10. One-Way Conservation Balancing Account
DRA concurred with SGV that test year conservation expense should be forecasted at $652,000, $650,000 of which would be applicable to LA Division's enhanced conservation programs. DRA also concurred with SGV that $652,000 should also be forecasted for the 2009 and 2010 years for the same purposes. However, DRA is concerned that the LA Division may incur implementation problems that would prevent the full expenditures of forecasted costs in the test year. To ensure that the LA Division does not earn an inappropriate windfall by retaining unspent forecasted conservation costs, DRA recommended a one-way balancing account to be cleared at the end of each year with any balance to be refunded to ratepayers.
SGV opposed the one-way balancing account because: (1) it conflicts with an ALJ ruling that memorandum accounts would not be addressed in this proceeding; (2) it conflicts with the WAP and RCP; and (3) the conservation programs are well defined.
We first address SGV's opposition to a one-way balancing account. A one-way balancing account does not conflict with an ALJ ruling on a memorandum account. A memorandum account enables a utility to track costs with an opportunity to recover its costs in the future while a balancing account records actual costs to be recovered or distributed in a future date.
Contrary to SGV's assertion, a one-way balancing account does not conflict with the WAP or RCP because these documents do not address one-way balancing accounts. Also, it could be argued that a one-way balancing account simplifies the ratemaking process by authorizing unused funds to be refunded to ratepayers without future consideration of alternative distribution.92 The final argument that costs of the conservation programs were well defined has no bearing on whether or how any unused funds should be distributed.
Although there is no merit to SGV's opposition of a one-way conservation balancing account, we recognize that GRC forecasts are based on a multitude of activities, including maintenance and general office expenses such as postage, none of which are required to be the subject of a one-way balancing account. The Commission has not and does not intend to micro manage water utilities. There is no assurance that the LA Division will spend all of its forecasted conservation costs for conservation programs. There is also the possibility that it would spend more than its forecasted costs. The same hold true for each of LA Division's other activities, many of which DRA concurred with without seeking one-way balancing accounts.
SGV has identified enhanced conservation programs it intends to partner with its CBMWD and SGVMWD neighbors. These districts expect the LA Division to participate in the conservation programs and we have no knowledge to the contrary. The one-way conservation balancing account proposed by DRA should not be adopted. At the same time we realize that the approximate $650,000 yearly conservation budget is a substantial commitment on the part of SGV. Hence, SGV shall track its actual conservation expenditures associated with its yearly conservation budget being approved by this decision. SGV shall also report the results of its conservation tracking as part of its next Los Angels Division GRC application.
92 We observe that SGV took a strict interpretation of the RCP. However, it contended in discussion of prior allowance for water sales losses due to enhanced conservation programs that the RCP should be used only as a general guideline. See Reporter's Transcript vol. 2, p. 109.
