ALJ/JCM/eap DRAFT Item 2
9/6/2001
Decision PROPOSED DECISION OF ALJ MCVICAR (Mailed 8/7/2001)
BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA
Application of Citizens Utilities Company of California (U-87-W), a California Corporation, and California-American Water Company, a California Corporation, for Each of the Following Orders: 1. Authorizing Citizens Utilities Company of California to Sell and to Transfer All of Its Water Utility Assets and Indebtedness to California-American Water Company; 2. Authorizing California-American Water Company to Acquire All of the Water Utility Assets and Indebtedness of Citizens Utilities Company of California and thereafter to Engage in and Carry on the Water Utility Business and Service to the Customers of Citizens Utilities Company of California; 3. Authorizing Citizens Utilities Company of California to Withdraw from the Water Utility Business; and 4. For Related Relief. |
Application 00-05-015 (Filed May 16, 2000) |
|
And Related Matter. |
Application 00-05-016 |
(See Appendix A for Appearances)
OPINION AUTHORIZING ACQUISITION
TABLE OF CONTENTS
Title Page
OPINION AUTHORIZING ACQUISITION 1
Summary 2
Background 2
Overview 2
The CalAm/Citizens Application 2
The CalAm/San Jose Water Application 3
The Parties and Their Positions 4
California-American Water Company 4
Citizens 7
Advocates for the Public Interest 8
Office of Ratepayer Advocates 10
Montara Sanitary District 12
Other Parties 13
The Proceeding: 14
The Proposals 15
The Application Sharing Proposal 15
Modifications During Hearings 18
The Alternative Sharing Proposal 20
The API Counterproposal 22
Discussion 23
Purchase Price, Acquisition Adjustment, and the Importance of § 2720 23
Standard of Review 26
Ratepayer Benefits 29
Ratepayer Risks 41
Overestimated Synergies 41
Overestimated Stayout Benefits 43
Service Degradation 43
Ratemaking Complexity 44
Premium Regeneration 47
Better Future Offer 49
§854(c) Criteria 50
§854(c)(1): Maintain or improve the financial condition of the
resulting public utility doing business in the state 51
§854(c)(2): Maintain or improve the quality of service to public utility ratepayers in the state 52
§854(c)(3): Maintain or improve the quality of management of
the resulting public utility doing business in the state 53
§854(c)(4): Be fair and reasonable to affected public utility
employees, including both union and nonunion employees 54
§854(c)(5): Be fair and reasonable to the majority of all
affected public utility shareholders 55
§854(c)(6): Be beneficial on an overall basis to state and local
economies, and to the communities in the area served by the
resulting public utility 55
§854(c)(7): Preserve the jurisdiction of the commission and the
capacity of the commission to effectively regulate and audit
public utility operations in the state 56
§854(c)(8): Provide mitigation measures to prevent significant
adverse consequences which may result 57
Montara Sanitary District's Recommendations 57
Conclusions 61
Other Matters 63
Environmental Review 63
Health and Safety Code Compliance 63
Comments on the Proposed Decision 63
Findings of Fact 64
Conclusions of Law 68
ORDER 70
APPENDIX A - List of Appearances
Summary
Under Application (A.) 00-05-015, Citizens Utilities Company of California (Citizens) is authorized to sell and transfer, and California-American Water Company (CalAm) is authorized to acquire, all of Citizens' California water utility assets and its California Safe Drinking Water Bond Act Loan indebtedness. The authority granted is subject to various ratemaking-related conditions proposed by the applicants in their alternative sharing proposal tendered during the final days of hearing in the proceeding. Upon completion of the transfer, CalAm shall assume all of Citizens' water public utility obligations.
Separate but related A.00-05-016 requesting authority to merge San Jose Water Company (San Jose Water, or SJW) into CalAm is dismissed without prejudice at the request of the applicants.
