BILL ANALYSIS �
SENATE GOVERNANCE & FINANCE COMMITTEE
Senator Lois Wolk, Chair
BILL NO: AB 54 HEARING: 7/6/11
AUTHOR: Solorio FISCAL: Yes
VERSION: 6/22/11 TAX LEVY: No
CONSULTANT: Detwiler
MUTUAL WATER COMPANIES' SERVICE AREAS
Establishes new requirements for organizing and operating
mutual water companies.
Background and Existing Law
Public water systems that deliver domestic water fall into
three categories:
Local agencies (cities and special districts).
Local agency formation commissions (LAFCOs) control
the cities and special districts' boundaries and local
officials are responsible to their voters for their
water rates.
Investor owned public utilities. The California
Public Utilities Commission (PUC) controls the
companies' service areas and their water rates.
Mutual water companies. These non-profit mutual
benefit corporations respond to their shareholders,
usually the landowners who receive water service.
Neither LAFCOs nor the PUC regulate mutual water
companies.
The State Department of Public Health and some county
health departments monitor the quality of drinking water
delivered to most households.
Because there is less oversight for mutual water companies
than for local agencies and investor owned utilities,
legislators worry that they may overlap the service areas
of other public water systems. Some may lack enough
capital to pay for needed water quality improvements and
the managerial capacity to operate successful public water
systems.
Proposed Law
AB 54 -- 6/22/11 -- Page 2
Assembly Bill 54 establishes new requirements for
organizing and operating mutual water companies. AB 54
authorizes a public water system that is a lead applicant
for funding from the Safe Drinking Water State Revolving
Fund to apply to the State Department of Public Health by
following specified procedures.
AB 54 allows LAFCOs, when conducting their required
municipal service reviews, to review whether public water
systems comply with the Safe Drinking Water Act. LAFCOs
may request information from water providers, including
mutual water companies and private utilities.
By December 31, 2012, mutual water companies that operate
public water systems must provide maps of their service
boundaries to LAFCOs. AB 54 gives these mutual water
companies 45 days to respond to LAFCOs' requests for
reasonably available nonconfidential information in
connection with LAFCOs' preparation of municipal service
reviews or spheres of influence.
The bill allows local agency formation commissions (LAFCOs)
to approve or disapprove the annexation of territory served
by a mutual water company into the jurisdiction of a city,
a public utility, or a special district.
State Revenue Impact
No estimate.
Comments
1. Purpose of the bill . Standing outside the regulatory
structures for local water agencies and investor-owned
water companies, mutual water companies are 19th Century
organizations that sometimes struggle with 21st Century
expectations about political accountability, managerial
transparency, and water quality. AB 54 requires mutual
water companies that operate public water systems to meet
more modern standards, similar to those expected of public
agencies and regulated public utilities. The bill,
however, does not subject these mutual water companies to
regulation by LAFCO or the PUC. They remain responsible to
AB 54 -- 6/22/11 -- Page 3
their shareholders.
2. Clarifying amendments needed . To achieve its statutory
reforms for mutual water companies that operate public
water systems, AB 54 amends the Corporation Code, the
Government Code, and the Health & Safety Code. Treading
into the Cortese-Knox-Nisbet Act that controls LAFCOs'
duties and powers, the bill needs clarifying amendments
that correctly use the specialized LAFCO dialect:
Improve the statutory cross-reference to the Act's
chapter relating to spheres of influence and municipal
service reviews (page 6, line 11).
Clarify LAFCOs' customary powers to impose terms
and conditions when approving annexations (page 10,
line 35).
Avoid the inference that LAFCOs can control the
boundaries of investor owned utilities that are
constitutionally subject to the PUC's jurisdiction
(page 10, line 39; page 11, lines 5-7).
In addition, the bill will eventually need double-jointing
amendments with SB 244 (Wolk) and AB 1430 (Assembly Local
Government Committee).
3. Double-referred . The Senate Rules Committee ordered a
double-referral of AB 54, first to the Senate Environmental
Quality Committee and then to the Senate Governance &
Finance Committee. On June 27, AB 54 passed out of the
Senate Environmental Quality Committee by the vote of 7-0.
Assembly Actions
Assembly Local Government Committee: 6-0
Assembly Environmental Safety & Toxic Materials Committee:
6-3
Assembly Appropriations Committee: 17-0
Assembly Floor: 77-0
Support and Opposition (6/30/11)
Support : Association of California Water Agencies;
California Association of Local Agency Formation
Commissions; California Special Districts Association;
City of Santa Ana; Food & Water Watch; Mountain Counties
Water Resources Association; Orange County LAFCO; San Mateo
AB 54 -- 6/22/11 -- Page 4
LAFCO; Tuolumne Utilities District.
Opposition : Unknown.