San Jose lawmakers protest San Jose Water Company rate hikes
Photo courtesy of San Jose Water Company

San Jose councilmembers are fighting back against “unfair” water rate hikes, voting unanimously to send a letter to the California Public Utilities Commission protesting San Jose Water Company’s proposed rate increases and calling for an investigation into a potential merger with Connecticut Water.

San Jose residents who conserved water in California’s long-standing drought may now have to pay back money to the company that pushed for the conservation.

“It’s super unfair,” said Councilmember Johnny Khamis. “Their fees are to recover money that has nothing to do with the actual cost of the water.”

Khamis, who said the company has been “jacking up the rates often,” is concerned about protecting the costs for ratepayers — especially if the merger is approved. His fear is that ratepayers will have to cover the “exorbitant merger fees” that will be rolled up in the costs of their water bills.

The San Jose Water Company last week asked the PUC to allow it to recover more than $9 million from customers via a surcharge. If approved, it would be the water company’s second rate increase in six months.

Every three years, the PUC sets prices based on projected estimates for water usage that it projects San Jose residents will consume. If San Jose Water Company customers don’t meet that number, the company must find a way to recover the debts.

“What we have experienced is not unusual compared to other water utilities,” John Tang, vice president of Regulatory Affairs and Government Relations, told San José Spotlight. According to Tang, costs are driven up for three reasons: infrastructure investment, increased wholesale of water supply costs and water conservation.

In this case, water conservation is the driving factor, said Tang, and the temporary surcharge will be dropped off the bill in a year once those fees from 2018 have been recovered.

“Current water rates are designed to not only support safe and reliable water service but also to send a conservation message,” added Tang. “A conservation rate design only allows utilities to recover a portion of their fixed costs. While conservation is a laudable goal, it does not allow utilities to recover their fixed costs when consumption is less than anticipated.”

If approved by the commission, San Jose residents can expect a monthly increase of about 19 cents per 748 gallons used starting July 1. The company’s request letter to the commission states that it’s about a $2.19 increase per month for the average customers.

The San Jose Water Company is the oldest and one of several water suppliers to the city, serving about 80 percent of San Jose as well as neighboring cities, totaling about 230,000 residential and business customers.

San Jose Mayor Sam Liccardo questioned a proposed merger between the parent company for the San Jose Water Company and Connecticut Water. After initially withdrawing a merger application, Liccardo said, a renewed application includes “significant benefits and commitments” to Connecticut Water customers, including bill credits totaling about $2.3 million.

“San Jose Water’s promises to Connecticut consumers to reduce and freeze costs may enable them to expand their utility empire, but must not come at the expense of California consumers who continue paying higher rates to the same company,” Liccardo said in a statement.

“We want to know when the increases will stop and we want them to justify the costs,” added Khamis. “Were not saying that it’s not right but we’re questioning the costs to see what’s going on — we want to know why it costs so much more to run this company rather than the other water companies in San Jose.”

San Jose residents didn’t take too kindly to being forced to pay more because they saved water during the drought.

And this isn’t the first time that the San Jose Water Company has come under fire for hefty bills. The state recently investigated a complaint that the company had overcharged customers. They ultimately found that between 2015 and 2017 the company had charged customers an extra $2,061,203 collectively. Currently, the state is considering whether the company should reimburse customers and face penalties.

Three posts on a Willow Glen Facebook group garnered more than 100 comments, almost all objecting to the increase.

“Our rates went up during the drought because we saved water so fast (and) changed our behavior,” wrote Mark Waterbury. “It’s stupid since it’s a private company, no options to buy elsewhere.”

“When they increased the delivery charges during the drought to make up their reduced profit that was supposed to be paying for the infrastructure,” Leann Cicco added. “I don’t expect the bill to go down from two years ago, but it also should not be going up further, particularly in a no drought situation.”

But Tang says that the company’s price rate design is complex.

“A rate design that doesn’t allow us to recover our fixed costs its not good for the utility,” added Tang. “This rate conservation nexus affected every single utility that was impacted by the drought–it’s an industry issue.”

Contact Grace Hase at grace@sanjosespotlight.com or follow @grace_hase on Twitter. Contact Nadia Lopez at nadia@sanjosespotlight.com or follow @n_llopez on Twitter.

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