O’Connor, Deddeh Call for PUC Regulation of All Water Rates in State

San Diego Mayor Maureen O’Connor and state Sen. Wadie Deddeh (D-Bonita) announced a plan Thursday to have the California Public Utilities Commission regulate all of the state’s water rates.

At a news conference in the mayor’s office, O’Connor said the city attorney’s office and Deddeh have begun “conceptualizing” a legislative proposal that would strip “water cartels and water barons” of their price-setting power.

The mayor said the idea is to give the PUC the same rate-setting authority it now has over utilities.

An official of the Metropolitan Water District, the agency that supplies San Diego County with almost all of its water and which has become a political target of the mayor, said there is no need for the PUC to step in.

Michael McGuire, MWD assistant general manager, said his agency is different from a privately owned utility because it is not a retail supplier nor a profit-earning company.

“Publicly owned utilities, of course, do not operate at a profit. . . . The issue doesn’t exist whether they require regulation,” McGuire said.

According to the state public utilities code, the PUC regulates only privately owned water companies that operate for a profit, said Fred Curry, chief of the water utilities branch of the PUC.

For these agencies, the commission gauges the cost of acquiring water and distributing it, then determines what is a reasonable profit. To raise rates, an agency must file a formal application to the PUC. Officials then scrutinize the request and evaluate whether the rates are reasonable.

McGuire said it is too early for the MWD to take a position on O’Connor’s and Deddeh’s idea because it has not been drafted into a legislative bill.

“There is so little information to go by,” McGuire said. “It’s impossible to know what the impact might be.”

Although the PUC also was unsure what the proposed legislation would contain, Curry expressed some skepticism about whether the PUC would be able to regulate all the state’s water.

“The commission has generally been trying to get out of the regulatory picture,” he said. “They might just say that’s just not an efficient way of doing what San Diego wants done.”

The mayor’s news conference, which offered little by way of explaining what would actually be included in the proposed legislation, left many speculating.

Curry said turning over control of all the state’s water agencies--both retail and wholesale--would first require changing the utilities code to include nonprofit agencies.

And, he said, there is the issue of whether the commission could handle the additional workload--from 220 profit-making companies to more than 1,000 city, county and regional water utility agencies.

There would also be the question of adding another layer of state regulation, he said.

Mike Madigan, chairman of the San Diego County Water Authority’s board of directors, said the plan was an “interesting public policy issue” and that taking local control away from the water agencies would be a “concern.” He said the CWA also is refraining from taking a position until more is known.

The PUC’s Curry agreed that local governments may bridle at the prospect of state control, although Texas, New Jersey, Alaska and eight other states regulate nonprofit water agencies.

“It would be an additional regulatory burden to the local agencies, no question,” Curry said. But “it is, in fact, done in other states, so I see that it is legal,” he added.

The proposal is expected to be submitted to the Legislature in January, Deddeh said.