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The Continued Privatization of Water on the West Shore

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By 2025, all water systems in California must be metered. This requirement proved too much for Mid-Sierra Utilities, which owns and operates Tahoe Cedars and Madden Creek water companies in Homewood and Tahoma.

“I didn’t want to put in the meters, so I sold it,” said Robbie Marr, president of Mid-Sierra Utilities.

But instead of selling to the Tahoe City Public Utility District(TCPUD), which put in offers for the small water companies in 2013 and again earlier this year, Marr and his siblings decided to sell to San Dimas-based Golden State Water Company, which has 39 water systems across California. Marr said the sale has not been finalized and an application still needs to be submitted to the California Public Utilities Commission, which regulates private water and sewer companies. Marr believes selling to Golden State is the best choice for his family, and for customers.

“My water company is good, but not perfect,” Marr said. “They can do a lot. They have a lot of people behind them.”

While it has been made public that a sale is in the works, and a representative for Golden State answered questions at a recent public TCPUD meeting on the matter, a spokesperson for the company told Moonshine Ink that he could neither confirm nor deny that an offer had been made to buy Mid-Sierra.

“Golden State Water Company has been providing safe, reliable water service to Californians for more than 85 years, and we are always looking into opportunities to serve new areas in the state that could benefit from our expertise,” according to a statement by Senior Vice President of Regulated Utilities Denise Kruger. “At this time, we don’t have any updates to share regarding new opportunities.”  

PRIVATE VS. PUBLIC

Although Golden State boasts 1 million customers and 500 employees throughout California, the TCPUD believes the right choice to be for it to take over Mid-Sierra Utilities water systems and is not backing down despite the impending sale. The public utility district has acquired 17 private water systems since it was founded in 1938. There are currently 10 private water companies along the West Shore.

“The only way we have grown is through acquisitions. It is synergistic, economy of scale, efficient, and local,” said TCPUD spokesperson Kurt Althof. “The more of these individual systems that we can tie together, the more we can build infrastructure.”

Althof said the TCPUD offered an “above market value” offer to Mid-Sierra. After negotiating and going back and forth, Mid-Sierra accepted the TCPUD’s offer as a backup, if the Golden State deal falls through, he stated. The TCPUD’s final offer was $4.55 million, including $50,000 each in consulting fees for the three sellers, and free water for life at the four homes of the sellers. Althof said the TCPUD’s offer included $150,000 “greater than any other bona fide offer.” Marr told Moonshine that the offer mirrored Golden State’s.

“The PUD rates are too high. They can do what they want,” Marr said. “The rates are going to go up no matter what.”

Currently, the 1,265 Tahoe Cedars customers pay an average of $36.70 per month for water compared to the TCPUD rate of approximately $75 per month. Rate information was not available for the 165 Madden Creek customers. The TCPUD has said it would gradually adjust rates for those customers over a 10-year period to match the current district rates for its 4,200 customers.

Public utilities, which make up 80 percent of the state’s water deliveries, are mandated by Proposition 218, which prevents public utilities from making a profit by mandating that rates equal the cost of service provided.

In public meetings, Golden State would not say how much they would charge customers, noting that the CPUC sets the rates. An Aug. 26 L.A. Times article revealed that Golden State recorded a $47.6 million profit last year on revenue of $364.6 million. It is a publicly traded company with 260,000 water customers.

Tahoma resident Ken Lewin, who has been a Tahoe Cedars customer for 10 years, said he is concerned about Golden State taking over and believes the TCPUD would be a better choice.

“My impression is that the PUD would be a more responsible water steward as opposed to the private water company,” Lewin said. “My thought is there would be more local accountability.”

In that vein, Althof points out that the TCPUD has invested $11 million over the last eight years in fire suppression infrastructure, which is not legally required. The utility district believes it is important to build the infrastructure to help with fire suppression.

“Is a private, for-profit company going to do the same thing if they don’t have to?” Althof asked.

In an Aug. 30 letter to TCPUD General Manager Cindy Gustafson, North Tahoe Fire Protection District Chief Mike Schwartz noted the utility district had been an “excellent long term partner” for the fire district and would support the TCPUD buying Mid-Sierra.

“The Public Utility District has a proven track record in terms of improving fire hydrants and water infrastructure, as well as assisting the [fire] district with facilities, and a fueling system. When Tahoe City Public Utility District has previously acquired other privately held water companies, they have successfully upgraded those systems to provide adequate fire flows and capacity,” the letter stated. “The best solution to ensure that the fire district has adequate water for fire protection would be our ability to work with the Tahoe City Public Utility District.”

While there is community support for the TCPUD to take over the Mid-Sierra Utilities, it is ultimately up to Marr and his siblings to decide who buys the company. Marr, who said his father bought the company in 1962 on “a handshake and $50,” affirms he is confident in Golden State and their technical experience.

However, Althof said the TCPUD will continue to pursue the purchase of the private company because the district believes that to be beneficial for the community.

“We feel very strongly that it is best for everyone involved,” Althof said. “We would be the most appropriate provider.”

 
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Reader comments so far...

markusfarkuscarcass's picture

markusfarkuscarcass | Cibola Arizona
Really, it's simple... Mr. Marr is going to go with the highest bidder. It's not difficult to understand the motivation. He and his staff clearly don't want to invest in the current technology (radio read) water meters. They cost big $$'s and aren't going to pay off very quickly. Why should Mr. Marr care about rates? He gets free water for life, so that is nothing more than a red herring to deflect from the issues here. Want to know about Golden State/American States Water? Go here: http://dev.aswater.com/about-us.html. Better yet, talk to one of their customers. You will find out how much they pay and what kind of service is received...AND The quality of service is the real issue here. I'm sure the public realizes who is likely to provide the higher quality service.

Robert Marr | Tahoma
a. We are not going to the highest bidder b. I get12% back on any money invested in the system c. I am selling to the company that is not giving me free water for life d. I have been a member of this community since 1956 and care for it dearly So Mr. Carcus you are wrong pretty much on all points
markusfarkuscarcass's picture

markusfarkuscarcass | Cibola Arizona
Without contesting the "facts" as written in the article by the reporter/publisher... the same points you are making in your reply Mr.Marr are meaningless to a community that will ultimately end up having the last say on service and costs as they will be paying the rates. It just isn't that tough to replace meters and buy some business software. This train has been coming down the regulatory track for years, plenty of time to plan, it didn't just suddenly pop up! I don't doubt that the future as operator of a small water company looks real tough, motivation enough to sell. Your buyer, ASW has consistently higher rates (not exorbitantly so, but you have to pay more to generate a profit for shareholders) and more customer complaints than comparable size publicly held utilities, statewide. The point is LEVEL OF SERVICE, LOCAL ACCOUNTABILITY, and COST. ASW has rate increases before the CPUC every year, no doubt these systems will become a part of that pattern. Point the finger at the previous operator, bemoan the money needed to upgrade, get a rate increase, put off system enhancements that ratepayers are already paying for and bolster the corporate bottom line. Enjoy your retirement.
markusfarkuscarcass's picture

markusfarkuscarcass | Cibola Arizona
Any doubts about my post above... Here's your link: http://www.visaliatimesdelta.com/story/news/local/2016/09/22/waterwise-cities-take-action-raise-mo

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October 12, 2017