The Settlement

The BVES general rate case (GRC) application proposed a $6.8 million increase in base rates representing a 22.7% increase in rates for 2009, and increases of $878,000, $391,000, and $315,000 in 2010, 2011, and 2012, respectively. DRA recommended a $4.4 million increase in base rates for 2009 and subsequent increases (or decreases) of $469,000, ($41,000) and ($73,000) in 2010, 2011 and 2012, respectively. The Settling Parties agreed to incremental revenue increases by changes in the base rates in the amount of $5,500,000 (18%) for 2009; $515,000

(0.96%) for 2010; $209,000 (0.83%) for 2011; and $168,000 (0.35%) for 2012.⁶ After taking into account the phase-in plan, the Settling Parties agreed to revenue requirements for 2009-2012 for BVES of: $17,712,800, $18,292,400, $18,841,200, and $19,449,600, respectively.

The Settling Parties also agreed that the baseline allowance for full-time residential customers taking service on tariff Schedule D should be increased from 270 kilowatt-hour (kWh) per month to 320 kWh per month. To implement this increase in the baseline allowance and ensure revenue neutrality, the Settling Parties agreed to increase the rates of the residential customer class under the Power Purchase Adjustment Clause by approximately $400,000.

In addition to reducing the overall rate increase, adopting a rate mitigation plan for the first year, and increasing the baseline allowance from 270 kWh to 320 kWh per month, the Settling Parties have taken the following steps to reduce the financial impact of the change in rates on BVES' customers: 1) Creation of an Energy Efficiency program to help customers reduce their energy usage; 2) Implementation of monthly billing to allow customers to better manage their bills; 3) Increasing the California Alternative Rates for Energy and Low Income Energy Efficiency eligibility requirements from 175% of the federal poverty level to 200%; and 4) Increasing Automated Meter Reading to facilitate timely and more accurate meter reading. The Settling Parties argue that in addition to minimizing rate shock for customers, reducing the return on equity from 11.7% to 10.5%, reducing the Administrative and General Expenses additions, reducing the plant additions, and accepting a lower cost of capital, take into account the current state of California's economy. (Settlement at 19-20.)

⁶ The parties agreed that $689,500 of the 2009 incremental revenue produced by changes in the Base Rates of BVES would be deferred until 2010. As used here, the term "rate" refers to the System Average Rate (SAR) in $/kWh obtained by dividing total base rate revenue by sales. The incremental increase in the SAR from one year to another, times the respective sales in kWh produces the average revenue referred to here.