FLOW vs. Cal-Am
by By Rachael Montague
Aug 07, 2007 | 313 views | 0 0 comments | 6 6 recommendations | email to a friend | print

Felton Friends of Locally Owned Water, a grassroots organization that fights to gain public control of the town’s water system, has put itself on the map when it comes to fighting privately owned corporation California American Water Co.

Over the past year, stories about Felton’s water fight have been featured in local media and in an entire chapter of the book, “Thirst: Fighting the Corporate Theft of Our Water,” published in March.

The small-town fight for water resounds far beyond its borders, especially when reports such as the International Water Management Institute’s projection of global water scarcity are released.

In a special issue on water privatization, Fortune magazine predicted that water promises to be one of the world’s greatest business opportunities and will be to the 21st century what oil was to the 20th: “The precious commodity that determines the wealth of nations.”

Since the 1990s, there has been an increase in the purchasing of publicly owned water systems by private companies, sparking the philosophical question: Is water a human right or a for-profit commodity?

Jim Mosher, director of the legal team for Felton Friends of Locally Owned Water, makes notes in front of the gate to Cal-Am’s Orchard Road tank. Lucjan Szewczyk/Press-Banner

Most of Santa Cruz County’s water is publicly owned. Why is it different for Felton? Felton has had a long history of private ownership dating back to the 1800s and hadn’t paid much attention to it until recently. In January 2002, Citizen Utilities Co. of California, owner of Felton’s water system, sold to Cal-Am.

Cal-Am is owned by American Water Works, which is owned by Thames Water Aqua Holdings, a subsidiary of multinational RWE Aktiengesellschaft of Germany. RWE is one of the largest for-profit water providers in the world.

A few months after purchasing Felton’s water system, Cal-Am wrote a letter to California’s Water Resources Control Board that stated: “At this time, we are anticipating an increased demand for water in the future. We have a new business locating to the Felton area that will require between 200-300 acre/feet annually to meet its water requirements.”

Several Felton residents became alarmed over the “new business” referred to in the letter.

“To put this in perspective,” said Jim Graham of FLOW, “the entire Felton customer base consumed only 422 acre-feet of water in 2001. An acre-foot contains 325,851 gallons. Some 200 to 300 acre-feet per year is equivalent to 65,170,200 to 97,755,300 gallons, or 178,548 to 267,822 gallons per day. What business could possibly require this much water?”

Some Felton residents wondered if a bottling company was coming to Felton, because the area generally has a surplus of water, making it a water gold mine. Evan Jacobs, community-relations manager of Cal-Am, said he doesn’t know what business the letter was referring to in 2002 but asserts that “California American Water does not, nor has it ever, intend to bottle water from Felton or the Santa Cruz Mountains.”

Additional concerns were sparked over a 74 percent rate hike, and several Felton residents got together to fight for public ownership of Felton water under the name of FLOW.

Jacobs said such rate increases are normal: “Water rates have increased throughout the county, from Davenport to Soquel Creek to the city of Santa Cruz to Scotts Valley to San Lorenzo Valley Water District. Every district has different rates because the cost of service is different in each area, as are the funding mechanisms.”

“The Public Utilities Commission rate-setting process is an open-book process that matches rates with cost of service. Our costs and expenditures are reviewed by accountants, engineers and other experts to ensure that the rates charged are fair and just,” he added. “We are one of the only water utilities in Santa Cruz County that has a payment assistance program for seniors and families that are struggling financially.”

Despite the prospect of an increase in property taxes of $600 a year for as many as 30 years, Felton voters in July 2003 passed measure W. It allocates $11 million for SLV Water District to purchase the Felton system from Cal-Am.

However, Cal-Am has so far refused to sell. “Cal-Am does not plan to sell because we feel we are doing a good job,” Jacobs said.

Not everybody agrees. Barbara Sprenger of FLOW said she believes that a publicly owned system could provide better water service for less money.

“When Cal-Am took over Felton’s water system, they increased rates to the point that we pay twice as much for water as our neighbors in SLVWD,” she noted. “Service has gotten much worse since Cal-Am took over. Our calls are now answered in Indiana rather than locally, and repairs are frequently delayed or handled from Monterey.”

“We’re paying for the high salaries of layers of non-local management in Monterey, Chula Vista, New Jersey and Essen, Germany,” she said.

“It will actually work out to be cheaper in the long run to purchase our water system than to pay Cal-Am’s high rates. Most of Santa Cruz county water systems are publicly owned and are running more efficiently, openly and cost-effectively than Felton’s water system. There is no good reason for our water to be owned by a distant corporation.”

Because Felton residents are eager to purchase, and Cal-Am is not selling, the fight has erupted into legal battles.   

In early 2007, RWE announced that it wanted to sell off American Water in an initial public offering of stock, a move required approval from the Public Utilities Commission and its counterparts in other states.

Felton citizens wanted the PUC to force Cal-Am to sell its Felton portion to the water district. On May 3, the PUC approved the public offering without requiring that Felton waterworks be sold separately first.

Asked why the PUC didn’t require Cal-Am to sell Felton, commission spokeswoman Susan Carothers said, “the issue is not under the jurisdiction of the PUC and must be settled by the courts.”

Despite setbacks from the PUC, Felton citizens are still trying to acquire Felton water through another strategy: eminent domain. Jim Mosher, coordinator of FLOW’s legal team, said, “the SLV Water District filed an eminent domain lawsuit against Cal-Am. On May 9, Judge Paul Burdick denied Cal-Am’s request for a change of venue, to move the lawsuit out of Santa Cruz County. On June 21, Cal Am contested Judge Burdick’s ruling.”

Betsy Herbert, the water district’s environmental analyst, said the district is waiting to hear whether the appeals court will dismiss Cal-Am’s appeal of Burdick’s ruling on the change of venue or hear arguments in court.

If the venue stays in Santa Cruz County, the right-to-take trial will be Jan. 14 in Santa Cruz County Superior Court. Should the water district prevail in that trial, a jury trial would follow the next month to decide the fair market value of the Felton system.

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