What Are We Doing?

Guarantees (December 28, 2015)

John Pedigo attempts to counter my common-sense proposals regarding the Town of Apple Valley’s hostile takeover of Ranchos Water Company but misses on all counts (A counter proposal, Daily Press, December 28, 2015).

Pedigo asks if Ranchos could only get rate increases to cover increases in costs of water and maintaining infrastructure, apparently not understanding that this is exactly what Ranchos does, given CPUC oversight. So when he writes, Will it happen? No., he is in error, because this is already happening, it has been happening for years, and it will be happening for the foreseeable future.

Some might argue that Ranchos also gets a mark-up on cost increases, from which it can make a profit, so to mollify the Town, all Ranchos has to do is give up its profits. Not only is the un-American and unsustainable, it is also a way of guaranteeing that no private enterprise will invest in our community the way Ranchos has.

Why is that important? Because there are lots of other investment alternatives. (Don’t take my word for it: Watch CNBC for a week and see for yourself.) Unless investing in Apple Valley is attractive enough to convince some person or company to do so, that money will go elsewhere. With no outside investment, Apple Valley ratepayers are on the hook for every penny needed by the system.

To take one trivial example, if The Carlyle Group had — instead of investing in Apple Valley Ranchos Water Company — simply purchased stock in Apple, it would far more than have doubled its money in less than five years, just by buying and holding it.

On top of that, The Carlyle Group would have received dividend payments.

To put it another way, for each dollar The Carlyle Group invested in Ranchos Water Company, it stood to profit (at maximum) $0.46 over five years, and that doesn’t account for all the grief that comes with actually running a business. Had The Carlyle Group invested in Apple stock, it would have received $1.36 in profits in that same span of time, plus dividends. We as a community are extremely fortunate that there are far-sighted companies such as The Carlyle Group and Liberty Utilities that see the value of this type of investment.

Pedigo is also incorrect in implying that Ranchos will be getting a 30 percent raise in rates that will just keep compounding every three years. According to the proposed CPUC decision regarding Application 14-10-002, […] [A]n average residential customer that achieves the conservation goals set by the Governor’s Executive Order will see its [bi-monthly] bill increase by $3.41 and 2.64 percent only. Pedigo’s figure comes from the Town of Apple Valley, which once again demonstrates it has no grasp of the facts or issues involved in running a water utility.

Finally, Pedigo is wrong that the Town will drop its eminent domain efforts for any reason short of extreme duress. This isn’t about water, it’s about money. Ranchos has income, and the Town wants it to cover its ample financial (and other) misdeeds.

— Greg Raven is Co-Chair of Apple Valley Citizens for Government Accountability, and is concerned about quality of life issues.

Published: Daily Press, January 1, 2015