4. Discussion

The structure of Park's proposed discount program for low-income customers is consistent, in all aspects other than the surcharge rate design, with the CARW programs previously authorized by the Commission for Apple Valley and San Gabriel. To this extent, we find Park's proposal to be reasonable. However, we reject Park's proposed discount amount and volumetric rate design for the subsidy surcharge.

4.1 Surcharge Rate Design

Neither the record of this proceeding nor Park's policy arguments persuade us to deviate from the fixed rate surcharge approach previously adopted by the Commission for the San Gabriel and Apple Valley CARW programs. The fact that DRA has proposed a volumetric surcharge rate design with the support of applicants in other GRCs does not inform this record of the merits of the proposal. The fact that, under a fixed rate surcharge approach, a residential customer who is slightly over the CARW eligibility requirements will pay the same as a large industrial user does not in itself lead to the conclusion that a fixed rate surcharge is inequitable. Regardless of whether the surcharge rate is volumetric or fixed, the eligibility requirement will by definition place barely ineligible customers in the same financial situation as clearly ineligible (high-income) customers, assuming equal consumption. Indeed, a volumetric surcharge might as easily be said to "inequitably" impact a barely ineligible customer who might necessarily consume more water than a clearly ineligible (high-income) customer.

Finally, the record does not support a finding that a volumetric surcharge will promote water conservation, especially in view of the size of the surcharge relative to the customer's overall bill. Park indicates that the average residential customer consumes 13 Ccf per month; the proposed surcharge for the average residential customer would constitute only 2.73% of its bill, or $1.22. More than doubling consumption to 30 Ccf would increase the surcharge to only 3.38% of the total bill, or $2.82. The incremental impact of the proposed surcharge does not on its face appear to be significant enough to create an incentive to minimize water consumption.

We therefore reject the proposed volumetric surcharge, and adopt a flat rate surcharge consistent with our previous decisions. In so doing, we do not determine that a volumetric surcharge is categorically without merit. We do, however, require analytic support for deviating from the precedent of a flat rate surcharge, which was lacking from the record of this proceeding. Such analysis should consider, for example, the relative impact of the competing surcharge rate designs by reference to household size and to income levels.

4.2 Discount Amount

Park proposes a discount equal to 25% of the 5/8" x 3/4" meter service charge, or $3.76, for eligible residential customers. In contrast, the Commission approved a $5.00 monthly discount for San Gabriel, with an estimated participation rate of 45% and funded through a flat surcharge rate of $2.32 (D.05-05-015); the Commission approved a $4.88 monthly discount for Park's affiliate Apple Valley, with a participation rate of 31% and funded through an estimated flat surcharge rate of $2.27 (D.05-12-020); and Park's subsidiary Mountain Water Company, located in Montana, currently offers a low-income discount program with a $4.90 discount for customers who qualify for the Low Income Energy Assistance Program.

Park states that it arrived at its recommended 25% discount (or $3.76) after comparing its impact on non-qualifying customers ($1.89, assuming a flat rate surcharge) to the impact of a 50% discount (or $7.51) on non-qualifying customers ($3.78, assuming a flat rate surcharge). Park states that, after discussions, Park, the Commission's Water Division and DRA concluded that a 25% discount provided relief to low-income customers at an appropriate level of subsidy from the typical non-qualifying residential customers.

Park provided the flat rate surcharge amounts necessary to fund discount amounts of $5.00, $4.75, $4.50, $4.25, and $4.00, respectively. We conclude that a $4.50 discount, funded through a flat surcharge rate of $2.27, represents a more reasonable subsidy amount than that proposed by Park. It provides greater relief to low-income customers without unduly burdening non-qualifying residential customers, consistent with our previously adopted programs.