COM/JB2/hkr Date of Issuance 11/22/2010

Decision 10-11-035 November 19, 2010

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

In the Matter of the Application of Golden State Water Company (U 133 W) for an order authorizing it to increase rates for water service by $20,327,339 or 20.12% in 2010; by $2,646,748 or 2.18% in 2011; and by $4,189,596 or 3.37% in 2012 in its Region II Service Area and to increase rates for water service by $30,035,914 or 32.67% in 2010; by $1,714,524 or 1.39% in 2011; and by $3,664,223 or 2.92% in 2012 in its Region III Service Area.

Application 08-07-010 (Filed July 1, 2008)

And Related Matter.

Application 07-01-014

(See Attachment F for List of Appearances.)

DECISION ADOPTING THE 2010, 2011, AND 2012 REVENUE REQUIREMENT, RATES, AND GENERAL OFFICE ALLOCATION FOR REGIONS II AND III, AND RESOLVING THE REGION I
LA SERENA PLANT IMPROVEMENT PROJECT COSTS
OF GOLDEN STATE WATER COMPANY

DECISION ADOPTING TEST YEARS 2010, 2011, AND 2012 REVENUE REQUIREMENT, RATES, AND GENERAL OFFICE ALLOCATION FOR REGIONS II AND III, AND RESOLVING THE REGION I LA SERENA PLANT IMPROVEMENT PROJECT COSTS OF GOLDEN STATE WATER COMPANY 22

1. Summary 22

2. Background 33

3. Procedural Background 33

4. The Settlement 66

5. Standard of Review for Settlements 1111

6. Burden of Proof Under Statute and Rate Case Plan 1313

7. General Office and Centralized Operations Support 1414

7.1. Costs Associated with Vacant Positions and DRA's Request for $45,000 Penalty 1414

7.1.1. Positions of the Parties 1414

7.1.2. Discussion 1515

7.2. Cost Allocation 1717

7.2.1. Positions of the Parties 1717

7.2.2. Discussion 2222

7.3. 1% Equity Adjustment 2626

7.3.1. Positions of the Parties 2626

7.3.2. Discussion 2828

7.4. Pension and Benefit-Retiree Medical 2929

7.4.1. Positions of the Parties 3030

7.4.2. Discussion 3232

7.5. Pension and Benefit-Balancing Account 3232

7.5.1. Positions of the Parties 3333

7.5.2. Discussion 3535

7.6. General Office Rent Expense 3737

7.6.1. Positions of the Parties 3737

7.6.2. Discussion 3838

7.7. Executive Labor Adjustment 3939

7.7.1. Positions of the Parties 3939

7.7.2. Discussion 4040

7.8. Management Audit 4242

7.8.1. Positions of the Parties 4242

7.8.2. Discussion 4343

8. Region II and Region III 4444

8.1. Tax Calculations 4444

8.1.1. Positions of the Parties 4444

8.1.2. Discussion 4545

8.2. Regulatory Commission Expenses for Regions II and III 4747

8.2.1. Positions of the Parties 4747

8.2.2. Discussion 4848

9. Region II and Region III Capital Projects 4949

9.1. Region II Central Basin East Norwalk System Wells 5252

9.1.1. Positions of the Parties 5252

9.1.2. Discussion 5454

9.2. Region II Central Basin West Hampshire Plant Booster Station 5454

9.2.1. Positions of the Parties 5454

9.2.2. Discussion 5555

9.3. Region II Central Basin West Hampshire Booster Station Storage Tanks/Reservoir 5656

9.3.1. Positions of Parties 5656

9.3.2. Discussion 5656

9.4. Region II Central Basin West Hampshire Plant Booster Station Chlorination System 5656

9.4.1. Discussion 5757

9.5. Region III Claremont System Miramar Reservoir Liner and Cover Replacement 5757

9.5.1. Positions of Parties 5757

9.5.2. Discussion 5858

9.6. Region III San Dimas System Baseline Well #4 Forebay and Pump 5858

9.6.1. Positions of Parties 5858

9.6.2. Discussion 5959

9.7. Region III San Dimas System Booster Station from Vinnell to
Wayhill 5959

9.7.1. Positions of Parties 5959

9.7.2. Discussion 6060

9.8. Region III Apple Valley South System Land Purchase and Well Construction 6161

9.8.1. Positions of Parties 6161

9.8.2. Discussion 6262

9.9. Region III Apple Valley North System Yucca Booster and Zone
Break 6262

9.9.1. Positions of Parties 6262

9.9.2. Discussion 6363

9.10. Region III Placentia System Land Purchase 6363

9.10.1. Positions of Parties 6464

9.10.2. Discussion 6464

9.11. Region III Placentia System Wells in Yorba Linda 6565

9.11.1. Positions of Parties 6565

9.11.2. Discussion 6666

9.12. Region III Orangethorpe Boulevard Transmission Main
Connecting the Yorba Linda and Placentia Systems 6767

9.12.1. Positions of Parties 6767

9.12.2. Discussion 6868

9.13. Region III Placentia System Newport Plant Boosters 6868

9.13.1. Positions of Parties 6868

9.13.2. Discussion 6969

10. Region II Issues 6969

10.1. Advanced Metering Infrastructure 6969

10.1.1. Positions of Parties 6969

10.1.2. Discussion 7171

11. Region III Issues 7171

11.1. Wrightwood System Water Supply 7171

11.1.1. Positions of Parties 7171

11.1.2. Discussion 7373

11.2. Conservation Expenses 7575

11.2.1. Positions of the Parties 7575

11.2.2. Discussion 7676

12. Region I Issues 7676

12.1. La Serena Plant Improvements Project 7676

12.1.1. Positions of the Parties 7777

12.1.2. Discussion 7979

13. Regionalized Rates 8383

14. True-Up of interim Rates 8383

15. Comments on Alternate Proposed Decision 8484

16. Assignment of Proceeding 8484

Findings of Fact 8484

Conclusions of Law 9393

ORDER 9797

Attachment A-Test Year Rate Schedule

Attachment B-General Office and COPS Summary of Earnings

Attachment C-Rate Base

Attachment D-Region II

Attachment E-Region III

Attachment F-Service List

DECISION ADOPTING TEST YEARS 2010, 2011, AND 2012 REVENUE REQUIREMENT, RATES, AND GENERAL OFFICE ALLOCATION FOR REGIONS II AND III, AND RESOLVING THE REGION I
LA SERENA PLANT IMPROVEMENT PROJECT COSTS
OF GOLDEN STATE WATER COMPANY

1. Summary

This decision authorizes a revenue requirement for Region II of Golden State Water Company (Golden State) of $124 million, a 23.1% increase for the 12 months beginning January 1, 2010. This decision also authorizes a revenue requirement for Region III of Golden State of $117.5 million, a 28.7% increase for the 12 months beginning January 1, 2010.

Under the adopted rates, the average residential customer with average water use will experience a bill increase of 18.5% in Region II and 28.1% in Region III. Rates will be adjusted for 2011 and 2012 consistent with the existing water company rate case plan. (Decision 07-05-062.)

Pub. Util. Code § 455.2 provides for interim rate relief when the Commission is unable to issue its final decision on the general rate case application in a manner ensuring the decision becomes effective on the first day of the test year in the application. The first day of the test year for this application was January 1, 2010. Golden State timely sought and was granted interim rates by a ruling dated December 23, 2009. The ruling authorized Golden State to request a memorandum account be established to track the differences between the interim rates and the final rates adopted in this decision. The surcharge to true-up the interim rates shall be collected over the remainder of this 3-year rate case cycle. Any over-collection will be refunded to customers in the form of a sur-credit and any under-collection will be collected from customers in the form of a sur-charge. In this instance, the sur-charge to true-up the interim rates and the rate increase adopted in today's decision shall be based on the methodology set forth in D.03-06-072 and collected over the remainder of this 3-year rate case cycle.

This decision adopts the partial settlements, available online at http://docs.cpuc.gov/efile/MOTION/103306.pdf, and http://docs.cpuc.gov/efile/MOTION/117288.pdf, and http://docs.cpuc.ca.gov/EFILE/MOTION/124226.htm between Golden State and the Division of Ratepayer Advocates. This decision requires Golden State to remove $1.8 million dollars associated with the La Serena plant improvement project from rate base and make a one-time refund to ratepayers of $582,832 for amounts previously collected from ratepayers.

This proceeding is closed.