27. Reasonableness Review-Job No. 5111-Walnut Avenue West of Sierra Avenue- Install 24-Inch Pipeline

SGV installed 5,379 feet of 24-inch pipe, 673 feet of 8-inch pipe and one 6-inch fire hydrant. The project was placed in service in 2006 at a recorded cost of $1,158,602.

27.1. Positions of Parties

COF recommends the costs be excluded from ratebase because the pipeline is not a replacement, was not put out for competitive bid and was not included in the April 2005 Master Plan. COF points out that there is no documentation as to the need for the pipeline, the size of the pipeline or any explanation as to how the fact that the City of Fontana was doing work on the street justifies the project.

FUSD recommends that the costs be excluded from ratebase because the project was not put out for competitive bid and was not included in the April 2005 Master Plan.

SGV states that upon learning of the City of Fontana's plans to pave and reconstruct curbs and gutters on Walnut Avenue, it decided to install the pipeline. The pipeline was designed to deliver a reliable water supply to the F16 reservoir, which is the primary water source for the F15 reservoir that supplies water to more than 9,500 customers in the northern part of SGV's service area. SGV states that it had no specific plan for the pipeline before it decided to build it, but had the intention of doing so.

27.2. Discussion

In this case, SGV explained that the City of Fontana's decision to pave and reconstruct curbs and gutters on Walnut Avenue was not anticipated in the Master Plan. SGV states the pipeline was designed to deliver a reliable water supply to the F16 reservoir, which is the primary water source for the F15 reservoir that supplies water to more than 9,500 customers in the northern part of SGV's service area.

The fact that this project was not in the Master Plan does not mean that it was necessarily unreasonable. However, the fact that the project was not included in the Master Plan tends to support a conclusion that it was not needed. SGV has the burden of showing the project was needed and the cost was reasonable. SGV provided no documentation addressing the need for the project.

When constructing a pipeline, whether a replacement or a new installation, coordination with the local government that will be doing street work in the same area may reduce costs. However, that is not sufficient justification for the project.

General claims that a project will enhance reliability without a convincing demonstration that it will do so is not sufficient to meet the burden of proof. SGV provided no demonstration of how this project will increase reliability or whether an increase in reliability is even needed. Since SGV has had ample opportunity to meet its burden of proof regarding this project and has not done so, it is excluded from ratebase.