6. Settlement

A settlement agreement between Fontana Water Company and DRA was filed with the Commission's Docket Office and served on all interested parties on May 27, 2008. Although the City and FUSD participated fully in the ADR process they did not sign the settlement agreement, nor did they oppose it, but they requested an opportunity to comment on the settlement within 14 days of its being filed with the Commission. There were no filed comments on the settlement agreement. Hence, the settlement agreement is unopposed.

The settlement agreement provides for a $305,000 total annual (or prorated portion thereof) conservation budget to fund conservation programs during an interim period between the effective date of this decision and the effective date of new rates to be authorized under Fontana Water Company's 2008 general rate case. These programs will consist of education and public information programs as well as provision of rebates, incentive payments and equipment to residential, commercial, industrial, institutional, and large landscape customers under specific spending guidelines.

Although the agreed upon spending guidelines provide flexibility to Fontana Water Company, the settlement caps spending in each of four major conservation categories as follows: (1) $50,000 on education and public information programs; (2) $228,600 on residential programs; (3) $262,500 on commercial, industrial and institutional programs; and, (4) $123,800 on large landscape programs. In addition, third-party service providers are to be used for a majority of these services, with a maximum of $10,000 of the total conservation budget allowed for overhead costs of third-party service providers.

The settlement agreement also provides for the implementation of a surcharge to fund these conservation programs and staff expenses. By a Tier 1 Advice Letter, Fontana Water Company will collect $305,000 in annualized revenues to fund these conservation programs effective after the date this settlement agreement is adopted. Also, by Tier 1 Advice Letter, Fontana Water Company will collect $43,000 additional annualized conservation payroll expenses. After Fontana Water Company has hired a customer service/conservation specialist, it will file an offset rate increase through a Tier 1 Advice Letter to recover $90,522 in annualized revenues through a conservation surcharge. All components of the surcharge will be collected through a volumetric surcharge and will end by the effective date of new rates to be set in the 2008 general rate case, expected to occur on July 1, 2009.