WATER RATE HIKE GIVEN TENTATIVE OK : JUDGE TO RULE ON 7% BOOST.

Byline: Amy Collins Daily News Staff Writer

The Santa Clarita Water Co. can raise rates 7.1 percent over four years under a tentative agreement sent Tuesday to an administrative judge.

The 20,000 customers of the Santa Clarita Valley's largest water retailer would see the monthly bill for an average homeowner rise about 27 cents to $27.55, according to the company's vice president and chief financial officer, John Garon.

``It's reasonable. It's a slight increase. It's appropriate. We could have fought for more, but we were happy with the status quo,'' said William Manetta, the president of the Santa Clarita Water Co.

Judge Orville Wright will make a recommendation on the agreement, which then will go to the California Public Utilities Commission board in August or September for a final decision.

The agreement calls for the water company to drop its rates by 8.5 percent this year and raise its rates 2.7 percent in 1998, 1.7 percent in 1999 and 1.7 percent in 2000. But it also allows the company to add a monthly surcharge of about $3 a month over a three-year period to cover costs the private company incurred through earthquake repairs and increased power and water costs. It will make up for $2.7 million of those charges; the company had sought $9.2 million.

The surcharge more than cancels out the 8.5 percent decrease, making rates actually rise 1.3 percent the first year, Manetta said.

But Garon said the water company and the PUC differ on which customers should bear the brunt of the increase. Santa Clarita Water Co. wants the smaller users to get just a 1 percent increase, while passing on a 1.9 percent increase for the large-meter users, which typically serve industrial users or mobile-home parks.

That issue will be resolved by the judge and the PUC board.

Kyle DeVine, a spokeswoman for the PUC, said the settlement was agreed to by the PUC's Office of Ratepayer Advocates and the water agency in a hearing held Wednesday and Thursday in downtown Los Angeles.

The process was begun two years ago when a group of ratepayers sued the company, charging that rates should be lower for customers who were receiving groundwater instead of the more expensive kind carried here from the State Water Project.

``What our suit did was inspire Mr. Manetta to go for a rate raise,'' said customer Vera Johnson.

The water company had proposed nearly doubling its rates over three years, but the Office of Ratepayer Advocates had recommended that the company cut its rates by 20 percent.

When the Santa Clarita Water Co. agreed in December to limit the increase to 6 percent, it also agreed to drop from its payroll four absentee employees who were being paid a total of $170,000 a year. That agreement was further refined in the past month and in the hearing this week.

Johnson said her group will meet Sunday to formulate its response to the proposal. Opponents have 30 days to submit written comments to Wright.

The water company serves homes and businesses in Saugus and Canyon Country. It has not raised its rates since August 1982. When the 36-month surcharge expires, the water company will begin a new round, Manetta said.

``Then we'll go back to the commission in three years for another increase,'' he said.

Manetta said the costs of this two-year battle have mounted to about $60,000, but he said that amount will be absorbed in the rate increases.