(Sutter Creek) What legal options does the Amador Water Agency have when an individual water or wastewater system continues to run in the red and ratepayers refuse to allow a rate increase?
AWA Directors emphasized that their interest in this question was purely theoretical during a presentation by Agency counsel at the AWA Board of Directors August 23, 2012 meeting.
Agency Counsel Steve Kronick said that the Agency most likely could not declare bankruptcy for any individual system, though there is a process for the Agency itself to declare bankruptcy. AWA includes four separate water systems and three wastewater systems.
Kronick said an individual system can be sold to a private entity, however. The Public Utilities Commission would regulate water or wastewater systems purchased by a private utility company. The PUC would set rates and fees and would not be subject to California’s Proposition 218 protest process.
Private utility companies are also entitled to turn a profit over and above cost of doing business as opposed to government agencies, which must show a “nexus” between rates and cost of providing service.
“This is something that’s occurring around the state,” said AWA General Manager Gene Mancebo. “Private companies are taking over small utility systems because of the high cost of operations.”
Mancebo noted that Citizens Utility owned and operated the City of Jackson’s water system for a period of years in the 1980s.
Directors and Mancebo said that currently proposed Agency-wide system rates would get Amador County’s underwater systems back on track. “There are no plans at this point to sell any systems or declare bankruptcy,” Mancebo said.
