New Group Wants Public Purchase of Cal-Am

Jun 13, 2013


In 2008 residents in the Santa Cruz Mountain town of Felton won a near eight year battle to purchase their water system from California American Water.  Today a newly formed group of Monterey Peninsula residents is hoping to do the same thing.

The Monterey Peninsula has always had a private water provider, with California American Water taking over ownership in the late sixties.  But if the group Public Water Now has its way, that will change.  “I believe there are a number of reasons why a public utility would be far superior.  But the most important one, I think personally as a business man, is that the costs can be reduced,” said Ron Cohen, Public Water Now’s Managing Director.  Cohen is the former owner of a software consulting company and a Pebble Beach resident.

Public Water Now wants voters to decide if they want the Monterey Peninsula Water Management District to pursue buying Cal-Am, and if necessary, purchase the private water company’s Monterey Peninsula holdings through eminent domain.  Ratepayers would pick up the bill, and Cohen says at first, they’d likely break even.  “If we could have an agreement with Cal-Am and create this buyout tomorrow the ratepayers would see their rates drop, but their fees on their bill to pay off Cal-Am would exist for the first time, and the net effect would probably be a break even, perhaps a slight savings,” said Cohen.  Then going forward ratepayers would still have to pay the $300 to $400-million tab of the creating a new water supply for the Monterey Peninsula.  Though Cohen says as a public entity, the water supplier could now qualify for grants, lower interest rates and have a more competitive bid process.  Then over time as everything is paid off, Cohen says ratepayers would save.

UC Santa Cruz Professor of Environmental Studies Brent Haddad has studied California’s and the Monterey Peninsula’s water issues.  He says a public water company can offer savings.  “If it’s a public system then you are not going to have a profit margin built into your rates, which the private entity will get, so that’s a plus,” said Haddad.  But there are trade-offs.  For example without the profit motive, Professor Haddad says a public water agency could run a less efficient operation. And a public agency could actually be less transparent, since its public meetings are through its one board of directors.  “When you have a private agency, they’re actually revealing more than once what’s going on inside their business because they’re revealing it to shareholders, they’re revealing to the California Public Utilities Commission, and they’re revealing it to oversight bodies, locally,” said Haddad,

Professor Haddad says the best way for a public entity to purchase a private water company is when the company actually wants to sell. Then in a process that could take up to two years, both sides can agree on a price and move on.  On the other hand, trying to force a sale through eminent domain could take a decade. He says the challenge of such a case is proving there’s an overriding public interest in buying the private company.  For example, if Cal-Am wasn’t providing safe, reliable water to its customers.  “This isn’t the case though because there really isn’t some interest that’s not being served.  There’s just great frustration on all parts that we can’t seem to solve the Monterey Peninsula water problems.” said Haddad.

Cal-Am is no stranger to the frustrations of Monterey Peninsula customers. But Manager of External Affairs Catherine Bowie says the existing problems will remain regardless of who owns the system.  “The reality we all face of increasing water bills because we need a new water supply won’t go away because it’s a publicly owned system,” said Bowie.  She adds Cal-Am is not for sale, and a public domain fight would be an unneeded distraction. “We really need to focus all of our energy right now on developing a water supply solution, and an eminent domain battle would simply detract from that work and move our efforts and resources in a different direction,” said Bowie.

Public Water Now will soon start gathering signatures in hopes of getting its buyout initiative to voters on the June 2014 ballot.  Public Water Now will hold its first town hall meeting on Wednesday.

Public Water Now Town Hall Meeting

Wednesday, June 19th at 7:15pm

Unitarian Universalist Church of the Monterey Peninsula,

490 Aguajito Road, Carmel