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Acquisition of the Bellflower Water System


The Public Advocates Office opposes the proposed purchase of the Bellflower Municipal Water System by California-American Water Company.  The City of Bellflower stands to collect an estimated $12 million in profit from the deal, which would be paid for by rate increases on Cal-Am’s customers statewide.  Additionally, the City has estimated approximately $36 million in necessary system upgrades, which again, will be paid for by ratepayers throughout the state. 

 

A California law known as the Public Water System Investment and Consolidation Act was adopted to encourage larger water companies to buy small, troubled water systems in order to improve water quality for residents and reliability for fire service.  However, Cal-Am is arguing that the law should be interpreted to allow water companies to put into rates any purchase price agreed to by the seller and the purchaser.  Here, the City has the incentive to get as high a price for their system as they can with their profit paid by ratepayers outside of the city.  The purchaser, Cal-Am, also doesn’t have much incentive to argue for a lower price, since Cal-Am isn’t paying for the system, its captive ratepayers are.  This abuse of the Investment and Consolidation Act does not help the customers of struggling water systems.  It compounds the burden of living in the territories of struggling water systems and reduces the investment capital available for truly disadvantaged and troubled systems.  The California Public Utilities Commission has the responsibility to reject unreasonable transactions that obstruct the public interest and should therefore reject this proposed transaction.


Testimony by the Public Advocates Office’s in the Proceeding can be found here


Additional information regarding this proceeding can found on the Commission’s docket