CalAm's Application

CalAm's application requests the overall rate increases shown in Table 1 to compensate it for increased expenses and capital investment costs in excess of increased revenues over time. In addition, it seeks Commission approval of fourteen so-called Special Requests, some of the rate effects of which are not included in the Table 1 figures, and three other requests:

Special Request #1: Accept CalAm's effectiveness study of its temporary, three-year experimental rate design, submitted in compliance with D.96-12-005, Ordering Paragraph No. (OP) 10 (no associated revenue requirement).

Special Request #2: Authorize CalAm to adopt as its conservation and standby rationing plan (Tariff Rule 14.1) MPWMD Ordinance No. 92; to track in a balancing account and recover through a surcharge its expenses of maintaining and operating the plan ($550,000 estimated annual revenue requirement) and its costs for a system water loss audit ($100,000 estimated revenue requirement); and to establish a memorandum account³ to track costs required to implement water-loss reduction measures to be determined following the system water loss audit (no immediate revenue requirement). These requests relate to D.96-12-005, OP2 and OP3.

Special Request #3: Authorize CalAm to establish a memorandum account to track costs related to compliance with the federal Endangered Species Act (no immediate revenue requirement).

Special Request #4: Authorize CalAm to recover $167,524 in operating and maintenance expenses and $103,440 in capital expenditures resulting from flooding in early-1998 and recorded in CalAm's Catastrophic Event Memorandum Account (revenue requirement included in CalAm's requested results of operations (R/O) figures).

Special Request #5: Authorize CalAm to record AFUDC (Allowance for Funds Used During Construction) for California Department of Health Services required improvements at its two Carmel Valley water treatment plants (revenue requirement included in requested R/O figures).

Special Request #6: Authorize CalAm to close to plant in service capital expenditures through December 31, 1999 on its San Clemente Dam Retrofit Project and the Carmel River Dam Project (revenue requirement included in requested R/O figures), and continue to accrue AFUDC on future such expenditures thereafter (no immediate revenue requirement).

Special Request #7: Allow CalAm to transfer amounts from six conservation-related and SWRCB Order 95-10 related memorandum accounts to its expense balancing account (revenue requirement included in Special Request #9 below), and $195,000 to plant accounts (revenue requirement included in requested R/O figures).

Special Request #8: Authorize CalAm to roll its WRAM (Water Rate Adjustment Mechanism) balancing account undercollections ($551,624 as of December 31, 1998) over into its proposed new WRAM balancing account (no immediate revenue requirement).

Special Request #9: Authorize CalAm to recover by means of a quantity surcharge over 30 months beginning July 1, 2000, the December 31, 1999 accumulated balance in its expense balancing account ($2.1 million estimated revenue requirement recovered over 30 months).

Special Request #10: Renew the Commission's now-expired authorization for CalAm to recover from customers any future fines imposed by SWRCB, until a permanent water supply solution is in place (no immediate revenue requirement).

Special Request #11: Authorize CalAm to establish a balancing account for all charges to CalAm from MPWMD for MPWMD's expenses related to Ordinance No. 92 (no immediate revenue requirement).

Special Request #12: Authorize CalAm to establish a memorandum account to track costs it would incur should MPWMD declare a water supply emergency and impose rationing under Ordinance No. 92 (no immediate revenue requirement).

Special Request #13: Authorize CalAm to establish a memorandum account to track costs it incurs due to the development of a contingency plan to be used in the event the Carmel River Dam project is not implemented (no immediate revenue requirement).

Special Request #14: Authorize CalAm to establish a memorandum account to track any sublease income and new lease expense pending a long-term solution for housing its Monterey Division administration and operations (no immediate revenue requirement).

New Rate Structure: Authorize a new, accelerating-block rate structure (the July 1, 2000 per capita rate design described below) intended to address the Monterey Peninsula's critical water conservation needs.

Hidden Hills and Ryan Ranch Rate Structure: Authorize a rate design for customers in the Highway 68 corridor which is the current experimental three-year rate design increased by the overall percentage of increase requested in the GRC. These customers are served by supplies independent of the Carmel River system.

Non-Domestic Fire Service: Authorize new Tariff Schedule No. MO-NDFS to cover all water furnished for non-domestic fire service.

CalAm prepared its GRC request using a 10.59% return on common equity, producing 9.03% and 9.01% rates of return on rate base for test years 2000 and 2001.