14. Assignment of Proceeding

John A. Bohn is the assigned Commissioner, and Bruce DeBerry is the assigned ALJ in this proceeding.

1. CalWater, a California corporation, is a water utility subject to the jurisdiction of this Commission.

2. CalWater needs external funds for the purposes set forth in the Application.

3. The money, property, or labor to be procured or paid for by the proposed issue of debt and equity is reasonably required for the purposes specified in the Application.

4. CalWater requests authorization to issue debt and equity securities of up to $350 million.

5. CalWater's Application includes all of the necessary financing information required by the Rules.

6. CalWater has entered into an unsecured Credit Agreement having a three-year term and providing a revolving line of credit for short-term financing to meet cash requirements and facilitate issuance of long-term debt and equity.

7. CalWater's Credit Agreement contains a provision requiring the line of credit to be fully paid off at least 30 consecutive days of every 12-month period.

8. This decision does not address the reasonableness of CalWater's capital structure, cost of money, or fees resulting from the issuance of securities or indebtedness. These issues are normally subject to review in cost of capital or GRC proceedings.

9. The decision does not address the reasonableness of CalWater's construction budget or cash requirements. These issues are normally subject to review in cost of capital or GRC proceedings.

10. No responses to the Application were received.

11. 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.

12. CalWater may find it necessary to exceed the $20 million threshold for exemption from competitive bidding.

13. Whenever the Commission authorizes a utility to issue debt, the Commission is required to charge and collect a fee in accordance with
Section 1904(b).

14. In Resolution ALJ 176-3247, dated January 21, 2010, the Commission preliminarily categorized this application as ratesetting, and preliminarily determined that hearings were not necessary.

15. Short-term debt is limited to a 12-month term except for Commission authorization.

16. One purpose of CalWater's Credit Agreement is for cash flows for the WRAM and MCBA, which are operating expense accounts.

17. Annual reports reflect annual revenues and annual expenses, which by definition are for a 12-month period.

18. Although the interest spread between investment bond yields and 10-year U. S. Treasury Bonds was significant between September 2008 and September 2009, the current interest spread is more reflective of the spread before September 2008.

19. CalWater has not had difficulty in obtaining short-term financing.

1. Section 817 provides that a public utility may issue evidences of indebtedness payable at periods of more than 12 months only for specific purposes. Among the authorized purposes are for the construction, completion, extension, or improvement of its facilities (Section 817(b)), and for the discharge or lawful refunding of its obligations (Section 817(d)).

2. Section 818 provides that no public utility may issue indebtedness payable at periods of more than 12 months without first having obtained an order from the Commission authorizing the issue.

3. Section 823 governs the regulation of the use of short-term debt.

4. Section 823(b) provides that a utility may issue notes, for proper purposes and not in violation of any provision of law, payable at periods of not more than 12 months after the date of issuance of the notes without consent of the Commission.

5. Section 823(d) provides that no note payable at a period of not more than 12 months after the date of issuance of such note shall in whole or in part, be refunded by any issue of stock or stock certificates or other evidence of interest or ownership of bonds, notes of any term or character, or any other evidence of indebtedness, without the consent of the Commission.

6. The Credit Agreement meets the requirements of Sections 823(b) and (d).

7. Although the Credit Agreement is not subject to Sections 816-830 of the Code, that finding is based on our understanding that none of the debt incurred in the Credit Agreement will be refunded through the issuance of equity or debt securities not authorized by the Commission.

8. Sections 817, 818, 821(d), and 830 clearly restrict the issuing of short-term debt to a 12-month period without authorization of the Commission.

9. A public hearing is not necessary.

10. The Application should be granted to the extent set forth in the order that follows.

11. Res. F-616 specifically exempts debt issues of $20,000,000 or less from the Competitive Bidding Rule.

12. CalWater should be exempt from the Competitive Bidding Rule because it will not issue any one series of debt securities in excess of $20,000,000 and/or will not sell more than $20,000,000 in total during any calendar year to any one purchaser.

13. Domestic underwritten public offerings of fixed interest rate debentures and First Mortgage Bonds over $20 million to $350 million should comply with Res. F-616.

14. CalWater should pay the fee for the authority granted in this order as determined in accordance with Pub. Util. Code §§ 1904(b) and 1904.1.

15. Approval of this debt and equity issuance does not involve any commitment to any specific project which may result in a potentially significant impact on the environment; thus it is not a project subject to CEQA. (CEQA Guidelines Section 15378(b)(4).)

16. The following order should be effective immediately.

ORDER

IT IS ORDERED that:

1. California Water Service Company, on or after the effective date of this order, upon terms and conditions substantially consistent with those set forth or contemplated in Application 10-01-013, is authorized to:

(a) Issue, sell and deliver New Securities not exceeding $350,000,000 in aggregate principal offering amount, said securities consisting of debt and equity securities;

(b) Execute and deliver any and all related documents required for the completion of the proposed financing, including, without limitation, an indenture or supplemental indenture;

(c) Encumber its assets in connection with the debt issue; and

(d) Amortize any discount, expense, or premium associated with the issuance or redemption of its long-term obligations before the date of maturity of the first issue ratably over the remaining life of the replacement obligation.

2. California Water Service Company shall apply the proceeds of the New Securities authorized for the purposes specified in its Application and discussed in this decision.

3. California Water Service Company's proposed debt issues with principal amounts of $20 million or less to any one purchaser in a calendar year, variable rate debt securities, negotiated financing transactions, and debt enhancements are exempt from the requirements of the Commission's Competitive Bidding Rule addressed in Resolution F-616, dated October 1, 1986.

4. California Water Service Company's request to modify the provisions of its existing unsecured line of credit to allow the use of the credit facility for terms of up to 24 months is denied without prejudice.

5. California Water Service Company shall file with the Utility Audit, Finance and Compliance Branch of the Division of Water and Audits, copies of the agreements and indenture within thirty days of the execution of these documents.

6. Pursuant to Public Utilities Code Section 824 and General Order 24-B, California Water Service Company shall maintain records to (i) identify the specific long-term debt issued pursuant to this order, and (ii) demonstrate that the proceeds from such debt and been used only for the purposes authorized herein.

7. On or before the 25th day of each month, California Water Service Company shall provide the Utility Audit, Finance and Compliance Branch of the Water Division of Water and Audits the reports required by General Order 24-B.

8. Pursuant to Public Utilities Code Section 1904(b) and 1904.1, California Water Service Company shall remit to the Commission's Fiscal Office a check for $181,000. The decision number shall appear on the face of the check.

9. California Water Service Company may not exercise the authority granted by this decision until it remits $181,000 to the Commission's Fiscal Office.

10. Application 10-01-013 is closed.

This order is effective today.

Dated September 23, 2010, at San Francisco, California

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