BILL ANALYSIS �
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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: 8/22/14 in Senate
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 : Water Recycling Act of 1991: mutual water
companies:
duplication of service
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.
Senate Floor Amendments of 8/22/14 establish in the Water
Recycling Act the conditions under which a mutual water company
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must allow the provision of recycled water and those conditions
where it need not.
ANALYSIS : Existing law:
1.Finds and declares that it is necessary for the public health,
safety, and welfare that privately owned public utilities
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."
6.Establishes, under The Water Recycling Act of 1991 (Act), a
statewide goal to recycle a total of 1,000,000 acre-feet of
water per year by the year 2010. In order to achieve this
goal, the Act requires retail water suppliers to identify
potential uses for recycled water within their service areas,
potential customers for recycled water service within their
service areas, and, within a reasonable time, potential
sources of recycled water.
7.Authorizes a retail water supplier that has identified a
potential use or customer to apply to a recycled water
producer or wholesaler for a recycled water supply and
authorizes a recycled water producer or wholesaler that has
identified a potential use or customer to request, in writing,
a retail water supplier to enter into an agreement to provide
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recycled water to the potential customer.
8.Includes specific requirements that are applicable only to a
retail water supplier that is a public agency.
This bill:
1.Authorizes a recycled water producer or wholesaler that has
identified a potential use or customer within the service area
or jurisdiction of the retail water supplier, to request, in
writing, a retail water supplier to enter into an agreement to
provide recycled water to the potential customer consistent
with specified requirements of the Act.
2.Extends specific requirements that are applicable only to a
retail water supplier that is a public agency to a mutual
water company formed and operating pursuant to specified
provisions of the Corporations Code.
3.Allows specified agencies to provide recycled water service in
the territory of mutual water companies, without providing
compensation.
4.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, if the
political subdivision complies with the Act, 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.
5.Provides that the above exemption will not apply to those
customers and their properties to which the mutual water
company was providing recycled water service, or for whom the
mutual water company has identified and developed specific
plans to provide recycled water service, as of December 31,
2014.
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
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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
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.
Comments
According to the author, "In order to promote broader use of
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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 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."
FISCAL EFFECT : Appropriation: No Fiscal Com.: No Local:
No
SUPPORT : (Verified 8/25/14)
City of Calimesa
San Bernardino County Supervisor, James C. Ramos
Sierra Club California
Yucaipa Valley Water District
Yucaipa-Calimesa Joint Unified School District
OPPOSITION : (Verified 8/25/14)
Amarillo Mutual Water Company
Atascadero Mutual Water Company
Averydale Mutual Water Company
Bellflower-Somerset Mutual Water Company
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
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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
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
Hern�ndez, Holden, Jones-Sawyer, Levine, Lowenthal, Medina,
Mullin, Muratsuchi, Pan, John A. P�rez, V. Manuel P�rez,
Quirk, Quirk-Silva, Rendon, Ridley-Thomas, Rodriguez, Salas,
Skinner, Stone, Ting, Weber, Wieckowski, Williams, Yamada,
Atkins
NOES: Achadjian, Allen, Bigelow, Ch�vez, 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 8/25/14 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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