MONTEREY >> A jump in water rates for California American Water Co. customers is in the works, but a far-tamped-down version of what the company originally requested of a state regulator.

The increase is part of a proposed decision by Administrative Law Judge Jacob Rambo for the California Public Utilities Commission, or CPUC. It won’t take effect until the full commission approves it.

The increase is the result of Cal Am’s every-three-year General Rate Case it presents to the CPUC for approval. It includes a hotly contested Water Rate Adjustment Mechanism, or WRAM. The mechanism basically allows Cal Am to recoup from ratepayers the difference between forecasted revenue and actual revenue.

In theory, such a charge is supposed to encourage conservation.

In the original application, Cal Am asked the CPUC to allow it to increase WRAM charges by $55.8 million, or 18.71%, in the year 2024, by $19.6 million, or 5.50%, in the year 2025, and by $19.9 million, or 5.30%, in the year 2026.

In Rambo’s proposed decision, he sliced significant amounts off Cal Am’s request down to $19.96 million this year, $15.51 in 2025, and 4.42% in 2026. The increase will be for all Cal Am ratepayers statewide.

Josh Stratton, Cal Am’s external affairs manager in Monterey, said the company is pleased with the rate increase in the decision. The increase is based on a settlement agreement between Cal Am and the CPUC’s Public Advocate’s Office, he said. The Advocate’s Office is an independent organization within the CPUC that advocates solely on behalf of utility ratepayers. He emphasized that the company is not requesting the continuation of the existing WRAM, but rather what is now called the Water Resources Sustainability Plan.

The plan is extremely complicated but essentially has many of the same features as the old WRAM. Stratton said the WRSP is a ratemaking tool that supports affordability, conservation and reliable water service.

The increase has been attacked on two fronts: the already expensive water for the Monterey Peninsula, and the very nature of the rate increases, said Melodie Chrislock, the managing director of Public Water Now, the nonprofit behind the success of Measure J, which calls upon the Monterey Peninsula Water Management District to acquire the assets of Cal Am.

She said that a multiyear test was conducted by the CPUC that showed the WRAM system failed to conserve water, something Rambo acknowledged in his decision.

The decision recommended discontinuance of the WRAM and substituting what’s known as the Monterey-style WRAM, or M-WRAM, which still allows for tiered, or “conservation” rates, but does not automatically reward the investor-owned utility to recover shortfalls due to poor forecasting, she said.

“If less water is used than forecasted, then the utilities should get better at forecasting, not charge for water we didn’t use,” Chrislock wrote in an op-ed in the Monterey Herald.

On Public Water Now’s website is a graph of the Top 10 most expensive water rates in the country in 2017, based on a report by the nonprofit Food and Water Watch.

Cal Am Monterey was at the top of the list. That amount hasn’t been updated for the past six years.

But Chrislock and others are also critical of the logic behind the rate increase.

For example, say Cal Am forecasts that 10,000 acre-feet of water will be used by Peninsula users during any given year. But ratepayers conserve their water and only use 9,000 acre-feet.

The WRAM allows Cal Am to charge ratepayers the difference between the revenue based on the forecasted amount and the revenue on the actual amount of water used.

Critics argue that this mechanism would be like any publicly traded company making a sales forecast for financial analysts and investors.

If sales come up significantly short, the analysts downgrade stock and the company’s share price gets hammered.

Depending on the size of the company and the number of shares issued to the public markets, it could cost tens or even hundreds of millions of dollars in valuation.

They don’t raise prices to consumers because their own forecasts were inaccurate.

Cal Am argues that WRAM charges are an effective means for consumers to conserve more water.

“WRAM is a rate-making mechanism adopted by the California Public Utilities Commission that breaks the link between water sales and revenues to encourage conservation,” Cal Am states on its website.

Within the proposed decision, the Water Management District raises a number of issues as to how the decision as written could harm ratepayers.

Water District General Manager Dave Stoldt said among the issues is how Cal Am spreads out costs incurred by acquisitions to all its districts in the state.

Since Monterey Peninsula water users already pay an expensive rate for water, it shouldn’t have to subsidize costs incurred in other divisions, Stoldt said.

He noted that in many places in the decision, Rambo acknowledges a problem, but “when we raise the issue of the disparity in affordability, they just pat us on the heads and say, ‘We understand those concerns, but no.’”

Rambo wrote in the decision that spreading the costs over a larger customer base is in the public interest.

“This benefits Cal-Am customers not only in Monterey but also elsewhere in the state,” he wrote.

People interested in commenting on the proposed increase can post comments with the CPUC at Post your comment here: https://apps.cpuc.ca.gov/apex/