Findings of Fact
1. The agreed outcomes San Gabriel and ORA jointly recommend in their All Parties Joint Stipulations and Comparison Exhibit, and the outcomes to disputed issues set forth in the body of this decision, are reasonable for our purposes in this proceeding except as otherwise set forth in this decision.
2. The capital structure, cost of debt, rate of return on equity, and rate of return on rate base shown in Table 2 are reasonable for San Gabriel's LA Division for the 2005/2006 through 2007/2008 general rate case cycle.
3. The adopted summary of earnings presented in Attachment A-1, the adopted 2005/2006 and 2006/2007 rate bases in Attachment A-2, and the adopted quantities and calculations included as Attachment C that underlie them, are reasonable for ratemaking purposes.
4. San Gabriel has reached a settlement with polluters in the BPOU under which San Gabriel is receiving $3.5 million in excess of reimbursements the polluters agreed to pay for capital and operating costs of remediation facilities in LA Division.
5. As part of the BPOU settlement, San Gabriel granted the polluters a release of liability for its claims, including a release from liability for attorneys' fees.
6. Part of the consideration San Gabriel granted the settling counterparties to obtain the $3.5 million settlement was a waiver of any further opportunity it or its ratepayers might otherwise have had to recover from those parties its litigation costs booked to the LA Division water quality litigation memorandum account.
7. Other settlements similar to the BPOU settlement have occurred, or may likely occur, as a result of San Gabriel's ongoing litigation against polluters in the three areas of LA Division other than the BPOU.
8. It cannot be known until litigation has ended whether the total of all amounts eventually received from polluters, including the $3.5 million at issue here, will be less than, the same as, or more than the total litigation costs San Gabriel will seek to recover from ratepayers through the LA Division water quality litigation memorandum account.
9. San Gabriel should be authorized to begin recovering the portion of its water quality litigation memorandum account associated with its defense of water quality litigation for LA Division.
10. San Gabriel should continue to record in its water quality litigation memorandum account, for later evaluation and possible recovery, its defense-related water quality litigation costs and all defense-related amounts received from polluters, insurers, and others.
11. It would be burdensome to San Gabriel, ORA, Water Division and the Commission to prepare, file and process a large number of separate advice letters implementing authorized capital project and payroll expense offset rate increases during the rate case cycle, and the resulting rate changes would be confusing to customers. It would be reasonable for the Commission to limit the number of such advice letters resulting from this order to two per fiscal year.
12. There is a strong likelihood San Gabriel will receive some as-yet-unquantifiable tax benefit from the federal American Jobs Creation Act of 2004. That benefit has not been reflected in the adopted figures for this proceeding.
13. The test year 2005/2006 rates in Attachment B have been designed to produce revenues consistent with the summary of earnings adopted in this order.
14. The potential benefits of full cost balancing accounts for purchased water, pumped water, and purchased power are greatly outweighed by other considerations.
15. San Gabriel's showing of compliance with applicable water quality standards during the past three-year rate case cycle is undisputed. San Gabriel provides adequate water service in LA Division.
