CPUC READY TO GRANT 44 PERCENT RATE HIKE TO TROUBLED LIVE OAK SPRINGS WATER CO.

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By Mike Allen

April 4, 2016 (Boulevard) --Customers of tiny Live Oak Springs Water Co. in Boulevard are worried that a pending 44 percent increase to their water bills won’t provide them with better service, and is nothing more than a bailout to the water company that remains in bankruptcy.

When the California Public Utilities Commission convenes April 7 the commission will likely grant Live Oak its rate increase, which is on the consent calendar. That will send average water bills to $107 a month, from the current average $74, according to the proposed resolution). Yet some customers say instead of helping the company, the PUC should replace the woeful management of Live Oak Springs Water.

“If it’s in bankruptcy, why in God’s name are they allowing him to run the water district?,” says Paul Isham, a 27-year resident of the area at the eastern edge of San Diego County. Isham said Live Oak pumped water from a stream near his property several years ago that caused his well to dry up. The action forced Isham to greatly curtail a small ranch business.

After the well dried up, Isham went from having 10 cows to just a few. He was forced to drill a new well, at a cost of $10,200, nearly bankrupting him. He said he is considering suing Live Oak.

Isham and other area residents claim Nazar Najor, Live Oak’s owner, will use the rate increase to line his own pockets, and won’t make any necessary improvements to the system.

“Everything is old pipes up here, and he’s not replacing anything,” said Otto Britschgi, a 20-year Boulevard area resident. “They don’t replace anything unless there’s a leak.”

Najor, whose family has owned the water company and the Live Oak Springs Resort since 1982, said extensive work on the system was done. In fact, about $80,000 was invested into the water system over the past two years, he said.

“How do they know that the work wasn’t done?,” Najor said. “I get irritated (about past coverage by ECM) because I’m not the bad guy....The past stories you printed about me are garbage.” [Editor’s note: Past stories were backed up with documentation from the CPUC and court records. Najor did not return requests for comment at that time.]

Live Oak’s customers have reason to worry. According to an administrative law judge’s decision in May 2013 , the Najor family has continued to ignore past PUC rules and orders about the water company’s operations.

The judge cited five compliance orders dating from 2009 to 2011 from San Diego’s County’s Department of Environmental Health for violations of the state’s Safe Water Drinking Act, including not conducting timely water testing, water containing a higher bacteriological total coliform, and not having a required environmental health permit for providing water service to the community.

In 2007, Live Oak was cited for submitting a falsified lab report to the county’s department of environmental health.

“The record regarding the severity of the offenses, conduct of the utility, and totality of circumstances would support a substantial penalty,” wrote Judge Karen Clopton then. The commission’s division of water and audits recommended a $1 million fine for Live Oak then, but the CPUC declined to issue such a fine.

Although Live Oak Springs Water Co. is a privately-owned entity, it must still comply with state regulations as a Class D water utility (among 70 in California) concerning its operations. As part of the pending resolution providing Live Oak with a 44 percent rate hike, the commission also ruled that Live Oak can sell bulk water to commercial customers at a rate of $15 per cubic feet. However, there are several contingencies including prohibiting such bulk sales to be pumped from Well 2, which is currently the sole source of the area’s potable water.

The order also requires Live Oak to closely document and monitor these bulk sales, and to share the profits with the utility’s 96 residential water customers.

In a response to the proposed resolution, Live Oak objected to several conditions, particularly limiting bulk sales to Well 1. It asked the CPUC to allow it to pump from Well 2 and other sources once it adds new infrastructure, including an additional pumping station. Live Oak said it will submit a detailed plan for the upgrades to the county and if approved, will build the facilities by borrowing funds.

That scenario is highly unlikely given Live Oak’s current status in Chapter 11 bankruptcy, which it entered into three years ago. That occurred after Live Oak Holding, the holding company for the water utility as well as the resort property, defaulted on its $1.5 million loan from 1st Pacific Bank of California in 2011.

The San Diego-based bank, burdened by a plethora of lousy loans, failed in 2010, and was acquired by Los Angeles-based City National Bank through an expedited sale arranged by the Federal Deposit Insurance Corp.

Live Oak Holding’s debt, including principal and interest, to City National totaled $1.9 million as of 2013, according to the CPUC Administrative Law Judge’s Decision in May 2013.

Najor refused several times to discuss anything connected to Live Oak Holding.

The Najors actually sought a rate hike of 62.7 percent from the CPUC, but were denied that based on their faulty accounting for the three previous years, and lack of proof of past work orders on the system. Najor said his bookkeeper recently died, and records of the work have yet to be found, but it’s obvious that the work was done.

“As I told them, what do think? Did the pipes put themselves into the ground?,” Najor said.

The Najors response letter  ended with a long diatribe by Lauren Najor, alleging the CPUC and other government agencies are discriminating against her because she is female.

“I am a female owner and have continued to be confronted by prejudicial restrictions for years now,” Lauren Najor said in the response letter. “Although I did not want to believe our government was capable of such unlawful and unfair acts, I believe there were true attempts to bankrupt my company and force me out of business. This must stop now.”

Nazar Najor said his intention once he receives the rate hike is to “continue operating, and continue giving people good water, doing all the maintenance, and putting in good infrastructure.”

“When we get the rate increase, and it comes through, then we’ll be able to get out of bankruptcy,” he said.

Britschgi said he doesn’t have a problem with paying higher water rates as long as Live Oak provides a clear plan to how it is investing their monthly payments, and there’s transparency in how those monies are being spent.

“There’s a trust issue here,” Britschgi said. “Every time they’ve raised the rates in the past, they haven’t made any improvements...Najor said he’s done certain things, but we’ve seen no reports.”