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Battle over water rates in Los Osos has residents searching for solution

Mike Baird

Los Osos Flow is a consumer activist group in Los Osos that says the water rates of Golden State Water, which serves about half the community, are too high. By comparison, the rates of the Los Osos Community Service District (LOCSD), which serves the other half of Los Osos are much lower.

The group is allied with a handful of other Flow organizations in Ojai, Felton and Claremont that are trying to use eminent domain to remove Golden State Water from their communities and turn operations over to local districts.

Naida Simpson is the president of Los Osos Flow and has lived in the town for 28 years. If a few years ago, you had told her she'd be leading such an organization she wouldn't have believed you. But, she says the sticker shock of her water bills finally got to her. "Three hundred and thirty dollars (for 2 months of water) is incredibly expensive for a person in my position."

Patrick Scanlon, Vice President of Water Operations for Golden State Water, doesn't shy away from the costs. He says it's a given Golden State's rates are higher on paper, but that's because the company doesn't get revenue from other sources the way LOCSD does, which he adds just received federal grant money.

"In that sense Golden State rate payers are paying for some of LOSCD's capital improvements," Scanlon said.

While municipal water companies have multiple sources of revenue, they don't have a profit motive. For commercial water providers, the California Public Utilities Commission regulates the rate of return to prevent a monopoly from gouging customers. But rates are tied to a percentage of a company's investments.

Jonathan Miller, a recent Los Osos resident and attorney and CPA, says the CPUC's regulation has led to Golden State to over build in order to increase what they can take in from ratepayers.

"They really don't make a lot of money just selling water," he said. "The way the PUC has it set up, they make money by passing on the costs of new projects plus an 8 percent markup to customers. Their incentive is to build and improve whether it's needed or not."

But Scanlon disagrees and points out the CPUC denies many of their proposals as well as estimated costs. Plus, he suggests many water districts are skimping on quality.

"I'm seeing a lot throughout the state, neighboring cities and districts are not proceeding with the capital to sustain the water supplies," he observed. "There certainly isn't any secret about the country's infrastructure needing billions of dollars in the next 20 or 30 years."

Los Osos Flow says it's not at war with Golden State and respects its right to operate according to the rules.

For Nita Welscher, a Los Osos Flow member, eminent domain is an available tool that's part of the rules. Her question: what makes the most business sense for Los Osos residents, water from a commercial company or from a municipal agency that doesn't pass on costs of taxes or franchise fees because it doesn't have to pay them, and can subsidize operations with tax revenue, bonds, grants and low interest loans.

"It would behoove us to have one water purveyor rather than two."

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