Comments on Proposed Decision

The proposed decision of the Administrative Law Judge (ALJ) in this matter was mailed to the parties in accordance with Section 311 of the Public Utilities Code and comments were allowed under Rule 14.3 of the Commission's Rules of Practice and Procedure. Timely comments and reply comments were filed by Golden State and DRA.

Both parties' opening comments express concern that the proposed decision did not clearly distinguish the prepayment as a capacity charge, distinct from a volumetric commodity charge for water. It is true that the payment is for capacity and not production, but both comments ignore the principal concern in the proposed decision which is the cost is prepaid for multiple years and not paid annually. Nothing in the record justified the need to prepay and burden ratepayers with a rate base treatment for a prepayment of capacity costs as a part of the water purchase agreement.

DRA comments that the proposed decision used an "out-of-date" interest cost and that issue is addressed in changes to the decision. The proposed decision used the interim forecast interest rate for the balancing account. For 2011 interest on the amortization Golden State must use the actual incremental cost of borrowing during the life of the company's Temporary Interest Rate Balancing Account that will be determined in the balancing account's reasonableness review in A. 11-05-004, which is Golden State's pending cost of capital application for a base year 2012. Thereafter the Company must use the adopted incremental cost of debt in A. 11-05-004 until subsequently modified by the Commission.

Based on the comments the decision is modified to eliminate the requirement that Golden State re-file the water purchase agreement with Contra Costa to eliminate the term "lease." What matters is our ratemaking treatment, not the internal characterization of the transaction. The core of the transaction is that Golden State prepaid an expense and did not made a rate base investment, therefore our ratemaking reflects that basic truth.

To the extent that any comments only reargue litigation positions they have been given no weight. Other minor changes have been made based on our review and consideration of the comments.