23. Reasonableness Review-Job No. 4901-Linden Avenue North of Casmalia Street Install 42-Inch Pipeline

SGV installed 137 feet of 42-inch pipe. The project was placed in service in 2007 at a recorded cost of $3,460,376.

23.1. Positions of Parties

DRA says the pipeline was installed to accommodate improvements to Sandhill.¹⁴ DRA argues that because Sandhill is unable to process more than 20 million gallons of water per day the additional capacity provided by the pipeline is not needed. DRA recommends the costs be excluded from ratebase. DRA offers, as an alternative, the installation of booster pumps on the existing line.

COF says, since the pipeline was installed to accommodate improvements to Sandhill that were not warranted, the pipeline should not have been built. COF further argues that since the pipeline is related to the Sandhill project, its cost should have been included in the $35 million cap imposed on Sandhill in D.07-04-046. COF also states the pipeline should have been included in the April 2005 Master Plan but was not.

COF points out that SGV has no written policy on bidding and that the selected contractor for this project was the last bidder and always got awarded pipeline projects whether bids were solicited or not. For all of the above reasons, COF recommends the costs of the pipeline be disallowed.

FUSD says the usefulness of the pipeline is dependent on the output from Sandhill. FUSD argues that, unless SGV can demonstrate that Sandhill can produce more than 18.7 million gallons per day of water, the pipeline is overbuilt and should be excluded from ratebase.

SGV states that the existing 30-inch pipeline for transporting water from wells in the Lytle Creek Basin and Sandhill to Plant F13 for distribution to its service area had insufficient capacity to deliver full production from both sources even prior to the Sandhill upgrade. SGV also states that the 42-inch pipeline was intended to provide the needed additional capacity for water from wells in the Lytle Creek Basin and upgraded Sandhill. SGV represents that it also provides needed contact time for disinfection of water from both sources.

23.2. Discussion

The record shows that, on some occasions when water was available from both Sandhill and the Lytle Creek well fields, one or both sources had to be cut back to avoid exceeding the capacity of the 30-inch pipe line. The record also shows that, on some occasions, flow rates in the 30-inch pipeline had to be reduced to achieve sufficient disinfection contact time for Lytle creek water treated at Sandhill. The 42-inch pipe was necessary even without the Sandhill upgrades. Thus, the project was necessary and is reasonable.

¹⁴ Improvements to Sandhill are addressed in Section 31.