2. Background
This joint application was submitted on September 20, 2011 by California-American Water Company (Cal-Am), California Water Service Company (Cal Water), Golden State Water Company (Golden State), Park Water Company (Park) and Apple Valley Ranchos Water Company (Apple Valley) (Applicants), all Class A water utilities regulated by the Commission.3 Applicants request modification of decisions adopting the conservation-related balancing accounts that decouple revenues from water sales - the Water Revenue Adjustment Mechanisms and the Modified Cost Balancing Accounts (WRAM/MCBA), as well as other Commission processes related to amortizing these balancing accounts.
In each of the WRAM/MCBA decisions shown in the caption of this proceeding, the Commission adopted an annual Advice Letter filing process to recover or refund the WRAM/MCBA balances but did not address the amortization time period over which the balances should be recovered/refunded. Therefore, the Commission's Division of Water and Audits (DWA) has applied the amortization period adopted by the Commission in Rulemaking (R.) 01-12-009, a generic proceeding on procedures for water utilities' offset rate increases and balancing accounts;4 this amortization schedule is also reflected in DWA's Standard Practice U-27W. Applicants now propose a shorter period within which to amortize WRAM/MCBA balances.
Prior to the December 3, 2010 prehearing conference (PHC), applicants were directed to provide their actual WRAM/MCBA balances for 2008 and 2009, as well as an estimate of 2010 balances. Each applicant's balances for these periods, by district, is presented in Appendix C of this decision, and reflect generally revenue under-collections, with approximately one-third of the districts reporting WRAM/MCBA under-collections that ranged from 10% to 27% of annual revenue.5
At the above PHC, participants discussed whether customers should have been provided notice of this application (under Rule 3.2 of the Commission's Rules of Practice and Procedure) since a change in amortization periods would result in a significant change in customer rates in some instances. After the parties briefed the applicability of Rule 3.2, the presiding officer (Administrative Law Judge (ALJ) Christine M. Walwyn) ruled on December 20, 2010 that customer notice is required. On May 4, 2011, pursuant to Rule 3.2(d), Apple Valley, Cal Water, Golden State and Park submitted proof of customer notice. Cal-Am submitted its proof on May 23, 2011.6
While waiting for customer notice to be completed, applicants prepared additional data on (1) possible causes of the high WRAM/MCBA balances, (2) options for dealing with the balances, and (3) why adopted safeguards had not alerted the Commission to this issue sooner.
On January 24 and February 17, 2011, additional PHCs were held to discuss preparation of the data identified above, and on April 15, the applicants submitted the requested material. Due to the very high WRAM/MCBA balances in Cal-Am's Monterey District, and Cal-Am's projection that high balances would continue to accumulate throughout 2011, Cal-Am and the Commission's Division of Ratepayer Advocates (DRA) submitted proposals for separately addressing the Monterey District, and a PHC was scheduled for April 25, 2011 to discuss this.
On June 8, 2011, the assigned Commissioner and ALJ issued a ruling and scoping memo (Scoping Memo) that bifurcated the proceeding in order to separately address the very high 2010 and 2011 WRAM/MCBA balances in Cal-Am's Monterey District.
On June 23, 2011, following a June 13th PHC addressing the Monterey District, Cal-Am moved to withdraw from this proceeding and instead litigate its WRAM amortization issues in its pending general rate case (GRC) proceeding, Application (A.) 10-07-007. DRA opposed this motion. Essentially, DRA and Cal-Am differ on whether this proceeding is best suited to deal with the complex and unique issues regarding the Monterey District.
On September 8, 2011, the assigned ALJs in this proceeding and in the GRC conducted a joint PHC. Based on the finding that the GRC proceeding may more comprehensively address Cal-Am's WRAM/MCBA mechanisms, particularly in the Monterey District, Phase 2 of the GRC will include those issues and Cal-Am's motion to withdraw from this proceeding will be granted. Consequently, today's decision will only address the application's proposals as they apply to Apple Valley, Cal Water, Golden State, and Park.
In response to the April 15, 2011 data submitted by applicants, DRA asserted that it could do a limited analysis within 90 days that would allow the Commission to consider the specific amortization issues requested here and then do a comprehensive analysis of the data and the WRAM/MCBA mechanisms in a later proceeding. Accordingly, the June 8, 2011 Scoping Memo set a hearing schedule based on DRA's requested 90 day review period, and directed that a more comprehensive review of the WRAM/MCBA mechanisms be done in upcoming GRCs.
Evidentiary hearings were held on September 28 and 29, 2011. Applicants and DRA filed opening briefs on October 17, 2011 and reply briefs on October 24, 2011. On February 1, 2012, an ALJ ruling reopened the record for the limited purpose of directing applicants to submit information required under Rule 16.4(b) of the Commission's Rules of Practice and Procedure. Applicants timely complied on February 8, 2012 and DRA filed comments on February 13, 2012. The proceeding was re-submitted on February 13, 2012.
3 A Class A water utility serves over 10,000 customers.
4 See Appendix A of Decision (D.) 03-06-072, issued June 19, 2003.
5 These summaries have been updated to reflect the final 2009 and 2010 balances, as submitted in applicants' Advice Letter filings, rather than the initial estimates provided in January 2011.
6 A limited number of e-mails and letters were received from customers, all generally opposing rate increases. No public participation hearings were held.
