Experienced Court Receiver Discusses Private Drinking Water Systems in California

In a recent interview, Nicolas Jaber shared his insights and experiences as an Attorney and Receivership Project Manager for a private drinking water company.  Jaber discussed the complexities of managing a failing water system and the vital role court receiverships play in preserving these essential resources amid regulatory and financial challenges.  His insights provide a compelling look into the realities of managing aging infrastructure under court oversight.

During the interview, Jaber addressed several key questions related to court receiverships:

What conditions trigger court receivership for private water systems?

Jaber explained that receivership may be initiated when a privately-owned public utility substantially fails to meet State and Federal standards, such as providing clean, safe, and reliable drinking water or maintaining operational infrastructure.  In a recent case, pervasive mismanagement and widespread financial and infrastructure issues made it impossible for the company to deliver adequate water service to its customers, prompting the request of the Office of the California Attorney General on behalf of the California State Water Resources Control Board, Division of Drinking Water that the Court appoint Serviam as Court Receiver.

What is the role of a court receiver in stabilizing such systems?

A court receiver serves as an agent and hand of the appointing Court, which retains the ultimate jurisdiction over the system and all assets.  On behalf of the Court, court receivers generally assume complete possession and control of the utility and are typically tasked with managing all aspects of the system’s operations, stabilizing conditions, raising necessary funding, resolving legal issues, and ultimately planning for/effectuating a transfer of ownership to a willing and capable entity.  A court receiver should bring the legal, technical expertise, and financial oversight necessary to address critical deficiencies.  In a recent example, Jaber summarized that his primary role is to navigate the company through its litany of complex issues and keep water flowing to the customers while searching for a new and permanent, willing and capable owner prepared to responsibly and effectively preside over the utility into the future.

What challenges do court receivers face in managing private water systems?

Jaber highlighted the extreme financial constraints and operational inefficiencies typical of small private systems.  One of the major challenges is securing an initial customer rate increase as well as supplemental funding for emergency operations, repairs, and planning.  However, Jaber also noted that a sustainable financial model preeminently requires additional customer rate adjustments, the procurement of which remains to be a delicate and complicated task.

What are the possible outcomes after a court receivership?  

Jaber stated that the goal is to stabilize the system while locating a permanent suitor.  In terms of its eventual transition out of the Court-ordered receivership, the private water company may consolidate with a public entity, transition to new private ownership, or adopt a customer-owned governance structure.  Long-term stability is the ultimate mission, enabling the water company to provide safe and reliable drinking water to its customers.

“A court receiver serves as an agent and hand of the appointing Court, which retains the ultimate jurisdiction over the system and all assets.  On behalf of the Court, court receivers generally assume complete possession and control of the utility and are typically tasked with managing all aspects of the system’s operations, stabilizing conditions, raising necessary funding, resolving legal issues, and ultimately planning for/effectuating a transfer of ownership to a willing and capable entity.  A court receiver should bring the legal, technical expertise, and financial oversight necessary to address critical deficiencies.” Nicolas Jaber, Serviam by Wright LLP

Jaber’s work underscores the importance of court receiverships as a mechanism for protecting public health and safety, especially when private water systems face crises.  His experience demonstrates how legal expertise, combined with financial and technical support, can help distressed systems recover and thrive.  You may contact Nicolas Jaber at Jaber@Serviam.Law.