BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 2443|
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THIRD READING
Bill No: AB 2443
Author: Rendon (D), et al.
Amended: As introduced
Vote: 21
SENATE NATURAL RESOURCES AND WATER COMMITTEE : 5-1, 6/24/14
AYES: Pavley, Evans, Hueso, Lara, Wolk
NOES: Cannella
NO VOTE RECORDED: Fuller, Jackson, Monning
ASSEMBLY FLOOR : 51-23, 5/19/14 - See last page for vote
SUBJECT : Duplication of service: mutual water companies
SOURCE : Author
DIGEST : This bill allows specified agencies to provide
recycled water service in the territory of mutual water
companies, without providing compensation. This bill exempts a
political subdivision, such as a water district, that constructs
facilities to provide or extend recycled water services to the
territory of the mutual water company from the service
duplication law which requires payment of compensation to
privately owned water utilities by a political subdivision that
provides duplicate water service in the same service area.
ANALYSIS : Existing law:
1.Finds and declares that it is necessary for the public health,
safety, and welfare that privately owned public utilities
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regulated by the state be compensated for damages that they
may suffer by reason of political subdivisions extending their
facilities into the service areas of such privately owned
public utilities.
2.Requires the payment of compensation to privately owned public
water utilities by a political subdivision that provides
duplicate water service in the same service area as the
private water utility.
3.Specifies that any corporation organized for or engaged in the
business of selling, distributing, supplying, or delivering
water for irrigation purposes or for domestic use must be
known as a mutual water company.
4.Exempts from the Service Duplication Law the use of reclaimed
water at a landfill in Los Angeles County.
5.Defines the following definitions for purposes of this bill:
"service area," "political subdivision," "public utility," and
"recycled water."
This bill:
1.Allows specified agencies to provide recycled water service in
the territory of mutual water companies, without providing
compensation.
2.Exempts a political subdivision, such as a water district,
that constructs facilities to provide or extend recycled water
services to the territory of the mutual water company from the
service duplication law which requires payment of compensation
to privately owned water utilities by a political subdivision
that provides duplicate water service in the same service
area.
Background
The Service Duplication Law enacted in 1965 requires the payment
of compensation to privately owned public water utilities by a
political subdivision, such as a county water district, that
provides duplicate water service in the same service area as the
private water utility. Mutual water companies are included in
the definition of a "private utility" meaning that the same
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requirement of compensation is required if a political
subdivision provides duplicate water service in a mutual water
company's service area.
Mutual water companies . Most mutual water companies are
organized pursuant to the General Corporation Law or the
Nonprofit Mutual Benefit Corporation Law. Shareholders in a
mutual water company hold a right to purchase water from the
company. Stock in a company is usually linked to the ownership
of a parcel served by the company and transfers with the land
when the parcel is sold to successive owners. This type of
corporate structure allows landowners to establish, essentially,
a customer-owned water provider to serve their properties.
State law exempts a mutual water company from state regulation
if it is organized to deliver water to its stockholders and
members, with specified exceptions. Governance of a mutual
water company is generally limited to shareholders, or members,
of the company. While the details of any particular company's
governing structure are determined by its articles and bylaws,
most mutual water companies allow only shareholders and members
to vote on organizational matters and serve on the company's
governing board.
Regulation of public utilities vs. mutual water companies .
Public water systems that deliver domestic water generally fall
into three categories: a) Local agencies (cities and special
districts), in which local agency formation commissions control
boundaries and local officials are accountable to voters for
issues like water rates; b) Investor owned public utilities, in
which the Public Utilities Commission controls the companies'
service areas and water rates; and, c) Mutual water companies
which are private entities that respond to their shareholders,
usually landowners, are not regulated by local agency formation
commissions or the Public Utilities Commission. The State
Department of Public Health and some county health departments
monitor the quality of drinking water delivered to most
households by any water systems.
FISCAL EFFECT : Appropriation: No Fiscal Com.: No Local:
No
SUPPORT : (Verified 6/25/14)
City of Calimesa
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San Bernardino County Supervisor, James C. Ramos
Sierra Club California
Yucaipa Valley Water District
Yucaipa-Calimesa Joint Unified School District
OPPOSITION : (Verified 6/25/14)
Amarillo Mutual Water Company
Atascadero Mutual Water Company
Averydale Mutual Water Company
Bellflower-Somerset Mutual Water Company
California Association of Mutual Water Companies
California Domestic Water Company
Cartago Mutual Water Company
Central Basin Water Association
Cherry Valley Water Company
Covina Irrigation Company
El Dorado Mutual Water Company
La Cumbre Mutual Water Company
Lincoln Avenue Water Company
Maywood Mutual Water Company # 3
Montebello Land and Water Company
Oildale Mutual Water Company
Pine Valley Mutual Water Company
Ponderosa Basin Mutual Water Company
Riverside Highland Water Company
Rubio Canyon Land and Water Association
San Gabriel Valley Water Association
Shadow Acres Mutual Water Company
South Mesa Water Company
South Midway City Mutual Water Company
Sundale Mutual Water Company
Sunny Slope Water Company
Sunnyside Farms Mutual Water Company
Valencia Heights Water Company
Valley Water Company
Western Heights Water Company
ARGUMENTS IN SUPPORT : According to the author, "In order to
promote broader use of recycled water, AB 2443 withdraws the
State's protection of mutual water company monopolies, but only
as to recycled water. Mutual water companies are not authorized
to produce recycled water and can only sell it by purchase from
a public agency. AB 2443 protects the rights of landowners to
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purchase recycled water from any public agency that is willing
to extend its "purple pipe" to the landowner's property. It
also prevents a mutual water company from forcing a landowner to
use clean and safe drinking water for non-potable purposes, such
as irrigation of football fields."
ARGUMENTS IN OPPOSITION : According to the California
Association of Mutual Water Companies, "AB 2443 will not
encourage the use of recycled water in areas served by mutual
water companies. AB 2443 will effectively prevent many mutual
water companies from retailing recycled water to their
customers, as wholesale public agencies seeking to retail water
bypass the mutual water company in order to serve the customers
directly, in contravention of existing law. In some cases,
mutual water companies currently selling recycled water may be
prevented from doing so in the future under AB 2443. This is
because AB 2443 allows wholesale public water agencies to
duplicate service of recycled water with their own connections
in areas already served by mutual water companies. AB 2443
creates disadvantages that can financially ruin mutual water
companies with stranded costs of past investments in safe
drinking water improvements and recycled water."
ASSEMBLY FLOOR : 51-23, 5/19/14
AYES: Alejo, Ammiano, Bloom, Bocanegra, Bonilla, Bonta,
Bradford, Brown, Buchanan, Ian Calderon, Campos, Chau,
Chesbro, Cooley, Dababneh, Daly, Dickinson, Eggman, Fong,
Frazier, Gatto, Gomez, Gonzalez, Gordon, Gray, Hall, Roger
Hernández, Holden, Jones-Sawyer, Levine, Lowenthal, Medina,
Mullin, Muratsuchi, Pan, John A. Pérez, V. Manuel Pérez,
Quirk, Quirk-Silva, Rendon, Ridley-Thomas, Rodriguez, Salas,
Skinner, Stone, Ting, Weber, Wieckowski, Williams, Yamada,
Atkins
NOES: Achadjian, Allen, Bigelow, Chávez, Conway, Dahle,
Donnelly, Fox, Beth Gaines, Gorell, Grove, Hagman, Harkey,
Jones, Linder, Logue, Maienschein, Melendez, Olsen, Patterson,
Wagner, Waldron, Wilk
NO VOTE RECORDED: Garcia, Mansoor, Nazarian, Nestande, Perea,
Vacancy
RM:nl 6/26/14 Senate Floor Analyses
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SUPPORT/OPPOSITION: SEE ABOVE
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