For over a decade, Californians have been dealing with unpredictable and confusing water surcharges. That could change if the state’s Public Utilities Commission (CPUC) votes to adopt a program recommended by the Public Advocates Office (Cal Advocates) as soon as Aug. 27.
If passed, the new program would promote water conservation and make water bills more affordable and transparent for millions of residents, benefitting both low-income customers and those who use less water.
Cal Advocates, the independent consumer advocate at the CPUC, supports the new program primarily because it puts the well-being of customers above utility profits. It also would end the current program that is one of the biggest contributors to water bill surcharges.
When water use has dropped due to economic factors, the revenues of utilities are protected while ratepayers are stuck footing the bill.
Introduced by Commissioner Martha Guzman Aceves, the new program ties the increases in water bills more directly to conservation efforts and makes sure that customers only pay for water they use. With many families experiencing financial hardships due to COVID-19, this program could not have come at a better time.
A Failed Experiment
The new program would replace the Water Revenue Adjustment Mechanism (WRAM), a pilot program adopted in 2008.
While the WRAM was intended to remove the incentive for water utilities to discourage water conservation, data shows it had little to no impact on customers using less water. For example, when looking at annual change in average consumption for WRAM and non-WRAM utilities, there were almost identical patterns of change in water usage.
The data also indicated that WRAM led to substantial under collections and subsequent increases in water bills. Under the WRAM, utilities have the power to place additional charges on customer bills if the company sells less water than it anticipated.
For example, when water use has dropped due to economic factors, the revenues of utilities are protected while ratepayers are stuck footing the bill. Because the WRAM conflates conservation with consumption, it has led to massive confusion: customers see their bills continue to grow, even when they use less water.
Another reason to end the WRAM is because it is one of the biggest contributors to surcharges on customers’ bills. At times, they may account for upwards of 15 percent of water bills, depending on the utility and service area. Surcharges also have accounted for about 10 percent of the revenues of participating utilities over the past decade. This means customers are unnecessarily paying hundreds of millions of dollars and making the utilities even more profitable than the CPUC determines is reasonable.
The transition to the M-WRAM program will be critical in setting just and reasonable rates now and in the future …
The Commissioners have an opportunity to put customers above utility profits by tossing out this outdated program.
Moving to A Better System
The new program up for adoption is called the Monterey Style Water Revenue Adjustment Mechanism (M-WRAM), and it will protect 3 million customers of water companies that have WRAM. Another part of the vote at the CPUC would prevent other water utilities from adopting the WRAM, protecting millions more customers.
Moving to this better program will benefit customers by reducing the volume and frequency of surcharges on their bills. By tying them solely to conservation efforts, the M-WRAM will increase affordability and bill transparency Also, because the new program retains tiered rates, it will advance conservation and allow the CPUC to ensure that water is more affordable for low-income and low-use customers.
The M-WRAM also has benefits for the utility as it provides better incentives to more accurately forecast sales while still allowing the company to earn a reasonable rate of return. The transition to the M-WRAM program will be critical in setting just and reasonable rates now and in the future as it produces more accurate cost and sales projections from water utilities.
While more work needs to be done to remove surcharges on customer bills, this decision is a significant step forward. Getting rid of the WRAM is long overdue. We encourage the Commissioners to vote yes on the new program and provide greater stability for millions of Californians.
Editor’s Note: Elizabeth Echols is the director of the Public Advocates Office, the independent consumer advocate at the California Public Utilities Commission.