2. Background

SGV provides public utility water service in the counties of Los Angeles and San Bernardino through two operating divisions and a General Division. SGV serves approximately 48,000 customers in the LA Division and an additional 44,000 customers in San Bernardino County through its Fontana Division at the close of 2006. The General Division provides services common to the LA and Fontana Divisions, the costs of which are allocated to these divisions.

On July 2, 2007, SGV filed the above-captioned application to increase rates charged for water service in its LA Division by $13,366,100 or 28.0% in July 2008, $3,298,100 or 5.4% in July 2009, and $1,439,600 or 2.2% in July 2010 to produce a 10.99% overall rate of return on equity for the period 2008 through 2010. SGV also seeks to increase rates charged for water service in its Fontana Division by $678,200 or 1.5% in July 2008 to compensate it for an additional allocated share of General Division expenses and rate base. Finally, SGV seeks advice letter treatment in its LA and Fontana Divisions for the capital cost of its El Monte Office project. This application involves only the LA Division and its general office serving both divisions.

SGV filed its application on the basis that its present LA Division rates are unjust and unreasonable in that they fail to provide a just and reasonable return on investment in utility plant. The application is due to a combination of circumstances, particularly the effect of substantial increases in major expense items such as required water treatment costs to remove contaminants from groundwater supplies and the cost of increasing capital requirements.

Notices of the application were provided to the public through notice by posting and publication, and by mailing notice of the application to each customer and to all cities and public agencies in the service territory. However, there was no notice of the evidentiary hearing other than to persons appearing on the service list.