14. Assignment of Proceeding
John A. Bohn is the assigned Commissioner and Seaneen M. Wilson is the assigned ALJ in this proceeding.
1. Based on Cal Am's forecast of sources and uses, the forecast of funds needed by Cal Am over the period 2010-2012 is $395 million. Of this need, $108.7 million will be provided from short-term debt, $117 million equity from the parent, $84.3 million from cash from operations, and $85 million from new Debt Securities.
2. Pursuant to the Agreement, Capital Corp. provides financial services to Cal Am.
3. Cal Am has no outstanding financing authority.
4. Resolution F-616 requires utilities to issue debt using competitive bids and provides for exemptions from the Competitive Bidding Rule.
5. Cal Am is required to follow affiliate transaction rules authorized in D.00-01-067 and D.02-12-068.
6. The Commission does not, by this decision, determine that Cal Am's construction budget, cash requirements forecast, and capital structure are necessary or reasonable for ratemaking purposes. These issues are normally reviewed and authorized in general rate case or cost of capital proceedings.
7. The Commission has opened R.09-04-012 on its own motion to, in part, develop standardized affiliate transaction rules for water and sewer utilities.
8. GO 24-B requires utilities to submit a monthly report to the Commission that contains, among other things: (a) the amount of debt issued by the utility during the previous month; (b) the total amount of debt outstanding at the end of the prior month; (c) the purposes for which the utility expended the proceeds realized from the issuance of debt during the prior month; and (d) a monthly statement of the separate bank account that the utility is required to maintain for all receipts and disbursements of money obtained from the issuance of debt.
9. The Commission has routinely authorized utilities to report on a quarterly basis the information required by GO 24-B in order to reduce the utilities' administrative and compliance costs.
10. Cal Am's request for financing authority is made pursuant to §§ 701.5, 816, 817, 818, 824, and 851.
11. This application does not propose, and today's Decision does not authorize, any specific new construction or changes in use of existing assets and facilities.
12. Notice of A.10-03-024 appeared in the Commission's Daily Calendar on April 1, 2010.
13. In Resolution ALJ 176-3251, the Commission preliminarily determined that A.10-03-024 should be categorized as ratesetting and that a hearing would not be necessary.
14. Cal Am has no bond rating.
15. Cal Am should be granted authority to issue new Debt Securities of $85 million for terms of no more than 30 years.
16. Cal Am should be granted authority to issue new Debt Securities on an unsecured basis through Capital Corp. pursuant to the Agreement, dated June 15, 2000.
17. Cal Am should be granted authority to issue tax-exempt financing through Capital Corp. or through a governmental entity, on either a secured or an unsecured basis. This authority should be used whenever Cal Am's facilities qualify for tax-exempt financing under federal or state law and result in lower cost financing.
18. Cal Am should be granted authority to sell, lease, assign, mortgage, or otherwise dispose of or encumber its utility property as part of issuing secured tax-exempt financing, consistent with §§ 701.5 and 851.
19. Cal Am should be granted an exemption from the Competitive Bidding Rule.
20. Cal Am should continue to follow the affiliate transaction rules authorized in D.02-12-068 and D.00-01-067 in all transactions with Capital Corp., unless and until they are replaced by new affiliate transaction rules applicable to Cal Am.
21. A granting of financial authority to a utility does not obligate the Commission to approve any capital projects.
22. Review of the reasonableness of capital projects occurs as needed through the regulatory process applicable to each capital project.
23. Approval of this financing request does not prejudge any of Cal Am's forecasted capital projects for the period 2010 through 2012.
24. The authority granted by this decision should not become effective until Cal Am has paid the fees prescribed by §§ 1904(b) and 1904.1. This decision should be effective, once Cal Am pays its fees pursuant to §§ 1904(b) and 1904.1, so that Cal Am may issue the securities authorized herein as soon as possible.
25. Pursuant to §§ 1904(b) and 1904.1, Cal Am should pay a fee on $85 million of new Debt Securities of $48,500 to the Commission's Fiscal Office.
26. If the Commission authorizes a new set of affiliate transaction rules in R.09-04-012, and requires Class A water utilities to comply with them, Cal Am should note such new rules in its next request for new financing, and state how these new rules would affect its issuance of debt or equity through an affiliate.
27. Cal Am should be authorized to report on a quarterly basis the information required by GO 24-B.
28. Cal Am should not use the proceeds from the debt authorized by this decision to fund its capital projects until Cal Am has obtained any required Commission approvals for the projects, including any required environmental review under CEQA.
29. The financing authority granted in this decision should have no expiration date.
30. Cal Am's request is in compliance with §§ 701.5, 816, 817, 818, 824, and 851.
31. Resolution F-616 specifies that the Competitive Bidding Rule is only applicable to utilities with bond ratings of "A" or higher.
32. It is Cal Am's responsibility to abide by and comply with any applicable environmental regulations for any capital improvement undertaken using the debt authorized herein.
IT IS ORDERED that:
33. California-American Water Company is granted authority to issue new Debt Securities in the amount of $85 million for terms of no more than 30 years.
34. California-American Water Company is granted authority to issue new Debt Securities in compliance with Pub. Util. Code §§ 701.5, 816, 817, 818, 824, and 851.
35. California-American Water Company is granted authority to issue new Debt Securities on an unsecured basis through American Water Capital Corporation pursuant to their Financial Services Agreement dated June 15, 2000.
36. California-American Water Company is granted authority to issue tax-exempt financing through American Water Capital Corporation or through a governmental entity, on either a secured or an unsecured basis. This authority must only be used whenever California-American Water Company's facilities qualify for tax-exempt financing under federal or state law. In this structured financing, California-American Water Company may unconditionally guarantee or otherwise secure the issuer's obligations to its debt holders. As a means of securing the issuer's obligations, California-American Water Company may issue and pledge or deliver bonds in an equal principal amount to the issuer or a trustee.
37. California-American Water Company is granted authority to sell, lease, assign, mortgage, or otherwise dispose of or encumber its utility property as part of issuing secured tax-exempt financing through American Water Capital Corporation or a governmental entity, consistent with Pub. Util. Code §§ 701.5 and 851.
38. Pursuant to Resolution F-616, California-American Water Company is granted an exemption from the Competitive Bidding Rule for all Debt Securities issued pursuant to the authority granted herein.
39. California-American Water Company must continue to follow the affiliate transaction rules adopted in Decision (D.) 02-12-068 and D.00-01-067 in all transactions with American Water Capital Corporation unless otherwise directed by the Commission.
40. If the Commission adopts a new set of affiliate transaction rules in Rulemaking 09-04-012, and requires Class A water utilities to comply with them, California-American Water Company must note such new rules in its next request for new financing, and state how these new rules would affect its issuance of debt or equity through an affiliate.
41. California-American Water Company must remit a check for $48,500, as required by Pub. Util. Code §§ 1904(b) and 1904.1, to the Commission's Fiscal Office at 505 Van Ness Avenue, Room 3000, San Francisco, CA 94102. The number of this decision must appear on the face of the check. The authority granted by this decision is effective once California-American Water Company has paid the fees prescribed by Pub. Util. Code §§ 1904(b) and 1904.1.
42. California-American Water Company must report on a quarterly basis all the information required by General Order 24-B with respect to debt issued pursuant to this Order. However, California-American Water Company must report this information on a monthly basis if directed to do so by the Commission staff.
43. California-American Water Company must comply with all applicable environmental laws and regulations when planning and implementing any capital expenditure programs financed, in whole or in part, with the proceeds from the debt authorized by this decision.
44. California-American Water Company must not use the proceeds from the debt authorized by this decision to fund its capital projects until California-American Water Company has obtained all required Commission approvals for the projects, including all required environmental review under California Environmental Quality Act.
45. This decision does not authorize any capital expenditures or construction project.
46. The financing authority granted to California-American Water Company in this decision has no expiration date.
47. Application 10-03-024 is closed.
This order is effective today.
Dated July 8, 2010, at San Francisco, California.
MICHAEL R. PEEVEY
President
DIAN M. GRUENEICH
JOHN A. BOHN
TIMOTHY ALAN SIMON
NANCY E. RYAN
Commissioners
