2. Background and Procedural History

Suburban provides public utility water service to 74,000 customers in its San Jose Hills and Whittier/La Mirada service areas. Communities served include Glendora, Covina, West Covina, La Puente, Valinda, Industry, Hacienda Heights, Walnut, Whittier, La Mirada, La Habra and Buena Park, as well as unincorporated areas in Los Angeles and Orange counties.

Since the late 1960s, Suburban has grown little beyond its saturated areas of certification. It added 500 customers in its acquisition of Maple Water Company (Maple) in 1997. About 7,000 new customers were added in the year 2000 when Suburban took over the water system of the City of West Covina. Suburban is a California corporation and a wholly owned subsidiary of Southwest Water Company (Southwest), a holding company. In its last general rate case in 1996, Suburban was authorized to combine its San Jose Hills and Whittier/La Mirada districts into a single district for ratemaking and Commission reporting requirements, thus making Suburban a single-district utility.

Suburban's last general rate increase occurred in January 1998, as authorized in Decision (D.) 96-04-076. Pursuant to a Commission order in Resolution No. W-4271, Suburban filed this general rate case on May 13, 2002, subsequently amending it with four supplements. On June 7, 2002, the Commission's Office of Ratepayer Advocates (ORA) protested the utility's request for increased rates. A Prehearing Conference was conducted on August 13, 2002, and Assigned Commissioner (now Commission President) Michael Peevey issued a Scoping Memo on August 19, 2002, concluding that a hearing was required. Two public participation hearings were conducted in West Covina on October 29, 2002, where the Commission heard from six ratepayers objecting primarily to what was then a proposed 45% increase in the San Jose Hills service area. By time of hearing, the company had reduced the size of the requested increase.

Four days of hearing were conducted in Los Angeles on December 3-6, 2002. The Commission heard from 11 witnesses and received 31 exhibits. A joint exhibit comparing the recommendations of Suburban and ORA was filed on January 10, 2003, and final briefs were filed on January 31, 2003, when the case was deemed submitted for Commission decision.