17. Schedule for Subsequent Cost of Capital Proceedings
17.1. Background
The Commission adopted a revised rate case plan in D.07-05-062, requiring the Class A water utilities to file cost of capital applications to be considered in two consolidated proceedings.59 The three larger multi-district Class A companies, Golden State Water Company, California-American Water Company, and California Water Service Company, filed in May 2008, and the remaining six Class A water companies filed in May 2009 and five of them are consolidated here. Consideration of the application of Great Oaks Water Company (Great Oaks) was deferred to litigate concurrently with its general rate case.
17.2. DRA's Position
DRA proposed that the Commission consider readjusting the number of utilities handled in the consolidated cost of capital proceeding for the six utilities that are currently included in this second grouping (San Gabriel, San Jose, Park/Apple, Valencia, Suburban, and Great Oaks).
DRA believes a rebalancing of the consolidated filings is necessary due to the increased workload associated with consolidating the filings and simultaneously dealing with multiple utilities. Although DRA stated it was able to handle the three large utility filings in May 2008, the current consolidated filing of five utilities has put a significant burden on DRA's resources.60 DRA relies on an expert witness to review the utilities rate of return proposal. DRA argues the current schedule makes it more difficult for scheduling hearings and reviewing the testimony of the multiple utility witnesses.
During evidentiary hearing, DRA agreed with the judge's observation that the current group of companies in the consolidated proceeding has a much wider range in size and scope of operations than the three large publicly traded companies. (Tr. Vol. 3 at 160, Sanchez/DRA.) The judge suggested that, instead of creating a third consolidated proceeding, perhaps it would make sense to move San Jose, the largest company of the current group, with the three large multi-district companies. DRA agrees with the judge's suggestion to shift San Jose to the three large multi-district utilities. However, DRA notes that the work load issue remains in the second grouping since moving San Jose will only reduce the group by one utility, and therefore there would be a total of five of the smaller companies requiring one witness to rebutting multiple company and expert witnesses' testimony. (Id. at 161.)
DRA is agreeable to the judge's proposal to maintain two groups of consolidated proceedings, with a minor change to further balance the workload. DRA recommends that the two smallest single district utilities (Valencia and Great Oaks) file their cost of capital in their general rate cases (id. at 162) leaving a more manageable grouping for the two consolidated cost of capital proceedings of the four largest publicly traded utilities in group one and the three smaller companies in group two.
17.3. Discussion
We affirm our intention to continue with the policy of separating cost of capital from general rate cases, and to consolidate that review for relatively similar companies. Therefore, we will reassign San Jose to file with the three multi-district companies in 2011 for a new 2012 base year and we will allow Valencia and Great Oaks to file separate cost of capital proceedings to litigate concurrently with their subsequent general rate cases. The Commission can decide at that time whether to consolidate the cost of capital and general rate case for each company or whether to litigate concurrently but in separate dockets. This would allow for the most efficient and economical litigation process while preserving the independence of the two different but critical ratemaking proceedings. The next group filing for Park/Apple, San Gabriel, and Suburban will be in 2012 for a base year 2013.
San Jose asked for a regulatory account to reflect the earlier than anticipated cost of participating in a cost of capital proceeding. We will allow San Jose to record one-third of its costs of its next cost of capital proceeding and may seek recovery in its subsequent general rate case. The underlying assumption is that San Jose would accumulate on average one-third of the cost of its participation in rates in each of the three years between proceedings. Because we are accelerating its next cost of capital proceeding by one year, there is a reasonable assumption that there would be a one-third short-fall. San Jose must meet its burden of proof for reasonableness before any rate recovery.
59 D.07-05-062 at 13-16.
60 Great Oaks was given a one-time waiver from participation in the cost of capital consolidated proceeding. Its cost of capital application, A.09-05-007 was consolidated with its September 2009 general rate case. See Assigned Commissioner's Scoping Memo and Ruling, June 23, 2009.
