TOAV poised to seize the day (February 21, 2015)

APPLE VALLEY — In April, about 40 of 200 attending town residents spoke before an administrative law judge, disagreeing with the need for Apple Valley Ranchos Water Co. to raise rates over three years by more than 30 percent.

Town officials also had said Apple Valley’s budget would be adversely affected by the rate hike, which could impact the town’s delivery of services to residents.

After several explorations of how to control rates for customers’ and the town’s benefit, Apple Valley officials think the time is right to acquire their principal water supplier. With nearly 20,000 connections in town and in the unincorporated area to the east, Apple Valley Ranchos Water Co. is a plum of a target.

Apple Valley Ranchos is for sale, Town Councilman Art Bishop said Wednesday, referring to a proposed sale of all of Park Water Co., the parent company of Apple Valley Ranchos. This is a perfect opportunity as many people have asked us for years, ‘What are you going to do to bring down our water rates?’

Although AVR executives have repeatedly said the water provider is not for sale on its own, apart from Park Water Co., the pending sale by The Carlyle Group of its Western Water Holdings would transfer ownership of Park Water Co. Western Water is on track for purchase by Oakville, Ontario, Canada-based Algonquin Power Co.’s Liberty Utilities, which already has a presence in California.

Bishop, who was mayor in 2014 when much of the groundwork was done to buy AVR, said the council’s inclination to acquire the company has a lot to do with maintaining local control.

Water is a mandate and the people want to see a local person they can talk to about service and rates, he said, rather than out-of-state or out-of-country owners. Although a Blue Ribbon Committee of residents said the time was not right when it issued its recommendation in 2011, Bishop said rising rates and the proposed change in ownership since then have done much to change the council’s mind.

Town Manager Frank Robinson attributes the officials’ change in attitude, in part, to mounting pressure from unhappy water customers.

There’s some good reason water customers are upset, Robinson said: The continual double-digit rate increases every three years and the amenability of the (California Public Utilities Commission) to approve the increases.

Apple Valley Ranchos requested rate increases of $3.12 million or 14.88 percent in 2015, $2 million or 8.48 percent in 2016, and $2.16 million or 8.19 percent in 2017. Although the case has been negotiated, AVR officials say, it is not yet ready to be published by the CPUC.

With respect to the delay in the final decision on our current rate case, effective Jan. 1, 2015 there was a temporary 1.7 percent rate increase the CPUC authorized Apple Valley Ranchos to charge its customers, AVR Executive Vice President Leigh Jordan wrote in an email. After the final decision is issued, any shortfall will be made up through a temporary surcharge.

Robinson said it is affordable for the town to launch a bid for AVR while an economic recovery is underway.

It seems the stars have aligned where it makes good economic sense to deliver a good-quality service to our community at a more stabilized cost, Robinson said.

Town officials are not deterred by AVR’s recent acquisition of Yermo Water Co., which may be a sinkhole of money for Ranchos and its customers — or the town if it acquires AVR.

Robinson said estimates of $750,000 for initial improvements and $7 million to bring the water system up to par for use by 250 customers is something he hopes is not passed on to Apple Valley customers. Officials said the town can unravel details of the Yermo Water addition if they gain control of Ranchos.

With respect to the timing of the town government’s attempt to use eminent domain to takeover Apple Valley Ranchos, I cannot speculate on why the town leaders have decided to use our precious tax dollars to mount a campaign to tarnish the reputation of a well-run, locally-operated, tax-paying business at this time, Tony Penna, vice president and general manager of AVR, said by email. The facts are clear about a government’s use of eminent domain to seize the assets of an investor-owned, regulated water utility. It always takes longer than anyone knows, costs more than anyone expects and divides a community.

But Apple Valley officials are heartened by prospects that Mountain Water Co. — also part of Park Water Co. — in Missoula, Montana, will fall to that city through condemnation proceedings. The grueling process of establishing public need and determining a fair market value for Mountain Water will begin in a Montana courtroom on March 18.

Apple Valley’s total cost of laying the groundwork for a potential acquisition of the water company includes expenses paid to town attorneys Best Best & Krieger LLP, public finance advisers Bartle Wells Associates, Altec Engineering Corp. and others. Those expenses amounted to $177,238 in 2014, according to records provided by the town.

Included in those efforts, the town released results of a summertime telephone survey conducted by True North Research that showed 67 percent of respondents support or probably support the town’s takeover of AVR. The survey obtained answers from 400 Apple Valley voters at a cost of $22,850.

And following that, the town bought advertising space in the Daily Press to present a series of informational ads on the intended acquisition, at a cost of $4,033. Much of the town’s information on water issues can be found on its website,, by going to the In the Spotlight — H2Ours link.

As the Town government continues to spend hundreds of thousands of tax dollars in its multi-year campaign to attempt to take over Apple Valley Ranchos, our shareholders, not our customers, continue to pay for the cost to protect Apple Valley Ranchos from this takeover of a well-run local business, Penna said, though he declined to reveal any of the company’s related expenses.

While water customers await the release of the pending Apple Valley Ranchos rate case, which will tell them how much they will have to pay for water over the next three years, the town is also awaiting two other results — a comparison audit of four Victor Valley water suppliers including AVR that is being conducted by the State Auditor, and an independent appraisal of the water system in preparation for its purchase.

We want to buy Apple Valley Ranchos, Robinson said. We’ve made that clear.

Source: Gary Brodeur, Daily Press