California’s Proposition 218 prohibits utilities from allowing some customers to subsidize other customer’s cost of water service. But today, that is exactly what is happening in St. Helena.
At last Monday night’s town hall meeting about St. Helena’s water rates, Mayor Galbraith said: the expensive studies and record-keeping that would be required to justify higher rates for outlying customers would not be worth the small amount of additional money the city might be able to collect.
Currently, there are $19 million worth of 5-Year Capital Improvement Projects (CIP) in St. Helena’s water enterprise. One of the projects is the removal of the York Creek Dam for $6.5 million and that money has been set aside. Two other projects are the upgrades to the Holmes and Meadowood water tanks. These tanks were installed many years ago to provide water service to a country club and a small number of residents residing in St. Helena’s higher elevations. The tanks do not benefit the service for all St. Helena’s water customers, only a few. The estimated cost to upgrade these four water tanks over the next 4 years is $1.9 million and this expense is being shared among all St. Helena’s water customers. According to a 2015 San Juan Capistrano Appellate Court Case, tiered water rates are permissible if it can be demonstrated it costs a utility a higher rate to provide water service to one set of customers over another. Clearly, the Meadowood and Holmes water tank upgrades fall under this criteria, but our mayor believes the cost and effort to document the tiered rates wouldn’t be worth it.
Another example of an existing water rate subsidy in St. Helena is for the fire service provided to 8 wineries and one resident in St. Helena. During the 2016 utility rate study, our city council voted to discontinue what was called the “Standby Rate” for residential water customers. This was a rate charged to residents connected to the city’s water system, but the customers had requested their water meters be turned off for various reasons. According to Hansford Economic Consulting ( HEC), standby rates are illegal according to a judicial case (Polard vs. Brooktrails). According to HEC, all water customers connected to a city’s water system are required to pay a base rate, regardless whether their meters are turned off or on.
St Helena has 8 wineries connected to it’s main water system for fire protection. The water is not used unless there is a fire. In other words, the fire service customers are “standby customers” just like past residential standby customers (connected but not using water unless needed).
The diameter of fire service water lines run from 4 to 8 inches and wineries pay: $9.92/month for being connected to a 4″ line, $28.81/month to be connected to a 6″ line and $61.40/month to be connected to an 8″ line. Currently, the residential base rate for being connected to a 5/8″ water meter is $51.71, much more than either a 4″ or 6″ fire service connection.
Industrial water customers connected to a full-time 6″ line pay $1,528.85/month to be connected to St. Helena’s water system. This represents a $1,467.45/monthly savings and subsidy to any 6″ fire service customers in St. Helena.
These examples are just a few examples of the water rate subsidies being allowed in our city’s water enterprise. Is St. Helena vulnerable to a law suit for being out of compliance with Proposition 218? Is it too expensive or not worth the time for our city to determine what the true cost of water service should be to these customers? If our city is sued for its negligence, guess who’ll pay the fines? I’ll bet dollars to donuts the city’s water enterprise will be holding the bag and guess who that is: That’s right, the water customers, just like our mayor voted with the removal of York Creek Dam!