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Is a water monopoly a good thing?

Environmentally Speaking

Posted: November 19, 2008 10:22 p.m.
Updated: November 20, 2008 4:55 a.m.
Recently, Castaic Lake Water Agency has begun promoting itself to become a water monopoly in the Santa Clarita Valley.

With all the failures to regulate large companies over the last several years - from Enron to the recent bank failures - which have cost the taxpayers dearly, would centralization of our water supply in Santa Clarita be any different?

Let's look at the record. In 1999, Castaic Lake Water Agency bought Santa Clarita Water Co. for $63 million, four times more than the appraised value of its assets, as reported by the company to the Public Utilities Commission.

The rate payers of Santa Clarita Water were assigned the burden of paying Castaic Lake Water Agency to buy their own water company. But worse than that, the purchase of this private water company, which had two major wells recently closed due to ammonium perchlorate pollution, meant that the public took on the burden and cost of that cleanup.

Now you would think that a company with polluted wells would not be able to negotiate a price of four times its appraised value in order to sell. Aren't polluted wells a huge liability?

Apparently not to the high-flying Castaic Lake Water Agency. Some grants and some insurance money have since been received that cover some costs of this cleanup, but the public has paid millions toward it as well.

At the time Castaic Lake Water Agency purchased Santa Clarita Water in 1999, it was not even legal for CLWA - a water wholesaler - to operate a retail water company.

The water agency had tried for many years to get the state Legislature to change legislation without success. The Legislature was worried about the monopolistic effects of a state water wholesaler owning a retailer.

Why is this a problem? Because state water could be directed to favor its own retail operation while ignoring the needs of the other retailers. In a time of state water shortage, such as we are experiencing now, this could really be a problem. In the end, CLWA just proceeded with the purchase. After an appellate court found in favor of the taxpayers in 2001 on this issue, the water agency went to Legislature again.

As part of a budget compromise, the water wholesaler got what it wanted, but the Legislature incorporated language into its approval that would protect Newhall County Water District from being taken over.

A water monopoly in Santa Clarita could lead to other environmental problems. For instance, in 1991 when Santa Clarita Water applied to the state Resources Control Board to appropriate 15,000 acre-feet of water from the Santa Clara River (approximately half the river's safe yield), both Valencia Water Co. and the Newhall County Water District objected, and the application was not approved.

Under one water agency, this check-and-balance system would not exist.

How about accurate reporting of water supply and water pollution? Would an agency that controlled all the retail and wholesale operations needed to supply water be truthful about that supply and about pollution problems? It took a lawsuit by the Sierra Club and Friends of the Santa Clara River to make sure that polluted water and a timeline to clean it up were disclosed in CLWA's Urban Water Management Plan. The Newhall County Water District's board made sure that this issue was addressed in subsequent reports.

Even more recently, CLWA's general manager has continued to report to the county and the city of Santa Clarita that there is no water supply problem for new development, in spite of a statewide drought and severe state water supply cutbacks.

California's water supply is extremely complicated. But one thing is for sure and very easy to see. It is obvious to most people now that centralization and monopoly is not the answer, simply because the checks and balances of competition are eliminated.

Eliminating our local water retailers would close the door to competition. But even more important, it also would eliminate the inherent oversight that such competition produces. Such a loss of oversight would hurt both the local environment and the public.

Lynne Plambeck is the president of the Santa Clarita Organization for Planning and the Environment and a member of the Newhall County Water District board of directors. Her column reflects her own views, not necessarily those of The Signal. "Environmentally Speaking" appears Thursdays in The Signal and rotates among local environmentalists.


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