ALJ/DKF/hl2 Mailed 8/23/2004

Decision 04-08-054 August 19, 2004

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

In the Matter of the Application of SAN JOSE WATER COMPANY (U 168 W) for an Order authorizing it to increase rates charged for water service by $25,793,000 or 18.20% in 2004; by $5,434,000 or 3.24% in 2005; and by $5,210,000 or 3.01% in 2006.

Application 03-05-035

(Filed May 23, 2003)

Palle Jensen and O'Melveny & Myers LLP, by
Patricia A. Schmiege, Attorney at Law, for
San Jose Water Company, applicant.

Benjamin H. Scharf, for Santa Clara Valley Transportation
Authority and Linda Deacon, interested parties.

Jonathan J. Reiger, Attorney at Law, for Office of Ratepayer
Advocates, protestant.

OPINION ON SAN JOSE WATER COMPANY'S
GENERAL RATE CASE REQUEST FOR TEST YEARS 2004 AND 2005

OPINION ON SAN JOSE WATER COMPANY'S GENERAL RATE CASE REQUEST FOR TEST YEARS 2004 AND 2005 2 2

1. Summary 2 2

2. Procedural History 2 2

3. SJWC's Request 4 4

4. ORA's Recommendation 5 5

5. VTA's Request 6 6

6. Settlement 6 6

a. Customers and Consumption 8 8

b. Operation and Maintenance Expenses 8 8

1. Escalation 8 8

2. Operations - Source of Supply 9 9

3. Operation - Pumping 9 9

4. Operation - Water Treatment 10 10

5. Operation - Customer Accounts 10 10

6. Maintenance - Pumping 10 10

7. Maintenance - Transmission and Distribution 11 11

8. Other 11 11

c. Administrative and General Expenses 11 11

d. Balancing and Memorandum Accounts 13 13

e. Plant 13 13

f. Depreciation 15 15

g. Rate Base 15 15

h. Rate of Return 15 15

i. Attrition 16 16

j. Design of Rates 16 16

1. Rate Assistance for Low-Income Customers 16 16

2. Resale Service 17 17

3. Private Fire Service 17 17

4. Residential Fire Sprinkler Service 17 17

7. Water Main Relocation Costs 17 17

a. Background 18 18

b. Discussion - Ratemaking Considerations 21 21

c. Discussion - Ratepayer Benefits 23 23

8. Comments on Proposed Decision 25 25

9. Assignment of Proceedings 27 27

Findings of Fact 27 27

Conclusions of Law 29 29

ORDER 29 29

Appendices:

Appendix A Settlement

Appendix B Revised Tariff Schedules for 2004

Appendix C San Jose Water Company Adopted Summary of Earnings

Appendix D San Jose Water Company Adopted Quantities

Appendix E San Jose Water Company Adopted Rates and Residential and Business Bill Comparison for Present and Proposed Rates

Appendix F San Jose Water Company Requested Recovery From Water Contamination Litigation Memorandum Account

Appendix G San Jose Water Company Surcharge Information

OPINION ON SAN JOSE WATER COMPANY'S
GENERAL RATE CASE REQUEST FOR TEST YEARS 2004 AND 2005

1. Summary

This decision adopts the settlement between San Jose Water Company (SJWC) and the Office of Ratepayer Advocates (ORA) and grants SJWC authority to increase rates by $11,773,000, or 8.00% for test year 2004; by $4,283,000, or 2.69% for test year 2005; and by $4,245,000, or 2.59% for attrition year 2006. Rates authorized by this decision also incorporate the effects of a 3.23% rate increase authorized by Resolution W-4479, effective July 13, 2004, to offset increased costs of purchased water and pump taxes. The decision does not adopt additional ratepayer funding of water main relocation projects as requested by the Santa Clara Valley Transportation Authority (VTA).