Proposition I - Independent Ratepayer Advocate

Voter Guide
November 1, 2008
This measure appeared on the November 2008 San Francisco ballot.

 

What it does

Proposition I would create an independent ratepayer advocate, appointed by the City Administrator, to evaluate and make recommendations on utility rates proposed by the San Francisco Public Utilities Commission. The appointee would be required to have at least ten years of experience in utility rates analysis and at least ten years of experience relevant to the operation of water, wastewater and power utilities. The job entails evaluation and analysis of the efficiency, equity and fiscal feasibility of rates proposed by the SFPUC. The advocate would make recommendations about rate proposals, budgets, contracts and operations to the SFPUC's existing Rate Fairness Board and to the Board of Supervisors. The advocate also would be able to interact with the public by responding to inquiries, explaining rate processes and conducting ratepayer outreach.

The ratepayer advocate would be located within the City Administrator's Office, not the SFPUC, and as such would be independent from the SFPUC's oversight.

The ratepayer advocate would be afforded the opportunity to provide comments on utility rates proposed by the SFPUC and to present those comments at the SFPUC, the Rate Fairness Board and the Board of Supervisors. The ratepayer advocate would be entitled to at least the same amount of time to provide comments as the staff of the SFPUC.

The cost of the position, estimated by the City Controller's Office to be approximately $125,000 per year, would be paid for as a water and wastewater utility expense by SFPUC customers.

Why it is on the ballot

Prop. I is a Charter amendment put on the ballot by vote of eight members of the Board of Supervisors.

The SFPUC uses its water and sewer rates to fund operations, maintenance and capital improvements on more than 2,000 miles of pipelines, tunnels, reservoirs and treatment plants. The SFPUC is conducting major retrofits of both the water supply and sewer systems, to improve their reliability and ability to withstand major earthquakes.

The concept of a local independent ratepayer advocate arose from the SFPUC's 2007 proposal to raise water rates to help pay for water and wastewater system improvements. This proposal included not only a modest rate increase, but also the addition of a rate tier for larger volumes of residential water use.

Currently, residential customers pay one rate for the first three units (one unit equals 798 gallons), and a slightly higher rate for any units used thereafter. Public concern that a third, higher rate, for more than 10 units, would hurt large families sharing a single home and water bill caused the SFPUC to withdraw from this proposal. As part of the agreement to pass the rate increase in 2007, the SFPUC agreed to support independent analysis of rate proposals in the future.

The ratepayer advocate model is based on the California Public Utilities Commission, which has a division of ratepayer advocates to oversee rate proposals from investor owned energy, water and telecommunications utilities.

The SFPUC already has a Rate Fairness Board, which was established by San Francisco voters through 2002's Proposition E. The board advises the SFPUC on rate stability, fairness and affordability. The board also is responsible for conducting an annual review of the five-year rate forecast, holding public hearings on annual rate recommendations and submitting rate policy recommendations to the commission. The board is composed of city residential and business customers, and officials from the offices of the city controller and city administrator.

According to the SFPUC, even factoring in the rate increases in 2007 and 2008, the average San Francisco combined water and wastewater bill is lower than those in most major cities in the Bay Area and the United States. In 2007, an average single-family home customer used 5,236 gallons of water per month (seven units, by the SFPUC's calculation). The cost of this was approximately $15 for the water and $34 for the wastewater (based on the SFPUC presumption that 90 percent of that water goes down the drain and into the sewage system).

Pros

Arguments in favor of Prop. I:

  • Prop. I would improve the professional, technical analysis of rate proposals, a function currently performed by the SFPUC's Rate Fairness Board with additional oversight by the Board of Supervisors. Because of the specified qualifications necessary to hold the position, the ratepayer advocate would lend objective expertise to the rate setting process. The advocate would be able to explain to both elected officials and the public complicated issues regarding fiscal feasibility and the fairness and appropriateness of proposals.
  • Prop. I would improve the objectivity of analyses of rate proposals, because the advocate would be housed in the City Administrator's Office and somewhat shielded from the politics that sometimes affect decision making at the SFPUC and at the Board of Supervisors. The independence of the office would allow a check and balance of numbers and data provided by the SFPUC to support rate changes.
  • The SFPUC is investing more than $6 billion to upgrade our water and wastewater systems, for which ratepayers will pay back revenue bonds over the next 30 years. Because the amount of money is so large, added oversight of how we fund these investments is prudent management.

Cons

Arguments against Prop. I:

  • This charter amendment and the new office are not needed. The Rate Fairness Board is a panel of diverse stakeholders and experts set up to do the job of ratepayer advocacy. The board has representatives from different types of SFPUC customers and from City financial experts. The board can hire staff with expertise to analyze rate proposals, and can do so without a Charter amendment.
  • Between the elected mayor and Board of Supervisors, the appointed general manager of the SFPUC and its commissioners, and the Rate Fairness Board, there are enough checks and balances in the system to ensure that ratepayers are getting fair and appropriate treatment. At least four major offices watch over the manager of the SFPUC already. Adding a watcher over the watchers is bureaucracy gone to excess.
  • The California Public Utilities Commission's Independent Ratepayer Advocate helps protect ratepayers from the profit-seeking behavior of investor-owned utilities. The SFPUC is a department of the City and County of San Francisco, with the mission of providing water, wastewater and municipal power services. It does not have a revenue-generating motive other than to pay for the public services it provides. As a government entity, it does not need an additional government entity — other than the elected officials and commission to which it is already responsible — to analyze its budget, sources of income and impact on the public.
  • To the extent that the ratepayer advocate's input resulted in the reduction of water rates or the maintenance of San Francisco's historically low water and sewer rates, the office would be doing the City a disservice. The SFPUC is undergoing billions in necessary infrastructure upgrades that require a strong rate base to help finance and pay for them.

SPUR’s analysis

Although we agree that ratepayers need fair and balanced analysis of proposed rate increases, we do not believe that a new office needs to be created to serve this purpose. We elect a mayor to run the City, and we elect district supervisors to provide oversight of City departments. We also have commissioners to serve as the board of the SFPUC and a professional general manager to run it. This system ensures that things such as water rates are fair and appropriate, but also get the job done in terms of paying for necessary infrastructure improvements. If the Rate Fairness Board we already have does not possess the expertise to analyze or explain rate-setting procedures to elected officials and the public, it can hire people to do so. We do not need an amendment to the City Charter to fill this role. Furthermore, this measure risks both too much bureaucracy and too little investment in our water system.

SPUR recommends a "No" vote on Prop. I.