6. Discussion

We agree with the assessment of ORA's Water Branch that the authority requested in this application should be granted. Public convenience and necessity are served by permitting Cañada Woods to provide water, reclaimed water and sewer services to these developing subdivisions. As ORA observes, these services have been operating for three years in full compliance with applicable regulations. Continued provision of these services pursuant to Commission regulation and oversight will help ensure that such services will meet high standards of quality at reasonable rates.

The applicant has shown that the local water utility, Cal-Am, does not have sufficient water rights to serve the subdivisions. Applicant, however, does have appropriative water rights and wells sufficient to meet demand at full build-out.

Applicant also has shown that it has the financial resources necessary to operate these systems, and it has provided a letter of credit of $1.5 million to guarantee financial capability. Exhibit V in the application indicates that the utility will become profitable after its fifth year of operation. The applicant's principal, Clint Eastwood, lives in the development to be served by the utility and also is an owner of a golf course and other commercial properties that depend on the utility's services.

The Monterey County Board of Supervisors has issued an Environmental Impact Report and Negative Declaration for the utility operation and development of the subdivisions, and an addendum to those reports found that the formation of the Cañada Woods utility will not result in any potentially significant environmental impacts that cannot be mitigated. We have examined those documents and have found no reason to dispute their conclusions.

We will adopt the three conditions for approval suggested by ORA: the option for purchase by Cal-Am should conditions warrant; notification to ORA of filed tariff sheets; and filing with the DHS or the County Health Department as appropriate. We note that Monterey County Code Section 1504 addresses operational capability of county-regulated water systems.

In Resolution ALJ 176-3068 dated August 2, 2001, the Commission preliminarily categorized this proceeding as ratesetting and preliminarily determined that hearings would be necessary. Since ORA has effectively withdrawn its protest following its investigation and recommendations, our order concludes that hearings are not required.