COUNCIL EXPECTED TO APPROVE PURSUING WATER COMPANY PURCHASE.

Byline: Teresa Jimenez Daily News Staff Writer

The City Council on Tuesday is expected to formally allow the city manager to pursue the purchase of the Santa Clarita Water Co., the largest water retailer in the valley.

The council also is expected to condemn the Castaic Lake Water Agency's efforts to buy the private retail water company by claiming that state law allows the water agency to sell wholesale state water only.

The competition to buy the Santa Clarita Water Co. began only recently, when the wholesaler in late December announced its intentions to negotiate for its purchase.

The proposal has irritated city officials because it appears the agency did not decide to pursue the purchase until finding out about the city's ongoing discussions with the company.

Castaic Lake Water Agency President Bill Cooper, however, said the city had made no formal announcement about its interest in buying the water company when the agency decided to begin negotiations, as well.

At stake is more than just running a retail water company. The valley's water supply has become a critical issue in the debate over development of the community.

For example, Newhall Ranch, The Newhall Land and Farming Company's expansive 21,000-home development, cannot be built until the company can show that water is available for the project.

If the wholesaler were to purchase the Santa Clarita Water Co., a majority of the valley's customers would be served by the agency and the Valencia Water Co., which is a subsidiary of Newhall Land. The other two water districts - Newhall County Water District and Los Angeles County Waterworks - are public and serve only a small remainder of customers.

``We need a balance of power with water,'' Councilwoman Jan Heidt said. ``We want to make sure that everyone in Santa Clarita has water coming out of their faucet. When it's all in one hand, that water can be sent anywhere.''

If the council approves the staff-recommended action on Tuesday, the city would pay $150,000 for a study to be conducted by Bookman Edmonston Engineering.

A city study of the purchase was completed in September, and the council discussed the matter in closed session in November, City Manager George Caravalho said.

A short time later, the wholesaler announced its intentions to begin negotiations with the water company.

The California Water Code Appendix, which was drafted when the Castaic Lake Water Agency was created, is quoted in a city memo and clearly states that the wholesaler cannot operate a retail company.

But Cooper countered that two separate state water codes supercede the guideline being quoted by the city. The second code allows a public agency to purchase a private agency as long as the water is intended for its customers, Cooper said.