Discussion
As required by Pub. Util. Code § 454, Cal-Am bears the burden of justifying the proposed ratemaking treatment for the Aquifer Storage and Recovery Project Phase 2, Seaside Well ASR-4, and the fisheries, riparian vegetation and wildlife, and lagoon vegetation and wildlife components of the Carmel River mitigation program, and of demonstrating that the proposed rates will be just and reasonable as required by § 451. As set forth below, Cal-Am has met its burden of justifying its proposals, and we approve the Seaside
Well ASR-4 and the Carmel River mitigation agreement.
The urgent need to increase water supply in Cal-Am's Monterey district is well-documented.4 In its testimony supporting its application, Cal-Am stated that this additional well is necessary to allow Cal-Am to capture the full 2,900 acre-feet per year it is allowed to divert from the Carmel River
pursuant to Permit 208008C. This permit allows Cal-Am during the winter period - December 1 to May 31 of the succeeding year - to divert from the Carmel River for injection into the Seaside Basin up to 2,900 acre-feet. Cal-Am stated that it requires a second well at the Seaside Middle School site to accomplish this diversion reliably.
No party disputed Cal-Am assertions justifying Well ASR-4, and DRA supports the project.
Cal-Am presented cost forecasts of $4.2 million for Well ASR-4, with a projected completion date of 2013. To expedite the project for a projected completion date in 2012, Cal-Am forecasted total costs of $4.7 million. DRA has examined these cost forecasts and supports the estimates and proposed ratemaking.
Cal-Am has presented detailed cost forecasts for the record, which have been reviewed and are supported by DRA. Therefore, we conclude that Cal-Am has met its burden of justifying the costs of Well ASR-4.
Cal-Am requested a memorandum account, with costs properly recorded therein to be transferred to rate base via a Tier 2 advice letter to be filed upon placing Well ASR-4 into service. The amount authorized to be recorded in the memorandum account must be reasonable and shall not exceed $4.7 million. Should Cal-Am's reasonable and actual costs exceed $4.7 million, Cal-Am may request Commission authorization to include such costs in revenue requirement by a Tier 3 advice letter or the next general rate case. The memorandum account will accrue interest at the 90-day commercial paper rate.
We conclude that Cal-Am has met its burden of showing that the proposed ratemaking for Well ASR-4 is just and reasonable.
Turning now to the portions of the District's mitigation program for which Cal-Am is responsible,5 Cal-Am and the District have entered into a written agreement pursuant to which the District will continue these activities and
Cal-Am will reimburse the District for its costs up to $1.6 million per year. We therefore, find that Cal-Am has justified these costs but will also cap this amount pending further detailed review of the direct costs, indirect allocations, management and administrative costs, and overhead allocations in Cal-Am's next general rate case. We will also approve Cal-Am's proposed recovery of these costs by continuing its existing District surcharge mechanism with the amounts adjusted to reflect the change in costs being recorded.
Therefore, Cal-Am is authorized to collect a surcharge in its Monterey district for Carmel River mitigation program costs included in the agreement with the District. Cal-Am reports that it has been recording in its Cease and Desist Order Compliance memorandum account payments to the District since May 24, 2011, the effective date of its agreement with the District. Cal-Am proposed to transfer all such amounts recorded in the Cease and Desist Order memorandum account to the existing District fee surcharge balancing account, as of June 30, 2012.6 The amounts so transferred will be amortized and collected from ratepayers over 12 months. Thus, for October 2012 to March 2013 both the existing District fee surcharge and the Carmel River mitigation program costs will be simultaneously collected, with a resulting cumulative surcharge of 15.37%. Thereafter, all mitigation program payments will be recorded directly in the District surcharge balancing account, amortized and collected from ratepayers, with a surcharge of 5.42%, through December 2014. In this way,
Cal-Am will record and recover annual costs for the Carmel River mitigation program through December 2014.
4 See, e.g., D.09-07-021.
5 See D.11-03-035 at 15 - 16.
6 Pursuant to Advice Letter 935, Cal-Am is collecting a surcharge of 12.5% in its General Metered Service Tariff as Special Condition 24. The Carmel River mitigation program costs approved in today's decision will be added to this balancing account and recovered through this surcharge.
