Mountain Water Company
5:02 pm
Thu July 17, 2014

Missoula, Apple Valley Collaborate On Publicly Owned Water Utilities

Missoula and the southern California town of Apple Valley are separated by over 11-hundred miles, but both have at least one thing in common; officials from both towns want their local water systems under public ownership.

Leaders from both communities met earlier this week in Missoula to discuss ways to do just that.

Apple Valley's water system is owned and operated by Apple Valley Ranchos Water Company. In Missoula, it's Mountain Water Company.

Both are owned by Park Water Company. Park itself is owned by Western Water Holdings, LLC, which in turn is a wholly-owned indirect-subsidiary of Carlyle Infrastructure Partners, a division of The Carlyle Group.

That's the private equity firm Missoula officials have sued to assume control of Mountain Water under eminent domain laws. Carlyle rejected the city's purchase offers and is fighting the condemnation suit. Apple Valley's Town Council has authorized preparation of a Request for Proposals for appraisal services for properties including the local water company. When reached by his car phone, Town Manager Frank Robinson says water rate hikes are now commonplace and locals have reached a breaking point.

"Every 3 years, the water utility goes back to the California Public Utility Commission and proposes rate increases. These rate increases every 3 years are spread over a 3 year period, but cumulatively they'll exceed 25, 30 percent in their requests. We've been successful in knocking those requests down, but it is such a costly intervention on our taxpayers and it requires so much work, and still we usually wind up with increases that are in the 8, 9 percent range, sometimes in the 15 percent range on an annualized basis."

Robinson says the California Public Utilities Commission allows privately held utilities to maintain a certain level of profit.

"Part of the justification is their desire to maintain the 8 percent profit margin that they're allowed to keep. But in addition to that they'll often times try to work into those rate cases capital improvements they're proposing; and some of those capital improvements, we think, are not necessary. And so those are some of the issues we debate."

Missoula Mayor Engen says he hopes Missoulians would never be faced with those sort of rate hikes:

"But here are the barriers to that: The Montana Public Service Commission and the regulatory environment is what it is and so it depends on who those commissioners are and what the private ownership of the private owners of the water company can attempt to justify in terms of building rate. We don't have to justify anything in terms of our rate beyond our ability to deliver water and maintain the system. And any nickel of profit, and there is profitability in these companies today clearly, for us that becomes reinvestment in the company or lower rates over time or a combination thereof."

Engen says Monday's meeting with reps from Apple valley was an excellent starting point:

"We learned a lot about what each community has been up to, how each community is responding to the news that Carlyle has placed these critical utilities on the auction block. We want to be part of the transaction. We want to own our piece of it, Apple Valley wants to own its piece of it, and we're hoping to find another partner who wants to own the third leg of the stool, and that's a system called Park Water that serves portions of south central Los Angeles."

Both Engen and Frank Robinson say no concrete conclusions were reached during Monday's meeting, but that the discussions will continue.