Estimated Project Costs

Citizens agrees that the most recent 1998 rate of return is more appropriate for estimates than one authorized in 1993. Therefore, we will use ORA's rate of return of 8.81% for revenue requirement estimates. However, we are mindful that this return may be reduced should joint development of lower cost financing with MSD succeed.

Citizens objects to ORA's reduced factors, arguing that those factors are appropriate for capital projects more advanced than the projects in the 2000 Master Plan. Citizens alleges these projects are still in the exploratory stage, since it has not developed schematics and sites have not been secured. Given the many years of study already devoted to supply planning for the Montara District, we find ORA's reasoning more persuasive, and will use its lower factors where recommended.

Regarding the MSD proposal that Montara be combined with other Citizens or Cal-Am districts to spread improvement costs to more utility customers, Citizens indicates that it will pursue all options, including district consolidation, in order to minimize the impact on rates for completed improvements at the time it requests cost recovery. Establishing a single tariff for two or more districts requires a persuasive showing that the benefits of doing so outweigh the burden of higher rates and authorizing the potential subsidizing of rates by some customers.