16. Assignment of Proceeding
John A. Bohn is the assigned Commissioner and Linda A. Rochester is the assigned ALJ in this proceeding.
1. Golden State and DRA are the only parties to the settlement.
2. Golden State provided applications and exhibits explaining its request for a rate increase in detail.
3. DRA provided an analysis of the applications indicating that it agreed with some of Golden State's estimates and disagreed with others.
4. The overall settlement result lies between the initial positions of Golden State and DRA, and the settlement resolves some issues raised by other parties.
5. Golden State represents the interest of its shareholders.
6. DRA represents the interests of ratepayers.
7. The settlement and our resolution of contested issues in this proceeding result in rates sufficient to provide adequate reliable service to customers at reasonable rates while providing Golden State with the opportunity to earn a reasonable return.
8. Absent "extraordinary circumstances," including vacant positions in labor expense is not reasonable.
9. Golden State's aggressive recruiting efforts do not constitute "extraordinary circumstances", but there is no evidence of bad faith on Golden State's part to indicate willful noncompliance with Pub. Util. Code § 2107, warranting a fine of $45,000.
10. Golden State's proposal to allocate certain costs based on a single-factor allocation and certain other costs based on a four-factor allocation is not reasonable.
11. It is reasonable to allocate to Golden State only and to Golden State, Chaparral and ASUS-City combined, all those costs centers which provide absolutely no service to ASUS-Military.
12. It is reasonable for Golden State to count each military contract as one customer.
13. It is not reasonable to use the combined total of connections at each military base (17,788) under contract to ASUS as the number of ASUS-Military customers in the four-factor allocation.
14. The amount or expense related to purchased water does not materially impact the amount of general office activity, and including purchased water in the four factor calculation unreasonably skews the allocation results.
15. Excluding the purchased water costs from the expenses factor of the
four-factor cost allocation is reasonable.
16. DRA's proposal to include the value of all distribution assets at the military bases served by ASUS in the plant factor of the four-factor cost allocation is reasonable.
17. Golden State's proposal to use only the plant associated with ASUS's corporate headquarters and assets is not reasonable.
18. Golden State's proposed employee expenses for ASUS represents only 27 ASUS employees in the employee expenses factor of the four-factor cost allocation.
19. The number of ASUS employees has gone from 27 to 84 since Golden State filed its GRC application.
20. Using employee count instead of employee expenses results in a more accurate cost allocation.
21. All Golden State's contracts to supply unregulated services to various cities expired January 1, 2010, except the contract with the City of Torrance.
22. Golden State and DRA reached settlement on the allocation of general office costs for the City of Torrance contract.
23. Golden State`s criteria for awarding merit increases ensures that only the highest performing employees would be awarded bonuses.
24. Golden State employees must meet certain performance criteria to receive a merit increase.
25. The Commission should not micro-manage how a company structures the compensation of its employees.
26. Golden State's request for a 1% equity adjustment is reasonable.
27. Golden State asserts that enhanced and expanded retiree medical benefits are necessary to stay competitive with other water utilities vying for the same employees from a limited pool of technically skilled candidates.
28. Golden State's request to expand and enhance retiree medical benefits increases the costs to ratepayers by 350%.
29. Golden State's request for expanded and enhanced retiree medical benefits is not reasonable.
30. Under the current ratemaking treatment for pension and post-retirement benefits, market fluctuations result in over-recovery in some years and
under-recovery in others.
31. Balancing accounts remove the impact of market fluctuations and protect ratepayers from under-recovery.
32. Golden State would not object to limiting rate recovery of pension costs to the minimum ERISA funding levels if it is granted a two-way pension and benefits balancing account.
33. Golden State's request for a pension balancing account is reasonable.
34. Golden State's two general office facilities house 154 employees.
35. Varied and overlapping work schedules for its call center employees indicate a need for individual work spaces.
36. Golden State's request for $288,900 in 2009 for new leased general office space is reasonable.
37. Golden State's compensation for its five highest paid executives falls high within the range set by its consultant.
38. Golden State has 12 executive or officers whose compensation falls within the range of compensation set for only the 5 highest paid positions.
39. Golden State's executive compensation exceeds the level recommended by its consultant.
40. DRA's request for executive labor expense that is $1 million (30.1%) less than Golden State requested is not reasonable.
41. Allowing Golden State's executive compensation at a level that is $500,000 (15%) less than requested is reasonable.
42. Golden State's COPS reorganization is not complete.
43. Golden State's next GRC is due to be filed in May 2011, about six months after the issuance of the decision in this proceeding.
44. A management audit prior to the next GRC would not provide sufficient time to determine if the reorganization is providing the expected beneficial results.
45. DRA's request for a management audit prior to the next GRC is not reasonable.
46. In past GRCs, because more accurate information was not available, an estimate was used to calculate test year CCFT for FIT purposes.
47. Some of Golden State's CCFT figures are readily available during the current tax year.
48. Using partial actual CCFT figures in the calculation of FIT is preferable to a total estimate.
49. Any changes to the current CCFT methodology will result in inconsistent tax treatment among Golden State's regions. A review of the CCFT is more appropriately undertaken in Golden State's upcoming statewide GRC due to be filed in 2011.
50. The Commission's Water Action Plan discusses the necessity of water utilities addressing their infrastructure needs by undertaking long-term planning to provide the capital to improve or replace existing infrastructure.
51. Golden State's consultant's activities, or similar future activities, comply with the Water Action Plan.
52. Golden State's request for $200,000 for Region II and $250,000 for Region III regulatory expense is a reasonable forecast of future expenses.
53. Golden State interprets DPH's § 64554(c) to require that all
groundwater-only systems meet MDD with the highest-capacity source off line, defining it as a "firm capacity" standard and a prudent utility practice.
54. DPH has clarified § 64554(c) as requiring only groundwater-only water systems to meet MDD with the highest source capacity off line before being granted an initial permit.
55. Golden State's request for two new wells in the Norwalk System is based on Golden State's application of its "firm capacity" standard.
56. Golden State's request for two new wells in the Norwalk System is not reasonable.
57. Removing the largest capacity source to determine adequate water supply or water pressure in the West Hampshire Plant is not required by DPH's § 64554(c) or GO 103-A.
58. Golden State's request for booster pump stations in the West Hampshire Plant to address water pressure issues when the highest-source capacity is off line is not reasonable.
59. Golden State's request for new storage tanks/reservoirs in the West Hampshire Plant is based on the need for the new booster station.
60. Because the new booster station in the West Hampshire Plant is not reasonable, the storage tanks/reservoirs are unnecessary and therefore not reasonable.
61. Golden State's request for a chlorination system is based on its need for a booster station and storages tanks/reservoirs.
62. Golden State's request for a chlorination system is not reasonable.
63. The Three Valleys MWD inspection of the Miramar Liner and Cover found the reservoir was in good condition and recommended only repairs.
64. Golden State's request for funds to replace the liner and cover on the Miramar Reservoir is not reasonable.
65. Reconstructing the San Dimas Baseline Well #4 forebay and pump is reasonable as the pump is projected to last as long as the current well and the pump will be used on the replacement well.
66. Golden State's request for funds to reconstruct the Baseline Well #4 forebay and pump is reasonable.
67. The new site for a booster station in the San Dimas System has not been chosen.
68. Project design and permitting activities are associated with a particular site.
69. Because no site for the San Dimas booster station has been selected or purchased, Golden State's request for design and permitting fees is not reasonable.
70. The Apple Valley South System is a groundwater-only system and has a supply deficit of 88 gpm when Golden State applies its interpretation of "firm capacity" which requires meeting MDD with the highest source capacity off line.
71. Less-costly alternatives, such as conservation, should be explored to address the possible 88 gpm deficiency prior to burdening ratepayers with the expense of a new well.
72. Golden State's request for a new well in the Apple Valley South System is not reasonable.
73. The Apple Valley North System is a single source groundwater system.
74. If Apple Valley North System's single source of groundwater is off line for any reason, the system has a 100% deficit that cannot be alleviated through conservation.
75. Relocating and enlarging the Yucca Booster Pump will enable Golden State to supply water to the Apple Valley North System if the single groundwater source is off line for any reason.
76. Golden State's request for funds to relocate and enlarge the Yucca Booster Pump in the Apple Valley North System is reasonable.
77. MWD of Orange County requires that water agencies purchase water at a constant rate over each 24-hour period.
78. The Placentia System's current storage capacity of 1.5 million gallons is insufficient to meet the storage requirements of 3.0 million gallons in order to maintain the constant rate required by the MWD of Orange County.
79. Golden State has provided an estimate for the land acquisition based on previous land acquisitions and land costs in Orange County, the site of the proposed reservoir.
80. Golden State's request for funds to purchase land and construct a new reservoir to increase storage capacity for the Placentia System in order to meet the MWD of Orange County requirement that water be purchased at a constant rate is reasonable.
81. The Placentia System's sole groundwater source is scheduled to be taken off line due to contamination, leaving the system with only two sources of supply, the OC-37 and OC-56 connections with the MWD of Orange County.
82. Although the MWD of Orange County's water supply has been reliable for the last 20 years, it is currently warning its customers of a possible 30% curtailment of water availability and possibly more if the drought continues.
83. Golden State's proposal to build two new wells in the Placentia System to increase its groundwater sources and decrease its reliance on diminishing MWD of Orange County water supplies is reasonable.
84. When Golden State takes its Concerto Well out of service, the Yorba Linda System will be completely reliant on a single source of groundwater, the OC-90 connection with MWD of Orange County.
85. Golden State has received warnings regarding curtailment of water supply from the MWD of Orange County.
86. Golden State's request to construct a transmission main to connect the Yorba Linda System with the Placentia System to improve system reliability is reasonable.
87. Golden State's booster pumps in the Placentia System Newport Plant are of insufficient size to deliver water to the system in the case of a planned or unplanned outage.
88. Golden State's request for permitting and design related to replacing the booster pumps in the Placentia System Newport Plant to increase system reliability in the event of an outage is reasonable.
89. Golden State's AMI program lacks the requisite preplanning detail and justification.
90. Golden State's request for AMI pilot program funding is not reasonable.
91. Golden State's request for pre-deployment funds to hire a consultant to assist in the preparation and evaluation of a final AMI deployment plan is reasonable.
92. Golden State provided no guidelines to predict when a dry year will occur in Wrightwood.
93. Golden State has provided no information to estimate the lag time between precipitation and groundwater recharge in Wrightwood.
94. Golden State has not met its burden of proof regarding inadequate water supply in the Wrightwood System.
95. Golden State's request for $11,313,039 for the Wrightwood water exchange project should not be included in rate base as the project was removed from the scope of its application.
96. Golden State's conservation costs are based on previous years' expenses, the Commission's Water Action Plan and the California Urban Water Conservation Council's recommendations.
97. Golden State's forecasted conservation costs are reasonable.
98. The La Serena project costs were poorly estimated.
99. Golden State did not revise the special facilities fees based on the updated cost estimates.
100. Golden State did not collect special facilities fees from all the developments.
101. The La Serena plant improvements were undertaken for the benefit of existing customers and new developments.
1. Rule 12.1(d) provides that the Commission will not approve settlements, whether contested or uncontested, unless the settlement is reasonable in light of the whole record, consistent with law, and in the public interest.
2. The settlement does not violate any statute or Commission decision or rule.
3. The settlement is consistent with law.
4. The settlement is in the public interest.
5. The settlement should be adopted.
6. Golden State should not be fined $45,000 for including vacant positions in its labor expense calculations.
7. Golden State's proposed $1,471,247 labor expense associated with vacant positions should not be approved.
8. Each military base should be counted as a single customer in the general office cost allocation methodology.
9. Purchased water costs for Golden State and Chaparral should be excluded from the total expenses factor of the general office cost allocation four factor methodology.
10. The total value of all distribution assets at the military bases served by ASUS should be included in the plant factor of the four-factor cost allocation.
11. Employee count should be used instead of total labor expense factor in the general office four factor cost allocation methodology.
12. Golden State's request for a 1% equity adjustment should be granted.
13. Golden State's request for $3,340,800 in 2009, $3,411,000 in 2010, $3,505,000 in 2011, and $3,573,000 in 2012 for expanded post-retirement medical benefits should be denied.
14. Golden State's request for a two-way balancing account to track pension and benefits should be granted.
15. Golden State's pension expense should be based on the minimum ERISA funding levels.
16. Golden State's minimum ERISA funding levels are $4,136,000 in 2010, $6,563,000 in 2011, and $6,117,000 in 2012.
17. The pension and benefits balancing account should track the difference between the expenses authorized in rates and the actual costs calculated in accordance with SFAS No. 87.
18. Golden State's request for $314,600 in 2009, $326,900 in 2010, $339,600 in 2011, and $352,800 in 2012 for rental expense should be granted.
19. Golden State's executive compensation included in rates should be $500,000 less than requested.
20. DRA's request for a management audit prior to Golden State's next GRC should be denied.
21. Golden State's CCFT figure of $630,400 should be adopted.
22. The issue of whether to revise Golden State's methodology for calculation of the CCFT should be undertaken in Golden State's statewide GRC to be filed in 2011.
23. Golden State's request for $200,000 for Region II and $250,000 for Region III regulatory expense should be granted.
24. Golden State's "firm capacity" standard exceeds the requirements of DPH's § 64554(c).
25. Golden State's request for $2,639,737 in 2009 and $3,946,809 in 2010 to purchase land and drill, develop and equip two new 900 gpm wells at the Norwalk System's Imperial East site should be denied.
26. Golden State's request for $2,639,737 in 2009 and $3,946,809 in 2010 to purchase land and drill, develop and equip two new 900 gpm wells at the Norwalk System's Imperial East site should be denied.
27. Golden State's request for $240,000 in 2009 and $1,360,390 in 2010 to design and construct a new booster pump station in the Central Basin West Hampshire Plant should be denied.
28. Golden State's request for $366,895 in 2010 and $1,967,565 in 2011 to design and construct a new 2.0 million gallon reservoir at the Hampshire Plant and demolish the existing 0.25 million gallon Hampshire Tank should be denied.
29. Golden State's request for $36,689 in 2010 and $248,045 in 2011 for a chlorination system for the Central Basin Hampshire Plant Booster Station reservoir should be denied.
30. Golden State's request for $5,301 in 2008 and $958,973 in 2009 to replace the liner and cover on the Miramar Reservoir #2 at Three Valleys MWD should be denied.
31. Golden State's request for $56,308 in 2008 and $278,540 in 2009 to reconstruct the hydraulics surrounding the San Dimas System Baseline Well #4 should be granted.
32. Golden State's request for $265,542 in 2011 for design and permitting costs associated with building a new booster station to move water from the Vinnell gradient to the Wayhill gradient in the San Dimas System should be denied.
33. Golden State's request for $2,075,861 to purchase land and design, construct, drill and equip a new well in the Apple Valley South System should be denied.
34. Golden State's request for $746,058 to relocate and enlarge the Yucca Booster Pump in the Apple Valley North System should be granted.
35. Golden State's request for $19,284 in 2010 and $5,242,589 in 2011 to acquire land to build a new reservoir should be granted.
36. Golden State's request for $1,865,386 to drill and equip a new 1,500 gpm well and $206,658 for design and permitting of a second well in the North Zone of the Placentia System should be granted.
37. Golden State's request for $55,134 in 2011 for the permitting and design related to replacing two booster pumps with larger capacity pumps should be granted.
38. Golden State's request for $55,134 in 2011 for the permitting and design related to replacing two booster pumps with larger capacity pumps should be granted.
39. Golden State's request to test, evaluate, and implement one phase of a $27,179,393 AMI system in Region II should be denied.
40. Golden State's request for $341,292 to hire a consultant to assist in the pre-deployment preparation and evaluation of a final AMI deployment plan should be granted.
41. Golden State's request for $11,313,039 for construction of the Wrightwood Project should be denied.
42. Golden State's request for $738,644 for conservation expenses in Region III should be granted.
43. Golden State should remove $1,843,956 associated with the La Serena project costs from rate base.
44. Golden State's Region I ratepayers should be given a one-time credit of $582,832 to offset the fact that Golden State previously included the La Serena costs in rate base.
IT IS ORDERED that:
1. The joint motions of Golden State Water Company and the Division of Ratepayer Advocates to approve the settlement agreements, are granted.
2. As provided for in the settlement, Golden State Water Company is authorized to file a Tier 2 advice letter to recover actual costs incurred for the design, acquisition of land and construction of a 500,000 gallon reservoir in Claremont after the project is completed, used, and useful. The advice letter recovery is capped at a total cost for design, land acquisition and construction of $1,677,542. This amount includes overhead of 17.80% for the design and 26.88% for construction and a contingency rate of 7.5%.
3. As provided for in the settlement, Golden State Water Company is authorized to file a Tier 2 advice letter to recover actual costs incurred to stabilize the Eaglecliff Tank in San Dimas after the project is completed, used, and useful. The advice letter recovery is capped at a total cost of $329,217 including overhead rates of 17.80% for design and 26.88% for construction and a contingency rate of 7.5%.
4. As provided for in the settlement, Golden State Water Company is authorized to file a Tier 2 advice letter to recover actual costs incurred to purchase land for a 2.5 million gallon reservoir site in South San Gabriel after the project is completed, used, and useful. The advice letter recovery is capped at a total cost of $2,064,200 including a contingency rate of 7.5%.
5. As provided for in the settlement, Golden State Water Company is authorized to file a Tier 2 advice letter to recover actual costs incurred to install the Lone Pine reservoir in Wrightwood after the project is completed, used, and useful. The advice letter recovery is capped at $537,500 including overhead of 17.80% and a contingency rate of 7.5%.
6. As provided for in the settlement, Golden State Water Company is authorized to file a Tier 2 advice letter to recover actual costs for the Sheep Creek Reservoir in Wrightwood after the project is completed, used, and useful. The advice letter recovery is capped at $376,250 including overhead of 17.80% and a contingency rate of 7.5%.
7. As provided for in the settlement, Golden State Water Company is authorized to file a Tier 2 advice letter to establish a balancing account to recover $375,000 for the cost of hiring a consultant to conduct a comprehensive well replacement study. The study will be expensed in the year the study is conducted and recovery will be based on actual prudently incurred costs at the time of the next general office general rate case.
8. Golden State Water Company is authorized to file a Tier 2 advice letter to establish a Pension and Benefits Balancing Account. This two-way balancing account shall track the difference between the pension and benefits expenses authorized in rates and the actual costs calculated in accordance with SFAS No. 87. The pension and benefits amounts shall be based on the minimum Employee Retirement Income Security Act minimum funding levels and are $4,136,000 in 2010, $6,563,000 in 2011, and $6,117,000 in 2012. The balancing account shall have an effective date concurrent with the effective date of rates in this proceeding.
9. For matters other than those addressed in Ordering Paragraph 1, Golden State Water Company's application is granted only to the extent specified in this decision and is otherwise denied.
10. Golden State Water Company shall provide a one-time credit of $582,832 to customers as an offset to La Serena plant improvement project costs included in rate base.
11. Golden State Water Company is authorized to file by Tier 1 advice letter, revised tariff schedules, and to concurrently cancel its present schedules for such service. This filing shall be subject to approval by the Commission's Division of Water and Audits. The effective date of the revised schedules shall be 5 days after filing, and shall apply only to service rendered on or after that date.
12. For escalation years 2011 and 2012, Golden State Water Company shall file Tier 1 advice letters in conformance with General Order 96-B proposing new revenue requirements and corresponding revised tariff schedules for each district and rate area in this proceeding. Golden State Water Company's advice letters shall follow the escalation procedures set forth in the Commission's Rate Case Plan (Decision 07-05-062) for Class A Water Utilities and shall include appropriate supporting workpapers. The revised tariff schedules shall take effect on January 1, 2011 and January 1, 2012, respectively and shall apply to service rendered on and after their effective dates. The proposed, revised revenue requirements and rates shall be reviewed by the Commission's Division of Water and Audits. The Division of Water and Audits shall inform the Commission if it finds that the revised rates do not conform to the Rate Case Plan, this order, or other Commission decisions, and if so, reject the filing.
13. The sur-charge to true-up the interim rates shall be collected over the remainder of this rate case cycle. The tariff implementing the sur-charge may be included in the filing authorized in Ordering Paragraph 11 or filed by Tier 1 advice letter within 5 days of the effective date of the rate increases authorized by this decision.
14. Application (A.) 08-07-010 and A.07-01-014 are closed.
This order is effective today.
Dated November 19, 2010, at San Francisco, California.
MICHAEL R. PEEVEY
President
DIAN M. GRUENEICH
JOHN A. BOHN
TIMOTHY ALAN SIMON
NANCY E. RYAN
Commissioners
