Sale of Thousand Oaks Water Utility to German Corporation Approved

Dismissing city fears of rising rates and reduced services, the state Public Utilities Commission on Thursday approved the sale of Thousand Oaks’ largest water company to a foreign corporation.

New Jersey-based American Water Works Co., which owns California-American Water Co., will be sold to a German corporation, RWE. Cal-Am serves more than 20,000 households in Thousand Oaks, mostly west of Moorpark Road.

For months, Thousand Oaks has fought the sale because of concerns about reduced service and rate hikes for customers, who already pay one-third more than those served by a city-owned water system. Officials also maintain that it is bad public policy to allow such a crucial utility to be owned by foreign interests.

“This is a sad day for California water policy,” said Deputy City Manager Scott Mitnick, in San Francisco on Thursday for the PUC vote. “Their business plan is so flawed and unrealistic that it’s hard for anyone outside the company to say that it’s beneficial for the company or the customers.”

The company maintains that the transaction benefits the more than 56,000 customers it serves in Thousand Oaks by prohibiting general rate hikes for at least three years.

“We don’t foresee raising rates in Thousand Oaks for at least five years,” said Cal-Am spokesman Kevin Tilden. “We’re not going to commit to that legally, but right now we just don’t predict that will be happening. Our last rate increase was in 1997, and that was for a third of one percent, so we have a very good record in that area.”

But city officials are not convinced. They say rates will surely rise after RWE and its London-based subsidiary, Thames Water Aqua Holdings, spend $4.6 billion for American Water Works -- a 65% premium over book value, they say -- along with absorbing the U.S. corporation’s $4.1 billion in outstanding debt.

“We see absolutely no upside for our residents and have some serious concerns about this. Increased costs for one, further removal of management,” said City Councilman Dennis Gillette, who lobbied PUC officials last week on the matter.

Ralph Nader’s watchdog group Public Citizen also has challenged the sale, saying it increases the profit motive in delivering a valuable natural resource.

“We see this move as the ‘Enronization’ of our water systems. It’s a real ominous development for California and the nation,” said Juliette Beck, an organizer in the group’s Oakland office. “We’ve been concerned based on their track record around the world and also in their home countries. We fear deteriorating service, escalating rates and erosion of local control of water resources.”

The city is worried the deal could lead to diminished service levels in terms of water pressure, system reliability, service response times and infrastructure upgrades. By merging with an international conglomerate, Tilden said, Cal-Am expects to cut costs with enhanced economies of scale, to learn from the new parent’s worldwide experience running water and waste water systems and to strengthen its bond rating, allowing it to pay less when it borrows money for capital improvements.

“We do see this as being a benefit for ratepayers, allowing us to hold off rate increases for a longer period,” Tilden said.

Though the city and Cal-Am both purchase their water from Calleguas Municipal Water District, Cal-Am customers pay on average nearly 33% more. A survey of 18 water providers in Ventura County shows Cal-American with the highest rates, averaging nearly $104 every two months for a typical household.

A second private water provider, California Water Service Co., charges its customers, on average, less than $79 bimonthly.

Tilden pointed out that, unlike the city, Cal-Am pays about $200,000 a year in property taxes and some $240,000 in fees while his company does not charge extra for most service calls for customers, as the city does.