5. Summary of DRA's Recommendations

Division of Ratepayer Advocates' (DRA) recommended returns on equity for Applicants are derived from a base return of 9.75% and then adjusted based on DRA's evaluation of individual risk which raises one company, Valencia, to 10%, and lowers Suburban to 9.5%. Thus, its final 2010 recommendations are: San Jose a 9.75% return on equity; Valencia a 10% return on equity; Park/Apple a 9.75% return on equity; San Gabriel a 9.75% return on equity; and Suburban a 9.5% return on equity.

Additionally, DRA developed imputed capital structures and cost of debt based on its proxy company analysis, i.e., adjusting the capital structure to fit its recommended range for return on equity. Finally, DRA supported the adoption of a Water Cost of Capital Adjustment Mechanism based on the mechanism recently adopted in Decision (D.) 09-05-051.