Some Bakersfield residents' water bills will be fundamentally restructured, with big cost implications, if the California Public Utilities Commission votes Thursday to end an experiment that 12 years ago erased a financial incentive to sell people more water.

Under the proposal, California Water Service and other investor-owned utilities would no longer bill customers a surcharge covering the cost difference between expected and actual water usage.

The CPUC's consumer-advocacy arm supports the proposal and estimates it would save ratepayers 10 percent to 15 percent, maybe more, on their water bills.

But Cal Water, which covers about half of Bakersfield (city government supplies the other half), says the way the plan is built it would raise low-usage, low-income customers' bills by up to 20 percent.

DECOUPLING

Central to the whole discussion is an idea called "decoupling." It holds that utilities shouldn't be rewarded financially for selling customers more water, especially in a drought-prone state like California.

But advocates of the proposal now under consideration say that system has inappropriately protected water utilities from inefficient operations and bad purchasing decisions. They say water companies should pick up costs incurred by faulty projections.

Decoupling is generally thought to have benefited customers of the state's investor-owned electric utilities. It has meant that companies like Pacific Gas and Electric Co. don't profit selling electricity. Instead the utility makes most of its money charging interest for infrastructure improvements and upkeep.

When utilities contract to buy more or less than its customers use, the difference is passed on to ratepayers in a "true-up" surcharge. This structure has applied to California investor-owned water utilities since 2008.

PROTECTING UTILITIES

Richard Rauschmeier, manager of the water branch at the CPUC's Public Advocate's Office, said the water business turned out to be different from the electricity business. He said decoupling ended up hurting water consumers and producing only negligible water savings while padding utilities' profits.

The system ultimately shielded utilities from the normal risks of doing business, he said, so that poor decisions on the companies' part were covered by ratepayers.

"Really, customers are getting charged for water that they didn't use," he said, adding, "Removing a (true-up) surcharge from a customer's bill results in a lower bill."

But Cal Water says there would be less incentive to conserve water and the change would hurt low-volume, low-income water users.

INEQUITABLE RESULTS

Justin Skarb, Cal Water's director of community affairs and government relations, said decoupling produced a 29 percent increase in water savings between 2008 and 2014, saving California nearly 8 billion gallons of water.

Bills for a quarter of Cal Water's customers "could see their bills jump between 10 and 20 percent because of the changes that could be required by this proposal," he said.

"Given the need to conserve in this state, we don't think this is a correct decision," he said.

He added the proposal deserves additional study, saying, "Our perspective is there's no reason this needs to be rushed."

Advocacy group The Alliance for Water Efficiency sided with California's investor-owned utilities, saying the system would become less equitable if the proposal passes.

"Rewarding customers who use excessive amounts of water with lower rates and punishing low-volume water users with higher rates is counterproductive from either a conservation or affordability perspective, and we fear that the (proposal before the CPUC) will be unintentionally doing just that," the organization's president and CEO, Mary Ann Dickinson, said in a letter Friday to the CPUC.

Follow John Cox on Twitter: @TheThirdGraf

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