8. Comments on Proposed Decision

The proposed decision of Commissioner Bohn in this matter was mailed to the parties in accordance with Section 311 of the Public Utilities Code and comments were allowed under Rule 14.3 of the Commission's Rules of Practice and Procedure. Comments were filed on October 4, 2010 by DRA, TURN, CFC, CWA, Cal Water, Cal-Am, Park Water, Suburban Water and Golden State Water, and reply comments were filed on October 11, 2010 by DRA, TURN, CFC, CWA, Cal Water, Cal-Am, Park Water, Suburban Water and Golden State Water.

In response to comments, we have made the following changes to the Proposed Decision:

1. Rule I.B is clarified so that the Rule now states that the Rules "... apply to transactions between a Commission-regulated utility and another affiliated entity that is engaged in the provision of products that use water or sewer services or the provision of services that relate to the use of water or sewer services." (Additional language in italics.) This clarification is made because we are generally concerned with market power issues only if there is some connection to water or sewer services (including affiliates involved in plumbing or insurance for water lines).

2. Ordering Paragraph #2 is clarified so that interim affiliate transaction rules adopted in D.10-09-012 for Suburban Water are superseded by the rules adopted in today's decision.

3. Rule III.B allows the utility to provide certain benefits from a utility to affiliates whose sole purpose is to serve regulated utility functions - in this case, across a number of regulated utilities within and outside of California - or non-profit or governmental organizations. In response to comments on the Proposed Decision, Rule III.B is modified to add the parent company of regulated utilities as allowable entities.

4. Rules III.B.4 is modified to contain an exception to allow parents of utilities to obtain proprietary information as referenced in this rule, and to speak on behalf of the utility. Rule III.B.6 is modified to eliminate a restriction on affiliates speaking on behalf of utilities, as this provision serves no specific purpose.

5. Rule V.D is modified to strike "employee recruiting" from the list of services prohibited from being shared between the utility and its affiliates.

6. Rule VII.E is modified from a requirement to obtain a non-consolidation opinion (a so-called "ring-fencing" provision), to a requirement that each subject water utility with a parent file an Advice Letter proposing provisions that are sufficient to prevent the utility from being pulled into the bankruptcy of its parent company.

7. Rule X.D is modified to delete language which would have required non-incremental investments and costs incurred for labor and capital joint used for non-tariffed and tariffed products and services to be fully allocated between ratepayers and shareholders. This language was ambiguous, potentially counter-productive and unnecessary.

8. In order to give the water and sewer utilities sufficient time to adapt to the rules adopted today, the rules will become effective in 90 days.

9. Typographical errors and minor factual errors are corrected.