On Monday, January 6, I attended another session of the Town of Apple Valley’s eminent domain trial that seeks to seize the Liberty Utilities water system (Town of Apple Valley v. Apple Valley Ranchos Water Corp., CIVDS1600180), in front of Donald Alvarez in Department S-23 of the San Bernardino Justice Center. I was the only “civilian” in the gallery, although other supporters of Liberty Utilities have attended on other days. From what I could tell, not a single one of the “outraged citizens” who agitated for the Town to take this course of action has yet to make the trip to monitor the case. Thus, what may have once appeared to be public support for this cause has finally been revealed to be nothing more than astroturf ginned up by the Town.
This case is taking much longer than anyone anticipated. Not only is the trial still underway, but Liberty Utilities — which is presenting its case before the Town presents its side — is still putting on its witnesses and evidence. I wasn’t able to get a sense as to how much longer Liberty Utilities plans to take, but it will be at least a few more days, and then it will be the turn of the Town’s attorneys. Given their cross-examinations of Liberty Utilities’ witnesses, this does not promise to be a concise presentation. I think we can fully expect that all the attorneys involved in this action will be in a higher tax bracket as a result of this litigation.
Appearing for the Town were Kendall Macvey, Guillermo Frias, and Christopher Pisano from the Town’s law firm, BB&K. Defending Liberty Utilities were George Soneff, Edward Burg, David Moran, and Lauren Fried.
When the court recessed for the holidays, Liberty Utilities had Mr. Edward Jackson on the stand. Jackson is Director, Rates and Regulatory Affairs, which makes him the point man for General Rate Case [GRC] and other proceedings before the California Public Utilities Commission [CPUC]. Liberty attorney Edward Burg conducted the examination.
This process is anything but exciting. Liberty Utilities’ approach seems to be to construct an impenetrable fortress of facts concerning how well-run the water utility is, especially now under the ownership of Liberty Utilities. While the final edifice may be impressive, watching the stones being laid can seem fairly mundane. Clearly, though, attorneys for the Town see what is happening and because they are powerless to prevent it, have to content themselves with nit-picking and innuendo — often about matters that have no substantive bearing on the case.
There were a couple of points of interest, however.
First, Mr. Jackson informed the court that the Town of Apple Valley had not intervened in the last General Rate Case application by Liberty Utilities to the California Public Utilities Commission. In other words, the same Town that for years has been falsely accusing the water company of price gouging opted not to oppose Liberty Utilities’ current request for a rate hike. Recall that Art Bishop and others have virtually bragged about how much the Town has spent opposing water rate increases on behalf of poor, defenseless citizens (while failing to show that the Town’s opposition has had any effect whatsoever), one has to wonder if the Town was too broke, or whether they realize that the higher the water rates, the better chance they have of being able to skim money off of the water revenues to pay for other Town expenses — assuming they prevail in court, of course.
The second bombshell was that Liberty Utilities now has the lowest rate of return of all the Class A water utilities in California. Recall that one of the Town’s talking-points in the past has been that no company should be allowed to make a profit of 9% or more, and certainly not our water company. Since Liberty Utilities purchased the water company, though, they have restructured the company’s debt, which has allowed them to operate with a dramatically lower rate of return than before: 7.35%! Granted, the Trump tax breaks and less expensive energy costs no doubt contributed to this increased efficiency, but keep in mind that Liberty Utilities currently has proposed even more debt restructuring, which could well provide even further reductions in the rate of return needed to operate efficiently. Juxtaposed against the testimony of Carol Thomas-Keefer, the capable Operations and Maintenance manager for Liberty Utilities, that Liberty Utilities was the only water company in our area to have a perfect water-quality record.
|Utility||Cost of Debt||Rate of Return||Rank||Cost of Debt||Rate of Return||Rank||Cost of Debt||Rate of Return||Rank|
|Before Liberty Utilities Ownership||After Liberty Utilities Ownership|
|Apple Valley Ranchos & Park Water||8.38%||9.42%||8||8.12%||9.07%||7||4.71%||7.35%||1|
|San Jose Water||7.03%||8.68%||3||6.68%||8.38%||2||6.20%||7.64%||4|
|Golden State Water||7.49%||8.90%||5||6.99%||8.64%||6||6.60%||7.91%||6|
|San Gabriel Valley Water||7.56%||9.25%||6||6.26%||8.49%||4||6.17%||8.12%||7|
|Great Oaks Water||7.50%||9.26%||7||7.50%||9.10%||8||6.50%||8.15%||8|
|[A] 2009/2010: Decision 09-05-019, May 7, 2009; Decision 10-10-035, October 28, 2010; Decision 10-12-057, December 16, 2010.|
[B] 2012/2013: Decision 12-07-009, July 12, 2012; Decision 13-05-027, May 23, 2013.
[C] 2018: Decision 18-03-035, March 22, 2018; Decision 18-12-002, December 13, 2018.
Mr. Burg finally finished his examination of Mr. Jackson, and Kendall MacVey took up the cross-examination for the Town.
As noted above and in my previous court report, the Town attorney seemed to alternate between a microscopic examination of minutiae, and criticism of the CPUC and the Office of Ratepayer Advocates (AKA Cal Advocates, AKA Public Advocates, AKA Cal PA, AKA Public Advocates Office). Criticizing the CPUC is nothing new for the Town, of course, which on more than one occasion has referred to the CPUC as venal and willing to rubber-stamp any proposal by the water utility. A thoughtful person might wonder why the Town spent thousands and thousands of dollars appearing in CPUC hearings if they knew the fix was in against them. This approach is thus an extension of the “local control” argument (AKA political promise) that once the water utility is under Town Hall’s control, citizens will just be able to call up and get whatever they request because the Town cares so very, very much.
In reality, this argument is camouflage for the Town’s position that fascism (private ownership with government control) isn’t enough; what Apple Valley deserves is TOAV government ownership of the water utility with TOAV government control — AKA communism.
Surprisingly, enough citizens have agreed that the Town has been emboldened to proceed with its jihad. The smart money is betting that Judge Alvarez is not going to fall for it, though.
Granted, I have observed only two days of this lengthy trial, but the days were eerily similar, with Liberty Utilities’ attorneys presenting cogent facts and the Town’s attorneys slinging mud. If my read is correct, though, the citizens of Apple Valley need to prepare for the worst.
This trial is costing a fortune on both sides, and we citizens get to pay the bill no matter who wins. Given that the Town is essentially broke, what will happen when it has to pony up the fees and expenses for Liberty Utilities’ attorneys? If Liberty Utilities isn’t willing to forego reimbursement for tens of millions in legal costs, the sum total of all Town assets may not be enough to cover the judgment.
— Greg Raven, Apple Valley, CA