4. Comments on Proposed Decision
The proposed decision of ALJ Walwyn 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. Comments were timely filed on April 6, 2012 by Joint Applicants and on April 9, 2012 by DRA. Reply comments were filed on April 16, 2012 by Joint Applicants and DRA.
In the proposed decision mailed on March 19, 2012, rather than adopting parties' proposals, the assigned Administrative Law Judge proposed smaller adjustments to the WRAM/MCBA amortization schedule and also proposed a percentage cap on each year's surcharge of 7.5% of the last authorized revenue requirement. These proposals were made because of a concern that the mechanisms are not working as intended, for reasons that are not clear, and that the high under-collections experienced in many districts lead to substantial surcharges being passed through to customers without notice in Tier 1 Advice Letters.
In comments on the proposed decision, the joint applicants oppose the proposed amortization schedule and surcharge cap, as well as the proposed decision's focus on the substantial customer bill impacts of the surcharges rather than focusing on the financial accounting and cash flow impacts to applicants of a delay in collecting these account balances, as well as any "intergenerational equity" problem for ratepayers that may occur under longer amortization periods. In its comments, the Division of Ratepayer Advocates (DRA) supports the proposed decision's recommendations and finds the surcharge cap a reasonable safeguard for customers.36
Based on the comments, the proposed decision is revised to allow applicants to address existing large under-collections under their proposed alternative amortization schedule while requiring that (1) a more vigorous review of the WRAM/MCBA mechanism and options to the mechanism, as well as sales forecasting, be conducted in each applicant's pending or next GRC proceeding and (2) following that GRC review, a cap be placed on the total WRAM/MCBA surcharges of 10% of the last authorized revenue requirement. The revised amortization schedule and GRC effective dates for each applicant are shown at revised Appendix A. To implement these revisions, we allow advice letter filings for the 2011 WRAM/MCBA account balances to be made within 30 days after adoption of a decision in this proceeding or, where the applicant has already filed its advice letters, to allow applicant to update its filings based on a decision in this proceeding.
In addition, minor changes are also made to add clarifying language to the decision. While both applicants and DRA object to the decision's finding that under the WRAM/MCBA mechanisms applicants may have an incentive to make or to agree to high GRC sales forecasts, this is an observation on how the mechanism works, not a finding on the cause of the large under-collections. This observation should be given further examination in the upcoming GRCs.37
36 DRA's proposed safeguard is for the Commission to implement a formal review process when the annual WRAM/MCBA under-collection is greater than 15% of the last authorized revenue requirement.
37 In its comments on the proposed decision, DRA disagrees that the WRAM/MCBA mechanism may provide applicants an incentive to make or to agree to high GRC sales forecasts and states that in recent GRCs for all applicants, adopted or proposed settlements have reflected the lowest sales forecasts proposed by any party in the case.
