STATE OF CALIFORNIA ARNOLD SCHWARZENEGGER, Governor



CALIFORNIA PUBLIC UTILITIES COMMISSION

505 VAN NESS AVENUE

SAN FRANCISCO, CA 94102-3298

April 21, 2009 Draft Resolution W-4762

Agenda ID #8476

TO: ALL INTERESTED PARTIES

Enclosed is draft Resolution W-4762 of the Division of Water and Audits. It will be on the Commission's May 21, 2009 agenda. The Commission may then act on this Resolution or it may postpone action until later.

When the Commission votes on a draft Resolution, it may adopt all or part of it as written, amend, modify or set it aside and prepare a different Resolution. Only when the Commission acts does the Resolution become binding on the parties.

Parties may submit comments on the draft Resolution. An original and two copies of the comments, with a certificate of service, should be submitted to:

Division of Water and Audits, Third Floor

Attention: James Boothe

California Public Utilities Commission

505 Van Ness Avenue

San Francisco, CA 94102

Parties may submit comments on or before May 11, 2009. The date of submission is the date the comments are received by the Division of Water and Audits. Parties must serve a copy of their comments on all persons on the service list attached to the draft resolution, on the same date that the comments are submitted to the Division of Water and Audits.

Comments shall be limited to five pages in length plus a subject index listing the recommended changes to the draft resolution, a table of authorities and an appendix setting forth the proposed findings and ordering paragraphs.

Comments shall focus on factual, legal or technical errors in the draft Resolution. Comments that merely reargue positions taken in the advice letter or protests will be accorded no weight and are not to be submitted. Late submitted comments will not be considered.

/s/ RAMI KAHLON

Rami Kahlon, Director

Division of Water and Audits

Enclosures: Draft Resolution W-4762

Certificate of Service

Service List

DRAFT

AGENDA ITEM #8476

PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

DIVISION OF WATER AND AUDITS RESOLUTION NO. W- 4762

Water and Sewer Advisory Branch May 21, 2009

R E S O L U T I O N

(RES. W-4762), DUNNIGAN WATER WORKS (DWW). ORDER AUTHORIZING GENERAL RATE INCREASES PRODUCING ADDITIONAL ANNUAL REVENUES OF $37,795 OR 87% IN WATER REVENUES AND $27,112 OR 43.46% IN SEWER REVENUES FOR TEST YEAR 2008.

SUMMARY

The Grant Park Development, Inc. dba Dunnigan Water Works (DWW) filed an informal general rate increase request with the Division of Water and Audits (DWA) for both water and sewer service on May 5, 2008. DWW requested authority to increase rates for water service by $80,372 or 185%. DWW requested authority to increase rates for sewer service by $21,833 or 35%. The stated purpose of these rate increases is to recover operating expenses and costs related to plant improvements.

DWW's request shows that 2008 gross water revenues of $43,445 at present rates would increase to approximately $123,817 at proposed rates with 0% rate of return on rate base and no return on margin; and 2008 gross sewer revenues of $62,377 at present rates would increase to approximately $84,210 at proposed rates with 0% rate of return on rate base and no return on margin.

For test year 2008, this resolution grants an increase of $37,795 or 87% in annual water revenues. This resolution also authorizes an increase in annual sewer revenues of $27,112 or 43.46 % for test year 2008. The sewer revenue increase approved is $5,279 higher than requested. Although the authorized operating expenses and depreciation are $23,058 lower than requested, the authorized income taxes (both state and federal) and return on margin are higher by $22,619 than is reflected in DWW's request. DWW included only $800 in state income taxes and $289 in return in its request. Finally, DWA did not include the $5,718 in land lease revenues from excess adjacent land as an offset to the sewer revenue requirement since DWA did not include any plant in rate base at this time.

The initial rates were established on April 12, 2007 pursuant to Decision No. (D.) 07-04-018 which granted DWW's Certificates of Public Convenience and Necessity (CPCN) for operation of a water utility and sewer utility within the service area known as Dunnigan, Yolo County and authorized the initial rates which were already in effect.¹

The Utility Audit, Finance and Compliance Branch (UAFCB) of the California Public Utilities Commission (Commission) recommended interim rate increases for water and sewer services. The increases were based on the results of cash flow analyses from the utility financial statements. Advice Letters 3-W and 3-SS were filed on July 29, 2008. The interim rate increases were effective August 1, 2008. The utility noticed their customers with the August 2008 billing statements. The interim rate increases are subject to adjustment, up or down, pending a final determination by the Commission in this general rate case resolution pursuant to Commission Res. W-4540.

SYSTEM DESCRIPTION

Grant Park Development acquired the land, Country Fair Estates Mobile Home (MH) and Happy Time RV Parks (RV), and water and sewer systems in May 1998. DWW has provided water and sewer services to the RV and MH Parks since. DWW currently provides flat rate water and sewer service to 228 customers in the MH and RV Parks.

DWW's existing water system includes two wells with a total capacity of approximately 550 gallons per minute (gpm). The wells supply two master meters serving the RV and MH parks through Schedule 80 PVC pipe, and C-900 main piping. Current water storage capacity is 255,000 gallons.

DWW's existing sewer system consists of Schedule 40 ABS lateral piping, C-900 main line piping, a primary submersible wastewater grinder lift station pump, and a secondary submersible wastewater grinder lift station pump. Sewage is pumped to nearby collection ponds. The ponds perimeter has sampling stations for monitoring ground water quality to prevent contamination.

NOTICE AND PUBLIC MEETING

Notice of the proposed rate increases was mailed to the DWW's customers on June 13, 2008. DWA held a public meeting in Dunnigan on July 17, 2008. The meeting had approximately 66 people in attendance. Thirty-four people signed the Sign-Up Sheet(s). Twenty-six people gave e-mail addresses and seven gave postal addresses to receive correspondence concerning this case.

There were recurring questions concerning the separation of utility rates from mobile home park space lease rents. The owner insisted that there is a difference between "space rent and services provided." Also, there were recurring statements that the owners/managers were inaccessible as "the phone is never answered" and "there is never anyone in the office." The owner lives in the mobile home park and the office is inside his home. He insists that he is on the premises every day and that all residents have both his office phone and cell phone numbers. More than one resident indicated that they were frequently flooded, which resulted in toilet backups with more unanswered calls. The owner categorically denied those charges. At this point DWA staff interjected that complaints about the utility not responding to problems should be addressed to the Commission's Consumer Affairs Branch.

Several individuals questioned a rate increase of $0.48 which started in June 2007. The increase reflects the 1.5% CPUC User Fee which was added to their bill following D.07-04-018 granting the CPCN and initial rates. There were questions concerning the utility's requirement to notify customers of the new charge and also whether late fees of $10 could be assessed for non-payment of the unknown increase. DWA staff agreed to look into the question of late fees and customer notice but advised the customers to simply request the late charges, if any, be waived under the circumstances. Questions regarding the CPUC requirement of an emergency number and service were left open to investigation. Questions concerning a low income program were explained as available generally to customers of large utilities because of the large customer base available over which to spread the low-income subsidy. There was a question concerning costs charged to the RV Park and the response was that monthly RV users paid the same rate as Mobile Home Park users (daily or weekly users paid a pro-rated cost).

CUSTOMER COMPLAINTS

DWA received six letters of protest prior to the public meeting. All of the issues raised in these letters were addressed at the public meeting. DWA also received copies of eight letters from DWW's customers who sent their August bill payment to the Commission's Consumer Affairs Branch with letters protesting the interim rate increase. All of the customers checks were returned as the interim rates are the correct rates authorized and in effect until changed by a Commission resolution.

DWA received a letter from the law office of David Grabill representing the Homeowners Association (HOA) of Country Fair Estates Mobile Home Park. In that letter Mr. Grabill indicates that the HOA requests "a full public hearing on this application." DWA responded in writing to Mr. Grabill explaining that the Commission attempts to resolve rate requests from Class D water and sewer utilities on an informal basis that is less costly for all parties. It was explained that the cost of a formal proceeding, including evidentiary hearings, can approach a small utility's annual revenue requirement and this cost would be included in customers' rates on a going forward basis. Mr. Grabill requested a copy of any DWA report or resolution and his name has been added to the service list for this proceeding.

SUMMARY OF EARNINGS

DWA performed an independent analysis of DWW's summary of earnings. Appendix A shows DWW's and DWA's summary of earnings at initial and proposed rates for test year 2008.

The UAFCB of the Commission assigned an auditor to examine the records of DWW. Data requests were issued for documentation of plant and expense expenditures. DWA has incorporated the audit findings in this resolution as appropriate and consistent with its review and analysis of DWW's operations.

Operating Revenues

DWW currently provides flat rate water and sewer service to 228 customers in the MH and RV Parks. In addition, Grant Park Development pays DWW for water and sewer service provided to the MH and RV Parks as business uses. These business uses include park clubhouses, swimming pools, showers, and landscaping (irrigation). The business uses are estimated at 50 equivalent meters. DWW revenues include billings for 50 additional water and sewer customers. DWA estimates of revenues and rates use 278 total water and sewer customers. DWA recommends that DWW install meters for all business uses and bill accordingly. This will provide more accurate water usage information for billing purposes.

DWW (sewer) revenues include a land lease for excess land adjacent to the sewer collection ponds. The lease revenues for 2008 are estimated at $5,718, an increase of $1,483.

Purchased Power

This account includes the cost of purchased power. DWW's recorded 2007 costs are $3,880 (water) and $776 (sewer). DWW provided billings for purchased power but the amounts were much greater than recorded or requested. DWW provided copies of two Pacific Gas & Electric Company's account billings for 2007 - 2008. One account was only for Well #1 pump with annual billings of $2,581. For explanation, DWW produced a worksheet which developed rolling 12-month averages which brought the recorded billings to the level of $3,000. This amount would be attributed 100% to water operations. The remaining $880 is a reasonable amount for the additional booster pumps to maintain system pressure. DWW responded to the power costs in DWA estimates and stated that the power cost should be increased to $7,832 based on submitted 12 month average power costs. DWA discussed this issue with DWW and both parties agreed that the current level of power costs is reasonable.

DWA staff advised DWW to install meters for the booster pumps and wastewater pump to get accurate power cost measurements for sewer operations. DWW installed a sub-meter to measure the power for the wastewater pump and measured the actual consumption for one month. The daily power consumption was 11.11 kWh per day. By using this daily consumption DWW was able to reconstruct the electric bills for the 12 months of 2007. DWW computed billings for wastewater power consumption is $643. DWA will accept and use the revised power expense for sewer operations.

Interest Expense

DWW includes $17,376 in annual interest expense for the water operations. DWW took out a loan for $368,768 in February of 2004. The funds were used to make capital improvements to the water system. The improvements included "a new well, the elevated water storage, and associated pipelines" (E-mail from Frank B., dated October 21, 2008). ²

In response to DWA's data requests, DWW's owner Jerry Berger indicated that the water tank structure for water tanks and water treatment facility was actually built in 1998 and 1999. He states that he "underestimated cost for projects and borrowed to pay his debts." The interest expense should be removed from operation and maintenance expenses and treated as a "below the line" item.

Other Volume Related Expenses

Work papers indicate this expense was $6,729 (Water) and $7,052 (Sewer) in 2007 with no increase forecast for test year 2008. DWA requested that 2007 invoices be made available for audit in December 2008. The results of that audit are contained in the report prepared by the UAFCB. In that report the expenses in this account are reduced to $5,482 (Water) and $839 (Sewer). DWA has reflected the UAFCB adjusted numbers in the Summary of Earnings found in Appendix A. DWW did not provided details of these expenses to either DWA or UAFCB to support its full request. DWW responded to the Staff Report by providing a quarterly invoice of $2,060 or $8,240 annually from the California Regional Board. DWA accepted the $8,240 as a reasonable expense for this item.

Employee Labor

Work papers indicate this expense was $14,627 (Water) and $16,494 (Sewer) in 2007 with 4.1% increases in 2008 ($15,226 (Water) and $17,170 (Sewer)). In response to DWA's data requests, DWW produced the names, hourly rates, and hours forecast for test year 2008. There are three employees working part-time for DWW with weekly hours ranging from 5 to 8 hours for water and 6 to 9 hours for sewer O&M. DWW demonstrated the accounting for the employee hours at the company headquarters in Paso Robles. DWA is satisfied that the employee labor costs are reasonable.

Employee labor expenses were audited by the UAFCB in December 2008. The results of that audit are contained in the report prepared by the UAFCB. In that report the expenses in this account are reduced to $5,119 (Water) and $5,773 (Sewer).

DWA will not adjust the employee labor according to the UAFCB audit. DWA feels the employee labor expense estimated by DWW is a reasonable level for a company of this size. A total of $32,396 annually equates to one full-time position earning $15.58 per hour.

Transportation

Work papers indicate this expense was $2,524 (Water) and $2,846 (Sewer) for 2007 with 2.25% decreases (Water) and no change (Sewer) forecast for test year 2008 ($2,467 (Water) and $2,846 (Sewer)). DWA requested that 2007 invoices be made available for audit in December 2008.

DWW produced a worksheet which computed fuel expenses based on actual miles driven from recorded odometer readings, average miles per gallon for utility-owned vehicles, and the average cost of gasoline. For the Water Utility the expense was for 765 gallons at $3.30 per gallon. For the Sewer Utility the expense was for 863 gallons at $3.30 per gallon.

DWA adjusted the fuel expense to reflect the fact that gasoline is now selling for less than the average cost per gallon used by DWW. The Department of Energy's March 2009 Short-Term Energy Outlook projects average gasoline price for 2009 at $2.18 per gallon on the west coast (Petroleum Administration Defense District V). Recent California prices are running $0.03 per gallon higher than the west coast average. The total $2.21 per gallon, when substituted into DWW's worksheet, reduces the total Transportation Expense from $5,370 to $3,598. The revised estimate was divided 50/50 between Water and Sewer or $1,799 each.

DWW responded to the Staff Report that these expenses should be higher based on the expenses of nearby Rolling Green Water and Sewer. DWA expenses are based on miles driven and a reasonable cost of fuel as indicated above. DWA did not adjust these expenses.

Office Salaries

Work papers indicate this expense was $3,421 (Water) and $3,858 (Sewer) in 2007 with 11.7% and 5.7% increases respectively forecast for test year 2008 ($3,820 (Water) and $4,079 (Sewer)). In response to DWA's data requests, DWW produced the name, hourly rate, and hours forecast for test year 2008. There is one employee working part-time for DWW at six hours per week, three hours charged to water and three hours charged to sewer. DWW demonstrated the accounting for the employee hours at the company headquarters in Paso Robles.

Office salaries expenses were audited by the UAFCB in December 2008. The results of that audit are contained in the report prepared by the UAFCB. In that report the expenses in this account are reduced to $1,197 (Water) and $1,350 (Sewer).

DWA will not adjust the office salaries according to the UAFCB audit. DWA feels the office salaries expense estimated by DWW is a reasonable level for a company of this size. A total of $7,899 equates to 312 hours per year at approximately $25 per hour.

Management Salaries

Work papers indicate this expense was $12,000 (Water) and $12,000 (Sewer) in 2007 with no change forecast for test year 2008. In response to DWA's data requests, DWW confirmed that the owners are paying themselves a monthly salary of $1,000 each for working as Plant Operator (Mel Smith) and Business Manager (Jerry Burger). DWA is satisfied the management salaries expenses are reasonable.

Management salaries expenses were audited by the UAFCB in December 2008. The results of that audit are contained in the report prepared by the UAFCB. In that report the expenses in this account are reduced to $4,200 (Water) and $4,200 (Sewer).

DWA will not adjust the management salaries according to the UAFCB audit. DWA believes the Management Salaries expense estimated by DWW is a reasonable level for a company of this size.

Employee Pensions and Benefits

Work papers indicate this expense was $5,226 (Water) and $5,893 (Sewer) in 2007 with 4.1% increase (Water) and no change (Sewer) forecast for test year 2008 ($5,440 (Water) and $5,893 (Sewer)). DWA requested that 2007 invoices be made available for audit in December 2008. DWW broke down the expenses as follows:

	Water	Sewer
Employee Health Insurance	$796	$897
Workers Comp	1,580	1,782
Xmas Bonus & Misc. Expenses.	1,645	1,855
Continuing Education	1,205	1,359
Total	$5,226	$5,893

Employee pension and benefits expenses were audited by the UAFCB in December 2008. The results of that audit are contained in the report prepared by the UAFCB. In that report the expenses in this account are reduced to $402 (Water) and $453 (Sewer). These amounts reflect acceptance of the continuing education expense. The cost is recommended by UAFCB to be amortized over three years since the benefits accrue for more than one year. DWA has reflected the UAFCB adjusted numbers in the Summary of Earnings found in Appendix A. DWW has not provided details to substantiate the other costs in this expense category to either DWA or UAFCB. DWW responded to the Staff Report with back up work papers to support their request of $3,584 and $4,038 for Water and Sewer. DWA reviewed the work papers and made adjustments based on clerical staff working six hours per week or 15% instead of 20% used by DWW and on the salaries paid for the staff instead of the higher salaries used in the calculation

For pensions and benefits used in DWW work papers. DWA included an additional expense of $1,013 for water and sewer for a total of $1,415 and $1,466 respectively.

Office Services and Rentals

Work papers indicate this expense was $2,473 (Water) and $2,991 (Sewer) in 2007 with 4.1% increase (Water) and no change (Sewer) forecast for test year 2008 ($2,575 (Water) and $2,991 (Sewer)). In response to DWA's data request, DWW broke down the expenses as follows:

	Water	Sewer
Trash removal	$394	$444
Internet & Phone	1,174	1,324
Office Supplies	748	844
Credit Card Services	157	178
Office Rentals		202
Total	$2,473	$2,992

DWA requested that 2007 invoices be made available for audit in December 2008. The results of that audit are contained in the report prepared by the UAFCB. In that report the expenses in this account are reduced to $49 (Water) and $55 (Sewer).

The UAFCB audit disallows all but a small fraction of Internet and Phone expense. DWA has reflected the UAFCB adjusted numbers in the Summary of Earnings found in Appendix A. DWW has not provided details to substantiate these expenses to either DWA or UAFCB. DWW responded to the Staff Report by requesting a minimum of $2,000 for Water and $3,000 for Sewer based on the expenses of Rolling Green Water and Sewer. DWA has included for Water and Sewer an additional $1,800 per year each for rent. This estimate is based on rent levels of other Class D water companies.

Office Supplies and Expenses

Work papers indicate this expense was $1,616 (Water) and $1,823 (Sewer) in 2007 with 4.1% increase (Water) and no change (Sewer) forecast for test year 2008 ($1,683 (Water) and $1,823 (Sewer)). In response to DWA's data request, DWW broke down the expenses as follows:

	Water	Sewer
Postage	$391	$440
Supplies	394	444
Phone	831	938
Total	1,616	1,822

DWA requested that 2007 invoices be made available for audit in December 2008. The results of that audit are contained in the report prepared by the UAFCB. In that report the expenses in this account are reduced to $833 (Water) and $939 (Sewer).

The UAFCB audit has disallowed cell phone charges of $783 (Water) and $884 (Sewer). The audit shows that cell phone use was related to Grant Park Development's other businesses. DWA has reflected the UAFCB adjusted numbers in the Summary of Earnings found in Appendix A. DWW responded to the Staff Report that the expense for water should be increased to $1,795 based on the expenses of Rolling Green Water. After a review, DWA did not make any adjustments to this expense.

Professional Services

Work papers indicate this expense was $4,223 (Water) and $4,762 (Sewer) in 2007 with 38.6% decrease (Water) and no change (Sewer) forecast for test year 2008 ($2,594 (Water) and $4,762 (Sewer)). In response to DWA's data request DWW broke down the expenses as follows:

	Water	Sewer
CPA Services	$176	$199
Consulting	4,047	4,563
Total	$4,223	$4,762

DWA requested that 2007 invoices be made available for audit in December 2008. The results of that audit are contained in the report prepared by the UAFCB. In that report the expenses in this account are reduced to $1,525 (Water) and $1,719 (Sewer).

The UAFCB audit has adjusted the consulting costs by amortizing those expenses over three years. The audit shows that the consultant's services were for more than one year and incurred on a non-recurring basis. DWA has reflected the UAFCB adjusted numbers in the Summary of Earnings found in Appendix A. DWW responded to the Staff Report that expenses as of March 31, 2009, for Frank B & Associates has been $16, 906 besides $375 annual cost per year for an outside auditor. These expenses should be amortized over three years and thus a Water and Sewer cost of $6,011. DWA reviewed the requested expenses. For a lass D water company typical costs range from several hundred dollars to $3,000 based on test years 2006 and 2007. DWA estimated costs of $3,244 per year for three years or $9,732 for Water and Sewer combined are reasonable.

Insurance

Work papers indicate this expense was $3,071 (Water) and $3,463 (Sewer) in 2007 with 43.2% decrease (Water) and no change (Sewer) forecast for test year 2008 ($1,744 (Water) and $3,463 (Sewer)). In response to DWA's data request, DWW broke down the expenses as follows:

	Water	Sewer
Commercial. Liability	$41	$47
Commercial Property	157	177
Business Auto	2400	2707
Additional Auto	224	253
Commercial Inland Marine	533	601
Total	$3,355	$3,785

DWW auto insurance comprises 78.2% of total insurance expenses. DWW listed five vehicles used in their operations in Dunnigan, yet DWW has only one full-time equivalent employee in Dunnigan. This is an unreasonable expense for DWW's customers to bear. DWA believes that one vehicle dedicated full time to DWW is sufficient. DWA has disallowed 80% of the auto insurance expense. All other insurance expenses are considered reasonable. DWW responded to the Staff Report that DWW has three part time employees that do repair work and any repairs required generally require at least two employees at the job site. Insurance expenses should be for three cars or $3,200 each for Water and Sewer. As discussed above DWA has allowed wages for one full-time equivalent employee and thus car insurance for one vehicle as reasonable.

Regulatory Commission Expenses

Work papers indicate this expense was $0 for Water and $0 for Sewer in 2007 with $2,000 for Water and $2,000 for Sewer forecast for test year 2008. This account includes all expenses (except salaries of regular utility employees) incurred in connection with formal cases before regulatory commissions such as a rate increase request before the Commission. This would include the preparation of the DWW showing submitted to the Commission, representation at public meetings, and responding to data requests. DWW retained the services of Frank B and Associates to prepare and present this rate increase request. However those expenses have been included in Professional Services and to include anything here would be double counting. DWA has disallowed all of the expenses listed for this account.

General Expenses

Work papers indicate this expense was $1,914 for Water and $4,360 for Sewer in 2007 with 43.5% decrease (Water) and no change (Sewer) forecast for test year 2008 ($1,082 (Water) and $4,360 (Sewer)).

DWA requested that 2007 invoices be made available for audit in December 2008. The results of that audit are contained in the report prepared by the UAFCB. In that report the expenses in this account are reduced to $69 (Water) and $78 (Sewer).

The UAFCB audit disallowed all expenses to this account except a $69 charge to Water for equipment rental and $78 hotel charge to Sewer. All other charges were undocumented or unsupported. DWA has reflected the UAFCB adjusted numbers in the Summary of Earnings found in Appendix A. DWW has not provided details of these expenses to either DWA or UAFCB.

In the course of the audit investigation, DWW sent a copy of a Demand for Payment of Annual Waste Discharge Fees from the State Water Resources Control Board. DWW asserts this fee is part of the 2007 recorded expenses for this account. The UAFCB audit did not include this fee in any expense accounts. The fee for July 1, 2007 through June 30, 2008 was $3,117. The fee for July 1, 2008 through June 30, 2009 is $4,384. For test year 2008 ratemaking purposes, the appropriate process would be to prorate the fees for a 2008 expense of $3,751. DWA has determined that that the most recent invoice is a reasonable estimation for this expense on a prospective basis and has been included in the summary of earnings found in Appendix A of this report. DWW responded to the Staff Report that invoices from the County Health Department for permits, inspections, and sampling totaled $1,789 and should be included as an expense for Water. DWA estimate for Other Volume Related Expenses would include this $1,789 expense for Water. DWW also provided a recent billing from the Regional Water Quality Control Board for their annual permit fees of $4,384. DWA has included this $4,384 expense in the estimate for General Expense for Sewer.

Rate Base

Rate Base represents a utility's investment. Rate Base is comprised of the cost of average plant in service plus working cash allowance less average depreciation reserve. The rate base claimed by DWW is $1,990,059 (Water) and $2,265,310 (Sewer). In response to DWA's data request, DWW provided the following schedule of increases to plant from the original purchase to the present.

	Water	Sewer
Original cost at 4/15/1998	$576,500	$907,148
Plant Additions - 1998	107,965	108,505
Plant Additions - 1999	275,598	92,549
Plant Additions - 2000	204,439	181,409
Plant Additions - 2001	212,674	144,954
Plant Additions - 2002	199,477	180,279
Plant Additions - 2003	7,737	4,535
Plant Additions - 2004	223,504	0
Plant Additions - 2005	401,269	260,168
Plant Additions - 2006	69,941	67,898
Plant Additions - 2007	373	547,100
Total	$2,279,477	$2,494,545

DWA was not provided documentation to verify any of the plant figures given. DWW has been unable or unwilling³ to provide DWA with documentation to support these plant investments. DWW's filing does not seek any return on investment. DWW's owner Mr. Burger has stated that he is willing to defer the return on investment until he has 2,000 customers. In order to defer the return on investment and to continue the investigation of the plant numbers, DWA removed all plant dollars from the Summary of Earnings. This has multiple effects on the computation of revenue requirement and rates. DWW's owner understands that any future attempt to earn a return on investment will require full documentation of all rate base figures beginning with the original purchase and all subsequent plant additions. Pursuant to D.92-03-093, DWA calculated a return on margin as an alternative to a rate of return on rate base. DWA has incorporated a 20% return on margin based on the 2008 Test Year in the summary of earnings shown in Appendix A for both the water and sewer systems.

DWW operated the water and sewer utility without a CPCN from 1998 to 2007. DWW applied for a CPCN in order to expand their operations to serve the expected growth in the Dunnigan area. The plant additions and investments represented in the above table were not approved or authorized by this Commission. The records were not kept in the manner prescribed by this Commission. DWW has been advised by DWA that any future plant additions and financing must be approved by this Commission pursuant to Public Utilities Code §§ 816-851.

RATE DESIGN

DWW's current water rate structure consists of one schedule: No. 1, General Flat Rate Service. DWW has requested establishing a new metered schedule for water service. DWA believes a metered water schedule is appropriate to give customers a choice and to encourage water conservation. DWA has developed a metered rate schedule based on the revenues and average quantity used by existing customers. The water and sewer rates recommended by DWA are shown in Appendix B.

Interim rates for water and sewer flat rate service have been in effect since August 1, 2008. The adopted rate for flat rate water service decreases from the interim rate of $25.04 to $24.35. The $0.69 per month over collection between the interim rate and the final rate approved herein should be refunded to water customers as a monthly credit spread over six months. The recommended rate for flat rate sewer service increases from the interim rate of $21.70 to $26.83. The $5.136 per month shortfall between the interim rate and the final rate approved herein should be surcharged to sewer customers on a monthly basis spread over six months. DWW should be authorized to file a Tier 1 advice letter to collect the uncollected revenues for sewer service by a monthly surcharge spread over six months for under collected revenues to sewer customers and to refund to water customers by a monthly credit spread over six months for over collected revenues from August 1, 2008, the effective date of interim rates, to the effective date of the rates authorized in this resolution.

COMPLIANCE

DWW filed their first Annual Report with the Commission for water and sewer for 2007. DWW is not in compliance with the 2008 Annual Report that was due March 31, 2009.

COMMENTS

A DWA Staff Report was sent to DWW and all individuals who requested a copy for a 30-day public review and comment on February 26, 2009. DWA has incorporated changes as appropriate based on written comments from DWW. The draft resolution was sent to DWW and individuals on the service list for a 30-day public comment on April 21, 2009.

FINDINGS AND CONCLUSIONS

1. The Division of Water and Audits' recommended increase in annual water revenues by $37,795 or 87% for test year 2008 is reasonable.

2. The Division of Water and Audits' recommended increase in annual sewer revenues by $27,112 or 43.46% for test year 2008 is reasonable.

3. The Summary of Earnings (Appendix A) for Water and Sewer are reasonable and should be adopted.

4. The proposed rates (Appendix B) for Water and Sewer are reasonable and should be adopted.

5. In order to provide more accurate water usage information for billings, Dunnigan Water Works should install meters for all mobile home and RV park business uses.

6. Before filing any future rate cases, Dunnigan Water Works should prepare full documentation of all plant expenditures starting with the initial purchase of the water and sewer utilities in April 1998 and all plant additions for each year up to the time of a future filing for review by the Division of Water and Audits.

7. Before making any further additions to plant requiring outside financing, Dunnigan Water Works should file an advice letter pursuant to §§ 816-851 of the Public Utilities Code requesting Commission authorization to secure financing and encumber utility assets.

8. Dunnigan Water Works should credit customers the difference of $0.69 ($25.04 less $24.35) for General Flat Rate Service (Water) for every month from August 1, 2008 to the date the new rates are adopted. The total credit due plus interest at the 90-day commercial paper rate should be returned to customers over a period of six months.

9. Dunnigan Water Works should surcharge customers the difference of $5.13 ($26.83 less $21.70) for General Flat Rate Service (Sewer) for every month from August 1, 2008 to the date the new rates are adopted. The total surcharge plus interest at the 90-day commercial paper rate should be recovered from customers over a period of six months.

THEREFORE IT IS ORDERED THAT:

1. Authority is granted under Public Utilities Code Section 454 to Dunnigan Water Works, to file an advice letter incorporating the summary of earnings and the revised rate schedules attached to this resolution as Appendices A and B, respectively, and concurrently cancel its presently effective rate schedules: 1, General Flat Rate Service (Water) and 1, General Flat Rate Service (Sewer). The effective date of the revised rate schedules shall be five days after the date of its filing.

2. Dunnigan Water Works is authorized to increase its annual water revenues by $37,795 or 87% for test year 2008.

3. Dunnigan Water Works is authorized to increase its annual sewer revenues by $27,112 or 43.46% for test year 2008.

4. Dunnigan Water Works is authorized to file an advice letter to surcharge for sewer service the difference between the interim rate approved August 1, 2008, and the final rate approved in this resolution plus interest at the 90-day commercial paper rate. The surcharge will be collected over six months.

5. Dunnigan Water Works shall file an advice letter within thirty (30) days of the effective date of this resolution to surcredit for water service the difference between the interim rate approved August 1, 2008, and the final rate approved in this resolution plus interest at the 90-day commercial paper rate. The credit will be refunded over six months.

6. This resolution is effective today.

I certify that the forgoing resolution was duly introduced, passed, and adopted at a conference of the Public Utilities Commission of the State of California held on May 7, 2009; the following Commissioners voting favorably thereon:

_______________________________

PAUL CLANON

Executive Director













CERTIFICATE OF SERVICE

I certify that I have by mail this day served a true copy of draft Resolution

W-4762 on all parties in these filings or their attorneys as shown on the attached list.

Dated April 21, 2009, at San Francisco, California.

/s/Josie L. Jones

JOSIE L. JONES

Parties should notify the Division of Water and Audits, Public Utilities Commission, 505 Van Ness Avenue, Room 3106, San Francisco, CA 94102, of any change of address to insure that they continue to receive documents. You must indicate the Resolution number of the service list on which your name appears.

SERVICE LIST

DRAFT RESOLUTION W-4762

Pauline Gomes P. O. Box 730 #16 DUNNIGAN CA 95937		Paul Gentry P. O. Box 730 - 166 DUNNIGAN CA 95937		Joyce Sumner P. O. Box 730 Space 135 DUNNIGAN CA 95937
Lila V. James P. O. Box 730 Space 115 DUNNIGAN CA 95937		Peter Morris P. O. Box 730 #46 DUNNIGAN CA 95937		Connie Jones 5130 Hwy 99 Space 45 DUNNIGAN CA 95937
Nancy Coito P. O. Box 730 #140 DUNNIGAN CA 95937		Law Office of David Grabill 1930 Alderbrook Lane SANTA ROSA CA 95405		Melvin Lee Smith 3122 Adelaide Rd. PASO ROBLES CA 93446
Al Bent albent@sbcglobal.net		Barbara Kern pbkern@peoplepc.com		Betty and Harold Bradley haroldbradley@sbcglobal.com
Bonnie Wing bwings@accessbee.com		Carolyn Grant cseasoned@yahoo.com		David Burbey sburbey@gmail.com
Diana Willard Ms.d119@yahoo.com		Don Bouchay Booshay1936@yahoo.com		Doreen and Dick Foote Dfoote1@netzero.net
Duane Stark duanestark@sbcglobal.net		George Williams gwshideout@hotmail.com		Jack Fassett skyliner7@bigvalley.net

Jim Dummer James6290@sbcglobal.net		Jim Groves romrgro@att.net		Larry Kratzer lkratzer@aol.com
Lenny Beneze lbeneze@earthlink.net		Leo Beneze lbeneze@earthlink.net		Madalene Lane maddiev@juno.com
Mary Lou Morris joemorris2001@juno.com		Mel Smith Mel93447@msn.com		Michelle Graf Graf78963@aol.com
Mike Marsh Mikesuperduty62@aol.com		Pat Corcoran patrickjcorcoran@msn.com		Paul and Barbara King Paulking81@aol.com
Peter Morris pllmco@peoplepc.com		Phyllis Weber phyllisweber@gmail.com		Vern and Paula Favrat vfavrat@yaboo.com
Jerry Burger Dunnigan Water Works 5160 County Road DUNNIGAN CA 95937 waterworks@earthlink.net		Frank Brommenschenkel Frank B & Associates 134 Davis Street SANTA PAULA CA 93060 frank.brommen@verizon.net

¹ "At the request of the Water Division, DWW currently charges water and sewer rates based on similar rates charged by the City of Woodland, the nearest municipal water and sewer system." (D.07-04-018, page 2, footnote 5)

² Frank B. (Brommenschenkel) & Associates consultant for DWW.

³ DWW owner indicated that the plant numbers were approved by the ALJ and he didn't see any need to "do this again". Decision 07-04-018 speaks for itself. DWA contacted ALJ DeBerry to confirm that no agreements were made to any plant or expense figures.