Rate Change Proposal for Catalina Water Utility Customers

SCE, the island’s sole water service provider, seeks needed revenues to operate the system safely and reliably and to invest in water infrastructure. The utility’s director of Generation sits down for a Q&A.

Catalina Water GRC Presentation

Southern California Edison, which owns and operates the water utility system serving Catalina Island, is expected to file a General Rate Case application by the end of October with the California Public Utilities Commission. The filing seeks approval to increase rates to recover the costs of serving the island and proposes options to reduce the rate impact on residents.

SCE’s request before the commission addresses past drought and capital improvements from 2012-2019. The request also includes test year operating expenses and needed capital investments from 2020-2024 to maintain safe and reliable service to water customers.

The filing seeks to recover $9.3 million annually in Catalina water rates. An additional, one-time charge of $29 million would be recovered in electric rates across SCE’s service area.

As a regulated utility, SCE is required to file a General Rate Case before the commission, which, in a public process, determines what revenues are required to safely and reliably operate the system. It also approves the rates customers pay for that service.

Jim Buerkle, SCE’s director for Generation, provides oversight of the Catalina water utility. In this Q&A he discusses what is needed to reliably and safely provide for the island’s water needs and what rate changes are being sought.

Middle Ranch Reservoir on Catalina Island after the 2019 rains.
Middle Ranch Reservoir on Catalina Island after the 2019 rains.

Q: Why is there a need for a General Rate Case now?

A: SCE recognizes there is a great deal of economic uncertainty and stress on the island due to current pandemic impacts and is seeking to address those concerns in this filing.

The last water General Rate Case was filed nearly a decade ago and was resolved in an all-party settlement supported by the commission and the Catalina water revenue requirement has remained unchanged since 2015. Over the last 10 years, conditions have changed dramatically — due to aging of the system, historic drought conditions, the need for additional desalination to add resiliency during drought periods and visitor demand — so a delay in the filing is no longer possible.

SCE is committed to providing safe and reliable water service at reasonable rates based on the costs required to provide that service as regulated by the commission. Due to the nature and age of the Catalina water system and with no connection to the mainland, the costs to serve are higher than for mainland utilities. This filing does not include costs for potential environmentally required projects, including possible pipeline replacements, due to the age of the system.

Q: What could be the rate impacts to customers on the island?

A: This filing seeks to recover $9.3 million annually in customer rates, with increases spread over the next five years. The amount being sought reflects the costs to provide safe and reliable water on the island, establishing the revenue requirement and investments for the coming years.

This portion of the filing would increase the cost to island customers by an average of $116 a month for residents and $580 a month for business customers, phased in over five years. The cost recovery proposal includes a 127% overall increase for Catalina water customers, which reflects only a portion of the costs to serve the island.

In Year One, if approved by the commission, the average monthly bill for a residential customer would increase from $72 to $102, for a CARE customer from $73 to $89 and for a commercial customer from $170 to $197 — roughly a 25% increase in revenue requirement.

Q: What is SCE doing to mitigate these rate impacts to customers on the island and for low-income customers?

If approved, SCE is requesting the commission allow for a gradual phase in for these increases over a five-year period to help our customers plan for the increases. Additionally, SCE is requesting to transfer approximately $29 million in past drought and environmental expense and capital investment for recovery in electric rates across SCE’s service area.

To reduce the impact on low-income customers, SCE is also proposing to increase the amount of the discount that enrolled low-income Catalina water customers receive from the current 20% to 32.5%.

Q: What is different about this General Rate Case that customers may not be aware of?

Usually when a General Rate Case is filed, the utility requests rates that would only apply to the customers directly receiving the service. For the Catalina water utility, there are about 2,000 customer accounts receiving water service on the island.

In this case, where there is significant additional infrastructure necessary to serve the large number of visitors and extent of costs to be recovered, SCE is requesting the commission allow for cost sharing with the utility’s electric customers throughout Southern California, Catalina’s primary source of visitors, while island water customers pay for the ongoing costs to operate the utility.

Catalina Island is an important part of California’s tourism economy and has nearly a million visitors a year. The water system needs to be designed and constructed to provide safe and reliable service across a wide range of water demand. As water infrastructure ages, it requires refurbishment or replacement to continue providing safe and reliable service. This fact and the recent historic drought led to the need for substantial investment in the water system.

SCE seeks to transfer about $29 million of one-time drought and environmental costs and deferred revenues from the five-year phase-in proposal for recovery in electric utility rates. If approved by the commission, this approach will result in each of SCE’s 5 million customer accounts paying under $3 (over a 12-month period) to support water utility operations on the island, from which the entire region benefits.

Q: How long will the process take and is there a way for customers to participate?

The General Rate Case proceeding is a transparent process overseen by the commission to ensure costs are reasonable and justified, and customers are protected and given the opportunity to participate.

When filed, SCE will provide a notice to impacted water and electric customers of the proposed rate increases. Customers can submit comments and the commission will also hold public meetings to allow for customer and customer advocate groups to participate in the process.

The process can typically last between one to two years before a final decision is issued and new rates are implemented.

Q: SCE is an electric utility. What is SCE’s role in providing water service on the island?

In 1962, SCE acquired the electric, water and gas utilities on Catalina Island. SCE provides drinking water throughout the island to about 2,000 customer accounts and 4,100 residents — as well as to the nearly 1 million annual visitors to the island. The water utility system is comprised of groundwater wells, a surface water reservoir, water treatment facilities (including desalination), pipelines, storage tanks and supporting equipment​. SCE is responsible for the operation and maintenance required to operate the water system. Catalina is the only part of SCE’s service area where it provides public water utility service.