II. Background
The Commission regulates water service provided by Cal-Am in its seven California districts pursuant to Article XII of the California constitution and the Public Utilities Code.3 The Monterey and Felton districts are approximately 50 miles apart; Monterey is located on the coast south of Santa Cruz and Felton is located in the mountains east of Santa Cruz.
There are approximately 39,000 connections in the Monterey district, and of these about 37,600 are "main system" customers who rely on the Carmel River system and Seaside Basin as their primary water sources. The district and the entire Monterey peninsula have long-term water supply problems, which became immediate and pressing when the State Water Resources Control Board (SWRCB) issued Order No. WR 95-10 (Order 95-10) on July 6, 1995. In this order, the SWRCB (1) determined that Cal-Am did not have legal right to about 10,730 acre-feet annually of the water it was diverting from the Carmel River aquifer (about 69% of the water Cal-Am then supplied to its customers), (2) set a production limit for water that could be pumped, (3) required Cal-Am to implement environmental mitigation measures, and (4) required Cal-Am to actively pursue a replacement source of water.4 All but two of the 16 special requests in Cal-Am's Monterey application relate to its water supply issues.
Felton is a small, self-sufficient water district of approximately 1,300 customers located in a redwood rainforest. All water for the district is surface water taken from three springs. Water quality is high and the system has one relatively new treatment plant, brought online in 1997 to meet the requirements of the Surface Water Treatment Rule.5 The Felton district was acquired by Cal-Am in 2001 as part of its purchase of the water utility assets of Citizens Utilities Company of California (Citizens).
On July 26, 2005, a special election was held in Felton on Measure W, an $11 million bond proposal to acquire the water system from Cal-Am through Community Facilities District No. 1. With 64% of the registered voters casting ballots, Measure W passed 74.8% to 25.2%, and Santa Cruz County has begun negotiations with Cal-Am.6
Cal-Am's GRC applications for the Monterey and Felton districts were made pursuant to the rate case requirements for Class A water utilities in Pub. Util. Code § 455.2 (§ 455.2) and the implementing rate case plan (RCP) we adopted in D.04-06-018.7 Each Class A water utility must file a GRC application every three years. The application must have specified documentation and supporting material. For the 2005 transitional first year filings under the RCP, we adopted an expedited schedule, allowing a February 1 rather than January 1 filing date while retaining a projected completion date by the end of the calendar year; Cal-Am's Monterey and Felton applications are part of the February 2005 expedited filing schedule.
On February 16, 2005, Cal-Am filed these applications but did not serve the parties on its service list. On February 28, 2005, Cal-Am filed amended applications and served all parties. Notices of the amended applications appeared in the Commission's Daily Calendar on March 3, 2005, with protests due by April 4, 2005.8
Protests to Cal-Am's Monterey application were filed by the Independent Reclaimed Water Users Group (IRWUG), Monterey Commercial Property Owners Association (MCPOA), Monterey County Water Resources Agency (MCWRA), MPWMD, the Commission's DRA, Pajaro/Sunny Mesa Community Services District (PSMCSD), Public Citizen, and the United States Department of Defense and other affected Federal Executive Agencies (DOD).9 Protests to Cal-Am's Felton application were timely filed by Felton FLOW and DRA.10 PHC statements were filed by Cal-Am, the County of Monterey and MCWRA, DOD, and DRA.11
At the April 5 PHC, the scope of issues was discussed, a preliminary expedited procedural schedule was set and public participation hearings (PPHs) were scheduled for both Monterey and Felton. Due to problems with the accuracy of numbers in Cal-Am's applications and public notices, the ALJ directed Cal-Am to quickly perform an independent verification of both applications. On April 29, Cal-Am filed its verification, with corrected pages. Cal-Am's cover letter characterizes the corrections as being of a minor dollar amount and an attached 11-page matrix details the corrections.
PPHs were held at 2:00 p.m. and 7:00 p.m., on May 12, 2005, in Monterey and on May 13, 2005, in Felton. All sessions were well attended and transcribed, and many of the questions raised were to be responded to by Cal-Am in writing, with copies to the Commission and the service list.
On May 31, 2005, the assigned Commissioner and ALJ issued a scoping memo that consolidated the two applications for the purpose of evidentiary hearings, removed Special Requests 2 and 3 of Application (A.) 05-02-012 from consideration in this proceeding, addressed Cal-Am's assertion that the lobbying expense documents it provided DRA were confidential, and set a procedural schedule for evidentiary hearings.12
DRA, Felton FLOW, and MPWMD served testimony on June 29 and June 30, 2005, and Cal-Am served rebuttal testimony on July 14 and 15, 2005. The parties held a noticed settlement conference on July 18, 2005 and settlement discussions continued through July and early August.
Evidentiary hearings were held at the end of July and through August 10, then continued to August 17 to consider a partial settlement agreement anticipated to be filed on August 15 by Cal-Am and DRA. On September 16, an additional day of hearing was held based on a motion by Felton FLOW to reopen the record for the receipt of additional evidence. Cal-Am later also requested, and was granted, an opportunity to reopen the record to receive additional evidence; it withdrew its request by motion filed on September 20.
Pursuant to Rule 51.4 of the Commission's Rules of Practice and Procedure (Rule 51.4), comments on the proposed settlement were filed on September 20 by Felton FLOW and MPWMD and reply comments were filed by Cal-Am on October 5. Opening briefs were filed on October 11 by Cal-Am, DOD, DRA, Felton FLOW, and MPWMD.13 On October 18, reply briefs were filed by Cal-Am, DRA, Felton FLOW, IRWUG, and MPWMD. On October 21, Cal-Am and DRA filed final settlement documents.14 The hearing record was submitted on October 21, 2005. No party requests final oral argument before the Commission.15
Cal-Am timely requested and was granted interim rate relief in D.05-12-024.
3 The Commission regulates all prices and terms of service of all investor-owned water utilities operating in California.
4 Order 95-10 is Exhibit 72.
5 This plant was funded with California Safe Drinking Water Bond Act loans and is being repaid through a special surcharge.
6 Santa Cruz County Clerk's election statement is at Exhibit 24.
7 Class A utilities are investor owned water utilities with greater than 10,000 service connections. All Section (§) references are to the Public Utilities Code.
8 On March 21, 2005, an administrative law judge (ALJ) ruling memorialized the filing delays, confirmed the protest date, directed Cal-Am to file a revised procedural schedule by March 25, 2005, set a prehearing conference (PHC) for April 5, 2005, and gave interested parties until March 30 to file PHC statements addressing the revised procedural schedule and the scope of issues in the applications.
9 In 1978, the legislature created the MPWMD to provide a regional approach to managing and augmenting ground and surface water resources.
10 On April 14, 2005, Cal-Am filed a reply to the protests.
11 After the close of the record, the Office of Ratepayer Advocates changed its title to Division of Ratepayer Advocates (DRA). We use DRA throughout this decision.
12 In addition, the scoping memo set dates for Cal-Am to request interim rates and parties to request final oral argument. Special Requests 2 and 3 seek cost recovery for the Coastal Water Project and are being addressed in a separate proceeding.
13 Cal-Am filed a motion for acceptance of late-filed brief on October 12, 2005, and we grant the motion here.
14 Pursuant to a request by the assigned ALJ at the August 17 hearings, Cal-Am and DRA submitted their earlier August 15, 2005 settlement agreement as three separate and severable agreements. These agreements show the final construction costs for Felton's Highway 9 project and the impact of D.05-09-004 on the rate impacts shown in the Felton settlement.
15 As a procedural matter, we note that the transcript does not show Exhibits 107 through 115 as entered into evidence. This is an administrative oversight, and we receive these exhibits into evidence here.
