ALJ/DUG/eam/gd2 Date of Issuance 12/28/2011

Decision 11-12-034 December 15, 2011

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

In the matter of the Application of the GOLDEN STATE WATER COMPANY (U133W) for an order authorizing it to increase rates for water service by $2,911,400 or 29.9% in 2011and by $321,200 or 2.5% in 2012 in its Arden Cordova Service Area; to increase rates for water service by $1,782,400 or 33.2% in 2011 and by -$66,200 or -0.9% in 2012 in its Bay Point Service Area; to increase rates for water service by $409,100 or 22.6% in 2011 and by $23,300 or 1.0% in 2012 in its Clearlake Service Area; to increase rates for water service by $1,467,000 or 48.5% in 2011 and by $50,100 or 1.1% in 2012 in its Los Osos Service Area; to increase rates for water service by $1,647,900 or 38.8% in 2011 and by $343,200 or 5.9% in 2012 in its Ojai Service Area; to increase rates for water service by $2,350,700 or 25.2% in 2011 and by $363,200 or 3.1% in 2012 in its Santa Maria Service Area and; to increase rates for water service by $799,500 or 6.5% in 2011 and by $213,000 or 1.6% in 2012 in its Simi Valley Service Area.

Application 10-01-009 (Filed January 13, 2010)

DECISION ADOPTING A SETTLEMENT WHICH REQUIRES GOLDEN STATE WATER COMPANY TO MAKE REFUNDS TO CUSTOMERS, PERMANENTLY REDUCE RATE BASE, REDUCE THE ARDEN-CORDOVA MEMORANDUM ACCOUNT, PAY A FINE, ENGAGE AN INDEPENDENT AUDITOR
FOR THREE SPECIFIC AUDITS OF INTERNAL CONTROL FOR PROCUREMENT, AND, IN ADDITION TO THE TERMS OF THE SETTLEMENT, REQUIRES SPECIFIC EVIDENCE AND TESTIMONY
IN THE NEXT TWO GENERAL RATE CASES

1. Summary

This decision adopts a settlement,¹ between Golden State Water
Company (Golden State) and the Commission's Division of Water and Audits (Water & Audits), and imposes one further requirement. The settlement resolves an allegation that Golden State did not exercise reasonable management oversight, and failed to apply adequate internal control of the costs of specific projects and related contracts primarily in Region 1. Because of these failures ratepayers may have paid too much for water service in authorized rates.

As a result of the settlement Golden State will refund $9.5 million to the customers of Region 1 (with a small portion going to customers in Regions 2
and 3) and will permanently reduce rate base by $2.5 million which results in lower rates in the future. Golden State will reduce the balance in its existing Arden-Cordova Memorandum Account by $500,000, and proportionately reduce the surcharge used to collect the account's remaining balance. The settlement requires three subsequent independent audits and reporting to both Water & Audits and the Division of Ratepayer Advocates. Finally, Golden State will pay a fine of $1 million to the State of California's general fund for not informing the Commission of internal control failures. In addition to the terms of the settlement, we order Golden State to address its ongoing compliance with internal control in its next two general rate cases, the first of which is anticipated to be filed for test year 2016.

This proceeding is closed.

¹ The settlement is available at: http://docs.cpuc.ca.gov/efile/MOTION/138677.pdf.