Water Rate Meeting

April 21, 2010
Tahoma Firehouse

by Derek Taylor

Once a year, we all get a water quality report from Tahoe Cedars Water Company. This year, the report contained a notice the water company had requested a 76% increase in rates and that a meeting would take place. Such a large increase caught a few people's attention, including my own, so I went to the meeting and offer this report.

The water company is closely monitored by the California Public Utilities Commission, and a representative, Peter T.K. Liu, P.E., was present to oversee the meeting. The water company has hired a consultant, Marino Rodriguez, to help them through this process, and he presented the water company's case (available for viewing in a several hundred page binder at the water company office). There were about 30 residents present.

The first reason for the increase is the water company hasn't raised its general expenses in sixteen years, since 1994. The PUC representative told us the PUC was not happy about that. It's just been the last few years that Rob and Chuck Marr have taken over the water company from their father, Earl Marr, who passed away last year. So this rate increase is the beginning of more responsible management of our rates, which will need to be increased from time to time.

The water company offered this handout, which laid out the numbers behind their request. The "rate base" in the handout is the net investment of company, referred to as "net plant." The rate base in the handout assumes the water company will make a $558,000 capital expenditure they want, some of which has already been spent and some of which hasn't. This includes $250,000 already spent on a new well and desired items like replacing 1500 feet of the leakiest main lines ($225,000), fire hydrant replacement ($4500), a utility truck ($34,000), a dump truck ($25,500), an excavator ($15,300), a trailer ($3100), and ten meters ($4500). The water company hopes to continue replacing 1500 feet of main line each year.

The new well was needed to meet increasing water demands, which is another reason for the increase. The staggering amount of 700 gallons per day per house is how much water is delivered on average. The new well tested very slightly above the allowed levels for arsenic (it would have passed five years ago), so it will not be on active duty, but could be mixed into the main supply as a backup source, and allowed levels of arsenic would be achieved. This means another well will eventually need to be installed. The main well continues to deliver a strong supply of great water.

The bottom line of the handout shows the net profit of the company, assuming they make their full capital expenditure, with numbers for both the current rate and the proposed rate. Under the current rate, they would end up operating at a $75,000 loss. Under the new rate, they would make a 12.5% profit of $125,000. The company needs to make a profit, because it has to pay for most of its expenses before it can be reimbursed, so there has to be some operating capital. And they can only charge the depreciation on some equipment, so they need the money to buy the equipment in the first year of use.

The subject of water meters came up, and the water company is still installing meters on an "as needed" basis. If you see someone constantly overwatering, please let the water company know. There seems to be a general push towards meters in California, so they may be mandated by law in the not too distant future. Unfortunately, they are expensive to buy and install, and how this expense would be covered is not clear. One advantage to meters would be new technology that detects leaks and burst pipes.

[Correction from Ed Miller: Water meters have been mandated by law as of 2012, at a cost of approximately $1500-2000.00 each. The Marrs stated that they hope to be able to offer subscribers a ten year period to pay them off. The Company may, at their discretion, meter any property between now and 2012.]

The PUC representative expained the PUC would be deciding by early July how much of the rate hike they would approve. The PUC does a yearly review of expenses, so they would be aware if any requested expenditures were not made. One standard applied to the water company is everything it gets reimbursed for must be "used and useful" to the utility. Although the official protest period is over, he indicated any correspondence received before the final decision would probably be read and considered. You can email the PUC at .

Comments and questions were then allowed. The overall tone of the comments was reluctant acceptance of increased rates along with a call for better management, future planning, and communication with customers. And a few problem areas in the water system were discussed. One thing everyone agreed on was the excellent water quality and how "Tahoma tap" beats any water around.

I am supposed to receive a copy of the PUC's decision in July, and I will post that here when it becomes available.

Respectfully submitted,
Derek Taylor
Tahoe Cedars Property Owners' Association

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