8. Water General Rate Case Partial Settlement

On November 24, 2008, Cal-Am and DRA filed their partial settlement agreement on Monterey water and wastewater issues. The agreement would fully resolve all outstanding issues in the wastewater docket, A.08-01-023, and the components of the settlement agreement relating to wastewater are reviewed in a separate decision in that docket, which is a companion decision to today's decision. The entire settlement agreement is attached to the decision in A.08-01-023 as Attachment A, which we incorporate by reference in today's decision.²⁶⁸ At issue here are the remaining portions of that settlement agreement which pertain to the Monterey district water general rate case.

8.1. Description of the Settlement Agreement Provisions
that Apply to the Water General Rate Case

The settlement agreement resolved many plant in service issues raised in DRA's report. In terms of cost, the Aquifer Storage and Recovery project at $14,380,000 is the most significant. The parties agree to place up to this amount in a memorandum account for Commission review in the upcoming state-wide Cal-Am general rate case to be filed in early 2010. Other significant plant investment projects include the New Segunda tank at $2.9 million to be accepted via advice letter, the Withers pump station at $491,000, and the CRV production and distribution system for $1.5 million. The last two projects are completed and in service.

The settlement agreement also addressed several of Cal-Am's special requests in its general rate case application. DRA agreed with Cal-Am's request to track Endangered Species Act compliance costs in a memorandum account, to continue to record payments to the National Oceanic and Atmospheric Administration pursuant to its 2006 Settlement Agreement in a memorandum account, and to amortize certain account balances through a 12-month surcharge. Cal-Am subsequently withdrew its only remaining disputed special request, which sought Commission authorization for an Infrastructure System Replacement Surcharge.²⁶⁹

Finally, the settlement agreement would resolve capital projects for the Toro service area. Cal-Am is in the process of planning and permitting needed upgrades to the arsenic treatment facility in the Toro system. The expected costs for the upgrade have increased to $685,000 from the preliminary $650,000 agreed to in the 2007 settlement. The settlement agreement provides that Cal-Am may submit an advice letter when this project is completed and operational consistent with is permit from the California Department of Public Health, but that any amount above $685,000 will be subject to reasonableness review. Additional capital projects for the Toro system, and a description of the condition of the system are found in Attachment 1 to the settlement agreement. The projects set out there total $139,620 for 2008, $616,620 for 2009, and $99,620 for 2010.

8.2. Evaluating and Approving the Water
General Rate Case Settlement
Agreement Provisions

Rule 12.1(d) requires that in order for a settlement to be approved by the Commission, the settlement must be: (1) reasonable in light of the whole record, (2) consistent with the law, and (3) in the public interest. As regards the provisions of the settlement agreement between DRA and Cal-Am that pertain to the Monterey water district, we find that each element is present here. The partial settlement agreement is Attachment A to the companion decision in A.08-01-023.

The parties contend the settlement agreement is reasonable in light of the whole record because the parties engaged in extensive and duly noticed settlement negotiations over several weeks to reach reasonable compromises on the ratemaking issues. They submit that the resulting settlement agreement as to the water issues resolves several issues in this proceeding consistent with sound ratemaking practices and allows needed system investment to go forward. We agree that the partial settlement addressing Monterey district water general rate case issues is reasonable in light of the record. The parties explain that the proposed resolutions of the water general rate case issues result in just and reasonable rates as required by Pub. Util. Code § 451. We find that this portion of the settlement is consistent with the law.

Finally, we find that this partial settlement agreement is in the public interest. The proposed settlement agreement efficiently resolves a significant portion of the outstanding issues in this proceeding, thereby conserving the parties' and the Commission's resources for vital policy and ratemaking issues in this proceeding.

For the foregoing reasons, the Commission finds that the resolution of the Monterey district water general rate issues in the settlement agreement attached to the companion decision in A.08-01-023 are reasonable in light of the whole record, consistent with the law, and in the public interest.

²⁶⁸ The entire settlement agreement and motion addresses issues in both the wastewater and Monterey District water general rate cases. A complete copy may be viewed at http://docs.cpuc.ca.gov/efile/MOTION/94575.pdf < http://docs.cpuc.ca.gov/efile/MOTION/94575.pdf>.

²⁶⁹ Cal-Am Reply Brief at p. 117.