VI. Comments on the Proposed Decision

The proposed decision of the ALJ in this matter was mailed to the parties in accordance with Section 311(d) of the Public Utilities Code and Rule 77.1 of the Rules of Practice and Procedure.

On March 1, 2004, Cal Water and ORA filed joint comments on the proposed decision. Cal Water and ORA oppose the proposed decision's use of the ROE and ROR Cal Water and ORA stipulated should be used as interim, as both the interim and final ROE and ROR for this proceeding. Cal Water and ORA agreed to use an interim ROE and ROR in this proceeding pending resolution of the ROE and ROR issues by the Commission in A.03-01-034. At that point, according to these parties, Cal Water's authorized ROR and ROE for A.03-01-034 would be applied prospectively to the Redwood Valley District.

We decline to change the proposed decision on this issue. As more fully discussed above, Cal Water and ORA's stipulation was based on the assumption that the parties would fully litigate the issues in A.03-01-034. However, the parties settled the ROE and ROR issues in A.03-01-034, and in settlements, parties do not fully litigate issues but rather, make case-specific tradeoffs.

The Commission can evaluate the reasonableness of these case-specific tradeoffs in its decision in A.03-01-034. We cannot determine on this record whether or not the tradeoffs make in A.03-01-034 are reasonable to use in this case involving the Redwood Valley District. Moreover, the rates for some divisions in this district, such as Lucerne, are increasing over 50% as a result of this decision. We therefore believe that the interim ROE and ROR numbers (which are less than those reflected in the settlement in A.03-01-034) are more reasonable to use for the Redwood Valley District given the unique circumstances of this case.