9. Assignment of Proceeding

Michael R. Peevey is the assigned Commissioner and Maribeth A. Bushey is the assigned Administrative Law Judge in this proceeding.

1. San Clemente Dam is located on the Carmel River in Monterey, California.

2. The San Clemente dam was constructed in 1921.

3. Cal-Am is undertaking the San Clemente Dam Seismic Safety Projects under orders of the DSOD.

4. The EIR analyzed four alternatives to the dam strengthening option: dam notching, dam removal, river bypass, and no project.

5. Cal-Am and the involved state and federal agencies have not determined which alternative project will be implemented to address seismic deficiencies in the San Clemente Dam.

6. The Final EIR for the San Clemente Dam Seismic Safety Project concluded that the "no project" alternative would not meet the project purpose and need of increasing dam safety to meet current standards.

7. The proper carrying cost of the dollars associated with the seismic safety project is a project-specific cost of capital reflecting the risks of this investment.

8. Cal Am has utilized both equity and debt to finance this project.

9. The San Clemente Dam seismic safety project, when selected, will involve significant capital dollars.

10. From 2003-2006, dollars associated with the San Clemente Dam Seismic safety project were given the authorized rate of return through the CWIP ratemaking mechanism.

11. D.06-11-050 placed the project costs in a memorandum account for later reasonableness review and did not decide the final applicable interest rate.

12. D.06-11-050 gave the project costs an interim carrying cost at the 90-day cpr.

13. Previously, the Commission adopted an AFUDC rate at the authorized rate of return for the Calipatria Treatment Plant of Southern California Water Company (now Golden State Water Company).

14. The San Clemente Dam project and the Calipatria treatment plant of Southern California Water Company (now Golden State Water Company) have substantially the same legal and regulatory status and therefore should be given the same accounting treatment.

15. There are no disputed issues of material fact which require evidentiary hearing for resolution.

1. There is certainty that large capital dollars will be spent by Cal-Am on a capital project to bring the San Clemente Dam into seismic compliance.

2. Where possible, we want to match the regulatory carrying costs with the actual costs incurred.

3. Setting the AFUDC rate below the actual current cost is harmful.

4. Long term projects, with significant capital dollars, designed to bring a utility into regulatory compliance, have been given two interest rate treatments, 90-day cpr and the cost of capital.

5. The San Clemente Dam Seismic Safety Project, unlike the Coastal Water Project, has a final EIR.

6. The San Clemente Dam Seismic Safety Project is more similar to the Calipatria Treatment Plant than the Coastal Water Project.

7. The Coastal Water Project EIR is currently ongoing and the scope of the EIR was not known at the time of decision D.03-09-022.

8. Cal-Am should record carrying costs equal to the authorized rate of return on all amounts properly recorded in its San Clemente Dam project memorandum account.

9. The Commission shall review the reasonableness of all amounts recorded in the San Clemente Dam project memorandum account prior to any amount being included in revenue requirement or rate base.

10. Hearings are not necessary.

11. This proceeding should be closed.

ORDER

IT IS ORDERED that:

1. California-American Water Company shall include in its San Clemente Dam Memorandum Account carrying costs equivalent to the authorized rate of return on all amounts properly recorded in the account.

2. Application 07-02-023 is closed.

This order is effective today.

Dated May 29, 2008, at San Francisco, California.

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