4. Competitive Bidding Rule

The Competitive Bidding Rule set forth in Resolution (Res.) F-616 dated October 1, 1986 exempts bond issues of $20,000,000 or less from the competitive bidding requirement. CalWater states that it will continue, as ordered in
D.09-03-038, to limit direct purchases of its bonds to issuances of $20 million of debt per purchaser in a calendar year.

CalWater requests that it be exempted from the Competitive Bidding Rule with respect to its debt securities, and states that its situation is similar to that described by Golden State Water Company (GSWC) in A.06-10-029. In that proceeding, the Commission, by D.07-02-014, granted a full exemption from the Competitive Bidding Rule. Like GSWC, CalWater is a relatively small and infrequent participant in the capital and debt markets, having last issued equity in 2006 and having last issued debt in 2009 and 2006, and like GSWC, CalWater states that its debt offerings require substantial marketing efforts to potential investors. Consequently, in a competitive bidding process, bidding underwriters would be unable to obtain adequate market intelligence on CalWater and the resulting bids would be less cost-effective than bond purchases through negotiated offerings.

The Commission has granted Competitive Bidding Rule exemptions to CalWater and similar water utilities in the past for issues of debt and equity.⁸ In addition, due to its size and the fact that CalWater is a relatively small infrequent participant in the capital and debt markets, use of competitive bidding for bonds is not viable. Therefore, CalWater should be granted the requested exemption from the Competitive Bidding Rule. Nevertheless, in the event that CalWater finds it necessary to go beyond the $20,000,000 Competitive Bidding Rule threshold for purchases by any one purchaser in a calendar year, such public offerings of fixed interest rate debentures and First Mortgage Bonds in the principal amount of over $20,000,000 to $350,000,000 must comply with
Res. F-616.

⁸ See, for example, D.09-03-038 (A.09-01-012) and D.06-07-035 (A.06-05-005).