ALJ/DUG/jt2 Date of Issuance 4/27/2012

Decision 12-04-009 April 19, 2012

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Application of Suburban Water Systems (U339W) for Authority to Increase Rates Charged for Water Service by $19,234,576 or 35.85% in 2012, by $3,032,827 or 4.18% in 2013, and by $1,973,200 or 2.61% in 2014.

Application 11-02-002 (Filed February 1, 2011)

DECISION ADOPTING THE REVENUE REQUIREMENTS FOR TEST YEAR 2012 AND POST-TEST YEAR RATE ADJUSTMENTS FOR 2013 AND 2014

Table of Contents

Title Page

DECISION ADOPTING THE REVENUE REQUIREMENTS FOR
TEST YEAR 2012 AND POST-TEST YEAR RATE ADJUSTMENTS
FOR 2013 AND 2014 11

1. Summary 22

2. Background 22

3. Standard of Review 22

3.1. Proposed Partial Settlement 33

4. Litigated Issues 33

4.1. Litigated Issues 33

5. Treatment of State Taxes 44

5.1. Background 44

5.2. Suburban's Position 55

5.3. DRA's Position 55

5.4. Discussion 55

6. Domestic Production Activity Deduction 66

6.1. Suburban's Position 66

6.2. DRA's Position 77

6.3. Discussion 77

7. Rate Case Expense 99

7.1. Suburban's Position 99

7.2. DRA's Position 99

7.3. Discussion 1010

8. Four-Factor Allocation - Parent 1111

8.1. Background 1111

8.2. Suburban's Position 1515

8.3. DRA's Position 1515

8.4. Discussion 1616

9. Utility Group Allocation 1919

10. Fines 2020

11. Audit 2222

12. Procedural History 2424

13. Interim Rates Memorandum 2424

14. Post-Test Year Ratemaking 2424

15. Comments on Proposed Decision 2525

16. Assignment of Proceeding 2525

Findings of Fact 2525

Conclusions of Law 2727

ORDER 2929

Appendix A - Partial Settlement Between Suburban Water Systems and The
Division of Ratepayer Advocates

Appendix B - Suburban Water Systems Test Year 2012 Summary of Earnings

Appendix C - Suburban Water Systems San Jose Hills Service Area Tariff Areas

Appendix D - Suburban Water Systems Adopted Quantities

Appendix E - Suburban Water Systems 2012 Bill Comparisons

DECISION ADOPTING THE REVENUE REQUIREMENTS FOR TEST YEAR 2012 AND POST-TEST YEAR RATE ADJUSTMENTS FOR 2013 AND 2014

1. Summary

Today's decision adopts a proposed partial settlement between Suburban Water Systems (Suburban) and the Division of Ratepayer Advocates and resolves all other litigated disputed matters necessary to adopt the revenue requirement for a test year 2012 and two years of subsequent adjustments. This decision results in an overall rate increase of $12,975,000 or 24.31% for 2012. We decline to fine Suburban or to order any additional audits of Suburban at this time. This proceeding is closed.