Report 2013-126 Recommendations and Responses in 2015-041

Report 2013-126: Antelope Valley Water Rates: Various Factors Contribute to Differences Among Water Utilities

Department Number of Years Reported As Not Fully Implemented Total Recommendations to Department Not Implemented After One Year Not Implemented as of 2014-041 Response Not Implemented as of Most Recent Response
California Water Service Company 1 1 1 N/A 0
Quartz Hill Water District 1 6 4 N/A 4

Recommendation To: Quartz Hill Water District

To ensure that water customers are able to have an understanding of how rate increases are determined, Quartz Hill Water District should include information in its public notices providing reasonably sufficient details of the basis of its fee methodology.

Response

We have not performed a rate increase/rate study. However, during the September 2015 Board of Director meeting the Board of Directors authorized staff to execute a contract with Urban Future Inc. to perform a comprehensive rate study. It is anticipated at this time the rate study will conclude prior to January 1st 2015.

  • California State Auditor's Assessment of Status: Not Fully Implemented
  • Completion Date: 03/01/2016
  • Response Date: September 2015

Recommendation To: Quartz Hill Water District

To ensure that water customers are aware of pass-through rate increases, Quartz Hill Water District should adopt a schedule of fees showing how these increases will affect its tiered usage charges before the new rates take effect.

Response

During the September 2015 Board of Director meeting the Board of Directors authorized staff to execute a contract with Urban Future Inc. to perform a comprehensive rate study. It is anticipated at this time the rate study will conclude prior to January 1st 2015. Steps are being taken to ensure the next rate study common work practice is modified to ensure the transparency and mechanism of the pass-through rate structure. Quartz Hill Water District customers understanding of the process is paramount to confirm this understanding of the process a schedule will be added to show rates before and after.

  • California State Auditor's Assessment of Status: Not Fully Implemented
  • Completion Date: 3/01/2016
  • Response Date: September 2015

Recommendation To: Quartz Hill Water District

To ensure that its water customers have access to Quartz Hill Water District's rate methodology and other factors that help it determine rate increases, the utility should keep all documentation it uses to calculate or otherwise explain the need for rate increases for as long as the rate increases are in effect.

Response

We have not performed a rate increase/ rate study. However, during the September 2015 Board of Director meeting the Board of Directors authorized staff to execute a contract with Urban Future Inc. to perform a comprehensive rate study. It is anticipated at this time the rate study will conclude prior to January 1st 2015.

  • California State Auditor's Assessment of Status: Not Fully Implemented
  • Completion Date: 03/01/2016
  • Response Date: September 2015

Recommendation To: Quartz Hill Water District

To assist low-income water customers, Quartz Hill water District should work with its governing body to consider the feasibility of using revenues from sources other than water rates to implement rate assistance programs for low-income water customers.

Response

During our February Meeting the low-income assist program was discussed and the Board of Directors instructed staff to not proceed with further investigation of this matter at this time.

  • California State Auditor's Assessment of Status: Will Not Implement
  • Response Date: September 2015

Recommendation To: California Water Service Company

To show water customers that they are attempting to keep rates reasonable, the California Water Service Company should maintain documentation to demonstrate any cost savings expected or achieved as a result of its cost-saving efforts.

Response

As documented in its 2015 General Rate Case (GRC) filing with the California Public Utilities Commission, Cal Water has taken a number of steps to control and reduce costs in its Antelope Valley District. For example, in its 2015 GRC filing, Cal Water estimates that per-employee pension costs will be 27% lower than projected during its 2012 GRC. In addition, Cal water is projecting that per-employee retiree health care costs will be 17% lower. Also, Cal Water has undertaken a fundamental change to its capital planning and procurement processes in Antelope Valley that will assist it in delivering capital projects on budget, and meet service requirements at the lowest life cycle cost.

Further, the Audit acknowledged that service areas "with a dense population of service connections allow water utilities to disperse their fixed costs over a larger number of water customers, resulting in lower overall monthly bills, whereas service areas with fewer service connections result in higher monthly bills because the water utilities must spread their fixed costs across fewer water customers." With only 1,400 customers, Cal Water's service area is the smallest of those included in the Audit. It has proposed to consolidate its Palos Verdes and Antelope Valley service areas for rate-making purposes. As such, the number of customers who share the cost of operating the water system would increase. Absent the proposal, revenue in the Lancaster portion of the service area would need to increase by about 34.9% to offset the cost of service. However, with the proposed consolidation, revenue in the Lancaster portion of the service area would need to increase by about 6.4%.

Cal Water will continue to use multiple communication channels to communicate cost savings to its customers. Further, Cal Water's local management will continue to give regular reports to its Officers regarding the service area's operations, including any efficiencies or cost-savings achieved.

  • California State Auditor's Assessment of Status: Fully Implemented
  • Completion Date: July 2015
  • Response Date: September 2015

Current Status of Recommendations

All Recommendations in 2015-041