I. Comments on Proposed Decision
The proposed decision of the ALJ in this matter was mailed to the parties in accordance with § 311(d) of the Pub. Util. Code and Rule 77.1 of the Rules of Practice and Procedure.
Opening comments were timely filed by Cal-Am, ORA, and LWWDAC on August 15, 2005 and reply comments were timely filed by Cal-Am on August 22, 2005.15 In its opening comments, Cal-Am addresses the proposed decision's findings on low-income customer assistance programs and requests that the Commission pursue a statewide low-income assistance program through a generic proceeding or, in the alternative, permit Cal-Am to propose its own low-income assistance program tailored to Sacramento and Larkfield's specific needs and characteristics, rather than trying to adapt the San Gabriel model for use in these districts. We decline to make these modifications. We do, however, reduce the timeframe for considering the issue of low-income assistance programs from six months to two months. Therefore, if the Commission has not instituted a generic rulemaking within two months, Cal-Am is directed to file an application. While this application must include a program similar to San Gabriel's, Cal-Am may also include an alternative program proposal for the Commission's consideration.
In its comments, LWWDAC raised concerns that Cal-Am was proceeding with the development of the Larkfield Well No. 6 in a manner that violated Section 15.3 of the proposed settlement. The parties subsequently modified their settlement to remove Well No. 6 from consideration in this proceeding. The modified settlement was filed on September 7, 2005 and is attached as Appendix A.
1. On February 25, 2005, California-American Water Company, on behalf of itself, the Office of Ratepayer Advocates, and the Larkfield/Wikiup Water District Advisory Committee, filed a Joint Motion for Adoption of Revised Settlement Agreement. On September 7, 2005, the parties filed a modified settlement, attached as Appendix A.
2. The Larkfield general rate case tables, attached at Appendix A, do not reflect the terms of the modified settlement.
3. The modified settlement resolves all general rate case issues except a low-income assistance customer program for the Sacramento and Larkfield districts.
4. The testimony and hearing record provide a comprehensive record for consideration of the settlement.
5. The settlement parties represent the interests of the water utility, ratepayers, and the Larkfield community.
6. Rate assistance for low-income customers is a technically complex issue with broad policy implications, and it should be decided in a generic proceeding.
7. The record here does not contain sufficient information to adopt a low-income assistance program for the Sacramento and Larkfield districts.
8. After the close of the record in this proceeding, the Commission adopted a low-income program for customers of San Gabriel Water Company in Decision D.05-05-015.
9. Timeliness in addressing the issue of low-income customer assistance is important.
10. If the Commission has not instituted a generic rulemaking on low-income assistance programs for residential water users within two months, Cal-Am should file an application for the Sacramento and Larkfield districts that is similar to the program adopted for San Gabriel Water Company in D.05-05-015. In its application, Cal-Am should provide specific information on the number of low-income indirect customers in each district, and a comprehensive analysis of any subsidy these indirect customers are providing to Cal-Am's direct customers.
11. The 1992 "Guidelines for Combining Water Utility Districts for Ratemaking and Public Utilities Commission Reporting Purposes" were intended to establish prima facie reasonableness of a proposed consolidation.
12. Cal-Am's rate consolidation application meets only one of the Guidelines criteria, the operations standard. It fails the proximity standard as the districts are 120 miles apart. It fails the rate comparability standard as the difference in rates between the two districts is 93%, based on revenue per customer. It fails the water supply standard as Larkfield purchases approximately 33% of its supply whereas Sacramento purchases only 3%.
13. Cal-Am did not make a showing that Larkfield is an impoverished district or that Larkfield customers cannot afford to pay stand-alone rates.
14. Cal-Am should true-up the interim rate increase granted in D.05-02-007 with the final rates adopted here by calculating the surcharge based on the actual loss or gain in each district's revenue, determined by applying the rate differential to the actual quantities of water sales and the actual number of customers. The surcharge should be fully recovered over the remaining period of 2005.
1. The modified proposed settlement is reasonable in light of the whole record, consistent with the law, and in the public interest.
2. Pursuant to Rule 51.1(e) of the Commission's Rules of Practice and Procedure, we should adopt the modified settlement and its accompanying tariffs.
3. The settlement parties should file modified Larkfield general rate case tables within 5 days of the effective date of this decision.
4. Cal-Am's proposal to consolidate rates for the Sacramento and Larkfield districts does not meet the guidelines we have relied on generally in ruling on rate consolidation proposals.
5. Cal-Am's proposal for rate consolidation does not meet the standards used in D.00-06-075 to grant rate consolidation for Southern California Water Company.
6. Cal-Am has not demonstrated that its proposal for rate consolidation is in the public interest.
7. Cal-Am's rate consolidation application, A.04-08-013, should be denied.
8. This decision should be effective immediately.
9. This proceeding should be closed.
IT IS ORDERED that:
1. The modified Settlement Agreement, with its attached tariffs and Sacramento District general rate case tables, is approved and adopted.
2. The settlement parties shall file modified Larkfield District general rate case tables to conform to the modified settlement within 5 days of the effective date of this decision.
3. If the Commission has not instituted a generic rulemaking on low-income assistance programs for residential water users within two months, California-American Water Company (Cal-Am) shall file an application for the Sacramento and Larkfield districts that is similar to the program adopted for San Gabriel Water Company in Decision 05-05-015. In its application, Cal-Am shall provide specific information on the number of low-income indirect customers in each district, and a comprehensive analysis of any subsidy these indirect customers are providing to Cal-Am's direct customers.
4. Cal-Am's request to restructure and consolidate its rates for its Sacramento and Larkfield districts is denied.
5. Cal-Am shall file within 15 days of the effective date of this decision a compliance filing containing the tariffs necessary to implement the surcharge methodology approved here to true-up the interim rates adopted in D.05-02-007.
6. This proceeding is closed.
This order is effective today.
Dated September 8, 2005, at San Francisco, California.
GEOFFREY F. BROWN
SUSAN P. KENNEDY
DIAN M. GRUENEICH
JOHN A. BOHN
Commissioners
I will file a dissent.
/s/ MICHAEL R. PEEVEY
President
I will file a concurrence.
/s/ SUSAN P. KENNEDY
Commissioner
A.04-04-040 - California American Water Company
D.05-09-020
President Michael R. Peevey, dissenting:
I'll be voting "no" on today's decision for two reasons; one, the proposed decision (PD) denies consolidation of the much larger Sacramento District with the Larkfield District,
and two, the proposed decision defers adoption of a low-income ratepayer assistance program.
The PD denies consolidation on the grounds of vigorous opposition from Larkfield residents, and because the proposal does not meet dated, regulatory guidelines. Instead, the PD accepts a settlement agreement filed between ORA, Cal-Am and the Larkfield Water Advisory Committee.
The consolidation application filed by Cal-Am lowers water rates of Larkfield residents and-more importantly-expands the customer base to spread the inevitable rising costs of water treatment and delivery. Sacramento District serves 57,000 customers and Larkfield serves just 2,400 customers. Larkfield's current water rates are more than double those of Sacramento. Why Larkfield residents would oppose lower rates-now and in the future-is beyond me. The old adage "the customer is always right" does not apply in this case. The customer, and sometimes this Commission, can be wrong. I echo this sentiment for Consent Agenda Item #5-the Cal-Am Monterey/Felton consolidation proceeding. Again, I can't understand the vigorous opposition to lower water rates from Felton customers. But we bought into it.
At the same time we deny consolidation and maintain higher rates for these small operating districts, we continue to deny the implementation of low-income ratepayer assistance programs-the ultimate double whammy for low-income residents. While the order requires Cal-Am to file for low income rates within two months time, we need to find a way to implement low income rate programs in GRC proceedings, instead of punting on this important issue.
Water is becoming costly to treat and costly to deliver. We need to put in place policies that will address this challenge, instead of looking for excuses to deny the obvious and maintain the status quo. In the electric, gas and communications industries, we spread fixed costs over vast geographic areas to make these essential utilities affordable and available. The time has come to do the same for the water industry.
/s/ MICHAEL R. PEEVEY
Michael R. Peevey
President
San Francisco, California
September 8, 2005
A.04-04-040 et al.
D.05-09-020
Commissioner Susan P. Kennedy, Concurring:
In general, I believe that all-party settlements merit great deference from the Commission. Since this decision adopts a settlement reached by all the active parties in this proceeding, I have voted to support it.
Despite my vote with the majority, I find that I fully share the policy concerns that have led Commissioner Peevey to dissent from the opinion of the majority.
First, the application filed by Cal-Am to consolidate the Larkfield and the Sacramento districts into a single ratemaking district makes good policy sense. It lowers water rates of Larkfield residents and-more importantly-expands the customer base to spread the inevitable rising costs of water treatment and delivery. Moreover, as California continues to grow, only regional approaches to water supply will make any policy sense. Thus, today's decision continues our backwards-looking approach to regulating water at the most local level. Although this approach is acceptable, it is far from optimal and is not forward looking.
Second, the opinion of the majority continues to deny the implementation of low-income ratepayer assistance program. I support low-income ratepayer assistance programs. Moreover, I also find that, as is the case here, our failure to implement a ratepayer assistance program is often a further consequence of our backward-looking policies that prevent the consolidation of rate districts. Without consolidation, we generally find that although the rates in small districts are so high that the need for an assistance program is great, we also find that the customer base is both too small and too economically homogeneous to permit the design of a practical low-income ratepayer assistance program.
In conclusion, although I vote to support today's decision adopting a settlement, I believe that the policies of rate consolidation and assistance programs for low-income water ratepayers make good sense, and I look forward to voting in support of these policies as other rate cases of water companies come before this Commission.
Dated September 8, 2005, at San Francisco, California.
/s/ SUSAN P. KENNEDY
SUSAN P. KENNEDY
Commissioner
APPENDIX B
LIST OF APPEARANCES
David P. Stephenson
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Miriam L. Stombler
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(END OF APPENDIX B)
15 A request by LWWDAC to file rebuttal to Cal-Am's reply comments was denied by the ALJ; the subsequent filing was rejected by the Docket Office on August 25, 2005.
