CPUC approves Ranchos sale (January 5, 2016)

Liberty Utilities acquires Park Water, parent of Apple Valley provider

APPLE VALLEY — The California Public Utilities Commission has conditionally approved the sale of Western Water Holdings LLC to Liberty Utilities, according to documents released by the CPUC.

The decision, which came last week, adopted the proposed settlement agreement between the joint applicants — Liberty Utilities, Liberty Western Water Holdings Inc, Western Water Holdings LLC, Park Water Co. and Apple Valley Ranchos Water Co. — and the Office of Ratepayer Advocates, and conditionally approved the application.

President of Liberty Utilities California Greg Sorensen told the Daily Press on Monday that a final date for the closing of the transaction has not yet been set, but added that the company is thrilled with moving into the neighborhood and really happy and excited to be a part of the Apple Valley community.

Town officials, however, might not share that excitement. Apple Valley has maintained throughout the application process that the potential sale of Park Water would not alter its intent to acquire Ranchos’ water system.

The Town Council took numerous steps toward acquisition amid the settlement process that culminated with the approval last November of two Resolutions of Necessity to take the system by eminent domain. Concerns were raised in the town, however, with regard to possible future rate increases given the approximately $77 million of existing long-term debt Liberty Utilities agreed to assume as part of the purchase settlement when the application was filed in November 2014.

Town officials said the joint application failed to adequately explain how Liberty Utilities would justify a $327 million purchase price for Park Water without contemplating eventually proposing major increases in the rate base that would affect Apple Valley residents and businesses, according to a previous Daily Press report.

And in January 2015, the Office of Ratepayer Advocates — a staterun watchdog with the mission of obtaining the lowest possible water rates for service consistent with reliable and safe service levels — filed a protest to the application that recorded a long list of concerns that might indicate the deal is not in the public interest, according to town officials at the time.

Sorensen said concerns surrounding rate increases as a result of the purchase lack legitimacy, though, because one of the conditions stipulated in the CPUC’s approval was the safeguarding against post-transaction rate increase(s).

The CPUC maintained that its decision would have no effect on rates or charges, documents showed.

Another of the CPUC’s conditions was the continued safe, reliable and reasonable operation of Park Water and AVR, which Sorensen acknowledged as already intrinsic to Liberty’s operational DNA.

The conditions, quite honestly, (are) right up our operating philosophy to begin with, Sorensen said. Maintaining local offices is exactly our (mode of operation).

Liberty Utilities offers water, wastewater, gas and electric services to roughly 500,000 customers in 10 states, according to Sorensen, who said that number will increase to 11 once the the sale is finalized and Mountain Water in Missoula, Montana, is absorbed by the company.

We bring a wealth of knowledge from an operational standpoint, Sorensen said, and look forward to sharing that knowledge (with) — as well as learning from — the employees of Apple Valley Ranchos.

In addition to Mountain Water, which is currently embroiled in its own eminent domain battle with the city of Missoula, Yermo’s water system will also reside under Liberty’s umbrella of ownership since Ranchos acquired that system last August.

Some 900 people are serviced by the water system in Yermo and proponents of that acquisition have previously spoken to the improvements Ranchos plans for the aging infrastructure that officials say has far exceeded its useful life.

Ranchos said at the time of its purchase that the company plans to invest $1.1 million in initial capital improvements in order to address Yermo’s most critical water system deficiencies.

But the Town Council has stated on numerous occasions that the purchase of Yermo’s system is simply a strategic move designed to boost a future selling price of Ranchos’ system.

Not unlike Liberty’s purchase of Park Water, Ranchos’ purchase of Yermo Water had little effect on the Council’s decision to continue its pursuit of the Ranchos water system.

And the Council did not include Yermo in its final Environmental Impact Report related to acquisition because that system is located outside the town’s boundaries and, therefore, would be of no benefit to Apple Valley residents, the EIR stated.

With regard to the town’s proposed acquisition, Sorensen said Liberty Utilities believes it is best situated to be the utility provider in Apple Valley.

I’ll point to our experience and technical expertise and availability of capital to ensure that anything that needs to be done has the funding and expertise behind it, he said.

Source: Matthew Cabe, Daily Press