STATE OF CALIFORNIA ARNOLD SCHWARZENEGGER, Governor

PUBLIC UTILITIES COMMISSION

505 VAN NESS AVENUE

SAN FRANCISCO, CA 94102-3298

November 16, 2010 Draft Resolution W-4856 Agenda ID #9993

TO: All Interested Parties

Enclosed is draft Resolution W-4856 of the Division of Water and Audits. It will be on the Commission's December 16, 2010 agenda. The Commission may act then act on this resolution or it may postpone action until later.

When the Commission acts on a draft resolution, it may adopt all or part of it as written, amend, modify or set it aside and prepare a different resolution. Only when the Commission acts does the resolution become binding on the parties.

This draft resolution proposes adopting a new rate structure for Lake Alpine Water Company. The rate structure that would be adopted by this resolution differs from the proposed rate structure about which all customers were previously given individual notice. Associations representing most of the customers were notified of this revised proposal. However, several customers were not notified, through their associations, of the currently proposed rate structure. The key difference is that under the currently proposed rate structure the service charge would vary for non-residential customers based on the size of their meters. This resolution is being mailed to all customers who were not represented by an association at the time the associations considered this proposal. Any customers who wish to object to the current proposal may do so by submitting comments in accordance with the instructions contained in this letter.

Interested persons may submit comments on this draft resolution. An original and two copies of the comments, with a certificate of service, should be submitted to:

Division of Water and Audits, Third Floor

Attention: Peter Liu

California Public Utilities Commission

505 Van Ness Avenue

San Francisco, CA 94102

Parties may submit comments on or before December 6, 2010. The date of submission is the date the comments are received by the Division of Water and Audits. Parties must serve a copy of their comments on the utility on the same date that the comments are submitted to the Division of Water and Audits.

Comments shall be limited to five pages in length.

Persons interested in obtaining copies of comments submitted by others may write to Peter Liu, email him at ptl@cpuc.ca.gov, or telephone him at (415) 703-1390.

/s/RAMI S. KAHLON

Rami S. Kahlon, Director

Division of Water and Audits

Enclosures: Draft Resolution W-4856

Certificate of Service

Service List

WATER/RSK/PTL/jlj DRAFT AGENDA ITEM #9993

PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

DIVISION OF WATER AND AUDITS RESOLUTION NO. W-4856

Water and Sewer Advisory Branch December 16, 2010

RESOLUTION

(RES. W-4856), LAKE ALPINE WATER COMPANY (LAWC). ORDER AUTHORIZING A REVISION TO THE RATE STRUCTURE OF RES. W-4809.

SUMMARY

By Advice Letter (AL) 92 filed on August 19, 2010, LAWC requested a revision to the current rate structure to allow LAWC to collect the adopted revenue requirements authorized in Res. W-4809.

This Resolution grants a revision to the rate structure which will not result in revenue requirements greater than those authorized in Res. W-4809.

BACKGROUND

LAWC currently provides service to approximately 303 metered and 180 residential flat rate customers in a service area located about three miles west of Lake Alpine adjacent to State Highway 4, Alpine County. The 180 residential flat rate customers represent customers who live in condominiums, whose condominiums can't be metered due to the buildings' plumbing structure.

By AL 90 filed on May 3, 2010, LAWC requested a revision to the rate structure to eliminate flat rate service. Under this proposal, the service charge would have been the same for all customers (i.e., both those who are currently metered and those who are currently flat rate) regardless of type of user or meter size. The same quantity rate would apply to all customers. Because the amount of water used by each individual condominium cannot be determined, the quantity charge for the owner of each condominium would be determined by dividing the total quantity used by that condominium homeowners association divided by the number of condominium units (and multiplying that quantity by the quantity rate).

A public meeting was held on July 15, 2010. Numerous complaints about the proposed rate structure were received and different rate structures were also suggested. LAWC

agreed to withdraw AL 90 and to file a new AL with a proposed rate structure that is supported by the majority of customers. LAWC withdrew AL 90 on July 19, 2010.

NOTICE, PROTESTS, AND PUBLIC MEETING

On June 25, 2010, a notice of the rate structure proposed in AL 90 and of an informal public meeting on July 15 was mailed to each customer. On June 25, 2010 copies of AL 90 were mailed to LAWC's GO 96-B service list.

An informal public meeting was held in Bear Valley on July 15, 2010. Numerous complaints were received and LAWC agreed to withdraw AL 90 and to file a new AL with a proposed rate structure that is supported by the majority of customers.

The new AL (AL 92) was filed on August 19, 2010, and on that same date notice of the revised rate structure proposal was mailed for comment to associations that represent the vast majority of the customers. The boards of all of these associations (representing 471 members) voted to support the revised rate structure. One email was received from a member of one of the associations supporting a different rate structure. 7 new customers were not yet members of the associations at the time their boards voted and 4 customers are commercial customers not represented by any association.

By failing to serve AL 92 on its GO 96-B service list, and failing to provide individual customer notice of the revised rate structure contained in AL 92, LAWC did not comply with the service and notice requirements of GO 96-B.¹ However, because all customers did receive notice of the original meeting and because associations representing the vast majority of the customers received notice of the revised rate proposal, and the boards of those associations have voted in favor of it, we will waive LAWC's non-compliance in this particular instance, but will serve a copy of the draft resolution on those customers not represented by an association at the time of the associations' votes, to allow those customers a chance to comment on the current proposal.²

DISCUSSION

By AL 92 filed on August 19, 2010, LAWC proposed to convert all connections to metered service rates, eliminate the flat rate service, and adjust the Safe Drinking Water State Revolving Fund Loan surcharge³ to allow LAWC to collect the adopted revenue requirements authorized in Res. W-4809.

AL 92 eliminates the flat residential rate for condos and treats all individual condo units as a 5/8-inch connection just like the single-family homes. All other connections have a service charge based on meter size. The proposed rate structure is supported by associations representing 471 or 98% of customers. Letters and emails were received from the following associations/organizations - BV Condo Management Company, Alpine Condo Management, Creekside Condo Association 2B, Bear Valley Business Association, Alpine County CSA #1, Alpine County, and Bear Valley Residents, Inc. representing the 471 customers. LAWC has a total of 483 customers. One customer prefers a different rate structure and the remaining 11 customers were not at the time represented by an association.

The Division of Water & Audits (Division) made an independent analysis of LAWC's proposed rate structure. The Division concludes that the proposal contained in AL 92 should result in collection of LAWC's authorized revenue requirement. Furthermore, and in light of the support of the proposed structure by associations representing the

vast majority of customers, the Division finds the rates attached to AL 92 are reasonable and recommends approval.

COMPLIANCE

LAWC has no outstanding compliance orders.

COMMENTS

Public Utilities Code Section 311(g)(1) generally requires that resolutions must be served on all parties and be subject to at least 30 days public review and comment prior to a vote of the Commission. Accordingly, on November 16, 2010, the draft resolution was mailed for comment to all persons and entities who informed the Division of their views on the rate structure proposed in AL 92 and to the 11 customers who were not represented by an association at the time the association boards voted in favor of the proposal contained in AL 92.

FINDINGS

1. LAWC currently provides service to approximately 303 metered and 180 residential flat rate customers in a service area located about three miles west of Lake Alpine adjacent to State Highway 4, Alpine County.

2. By AL 90 filed on May 3, 2010, LAWC requested a revision to the rate structure to eliminate flat rate service, with the same service charge for every customer, regardless of the type of user or the size of. meter. Because the amount of water used by each individual condominium cannot be determined, the quantity charge for the owner of each condominium would be determined by dividing the total quantity used by that condominium homeowners association divided by the number of condominium units (and multiplying that quantity by the quantity rate).

3. On June 25, 2010, a notice of the proposed rate structure was mailed to each custom and the advice letter was served on LAWC's GO 96-B service list.

4. A public meeting was held on July 15, 2010 and per customers' request, LAWC agreed to withdraw AL 90 and to file a new AL with a proposed rate structure that is supported by the majority of customers.

5. LAWC withdrew AL 90 on July 19, 2010.

6. By AL 92 filed on August 19, 2010, LAWC proposed to convert all connections to metered service rates, eliminate the flat rate service, and adjust the Safe Drinking Water State Revolving Fund Loan surcharge to allow LAWC to collect the adopted revenue requirements that authorized in Resolution W-4809.

7. AL 92 eliminates the flat residential rate for condominiums and treats each individual condominium unit as a 5/8-inch connection, just like a single-family home, for setting the service charge. All other connections have a service charge based on meter size. The method for determining the quantity attributable to each condominium remains unchanged from AL 90.

8. LAWC did not properly serve AL 92, nor did it provide individual notice to each customer of the proposal in AL 92, as required by General Order 96-B. LAWC did notify associations representing the vast majority of the customers of the proposal contained in AL 92.

9. Letters and emails were received from the following associations/organizations - BV Condo Management Company, Alpine Condo Management, Creekside Condo Association 2B, Bear Valley Business Association, Alpine County CSA #1, Alpine County, and Bear Valley Residents, Inc. representing 471 customers or 98% of the customers. These associations all supported the proposal contained in AL 92.

10. One email was received supporting a different rate structure, instead.

11. General Rule 1.3 of General Order 96-B permits a wavier of rules contained in the General Order, and notes the goal of securing just, speedy, and inexpensive handling of informal matters.

12. At present, under the current structure, LAWC is in fact not recovering its revenue requirement.

13. In order to remedy this problem expeditiously, it is reasonable in this particular situation for the Commission to waive the service and notice requirements applicable to AL 92 that LAWC did not comply with, and instead provide individual notice, by means of the draft resolution, to those customers who were not represented by an association at the time the associations voted in favor of the AL 92's rate structure, to allow those customers a chance to comment on the proposal contained in AL 92.

14. Division of Water & Audits concludes that the proposal contained in AL 92 should result in collection of LAWC's authorized revenue requirement.

15. The rates attached to AL 92 are reasonable and should be adopted.

THEREFORE IT IS ORDERED THAT:

1. The rate schedules Nos. 1A, Annual Metered Service, and 1B, Safe Drinking Water State Revolving Fund Loan General Metered Service, attached to Advice Letter 92 are adopted.

2. Lake Alpine Water Company is authorized to file a supplemental advice letter incorporating the adopted rate schedules and concurrently cancels its presently effective Schedule Nos. 1A, Annual Metered Service; 1B, Safe Drinking Water State Revolving Fund Loan General Metered Service; 2AR, Annual Residential Flat Rate Service; and 3AR, Safe Drinking Water State Revolving Fund Loan Residential Flat Rate Service. The effective date of the revised rate schedules shall be five days after the date of filing.

3. This resolution is effective today.

I certify that the foregoing resolution was duly introduced, passed, and adopted at a conference of the Public Utilities Commission of the State of California held on December 16, 2010; the following Commissioners voting favorably thereon:

PAUL CLANON

Executive Director

CERTIFICATE OF SERVICE

I certify that I have by mail this day served a true copy of Draft Resolution No. W-4856 on all persons shown on the attached list.

Dated November 16, 2010, at San Francisco, California.

NOTICE

Parties should notify the Division of Water and Audits, Third Floor, California Public Utilities Commission, 505 Van Ness Avenue, San Francisco, CA 94102, of any change of address to ensure that they continue to receive documents. You must indicate the Resolution number on which your name appears.

SERVICE LIST

DRAFT RESOLUTION W-4856

Eric Jung PO Box 5250 BEAR VALLEY CA 95223		Joel Barnett PO Box 5250 BEAR VALLEY CA 95223		David Johnston PO Box 5242 BEAR VALLEY CA 95223
Michelle Collay 1115 Glendora Avenue OAKLAND CA 94602		Jack Shuck 6368 Melville Drive OAKLAND CA 94611		CSA, Alpine PO Box 5383 BEAR VALLEY CA 95223
County of Alpine PO Box 387 MARKLEEVILLE CA 96120		Bear Valley Cross Country PO Box 5120 BEAR VALLEY CA 95223		Bear Valley School 43 Hawkside Drive MARKLEEVILLE CA 96120
William Bort 48310 Paso Tiempo Lane LA QUINTA CA 92253		William Bowie PO Box 5337 BEAR VALLEY CA 95223		Scott Brodek PO Box 5224 BEAR VALLEY CA 95223
Michel Budowski 2001 Drake Drive OAKLAND CA 94611		Bonnie Burdett 1080 Autumn Lane LOS ALTOS CA 94024		Robert Burns 1667 Springer Road MOUNTAIN VIEW CA 94040
BV Alpine Ski Company PO Box 5038 BEAR VALLEY CA 95223		Joseph Rihn 6678 Harrisburg Place STOCKTON CA 95207		Gustav Carlson 381 Valley Vista Drive TRACY CA 95376
Gary & Geri Carson-Hull PO Box 5026 BEAR VALLEY CA 95223		James & Roberta Clarke 14122 Seven Acres Lane LOS ALTOS HILLS CA 94022		Community Center 50 Diamond Valley Road MARKLEEVILLE CA 96120

Jonathan Cross 19984 Wellington Court SARATOGA CA 95070		Michael Denicola PO Box 5088 BEAR VALLEY CA 95223		Edward Diekmann 14901 N. Pennsylvania Ave., #10B OKLAHOMA CITY OK 73134
Edna Downie 1105 Elmsford Drive CUPERTINO CA 95014		John Dralla 242 Verano Drive LOS ALTOS HILLS CA 94022		John Ennals 10481 Florence Drive CUPERTINO CA 95014
Ken Enzi PO Box 5102 BEAR VALLEY CA 95223		Fire & Sheriff 50 Diamond Valley Road MARKLEEVILLE CA 96120		Michael Goddard 278 - 29th Avenue SAN FRANCISCO CA 94121
Herbert Goodman 1300 Cabrillo Street SAN FRANCISCO CA 94118		John Goodrich 13625 Hill Way LOS ALTOS HILLS CA 94022		Jeff Gouveia PO Box 5407 BEAR VALLEY CA 95223
Beverly Hess 838 Virginia Avenue LODI CA 95242		Johan Hultin 850 Powell St., #703 SAN FRANCISCO CA 94108		John Hymes 4524 Winding River Circle STOCKTON CA 95219
James & Christine Jenkins 601 Swain Avenue SEBASTOPOL CA 95472		Daniella Karo 6578 Stanton Court PLEASANTON CA 94566		Stephen Kaylor 1153 Cherry Avenue SAN JOSE CA 95125
Brandon and Trisha Kett 39 Cutter Drive WATSONVILLE CA 95076		Dick Klingenberg PO Box 5268 BEAR VALLEY CA 95223		John Korn PO Box 5147 BEAR VALLEY CA 95223
Jim & Dory Kranz 2020 Broderick Street SAN FRANCISCO CA 94115		Robert Kuechler 1516 Cherry Valley Drive SAN JOSE CA 95125-4429		Steven & Montana Lamarre 2661 Barbara Way TURLOCK CA 95380

Richard LeBlanc 1972 Desert Circle 4 WALNUT CREEK CA 94598		Richard Lyon 3641 S. Merrimac Circle STOCKTON CA 95219		Lance Machovsky PO Box 5183 BEAR VALLEY CA 95223
Shelley Matthews 9138 River Look Lane FAIR OAKS CA 95628		Ronald Murphy PO Box 5408 BEAR VALLEY CA 95223		Jearl Nelson PO Box 5133 BEAR VALLEY CA 95223
Jan Parelius 367 Pimlico Drive WALNUT CREEK CA 94597		Greg & Jolee Peterson PO Box 5264 BEAR VALLEY CA 95223		Dave & Ann Radford PO Box 502 ALTAVILLE CA 95221
Donald Ruch 17688 Rolling Oaks Drive JAMESTOWN CA 95327-9222		Gary & Pamela Rudy 5814 Pilar Court SAN JOSE CA 95120		Eric Seamon 6470 Upper Lake Circle WESTERVILLE OH 43082
Morley Singer 177 Belgrave Avenue SAN FRANCISCO CA 94117		David Smith PO Box 475 GRATON CA 95444		Kathy Snyder PO Box 5058 BEAR VALLEY CA 95223
Gerald Solberg 4735 St. Andrews Drive STOCKTON CA 95219		Tom Stillman 11141 E. Childs Avenue LA GRAND CA 95333		William & Cindy Strickland 19800 Skyline Boulevard LOS GATOS CA 95033
Sundowner Condo PO Box 5010 BEAR VALLEY CA 95223		Charles Tyler 831 Cathedral Drive SUNNYVALE CA 94087		Irene Wagner 2230 Homestead Road LOS ALTOS CA 94024
Martin & Jill Wegenstein 228 Lexington Drive MENLO PARK CA 94025		John & Kathleen Whiting 1459 N. San Pablo Avenue FRESNO CA 93728		Terry Woodrow PO Box 5194 BEAR VALLEY CA 95223

ATT BVLYCA 11 UE 197 PO Box 182552 COLUMBUS OH 43218-2552		PG&E Substation #302034 77 Beale Street Rm 2B19 SAN FRANCISCO CA 94105		Bear Valley Homeowners Assn. PO Box 5208 BEAR VALLEY CA 95223
Alpine County Unified School District Bear Valley School 43 Hawkside Drive MARKLEEVILLE CA 96120		Steve Harrick 390 Cotton Street MENLO PARK CA 94025		John and Amy Boyle- Unit 302 541 Fanita Way MENLO PARK CA 94025
Julie McDonnell - 303 3584 Milbridge Court DUBLIN CA 94568		Ivonne Felix - 307 15333 Kenney Road LOS GATOS CA 95032		Cassidy O'Hara-308 1123 Cherry Avenue SAN JOSE CA 95125
KBK Properties - 311 44 Palm Court MENLO PARK CA 94025		Robert Scheffel Creekside Condo, #82 BEAR VALLEY CA 95223		C. Bruce Orvis, President Lake Alpine Water Co. Star Route Box 370 FARMINGTON CA 95230

¹ Regarding service of advice letters, see General Rules 4.3 and 7.2 and Water Industry Rule 4.1. Regarding individual notice to customers, see General Rule 4.2 and Water Industry Rule 3.1.

² General Rule 1.3 of General Order 96-B permits a wavier or variance from the rules under specified circumstances. More specifically, it provides, pertinent part: "The General Rules and Industry Rules shall be liberally construed to secure just, speedy, and inexpensive handling of informal matters, as set forth in this General Order. The Commission in a specific instance may authorize an exception to the operation of this General Order where appropriate.

At present, under the current structure, LAWC is in fact not recovering its revenue requirement. In order to remedy this problem expeditiously, rather than requiring complete compliance with the service and notice requirements of the General Order, it is reasonable to provide individual notice, by means of the draft resolution, to those customers not then represented by the associations that did receive notice (which associations have voted in favor of the current proposal)."

³ The Safe Drinking Water State Revolving Fund Loan is repaid by a surcharge on the service charge. Accordingly, a change in the service charges requires a change in this surcharge to ensure that the proper amount is collected.