29. Reasonableness Review-Job No. 5205 and Job No. 5316-Systemwide-Install Services, Plastic Service Replacement 2007 and 2008

These two projects were placed in service in 2007 and 2008. The recorded costs were $2,381,169 for 2007 and $4,018,551 for 2008.

29.1. Positions of Parties

COF states that city officials did not direct SGV to increase service replacements. COF argues SGV did not seek bids for this work even though the work in aggregate is several million dollars. COF recommends reduction of the amount to the five-year average of $1,000,000.

FUSD states that because SGV did not obtained bids for this work, all of the costs should be excluded from ratebase.

SGV represents that replacing plastic services is necessary to avoid repeated costly repairs and water leakage. SGV also represents the number of leaking service connections and connections likely to leak increased dramatically in September 2007, requiring it to hire outside contractors to install 993 service connections that year. SGV represents that its efforts to coordinate its replacements with the City of Fontana's street repair program contributed to the increase in replacements in 2008.

29.2. Discussion

As discussed previously for proposed service replacements, SGV's replacement strategy is reasonable given the problems with polyethylene pipe. It avoids multiple repairs of the same services and future repairs of other services with the same vintage of polyethylene pipe. This, in turn, avoids frequent excavation and patching of the street in the same area and resulting customer complaints. In addition, it reduces water leaks. Waiting longer to replace pipes known to cause problems just means that SGV will be called upon to make more unplanned repairs. SGV's expenditures for these projects are reasonable.