Background

CalWater, a California corporation, is a wholly owned subsidiary of California Water Service Group, which also includes Washington Water Service Company, New Mexico Water Service Company, Hawaii Water Service Company, and CWS Utility Services. As California's largest Commission-regulated water utility, it serves approximately 430,000 customers in 24 districts throughout the state. Under the Commission's Rate Case Plan (RCP) for Class A Water Utilities, CalWater files general rate case (GRC) applications on a three-year cycle for eight districts each year. This proceeding addresses test year 2006/2007 and escalation years 2007/2008 and 2008/2009 for these eight districts: Antelope Valley, Bear Gulch, Dominguez-South Bay, Hermosa-Redondo, Kern River Valley, Marysville, Palos Verdes, and Redwood Valley.¹

CalWater filed these applications on August 8, 2005, and the Commission in Resolution ALJ 176-3157 preliminarily determined them to be ratesetting proceedings expected to go to hearing. Assigned Administrative Law Judge (ALJ) James McVicar held a prehearing conference on September 9, 2005 at which he consolidated all eight applications. Assigned Commissioner John Bohn's September 26, 2005 scoping ruling confirmed the category and need for hearing, defined the issues, established a schedule, and designated ALJ McVicar as the principal hearing officer and thus the presiding officer.

ALJ McVicar conducted public participation hearings during October and November 2005 in Lancaster, Kernville, Lake Isabella, Marysville, Menlo Park, Lucerne, Guerneville, and Redondo Beach, a second prehearing conference on November 30 at which the parties reported on their efforts to reach agreements before finalizing their positions, and six days of evidentiary hearing in San Francisco between January 24 and January 31, 2006.² The proceeding was submitted on receipt of closing briefs due March 9, 2006.

CalWater's applications request the rate increases shown in Table 1 to counter the effects of substantial increases in major expense items and plant investment since the last GRCs for these districts.³ The last two columns show our adopted changes for test year 2006/2007. Appendix D compares customer bills at current and adopted rates. The RCP requires CalWater to list for each district the five most significant factors driving the increases. Those factors having the greatest effect across all districts are increased plant investments and rate base, higher requested rate of return, increased pension and benefits and personnel costs in the general office,⁴ increased district payrolls, and increased pumping and/or purchased water expense.

¹ Redwood Valley District consists in turn of three separate ratemaking areas: Lucerne, Redwood Unified, and Coast Springs.

² In granting the intervenors other than DRA party status, the assigned ALJ limited their participation to matters potentially affecting their own ratemaking areas. Parties Young and Pareas were limited to matters affecting Redwood Valley's Coast Springs rate area; party Miller to matters affecting Redwood Valley's Unified rate area; party Lucerne Community Water Organization (LCWO) to matters affecting Redwood Valley's Lucerne rate area; and party Leona Valley Cherry Growers' Association (LVCGA) to matters affecting Antelope Valley District.

³ Requested and adopted increases are shown for 2006/2007. For 2007/2008 and 2008/2009, the increases shown as requested are only estimates based on April 2005 escalation factors. The application-requested columns include the rate effects of major plant addition projects to be filed later by advice letter. Those rate effects are not reflected in the adopted figures. In addition, CalWater seeks Commission approval to amortize balances in various balancing and memorandum accounts. The rate effects of those additional requests are also not included in the Table 1 figures.

⁴ This proceeding does not adjudicate CalWater's general office costs overall, although it does examine general office synergy savings resulting from CalWater's merger with Dominguez Services Corporation. Most general office costs were last determined in Decision (D.) 05-07-022.