III. Procedural Background

This application was assigned to Commissioner Duque and Administrative Law Judge (ALJ) Econome. The Office of Ratepayer Advocates (ORA), the City of Thousand Oaks (Thousand Oaks), and Montara Sanitary District (MSD) filed timely protests. The Commission held a prehearing conference on April 4, 2002, where Commissioner Duque designated ALJ Econome as the principal hearing officer. The April 11, 2002 Scoping Memo of the Assigned Commissioner and ALJ confirmed this designation.

The Commission held public participation hearings in Monterey on June 4, 2002, in Montara on June 17, 2002, in Newbury Park on June 20, 2002, and in Sacramento on July 8, 2002.

The Commission held evidentiary hearings from July 29 through August 9, 2002, during which applicants, the Utility Workers Union of America AFL-CIO (Union), the protestants listed above, and the City of San Diego (San Diego) participated. The Union submitted testimony supporting the application. ORA, MSD, San Diego, and Thousand Oaks each opposed the application for varying reasons. Generally, these parties argued that there were either insufficient benefits to the proposed transaction, or unreasonable risks, or both. Some of the risks these parties enumerated include: (a) increased business and financial risk; (b) diminished local control and accountability; (c) concern that Cal-Am will indirectly pass through in rates the acquisition premium or will decrease service; and (d) diminished corporate focus on water issues when the water portion of the business may have to compete with potentially more lucrative lines of business.

Shortly before hearings began, ORA and applicants participated in settlement discussions. A settlement conference was properly noticed and held on July 29 and 30. On July 31, ORA, applicants, and the Union signed a settlement agreement which they filed with the Commission on August 1, 2002 (settlement), together with a motion requesting Commission approval of the settlement. Applicants served supplemental testimony further explaining the settlement terms, and the settling parties were subject to cross-examination on August 6. On that day San Diego, which had opposed the application, entered into a stipulation which caused it to withdraw its opposition and support the settlement. MSD and Thousand Oaks continued their opposition.