Discussion

By A.00-10-043 filed October 19, 2000, Hillview sought Commission approval to borrow $3,408,477 under the SDWSRF including a repayment provision to be effected by customer surcharge. This loan application, which includes a rate increase proposal, failed to notify the Commission that, pursuant to Ordering Paragraph 7 of the OII, the Application must be consolidated with the OII. Hillview did not disclose its Application for this loan approval to the assigned Administrative Law Judge, the Ratepayer Representation Branch (now the Office of Ratepayer Advocates (ORA) - Water Branch) or other parties to the OII. Accordingly, the assigned examiner of the Water Division mistakenly prepared a proposed decision authorizing the SDWSRF loan and placed it on the Commission's February 8, 2001 consent agenda. Upon publication of the agenda, ORA staff consulted with the Water Division regarding the OII's requirement that the loan request, of which ORA had no prior knowledge, be consolidated with that proceeding. In addition, while at a meeting with DHS, Water Division learned that Hillview had applied for a $25,000 planning loan, the proceeds of which DWR was about to release. At the request of Water Division, the $25,000 loan was not released and Hillview was advised that because the life of the loan would extend beyond twelve months, PU Code § 818 requires that Hillview obtain Commission authorization for the planning loan.

Hillview has amended its SDWSRF loan application to seek approval of the additional planning loan. We are unaware of whether Hillview's failure to seek the requisite Commission approval of the $25,000 planning loan or its failure to seek consolidation of the $3,408,477 SDWSRF loan application with the OII, as ordered by the Commission, were intentional or innocent mistakes. However, because Hillview's loan history has been problematic, as detailed in RRB's 1997 investigation report, these recent failings are troublesome.

Pursuant to the Amended Application, Hillview seeks authority to enter into a funding agreement with DWR and to issue a promissory note in connection with a planning loan under the SDWSRF in an amount not to exceed $25,000. The loan principal will be the sum of total loan disbursement to be determined at the completion of the planning project. The planning loan has a term not to exceed five years at zero % interest with semi-annual payments. The proceeds from the planning loan will be used for expenses already incurred in connection

with a test well. Specifically, the costs of the test well are:

PG&E power $ 2,748.00

Pump 18,287.44

Well head equipment 1,081.06

Labor and Materials 1,555.53

Total $ 23,672.23

DWR has committed to provide Hillview with the planning loan. This loan may be rolled into the construction project loan requested in A.00-10-043. As of now there is no final time schedule as to when the construction will commence.

Hillview is authorized in this interim order to enter into a funding agreement with DWR for a planning loan not exceeding $25,000.

The authority requested by Hillview in A.00-10-043 to borrow $3,408,477 under the SDWSRF; to encumber its assets ratably with the interest of Hillview's existing or future secured loans; and to place in effect a surcharge on existing water rates for the purpose of amortizing the loan and accumulating a sinking fund reserve equal to one year's debt service will be addressed in the OII. Other issues pertaining to A.00-10-043 such as protests and comments will also be addressed in the OII.

In Resolution (Res.) ALJ 176-3050 dated November 2, 2000, the Commission preliminarily categorized A.00-10-043 as ratesetting, and preliminarily determined that hearings were not necessary. Eleven protest letters were received between December 15 and December 21, 2000.

The Commission mailed the draft decision of the Examiner in this matter to the parties in accordance with P.U. Code § 311(g)(1) and Rule 77.7 of the Rules of Practice and Procedure. Parties filed comments on ______, and filed reply comments on ______.