistake.

    “I did not know personally they were on a public-facing website,” Tang said. “This is not something that’s universally well-known in the industry.”

    Contact Eli Wolfe at [email protected] or @EliWolfe4 on Twitter.

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