7. Comments on Proposed Decision

The proposed decision of the ALJ in this matter was mailed to the parties in accordance with Section 311 of the Public Utilities Code and comments were allowed under Rule 14.3 of the Commission's Rules of Practice and Procedure. No comments were filed.

1. California American issued debt in November 2008 at a cost substantially higher than was forecast in its May 1, 2008 cost of capital application.

2. The Commission first considered a temporary interest rate balancing account in a proposed decision mailed for comment on December 18, 2008. Parties had no prior knowledge of the Commission's proposal prior to the public comment period for the proposed decision.

3. The purpose of the temporary interest rate balancing account adopted in D.09-05-019 was to offset forecast error risks to stockholders and ratepayers caused by the late 2008 and early 2009 financial markets' dislocation.

4. Recording the $88,958 on a monthly basis in the temporary interest rate balancing account will compensate California American for the difference between its forecast of 6.95% and the actual 10% cost for $35,000,000 in long term debt issued on November 26, 2008.

5. The accrual of any difference will stop whenever there is an adjustment triggered by the Water Cost of Capital Adjustment Mechanism adopted in
D.09-07-051 for either 2010 or 2011, or when a new cost of capital is adopted by the Commission.

1. The Commission had the authority to adopt the temporary interest rate balancing account in D.09-05-019 to protect ratepayers and shareholders from unpredictable swings in interest rate costs following the late 2008 and early 2009 financial markets' upheaval.

2. The Commission has the authority to consider an untimely filing that addresses fairness issues.

3. The Commission has the authority to authorize California American to prospectively record the $88,958 monthly difference between the forecast interest costs and the actual interest costs for the November 26, 2008 issuance of $35,000,000 in debt in the temporary interest rate balancing account only after the effective of this decision and continuing until the cost of capital is changed in a subsequent proceeding or by the Water Cost of Capital Adjustment Mechanism adopted in D.09-07-051.

4. This order should be effective immediately.

5. This proceeding should be closed.

ORDER

IT IS ORDERED that:

1. California American Water Company is authorized to prospectively record in its temporary interest rate balancing account, on a monthly basis, the $88,958 difference between the forecast interest rate and the actual interest rate on $35,000,000 of debt issued on November 26, 2008. This authority begins on the effective date of this decision and terminates upon either the adoption of a new cost of capital for California American Water Company or any adjustment to cost of capital pursuant to the Water Cost of Capital Adjustment Mechanism adopted in Decision 09-07-051. California American Water Company must file a Tier 1 advice letter to modify the description of the temporary interest rate balancing account in its preliminary statement, consistent with this order.

2. Application (A.) 08-05-002, A.08-05-003, and A.08-05-004 are closed.

This order is effective today.

Dated November 20, 2009, at San Francisco, California.

Previous PageTop Of PageGo To First Page