4. Description of the Wastewater Settlement Agreement
The settlement agreement provides for an increase in 2009 revenue requirement of $1,326,600, approximately the amount sought by Cal-Am, although with a few changes in line items. The revenue requirement tables based on the Settlement are Appendix B to today's decision. For example, DRA agreed to Cal-Am's proposal to add 10 new permanent employees, but also required Cal-Am to reduce its budget for temporary workers and contractors. Certain line items increased due to the availability of updated, year-end 2007 data, e.g., maintenance costs which increased to $254,200 from Cal-Am's originally requested $248,400. The customer number is also slightly increased to reflect the current customer count.3
Rate design was the most controversial issue presented by the wastewater application. Cal-Am's original proposal to place all customers on the same monthly rate resulted in significantly differing rate increases among the wastewater systems and, consequently, drew substantial opposition from customers in the systems with high proposed increases.
The settlement agreement addresses rate design by creating two groups of systems based on the technology used by the system. The "passive" systems - White Hills, Spreckels, Village Green and Oak Hills - use technologically simple and, thus, inexpensive wastewater treatment processes. In contrast, the "active" systems - Las Palmas, Pasadera, Carmel Valley Ranch and Indian Springs - use technologically advanced systems with a higher cost of service. The settlement agreement sorts the systems as either active or passive, with customers of the active systems paying $107.81 per month in 2009 and the passive systems paying $48.78 per month.
4.1. Comments on the Settlement Agreement
As noted above, the Coalition filed formal comments pursuant to Rule 12.2 of the Commission's Rules of Practice and Procedure opposing the settlement agreement. Three sets of informal customer comments were submitted and placed in the correspondence section of the formal file. These comments opposed the revenue requirement portion of the settlement agreement and contended that additional independent review should be undertaken prior to authorizing Cal-Am this substantial increase in revenue requirement.
3 Cal-Am stated that during 2007 it audited its wastewater customer database and discovered that 265 out of its 2,486 customers were not being billed. Cal-Am has corrected this situation and implemented measures to avoid recurrences. See Cal-Am Response to Stuart Burbank Letter, December 8, 2008.
