Electric Customers to Help Pay for Catalina’s Water

By Published On: October 17, 2014

The California Public Utilities Commission approved what’s being called a “novel” decision that calls on electric ratepayers to subsidize water ratepayers. The commission acted only after one commissioner voiced a stinging critique. The decision—based on an all party settlement—pares back a rate increase for water provided to Catalina Island by Southern California Edison from 85 percent to 31.4 percent with the help of an $8.9 million cross-subsidy by electric ratepayers throughout the utility’s territory. “This is a unique situation and it should not be viewed as a precedent for any other area,” said commission president Mike Peevey, urging support for the decision. However, commissioner Catherine Sandoval called the decision “fundamentally inconsistent with constitutional principles.” She said electric ratepayers weren’t notified in time to participate in the proceeding effectively, for instance in evidentiary hearings, even though Edison proposed the cross-subsidy at the outset. On top of that she said there’s no connection between Edison electric customers and Catalina water users, so there’s “no justification for this nearly $9 million charge.” Instead, she said, either a ferry boat surcharge for visitors to the island should be used to raise the $8.9 million or Edison should simply write off the money. Some of the other commissioners agreed with Sandoval’s concerns, but said that after four years of attempting to resolve the water rate case there appears to be no better alternative. “This is what we’re stuck with,” lamented commissioner Mike Florio. The commission approved the decision 4-1. Under it, Edison electric customers each are to contribute 9 cents/month to subsidize the utility’s public water supply system on the resort island for 12 months. As a result, each of the utility’s millions of power customers will pay a total of $1.08 for capital improvements to the water system for Catalina. Without the cross-subsidy, the utility and others argued that the island’s 2,000 permanent residents can’t afford to pay for the improvements alone. Edison noted it’s had to replace water pipes, a major water well pump house, and restore watershed area damaged by a 2007 wildfire on the island at shareholder expense and now needs to recover that money through higher rates. Under the decision, the average monthly water bill for Catalina residents rises from about $74 to $97—a 31 percent increase. Edison shareholders get dinged too under the decision with a $2.5 million capital disallowance on upgrades to the system already performed. The utility initially sought to increase its Catalina water rates in 2010. The settlement underlying this week’s proposed decision was first advanced in August 2013.

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