VII. True-Up of Interim Rates Adopted in D.05-12-024

In D.05-12-024, we found it in the public interest to grant interim rate relief to Cal-Am for the Monterey and Felton districts. Consistent with Section 455.2, the interim rate increase is based on the rate of inflation as compared to existing rates for each district, is subject to refund, and will be adjusted upward or downward, back to January 1, 2006, based on the final rates adopted by the Commission in this decision.

Based on our decision today, there will be a surcharge for the period since January 1, 2006. Cal-Am should calculate this surcharge amount based on the actual loss or gain in each district's revenue, determined by applying the rate differential to the actual quantities of water sales and the actual number of customers.

For the Monterey district, Cal-Am should recover this surcharge over the following 12 months. For the Felton district, Cal-Am should recover the surcharge over a period consistent with our 50% rate cap. For both districts, Cal-Am should earn interest at the 90-day commercial paper rate on the surcharge balance.