ALJ/CMW/eap Mailed 9/12/2005

Decision 05-09-020 September 8, 2005

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

In the Matter of the Application of California-American Water Company for an order authorizing it to change its rates for water service in its Sacramento District to increase revenues by $3,160.8 or 14.35% in the year 2005, by $2,158.6 or 8.48% in the year 2006 and by $1,202.2 or 4.35% in the year 2007.	Application 04-04-040 (Filed April 30, 2004)
In the Matter of the Application of California-American Water Company (U2100) for an order authorizing it to increase its rates for water service in its Larkfield District to increase revenues by $494.1 or 26.16% in the year 2005, by $183.4 or 7.63% in the year 2006 and by $61.9 or 2.39% in the year 2007.	Application 04-04-041 (Filed April 30, 2004)
In the Matter of the Application of California-American Water Company for Authority Pursuant to PU Code Section 454 to Restructure and Consolidate its Rates for its Sacramento and Larkfield Districts.	Application 04-08-013 (Filed August 11, 2004)

See Appendix B for List of Appearances

O P I N I O N

A. Summary

This decision adopts a modified settlement for California-American Water Company's (Cal-Am) Sacramento and Larkfield districts general rate cases (GRCs) that covers all issues except adoption of a low-income customer assistance program. For the Sacramento district, the settlement provides for revenue requirement increases of 9.99% in 2005, 3.60% in 2006, and 2.98% in 2007, with the increases spread over all rate schedules. For the Larkfield district, the revenue requirement will be recalculated to reflect the removal of $275,000 from rate base in the modified settlement. The revenue requirement will be lower than the original settlement, which proposed an increase of 7.88% in 2005, 2.36% in 2006, and 1.56% in 2007, with increases spread over all rate schedules.¹

For low-income customer assistance programs, we find that the record here does not contain sufficient information to adopt a low-income assistance program for the Sacramento and Larkfield districts. We agree with Cal-Am and ORA that this is a technically complex issue with broad policy implications, and it should be decided in a generic proceeding.

If the Commission has not instituted a generic rulemaking on low-income assistance programs for residential water users within two months, Cal-Am is directed to file an application for the Sacramento and Larkfield districts that is similar to the program adopted for San Gabriel Water Company in Decision (D.) 05-05-015.

In this decision we also address Cal-Am's request for rate consolidation of its Sacramento and Larkfield districts. We find Cal-Am has not demonstrated that its proposal is in the public interest. Customers at both the Sacramento and Larkfield public participation hearings (PPHs) spoke against the proposal and all active interested parties in the proceeding, including the Larkfield citizens group LWWDAC, oppose Cal-Am's request. By its own acknowledgement, the proposal does not meet the Guidelines that we have used to assess rate consolidations since 1992.² Further, Cal-Am's rate consolidation proposal is not consistent with the consolidation approved for another water utility in D.00-06-075.

In D.05-02-007, the Commission granted interim rate relief to Cal-Am for its Sacramento and Larkfield district customers effective February 10, 2005. This interim increase was based on the rate of inflation as compared to existing rates for these districts, and should be adjusted upward, back to the effective date, with the final rates adopted here. The methodology Cal-Am must use in calculating the surcharge is based on the actual loss or gain in each district's revenue, which is determined by applying the rate differential to the actual quantities of water sales and the actual number of customers. The surcharge will be fully recovered over the rest of 2005.