STATE OF CALIFORNIA ARNOLD SCHWARZENEGGER, Governor

PUBLIC UTILITIES COMMISSION

505 VAN NESS AVENUE

SAN FRANCISCO, CA 94102-3298

Agenda ID #3339
Ratesetting

March 12, 2004

TO: PARTIES OF RECORD IN APPLICATION 03-01-034 ET AL.

This is the proposed decision of Administrative Law Judge (ALJ) John T. Thorson previously designated as the principal hearing officer in this proceeding. It will not appear on the Commission's agenda for at least 30 days after the date it is mailed. This matter was categorized as ratesetting and is subject to Pub. Util. Code § 1701.3(c). Pursuant to Resolution ALJ-180 a Ratesetting Deliberative Meeting to consider this matter may be held upon the request of any Commissioner. If that occurs, the Commission will prepare and mail an agenda for the Ratesetting Deliberative Meeting 10 days before hand, and will advise the parties of this fact, and of the related ex parte communications prohibition period.

The Commission may act at the regular meeting, or it may postpone action until later. If action is postponed, the Commission will announce whether and when there will be a further prohibition on communications.

When the Commission acts on the proposed decision, it may adopt all or part of it as written, amend or modify it, or set it aside and prepare its own decision. Only when the Commission acts does the decision become binding on the parties.

Parties to the proceeding may file comments on the proposed decision as provided in Article 19 of the Commission's "Rules of Practice and Procedure." These rules are accessible on the Commission's website at http://www.cpuc.ca.gov. Pursuant to Rule 77.3 opening comments shall not exceed 15 pages. Finally, comments must be served separately on the ALJ and the assigned Commissioner, and for that purpose I suggest hand delivery, overnight mail, or other expeditious method of service.

/s/ ANGELA K. MINKIN

Angela K. Minkin, Chief

Administrative Law Judge

ANG:jva

Attachment

ALJ/JET/jva DRAFT Agenda ID #3339

Ratesetting

Decision PROPOSED DECISION OF ALJ THORSON (Mailed 3/12/2004)

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Application of California Water Service Company (U 60 W) for an Order Authorizing it to increase Rates for Water Service in its Palos Verdes District.	Application 03-01-034 (Filed January 31, 2003)
Application of California Water Service Company (U 60 W) for an Order Authorizing it to Increase Rates for Water Service in its Oroville District.	Application 03-01-035 (Filed January 31, 2003)
Application of California Water Service Company (U 60 W) for an Order Authorizing it to Increase Rates for Water Service in its Selma District.	Application 03-01-036 (Filed January 31, 2003) `
Application of California Water Service Company (U 60 W) for an Order Authorizing it to Increase Rates for Water Service in its Dominguez District.	Application 03-01-037 (Filed January 31, 2003)

Greg Bowling, Todd Alexander Pickles, and
Thomas F. Smegal, Attorneys at Law, for
California Water Service Company, applicant.

Monique M. Steele, Attorney at Law, for
Office of Ratepayer Advocates, protestant.

Joseph S. Lucido for Leona Valley Cherry Growers Association
Jeffrey Young, for himself; and Michele Waterbury, for
the City of Oroville Park Commission, intervenors.

OPINION APPROVING SETTLEMENT

Table of Contents

Title Page

OPINION APPROVING SETTLEMENT 22

I. Summary 22

II. Background 33

III. Procedural History 33

A. Prehearing Conferences 33

B. Intervenors 44

C. Interim Rate Increase 55

D. Public Comment 55

E. Settlement Discussions 77

IV. Settlement Criteria 88

V. Settlement Overview 1111

A. Net Operating Income 1111

1. Service Connections 1212

2. Water Sales 1212

3. Dominguez Water Supply 1313

4. Operating, Maintenance, Administrative & General Expenses 1313

5. General Office Expenses 1414

6. General Office Allocation 1515

B. Rate Base 1616

1. General Office Rate Base 1616

2. District Rate Base 1616

3. Capital Projects Deferred to Advice Letter Filings 1717

C. Rate of Return 2121

D. Revenue Requirement 2121

E. Attrition 2323

VI. Other Issues 2323

A. Oroville Water Supply 2323

B. Synergies 2424

C. Dominguez Water Supply 2525

D. Water Quality 2626

VII. Comments on Proposed Decision 2626

VIII. Assignment of Proceeding 2626

Findings of Fact 2626

Conclusions of Law 2727

ORDER 2828

Attachments

OPINION APPROVING SETTLEMENT

I. Summary

The Commission approves a comprehensive settlement agreement entered into by California Water Service Company (CWS), the Office of Ratepayer Advocates (ORA), and all other parties covering all issues in CWS's general rate increase application for four districts: Palos Verdes District, Oroville District, Selma District, and Dominguez (South Bay) District.

Pursuant to this decision, CWS is authorized a general rate increase for test year 2003, 2004, and attrition years 2005 and 2006 for these four districts in the amounts and percentages shown in Table 1. This table also shows the bill increases (in one instance, a decrease) for average consumption in each district.

Table 1
Summary of Bill Increases & Revenue Requirement

District/Year	Bill Increase (Average consumption)		Settlement/Adopted (Thousands of $)
	$	%	$	%
Dominguez:
2003	2.83	10.84	2,541.1	9.09
2004	0.22	0.76	231.6	0.75
2005 AY	n/c	n/c	230.6	0.7
2006 AY	n/c	n/c	230.6	0.7
Oroville :
2003	-1.76	-5.08	-154.4	-6.12
2004	0.52	1.58	49.1	2.07
2005 attrition year	n/c	n/c	41.3	1.7
2006 attrition year	n/c	n/c	41.3	1.7
Palos Verdes:
2003	3.18	4.69	1,179.9	5.04
2004	0.21	0.30	97.3	0.39
2005 attrition year	n/c	n/c	92.8	0.4
2006 attrition year	n/c	n/c	92.8	0.4
Selma:
2003	0.06	0.24	6.4	0.28
2004	0.29	1.17	26.4	1.15
2005 attrition year	n/c	n/c	18.4	0.8
2006 attrition year	n/c	n/c	18.4	0.8
N/c=Not calculated

The agreed-upon rate of return is 8.6% for all years 2003 through 2006.