2. Background
The Commission regulates water service provided by Great Oaks Water Company (Great Oaks) pursuant to Article XII of the California Constitution, the Public Utilities Code, and the Commission's rules and regulations.
Great Oaks is an investor-owned Class A water utility serving approximately 20,000 customers in the San Jose area.2 It is a family-owned business, started 50 years ago by the parents of the current chief executive officer, and supplies customers with water from company-owned wells located in the service territory. Under the Commission's Rate Case Plan for Class A Water Utilities, as revised in Decision (D.) 07-05-062 (Rate Case Plan), Great Oaks was scheduled to file a general rate case (GRC) application on July 1, 2009, with rates effective on July 1, 2010.3 By letter dated May 4, 2009, Great Oaks received permission to delay its GRC filing until September 1, 2009.4 On October 7, 2009, the Commission's Division of Ratepayer Advocates (DRA) filed a timely protest to the application.
Great Oaks filed an updated and corrected Application on October 19, 2009. The primary change in the updated application is the reflection of an interim rate increase of 1.75%, subject to refund, granted by Advice Letter 196C-W, effective September 1, 2009. Great Oaks was granted this interim rate increase because the Rate Case Plan's effective date for new rates was more than three years since the effective date of Great Oaks' last rate case.5 By Administrative Law Judge (ALJ) Ruling dated November 12, 2009, the caption of the proceeding was changed to reflect the revised revenue requirement increases contained in the updated filing.
A prehearing conference (PHC) was held on October 21, 2009 to discuss coordinating testimony and procedural schedules between this proceeding and Great Oaks' pending cost of capital proceeding, Application (A.) 09-05-007. At the PHC, a discussion was held regarding the Commission's conservation objectives, as set forth in our Water Action Plan, and Great Oaks was then granted the opportunity to submit a conservation rate design proposal, together with new conservation programs, in supplemental testimony.6
Following the PHC, it came to the attention of the Commission that Great Oaks had not provide its customers written notice of its request to raise rates, as required by Rule 3.2(d) of our Rules of Practice and Procedure. Great Oaks then provided this notice, together with the dates, place, and times for upcoming public participation hearings (PPHs), to all customers between November 5 and December 17, 2009. Pursuant to the preliminary schedule set at the PHC and confirmed in the December 2, 2009 assigned Commissioner's Scoping Memo (Scoping Memo), DRA served its report on December 9 and Great Oaks served its rebuttal testimony on December 28, 2009. Evidentiary hearings were held in San Francisco on January 21, 22, and 29, 2010. Opening briefs were submitted on February 25, 2010 and reply briefs on March 11, 2010. On May 27, 2010, Great Oaks filed Advice Letter 198-W requesting extension of its interim rates until the effective date of the decision in this proceeding; this advice letter was made effective July 1, 2010.
On March 19, 2010, DRA filed a "Motion to Reopen the Record to Admit Great Oaks' Nondisclosure of Lack of Payment of Groundwater Charges and Request that the Commission Issue an Order to Show Cause for Violation of Rule 1.1. and Possible Violation of Section 2114." The assigned Commissioner granted in part this motion, and directed our Division of Water and Audits to perform a verification and submit a report. We discuss our findings in a later section of the decision.
On August 20, 2010, Great Oaks filed a "Motion to Reopen Record for Limited Purpose of Updating and Revising Water Sales Data and Addressing Conservation Water Revenue Adjustment Mechanisms." In its motion, Great Oaks asserts that language in the Commission's Resolution W-4838, issued August 12, 2010, changes the beginning of the test year period in this application from July 1, 2010 to September 1, 2009, and thereby requires the Commission to accept new sales forecasts into the record and to change the rate making for the transition period September 1, 2009 - June 30, 2010.7
On September 8, 2010, DRA filed its opposition to the motion, asserting that the resolution's language does not allow Great Oaks to retroactively establish a Water Revenue Adjustment Mechanism (WRAM) memorandum account back to September 2009 and the Commission's Rate Case Plan requirements do not allow the additional sales forecasts to be entered into this record.
On September 13, 2010, Great Oaks responded to DRA's opposition by again asserting that in Resolution W-4838 the Commission for the first time changed the effective date of the GRC rates in this proceeding, thereby triggering its motion to reopen the record.
We find that the language in Resolution W-4838 cited by Great Oaks does not say what Great Oaks asserts. The language does not change the test period of this GRC or state that a sales forecast for the transition period September 1, 2009 - June 30, 2010 will be established in this proceeding (A.09-09-001). The underlying issues referenced in the resolution are that the Commission in A.09-09-001 is setting both a new sales forecast for Great Oaks and considering a WRAM adjustment , and is doing both for the test period July 1, 2010 to June 30, 2011. As stated in Resolution W-4838, once this is done in A.09-09-001, the interim rates authorized in AL 196C-W will then be trued-up to the final rates that are adopted in A.09-09-001. On this matter, the resolution is consistent with our scoping memo, which states:
When final rates are adopted in this proceeding, a surcharge or surcredit will be imposed to recover or refund the difference between the new adopted GRC rates and the rates collected since September 1, 2009 under the interim rate authorization of AL 196C-W.8
Therefore, we find that Great Oaks' August 20, 2010 motion should be denied as the relief requested would violate (1) the Rate Case Plan's adopted procedure for rate adjustments during the Rate Case Plan's transition period and for updates during the scheduled proceeding, (2) the interim relief authority granted Great Oaks in AL 196C-W, and (3) the scope of this application.9
On October 12, 2010, Great Oaks filed another motion to reopen the record, again for the limited purpose of admitting evidence relevant to water sales forecasts and conservation issues. In this motion, Great Oaks addressed the accuracy and credibility of the evidence related to test period for this proceeding by asserting that if the Commission admits into the record the actual sales data for the months of July through September 2010, it will support the accuracy of its proposed forecast for the GRC period.
Great Oaks argues that the Commission should deviate from its Rate Case Plan procedures to do this because of the "unusual circumstance" of the Commission's proposed decision being delayed that allows for consideration of three months of actual sales data in the GRC period at issue. Great Oaks also updates the record on the actions of Santa Clara Valley Water District (SCVWD), which has rescinded its call for mandatory conservation and now requests 10% voluntary conservation.10
We find that Great Oaks' October 12, 2010 motion should be denied as the relief requested would violate the Rate Case Plan's procedure for updates during the scheduled proceeding and Great Oaks has not met the Commission's standards for an extraordinary circumstance that would warrant the Commission deviating from its established procedure. 11 The procedural schedule set in D.07-05-062 for Great Oaks was an application to be submitted on July 1, 2009, a fourteen-month processing time, and rates effective on July 1, 2010.
The delays in issuing this proposed decision have not been extraordinary and, most importantly, have been solely caused by Great Oaks' own actions in (1) requesting a three-month delay in submitting its application, and (2) failing to disclose to the Commission and DRA that it had withheld payment to SCVWD since April 2009 of pump taxes it had collected from its customers. Great Oaks has not shown good cause for the Commission at this late date to reopen the record in order to accept three months of actual sales data and to provide DRA with a reasonable amount of time to respond to the updated information. Therefore, we deny the motion.
2 A Class A water utility is a Commission-regulated water utility serving over 10,000 customers.
3 Great Oaks' last GRC was handled through the advice letter process as an experiment to determine whether and when the advice letter process may be a suitable alternative to the formal application process. By Resolution W-4594, issued on May 11, 2006, Great Oaks was authorized a general rate increase for test year 2006-2007 and appropriate inflationary increases for escalation years 2007-2008 and 2008-2009.
4 The Commission's Executive Director had earlier denied Great Oaks' request for a three-year waiver in filing its GRC application. Great Oaks then filed, and subsequently withdrew, an application requesting a one-year postponement.
5 Great Oaks first filed Advice Letter 196-W in July 2009, requesting an interim rate increase of 21.6%, effective July 22, 2009. This advice letter, protested by DRA, was not accepted by the Commission's Division of Water and Audits. Subsequent filings of Advice Letters 196A and 196B were also not accepted. Advice Letter 196C-W and its accompanying tariff sheets were accepted by Division of Water and Audits on September 8, with an effective date of September 1, 2009.
6 The date set for Great Oaks' supplemental testimony was November 16, 2009. On November 12, 2009, Great Oaks notified the ALJ by electronic mail that it was working cooperatively with DRA on developing a proposal and, therefore, rather than submitting supplemental testimony it would evaluate and consider adoption of DRA's proposal in its rebuttal testimony.
7 Great Oaks cites to the following language in Resolution W-4838 as the basis of its motion:
Rejection of AL 197-W does not prejudice Great Oaks because the issues underlying the need to establish the two memorandum accounts requested by Great Oaks are being reviewed as part of our consideration of A.09-09-001. Given that Great Oaks has interim rates in place effective September 2009, the ultimate resolution of the issues raised in AL 197-W can be dealt with in A.09-09-001 without concern for retroactive ratemaking. (Resolution W-4838, Findings and Conclusions 20, mimeo. at 8.)
8 Scoping Memo at 6.
9 See D.07-05-062, issued May 30, 2007, mimeo. at 10-11 and Appendix A, Sections II-B and IV-F.
10 SCVWD issued a call to all Santa Clara Valley residents for 15% mandatory conservation in March 2009 and extended it in December 2009. In July 2010 it reduced its mandatory mandate to 10% and in September 2010 replaced its mandatory mandate with a call for 10% voluntary conservation. As will be discussed later in this decision, Great Oaks has never been under a mandatory production limitation from SCVWD.
11 In Appendix A at A-9 of D.07-05-062, the Commission provides that under extraordinary circumstances, a water utility may seek discretionary post-application modifications. We state that "any such request must, at a minimum, show that the addition sought: (1) causes material changes in revenue requirement; (2) is the result of unforeseeable events; (3) is not off-set by other cost changes; and (4) can be fairly evaluated with proposed schedule changes that have been agreed to by all parties."
