Discussion

Essentially, RRB's argument in that the 0.1 NTU standard is simply a DHS goal and not a legally enforceable standard. Apparently, RRB believes ratepayers should only have to pay for a plant that meets the less stringent 0.5 NTU 1992 standard. We believe it would be irresponsible for this Commission to adopt this argument, even for ratemaking purposes.

The state agency primarily responsible for administering the Surface Water Drinking Water Rules is DHS. It has previously participated in Commission proceedings where the quality of drinking water was at issue. In this proceeding, Bruce Burton, District Engineer for the Santa Rosa District of DHS testified with regard to the Cryptosporidium Action Plan and DHS' inspection of the plant in 1997. We find his testimony particularly forthright and compelling.

We note that the Commission has independent authority to protect the public health and safety and it has concurrent jurisdiction with DHS over water quality issues arising from water service provided by public utilities.

However, as expressed in the Memorandum of Understanding dated October 26, 1996, DHS and the Commission have agreed that:

1. DHS shall be responsible for the following:

a. To the extent its resources permit, DHS shall be responsible for evaluating and determining all technical aspects of monitoring water quality and identifying SDWA contaminants and for identifying the improvements necessary to provide safe and reliable water supplies. DHS will advise the CPUC of its recommendations.

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2. CPUC shall be responsible for the following:

a. Approving rate changes needed to finance necessary system improvement projects.

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DHS is responsible for identifying the improvements necessary to provide safe and reliable water supplies. And, it is not for the Commission to second-guess DHS. It is DHS' recommendation that to achieve an optimum level of water quality (0.1 NTU) the plant must be operated at no more than 720 gpm, if it is to meet DHS' Cryptosporidium Action Plan goals. Given DHS' recommendation, SCWC has no choice but to operate the plant to meet the higher standard, and since ratepayers are currently receiving that benefit, they should pay the reasonable cost for that level of service. However, for the reasons set forth below, that does not mean that the full cost of the plant should be allowed in ratebase.

SCWC's argument, in essence, is that since DHS has limited the capacity of the sedimentation basin to 720 gpm, and 730 gpm is the appropriate design flow to serve the number of customers at Clearlake, the entire plant is now fully "used and useful." We disagree. The facility was designed for a flow of 1500 gpm through the entire plant. Aside from the settlement basin, given that the flow through the plant is limited to 720 gpm, there is excess capacity in the remainder of the plant. Ratepayers should not pay for the excess capacity.

Calculating the ratemaking adjustment for this excess capacity requires making certain assumptions. We will assume that:

(1) the sedimentation basin is 100% utilized because its output is limited to 720 gpm, and that output approximates the 730 gpm DHS design standard for a plant to meet Clearlake's requirements;

(2) the remainder of the plant is 50% utilized because the plant was built for a flow of 1500 gpm but is limited to 720 gpm⁴; and,

(3) the cost of the sedimentation basin is approximately one-quarter or one-third of the total plant cost. Based on these assumptions, we estimate that only $2.0 million of the $3.1 million plant cost should be allowed in ratebase.⁵

Lastly, we will consider the question: what if SCWC had built a 1050 gpm plant in 1992 as authorized by D. 89-11-017? Assuming that the 1500 gpm plant that was built in 1992 was proportionately downsized to 1050 gpm, we estimate that to meet DHS' higher 0.1 NTU standard, the output would have had to be limited to 504 gpm.⁶ A plant output of 504 gpm is not adequate in light of DHS' design criteria which calls for plant capacity of 730 gpm for the number of customers at Clearlake. Also, in hindsight, we know that the maximum recorded demand is 674 gpm. Thus, Clearlake customers are receiving a benefit in excess of the plant capacity allowed in rates by D. 93-06-035. Therefore, it is reasonable to allow a total of $2.0 million in ratebase for the Sonoma Treatment Plant.

100% x ¼ x $3,100,500 = $ 775,125.00 50% x ¾ x $3,100,500 = $1,162,687.50
= $1,937,812.50

100% x 1/3 x $3,100,500 = $1,033,500.00 50% x 2/3 x $3,100,500 = $1,003,500.00
$2,067,000.50