Takin' It To The Limit

As we in the Southwest all know, water always comes at a price. But in the near future, for residents and businesses on the Westside, that price could get pretty high. Due to a recent feud between New Mexico Utilities, the for-profit carrier for 13,000 users in the northern Westside, and the Albuquerque-Bernalillo Water Utility Authority, a joint public agency, the private company that's been serving the area for more than 30 years may be in trouble. They're currently surpassing their threshold for water rights and that could lead to some costly legal battles.

A Little History

The feud began last year when the water authority conducted an overdue rate study (the first one in 15 years) to make sure users in the city and county were paying what they should for water and sewer service. What they found was the majority of Albuquerque customers, those not signed on to New Mexico Utilities, were effectively subsidizing the utility company by paying more every month than their neighbors. Because the rates were out of alignment, said Mark Sanchez, executive director of the water authority, on July 1 of last year they changed the rates they charged to the utility company. Soon after, the utility turned around and sued the water authority, in hopes of getting their old rate back.

Fourteen months later, the lawsuit still awaits a hearing in district court. In the meantime, the utility company has refused to pay the new rate, an increase of 48 percent over their old rate, and currently owes $1.5 million to the water authority in outstanding fees. But that's where things get tricky. According to Naan Winter, general counsel to the water authority, the utility company signed an agreement many years ago that stated they would pay the rate given to them by the water authority in exchange for something called “return flow credits.”

In the world of water utility companies, return flow credits are a big deal. Now, as of Sept. 1, because the utility company is no longer paying their rate, the water authority stripped them of their return flow credits; which basically means they're pumping a lot more water than they can return.

This requires a little clarification. When a utility pumps water out of the ground, they're required to return the same amount of water back to the system–in this case, the Rio Grande. Eventually, they have to return the full amount of what they pump, but in the short-term (every year) they only have to return a portion—which is the depletion the Rio Grande experiences because of what they take out. Because of the nature of groundwater, it takes years for the water they pump from wells to fully affect the river. They return water to the system either by acquiring surface water rights and diverting that water back to the system, or by gathering return flow credits—putting their treated wastewater back in the system, which usually ends up being around 50 percent the amount of what they take out.

New Mexico Utilities uses a bit of both. They own a little less than 1,300 acre-feet of surface water rights, which goes toward what they owe every year. And, for quite some time now, they've been getting a few thousand acre-feet worth of return flow credits for what they put back in the system as wastewater. The problem is, they don't have their own facility to treat wastewater, and instead give the water to the water authority, who treats it and returns it to the river. Because the water authority is actually the one to do this, they receive credit for the water, but through their agreement, have passed on the credits to the utility company. Now that the utility company is refusing to pay their new rate, the water authority has taken away their credits.

According to their permit from the State Engineer's office, New Mexico Utilities is allowed to pump 10,000 acre-feet from the Albuquerque regional aquifer every year. Currently, the company pumps around 8,000 acre-feet. Through a complex formula, this year they owe the local government 2,279 acre-feet, although they will have to pay back all of the water eventually, as well as surplus water from past years. Because they have the 1,300 acre-feet from surface water rights, that leaves them owing nearly 900 acre-feet which they no longer have any way of returning. At the current market price, if they want to acquire more water rights to pay back the amount due for this year alone, they need to dish out between $5.4 and 6.3 million. The question is, will the money come out of the utility company's pockets, or will customers feel the burden?

Getting Down to Business

Westside City Councilor Michael Cadigan said customers, many of whom are his constituents, will likely feel the weight of New Mexico Utilities' debt in the next few years. He added that he doesn't think many people are even aware of the situation. “This issue is lurking in the future and endangering our water supply.”

As evidence for his position, he noted that the New Mexico Utilities is a for-profit private company that has no incentives to save its customers money and no incentive to conserve water.

“The more water they pump, the more money they make,” he said. Recently, two of the company's pumps stopped working, and they were forced to institute emergency water conservation measures on their customers, asking them to turn off the water when not using it while shaving, take short showers and so on. But as soon as the pumps were fixed, conservation measures were dropped.

Bob Gay, vice president of New Mexico Utilities, did not return the Alibi's calls.

Cadigan said the system is unfair because Albuquerque has instituted successful conservation measures and has thereby lowered per capita consumption by 30 percent over the last decade, yet New Mexico Utilities, who is getting their water from the same water supply, gets away with wasting water. The water authority's Sanchez agrees. “They have been depleting our aquifer with no way to replenish it and have been providing water service at someone else's expense.”

Besides, the bottom line on water conservation has nothing to do with per capita usage. All of the water consumed in Albuquerque comes out of the regional aquifer, and the only number that matters is the total number of gallons pumped annually. Residential usage might have declined from 250 gallons a day per capita to 175 gallons a day per capita, but if the annual number of gallons pumped goes up, the conservation effort is meaningless.

But Cadigan said other issues arise from the mess as well, such as the fact that the company is misleading developers by ensuring them that they have water rights that don't exist. He said the company has tremendous influence over building on the Westside, because they issue certificates of water availability to developers, but now are doing so with no regard for whether they actually have the right to disperse them.

He said there could be further cost to customers in the near future because of the new federal standard for arsenic levels in drinking water that will be effective as of Jan. 1, 2006. At that point, the standard will change from 50 ppb (parts per billion) to 10 ppb. By the first of next year, they need to be able to either meet that standard or have a plan to meet it approved by the Environmental Protection Agency.

Albuquerque is set to meet the standard because we have our own treatment facility and will soon be using water from the San Juan-Chama diversion project, which exceeds the standard. But New Mexico Utilities has no treatment facility. If they choose to build one, Cadigan worries the cost of construction will go to customers as well.

To address these problems, some people think the city should purchase New Mexico Utilities. At a mayoral forum at the Taylor Ranch Community Center last week, in response to a question over whether the city should buy the company, Mayor Martin Chavez said, “Yes, we should purchase it. If need be, we should condemn it and take it.”

Cadigan agreed with the mayor's position. “If we acquire [the utility] it will give us the opportunity to impact things positively.” If the city doesn't take it over, he worries that very soon Westsiders will face water supply, quality and cost problems.

Currently, it's still too soon to know what will come of the situation. Jess Ward, district supervisor for the water rights division in the State Engineer's office, said if the company doesn't return the required amount of water, they will be in debt and the office will take action, although he assured the Alibi that water wouldn't be turned off right away. Steve Schwebke, gas, water and wastewater engineering chief from the staff of the Public Regulation Committee, was unaware of the issue when approached by the Alibi, but said they would now be following the situation closely to see if they need to intervene and help the utility acquire more water rights.

In the meantime, it looks like the fate of New Mexico Utilities will be decided in court.