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Water Fight Between Utility, Authority Heating Up
[January 08, 2007]

Water Fight Between Utility, Authority Heating Up

(Albuquerque Journal (NM) (KRT) Via Thomson Dialog NewsEdge) Jan. 8--Water wars were fought long before the Spanish arrived in New Mexico more than 400 years ago.

But who is best suited to manage this finite and treasured resource?

That is at the core of a dispute between the public Albuquerque Bernalillo County Water Utility Authority and the privately owned New Mexico Utilities Inc., which provides water and sewer service to about 53,000 people living and working on the West Side.

The fight began in earnest in 2006 when New Mexico Utilities sued the water authority over rate increases and then went public with advertisements in local newspapers and on radio. Both sides courted newspapers attempting to win editorial support.

Most recently, a flier from the water authority hit county residents' mailboxes.

The water authority claims its customers have been subsidizing New Mexico Utilities for years. Authority officials said the private utility is pumping more water than it should and isn't paying enough for sewer service the authority provides.

In 2004, the authority increased what it charges the utility for sewer service by tens of thousands of dollars. The utility sued.

The authority has made no secret that it wants to condemn New Mexico Utilities and merge its operations with the city/county agency.

The utility, which is owned by California-based Southwest Water Co. and has been operating on the West Side for more than 40 years, is fighting back.

It contends that the authority is in breach of agreements in place for decades and that it has never pumped more water than allowed by the State Engineer.

"I think (authority officials) are not being honest when they try to paint us with a different brush," said Bob Gay, vice president and general manager of New Mexico Utilities. "Just because they are doing a good job (at water conservation) doesn't mean that we are doing a bad job."

Authority board members have said the utility must pay current sewage rates, curtail its water pumping and obtain more water rights if it wants to avoid condemnation.

Plans to take over

To take over the utility, the authority would have to file a condemnation lawsuit in state District Court. If the court agreed to condemnation, it would then set the price the authority would have to pay.

The authority board has not voted to proceed with condemnation. However, it has offered to buy New Mexico Utilities for $37 million.

The company rejected the offer, saying it doesn't want to sell and the price is too low.

"I personally think we should take them over," said Alan Armijo, a Bernalillo County commissioner and chairman of the water authority board. "NMUI has no accountability."

However, Gay said the utility is accountable to its customers, the State Engineer and the Public Regulation Commission.

The water authority board will decide Tuesday whether to issue $50 million in bonds to buy the utility and pay for other infrastructure needs.

This is not the first time New Mexico Utilities has been the target of a takeover: The city tried to condemn and buy it in 1997 but lacked council support.

At the heart of the dispute is a 1973 agreement the city made with the utility. Both sides say the agreement is outdated, but neither is willing to compromise much on what changes should be made.

"I told (authority officials) I would be more than willing to renegotiate the contract," Gay said. "My experience in negotiating with the water authority is them saying, 'These are our demands, this is the way we want it and either you agree or we will take you over.' ''

1973 agreement

New Mexico Utilities was formed in the early 1960s to serve Paradise Hills, which was being developed by Arizonabased Horizon Corp., Gay said.

The state gave the utility rights to provide water and sewer service in 34 square miles on the West Side.

In 1973, the utility and the city signed an agreement formalizing their relationship. The city agreed to charge the utility the lowest sewer rate charged to "large water user" customers. The city also agreed to make up any depletions New Mexico Utilities made to the aquifer.

Development was slow until the 1990s, Gay said.

In 1995, the utility had about 3,500 customers, but at the end of 2006, NMUI had about 17,000 connections, he said.

The water authority in 2004 completed a rate study that determined it was undercharging New Mexico Utilities and raised its monthly sewage rates from about $1,400 to more than $92,000.

The utility contends the rate increase violates the 1973 agreement and refuses to pay it. The authority says the utility owes about $3 million in upaid rates.

Gay said the increase amounts to harassment.

"Whenever they changed their rate, we always paid the lowest rate for a large volume water user," Gay said. "That is in the 1973 agreement."

He said the authority wants to charge the utility as if it were "17,000 individual users instead of a single customer."

According to authority figures, New Mexico Utilities is charged a monthly base rate of more than $92,000 compared with about $30,000 charged to Kirtland Air Force Base, which pumps about half as much wastewater into the authority system as the utility does.

Swift countersuit

When the utility sued the water authority in 2006 over the rate issue, the authority quickly countersued.

The countersuit states the authority doesn't have a "legal" definition for "large volume water user" so it cannot base rates upon language in the 1973 agreement. The authority contends the city also did not have such a definition when it ran its water department.

Based on the lack of a definition, the authority states, it has the right to raise rates and contends its residential customers had to pay $4 a month more in sewage treatment charges because New Mexico Utilities was not paying enough.

"The idea was that rates should be based on cost of service, meaning no one customer class should subsidize another," said Mark Sanchez, the authority's executive director.

Conservation dispute

The water authority was created in 2003 to take over jurisdiction of water and wastewater treatment from the county and city.

Long before, the city had started conservation programs and made a $400 million investment to buy water from the San Juan and Chama river basins. Eventually, more than 70 percent of the water used by authority customers will have been diverted from the Rio Grande.

Sanchez said the San Juan-Chama river diversion project is one of many ways the authority is trying to save water in the aquifer.

"We're spending $400 million to bring in water to preserve the aquifer, and they're increasing pumping," Sanchez said. "We're at cross purposes."

Gay disagreed.

New Mexico Utilties customers have always conserved, he said. And, no matter who provides it, its customers are still going to need water.

The water authority says New Mexico Utilities is worth about $37 million and its purchase could be made without raising rates to either entity's customers.

The utility charges its residential customers a base fee of $10.42 for water service. The water authority charges $11.42.

Copyright (c) 2007, Albuquerque Journal, N.M.
Distributed by McClatchy-Tribune Business News.
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