3. GSWC and San Jose Conservation
Rate Design Proposals

The conservation rate design settlements are trial programs, which will be reviewed in the utilities' next general rate cases (GRC). The purpose of the trial programs is to initiate conservation rates; the rate design will change over time. We will examine the settlements' trial programs in light of our settlement objectives. CFC objects to various aspects of the settlements' rate designs and WRAMs.8 The other parties do not oppose the settlement. We discuss CFC's objections below.

3.1. GSWC's Proposed Conservation Rate Design Settlement and Amendment to Settlement

The GSWC settlement and the amendment to the settlement incorporating the revenue requirement adopted in D.07-11-037 include conservation rate designs for two regions with recent rate designs and interim conservation rates for the remaining region pending completion of the company's GRC. No conservation rate designs are proposed for areas with unmetered service, low average consumption or Commission-imposed rate freezes in high-cost service areas.9 One area with an existing three-tier tariff will not have additional changes in its rate design.

The settlement agreement as amended proposes conservation rate designs for six of the nine GSWC ratemaking areas.10 The conservation rate design for residential customers in Regions II and III consists of a reduced service charge and increasing block rates. The two-tier increasing block rates are based on seasonal averages that are determined to be a proxy for indoor water consumption and will ensure that consumers with low and average use remain within Tier 1. Tier 2 rates will be approximately 15% greater than Tier 1 rates. Nonresidential customers will have reduced service charges and a uniform quantity charge that recovers a greater percentage of fixed costs than the current rate design. Service charges will be reduced by approximately 5-10% and the quantity charge will increase by no more than 10%.11

In Region I, the interim conservation rate design will be the same for both residential and non-residential customers. These customers will have a reduced service charge and a uniform quantity charge that recovers a greater percentage of fixed costs than existing rates. In only one of the four ratemaking areas in Region I are more than 70% of revenues recovered from the existing quantity charge. Within 90 days after the Region I GRC decision issues, GSWC will file an application proposing revised conservation rates in a manner consistent with those proposed for Regions II and III in this settlement.

3.1.1. Comments on Conservation Rate Design

The Joint Consumers proposed that GSWC adopt aggressive notice and outreach measures to minimize customer confusion in the transition to conservation rates. Joint Consumers also propose data collection measures for monitoring purposes. The GSWC/Joint Consumers' settlement agreement on these issues is discussed infra.

CFC states there is no basis for the failure to propose increasing block rates for the four ratemaking areas in Region I pending the completion of the GRC for Region I. Instead, the settling parties have proposed decreasing the service charge and increasing the quantity charge for those ratemaking areas in Region I on an interim basis and no changes in three other ratemaking areas. We concur with CFC. In D.08-01-043, we adopted revised rates and a low-income assistance program for Region I. Since the proposed conservation rates for Region I do not conform to the recently adopted revenue requirement for Region I, we decline to adopt them here. GSWC and DRA agreed to modify the Region I rates within 90 days of resolution of the pending GRC, or April 30, 2008 and were granted two extensions of the settlement until July 15, 2008 and twenty days from the issuance of this decision for GSWC to file its application. That application shall govern the conservation rates adopted for Region I.

CFC states the settlement agreement fails to provide a cost allocation study underlying the creation of residential and non-residential customer classes. GSWC and DRA state no cost allocation study is necessary, because the settlement incorporates revenues currently recovered from residential customers and non-residential customers as separate groups and maintains the existing allocation of costs between those classes of customers. The amendment to the settlement incorporates the revenue requirement recently adopted in D.07-11-037. In that decision, the cost allocation studies submitted by GSWC and DRA did not address deaveraging of rates into residential and nonresidential customer classes, because a single quantity rate was adopted in the GRC. In this proceeding, GSWC and DRA stated that they determined the revenue breakdown between residential and nonresidential customers by type of dwelling unit. Residential customers are all single residences with one dwelling unit and nonresidential customers are all other meter customers. Prior classification of residential customers fell into four categories, including single residences with one dwelling unit.12

The lack of an analysis of the deaveraging of rates between Regions II and III residential and nonresidential customers in GSWC's GRC does not assist us in assessing CFC's concerns here. However, we are not persuaded that a cost allocation study in this proceeding is the appropriate remedy. We have no requirement for cost allocation studies when rates change from a single quantity rate to rates specific for each customer class. In addition, cost allocation studies, if necessary, are best reviewed in GRCs.13 Although GSWC and DRA state the proposed conservation rates recover the existing revenue requirement for residential and nonresidential customers, the definition of residential customers has changed. Because customers with greater than one dwelling unit are now nonresidential customers, under the settlement a greater percentage of revenue requirement will be recovered from nonresidential customers.

CFC states that the conservation rates in Region III are not consistent with the California Urban Water Conservation Council's (CUWCC) best management practice (BMP) 11 requirement that 70% or more of revenues be recovered through the quantity charge. GSWC and DRA point out that CFC is discussing existing rates in Region III and not the proposed conservation rates. GSWC and DRA provide the breakdown of revenue requirement between the two classes. In the original settlement rates, the combined revenue recovery through the quantity charge when rounded equals 70%. However, the residential revenue requirement separately does not. In the amendment to settlement GSWC and DRA have adjusted the service charges for both Regions II and III to conform to the revenue requirement adopted in D.07-11-037 and state that the revenues recovered through the quantity charge now meet CUWCC's requirement.

CFC questions the residential conservation rate design proposed for Regions II and III. CFC criticizes how the settling parties determined winter usage and proposed rates, which may be adjusted to recover within 1% of revenues recovered under a single quantity rate. GSWC and DRA point out that CFC's concerns about the development of average winter usage are based on incorrect data. The data CFC references refer to the amended application, not the settlement agreement. DRA and GSWC state that achieving revenue neutrality by adjusting rates to recover the target revenue requirement, plus or minus 1%, is a common rate design approach. We concur that CFC's concerns about the development of average winter usage and revenue neutrality of the proposed conservation rates are misplaced.

CFC also criticizes the impact of conservation rates on overall consumption in these regions and the establishment of a 15% difference between Tier 1 and Tier 2 rates. GSWC and DRA state that the 15% difference between tiers provides an incentive to reduce consumption while recognizing that conservation measures can require long-term investments, so a greater increase between tiers might result in a greater burden on customers in the short term. CFC disagrees because many conservation measures are not costly, for example, low-flow showerheads and leak detection and repair. GSWC and DRA counter that detection and repair of water leaks typically is very costly and time consuming.

We have not set a required minimum or maximum differential between tiers. Instead, we have examined parties' proposals on a case-by-case basis. The GSWC and DRA proposed differential between tiers is not inherently unreasonable for a trial program. Although CFC points out municipalities have differentials between tiers that are higher than proposed here, we have not required that utilities follow those rate structures. Since the trial programs will be assessed to determine whether they achieve targeted reductions in overall consumption, the differentials between tiers will be adjusted in future GRCs.

GSWC and DRA note that the number of residential customers in Regions II and III are 71% and 89% of all customers even though, as CFC discusses, overall sales for those customers are 40% and 58%, respectively. Conservation price signals through increasing block rates will affect more customers in both of those regions even though they are not customers with the highest consumption. Applying increasing block rates to a larger percentage of customers, even if sales attributable to those customers are lower on a per customer basis, is not inherently unreasonable.

CFC claims nonresidential customers will not experience appropriate conservation signals since rate increases are limited to 10%. GSWC and DRA explain that non-residential customers have significantly higher consumption as reflected in sales data and, as a result, a 10% increase will be significant in dollar amounts. CFC also states that nonresidential customers will see rate decreases, not rate increases. GSWC and DRA point out that the proposed single quantity rate is an increase over the existing rate. Although some customers will realize rate decreases since there are decreases in service charges and increases in the quantity charge, increased usage will result in rate increases. A higher rate for greater usage is an appropriate conservation price signal.

CFC proposes that we adopt a budget-based rate approach for GSWC's non-residential customers where base indices of water use are determined from historical usage and the monthly bill is calculated by comparing actual usage with the base index.14 We have permitted conservation rates for nonresidential customers to be based on CUWCC's requirement that 70% or more of revenues be collected through the quantity charge. GSWC has more than 37,000 nonresidential customers in Regions II and III.15 GSWC and DRA state the budget-based approach proposed by CFC is both time-consuming and costly. We will not require such an approach here. We will require GSWC to propose increasing block rates for its nonresidential customers in its next GRC.

CFC opposes the settlement's exclusion of the Wrightwood and Desert service areas from the conservation rate design included in the settlement. Wrightwood and Desert, including Apple Valley and Morongo Valley, are excluded because the Commission ordered that rates in these high cost areas remain frozen until rates in the other Region III service areas reach a similar level. Although the Region I and II GRCs recently were concluded, Region III was not. The rates in the Wrightwood and Desert service areas remain higher than other rates in Region III. Under D.00-06-075, GSWC is precluded from seeking any increase, or change in rate design that would increase, those rates. It is reasonable to exclude the Wrightwood and Desert service areas from the proposed conservation rate design.

CFC states the proposed rates are not seasonal rates. GSWC and DRA note that the proposed rates incorporate seasonality of water usage by using seasonal averages to establish breakpoints between Tier 1 and Tier 2. Seasonality of water usage results in rate increases for higher summer average usage. Usage at summer averages will result in customers' receiving bill increases. It is not necessary to adopt seasonal rates in order to capture seasonality. The proposed rate design is a reasonable means to address higher summer usage.

3.2. WRAM and MCBA

GSWC and DRA propose separate WRAMs for each ratemaking area, which will ensure recovery of the portion of GSWC's fixed costs that are recovered through the quantity charge and all variable costs not included in the MCBA.16 The WRAM will track the difference between adopted and actual revenue.17

CFC recommends that we reject the proposed WRAM because it is unlikely that the proposed conservation rate design will result in any revenue loss to GSWC.18 GSWC and DRA state that without a WRAM a rate design that is intended to promote conservation could substantially reduce GSWC's earnings. The WAP supported the adoption of decoupling mechanisms due to existing financial disincentives to conserve water. GSWC proposed reducing monthly service charges, because it was concurrently proposing a WRAM. With a WRAM, GSWC's earnings and revenue requirement would not be subject to the fluctuation of sales resulting from reducing service charges and recovering the costs captured in that portion of the service charges in quantity rates. (See generally Exhibit 1, pp. 13-14, 17.) Increasing block rates also increase volatility in sales, sales forecasts, and earnings. The proposed WRAM eliminates that volatility. (Id. at 14-15.)

GSWC notes that for Region III's six water programs, GSWC's 2005 water conservation budget would save about 753 acre feet of normal annual consumption. That level of savings would result in a revenue loss of $567,000. (Exhibit 4, p. 6.) Adoption of a WRAM removes the risk of that revenue loss. Adoption of a WRAM also removes weather and economic risk associated with sales volatility from both GSWC and its customers. (Id. at 14.) A WRAM will not affect GSWC's incentive to reduce costs, since it only adjusts actual revenues or sales. (Id. at 17.) We conclude the record sufficiently demonstrates GSWC is at risk for any revenue losses associated with adoption of the conservation rate design. Although the proposed conservation rate design was modeled to be revenue neutral, there is no guarantee it will achieve that result.

The MCBAs will capture the cost savings and cost increases associated with purchased water, purchased power, and pump taxes by tracking the difference between actual and adopted variable costs. The MCBAs will replace the existing supply cost balancing account, which only tracks cost changes attributable to changes in unit price. GSWC stipulates that it will exercise due diligence in ensuring the least-cost mix of its water sources and will track significant changes in water purchases.19

Annually the over- or under-collection traced in the WRAMs and the difference between adopted and actual costs tracked in the MCBAs will be reported to the Commission's Water Division. If the combined over- or under-collection exceeds 2.5% of GSWC's prior year revenue requirement, the combined balance of the accounts will be amortized. Combined under-collections will be passed through as surcharges on volumetric charges; combined over-collections will be passed through as surcredits on volumetric charges.20

3.2.1. Adoption of Conservation Rate Design and WRAM/MCBA Settlement Agreement as Amended

We have reviewed the conservation rate design and WRAM/MCBA settlement as amended and CFC's objections to the specific rate design and decoupling WRAM. We find GSWC's trial conservation rate design will advance our conservation objectives; it incorporates increasing block rates for residential customers and moves its nonresidential customer class to CUWCC's requirement to recover over 70% of revenues through the quantity charge. We will review this rate design to determine whether it meets targeted reductions in consumption. If it does not meet these goals or is unlikely to meet future goals, GSWC will propose rate designs that will accomplish these goals.

GSWC's WRAM and MCBA will balance utility and ratepayer interests and will ensure neither is harmed nor benefits from the adoption of conservation rates. The WRAM and MCBA implement the WAP's objective of decoupling sales from revenues to encourage successful conservation programs. The GSWC/DRA settlement agreement is reasonable in light of the record, consistent with the law, and in the public interest and will be adopted.

3.2.2. GSWC Data Collection and Reporting and Customer Education and Outreach Initiatives

GSWC and the Joint Consumers agree that GSWC will implement customer initiatives prior to conservation rates going into effect. GSWC will provide customers with conservation rate notices as a bill insert and will explain the impact of conservation rates on customers' bills.21 The notice will provide key information in large type and in Spanish and how to get a large print or Spanish version of the entire notice.22 GSWC will provide information on customer bills referring to the insert in both English and Spanish.23 GSWC's website will include notices in both English and Spanish regarding the new conservation rates. GSWC will distribute notices to community based organizations and will make best efforts to partner with them to develop additional educational material.24 GSWC will continue outreach efforts by making large type notices available to the visually impaired, making its website accessible to the visually impaired and establishing TTY accessibility.

GSWC will provide an annual report on conservation rates and WRAM that will provide data concerning the number of customers in each customer class, with residential and non-residential customers broken out, and bi-monthly customer usage in billing units, by ratemaking area and by customer class. This information will be provided for low-income ratepayer assistance (LIRA) customers. The report also will include bi-monthly usage for the current month of the current year versus prior year, using average customer profiles.25

The GSWC and Joint Consumer settlement was not opposed. The settlement provides a comprehensive customer education program, which advises customers of the benefits of conservation and the impacts of conservation rates. It requires comprehensive data collection and reporting that will assist in monitoring the impact of the trial program. The settlement is reasonable in light of the whole record, consistent with the law, and in the public interest. Thus, we shall adopt the settlement.

3.3. San Jose and DRA's Proposed Conservation Rate Design Settlement

The San Jose and DRA proposed settlement would implement a trial program consisting of two-tiered increasing block rates for residential customers and a pricing adjustment mechanism that is similar to the balancing account (also known as a WRAM) adopted for CalAm's Monterey District.26 The parties agree that an adjustment to San Jose's ROE is not a contested issue. San Jose agrees to work with DRA and other consumer organizations to develop customer education and outreach and data collection and monitoring programs. San Jose agrees to withdraw its request to implement a Water Quality Expense Memorandum Account without a cap and the parties agree San Jose should be authorized to track no more than $150,000 of additional conservation expenses in a memorandum account.

3.3.1. Conservation Rate Design

San Jose and DRA propose modifying the current single quantity rate for all residential customer classes by establishing two quantity rates and a breakpoint between those rates. The upper level of the first consumption block is set at the mid-point between the average monthly consumption over an entire year and the average monthly consumption during the winter months. There are two proposed schedules for residential customers. One schedule is for customers with meters ranging from 5/8 to ¾ to 1-inch in diameter, and the other schedule is for customers with meters ranging from 1 to 2 inches in diameter. The Tier I quantity rate is approximately a 3.23% discount from the current rate, and the Tier II rate is approximately 10% above the Tier I rate.

CFC objects to the lack of a cost allocation study for the change from a single quantity rate for all customers to a tiered rate design for residential customers. San Jose and DRA state that the settlement maintains the existing allocation of costs among San Jose's customer classes adopted in D.06-11-015. CFC points out that the Commission adopted a settlement agreement in D.06-11-015 and in the GRC prior to the last one. CFC also states that residential customers with larger meters use more water than customers with smaller meters so rates should separately recover costs from each group.

Neither San Jose in its consolidated application proposing to deaverage rates nor the settling parties explain how rates were deaveraged into residential and nonresidential customer classes.27 The settling parties state that customers were classified by individual customer group (rate code) and that customers in the residential rate codes were separately analyzed. San Jose does not track multi-unit residential buildings; however, these buildings tend to have larger meters.

CFC disputes the methodology the settling parties used to set the breakpoints and states that breakpoints were not set at the mid-point between annual average monthly consumption and average monthly winter use. The settling parties explain the breakpoint for the group of residential customers with smaller meter sizes was based on ¾" meters because 86.7% of the customers had that type of meter. The breakpoint for residential customers with larger meters was based on data for 1½" meters because more than 80% of customers with larger meters have 1½" meters. We have not required conservation rates for each meter size. However, rates for each meter size more specifically target consumption in that group. We also do not know whether customers with smaller meter sizes share any common characteristics, for example whether they are more likely to be single residences. Similarly, it is unclear whether customers with larger meter sizes more likely to be multi-family dwelling units. San Jose believes many of its low-income customers reside in multi-family dwelling units served by larger meter sizes.

CFC states the proposed conservation rates will not encourage conservation. San Jose and DRA state the conservation rate design was set to prevent rate shock and to be consistent with the take-or-pay provisions in San Jose's contract with the Santa Clara Valley Water District (SCVWD).28 San Jose must pay for at least 90% of the water scheduled over the three-year period of the contract under the take-or-pay provision and must contract for a minimum of 95% of the highest amount of water contracted for in any one year of those three years. This provision requires a gradual reduction in consumption in order to ensure San Jose does not pay for scheduled water its customers did not use. A gradual reduction in consumption is consistent with our targeted reduction in consumption.

CFC states a third rate tier should be created to encourage conservation. The third tier should be set at a level of use that exceeds 70 or 80% of other residential customers with the same meter size. CFC proposes an alternate rate design that establishes a third tier with a breakpoint at the amount of water used by 80% of San Jose's customers with residential meters. San Jose and DRA state that the alternate rate design is not revenue neutral and would recover more than the Commission-adopted revenue requirement in D.06-11-015. We have not required trial programs to include a third tier or established parameters that would require a third tier. We decline to require a third tier for San Jose.

CFC criticizes the settlement for failing to include any change to nonresidential rates. San Jose and DRA state the existing nonresidential rate design recovers approximately 80.93% of nonresidential revenues through volumetric rates. This recovery exceeds CUWCC's requirement of 70% or greater revenue recovery through the quantity charge. San Jose and DRA also state that it is more difficult to set fair quantity limits for commercial and industrial customers. Based on the high percentage of revenue recovered from nonresidential customers under the quantity charge, lowering the service charge to recover additional revenues through the quantity charge is not necessary.29 If no adjustment is made to the service charge, the quantity charge cannot be raised and still comply with the Commission's authorized revenue requirement. We have encouraged Class A water utilities to adopt block rates for residential customers, but have not required them to do so for nonresidential customers in this proceeding. We will require San Jose to propose increasing block rates for nonresidential customers in the GRC following implementation of its residential conservation rate design trial program for at least one year.

3.3.2. Pricing Adjustment Mechanism

San Jose and DRA propose a pricing adjustment mechanism similar to the Monterey-style WRAM. The pricing adjustment mechanism will track the difference between revenue San Jose receives for actual metered sales through the tiered volumetric rate and the revenue San Jose would have received through the uniform, single quantity rates if they had been in effect.30 San Jose will provide an annual report showing the revenue over- or under-collection for the prior calendar year. If the over- or under-collection exceeds 2% of San Jose's adopted revenue requirement for the present year for amounts recovered through the quantity rates of residential customers, San Jose will file an advice letter within 30 days that amortizes the balance in the account. If the cumulative 2% threshold is not met, the balance in the account will be amortized in the next GRC.31

The settling parties agree this mechanism complements San Jose's limited water supply and adequately ensures the recovery of sufficient revenue. CFC opposes adoption of the pricing adjustment mechanism because the rates are not true conservation rates. The proposed pricing mechanism ensures that San Jose's revenues do not decline as the result of adopting conservation rates. Although we find the pricing adjustment mechanism reasonable, we will not adopt it until the settling parties further clarify the conservation rate design.

3.3.3. Conservation Memorandum Account

San Jose and DRA agree that San Jose should be authorized to track additional conservation expenses in a memorandum account, not to exceed $150,000 a year, in addition to the amount authorized in D.06-11-015.32 Recovery of these expenses is subject to a reasonableness review. In order to implement the Commission's water conservation goals, the Class A water utilities are incurring additional costs. It is reasonable to permit San Jose to track additional conservation expenses in a memorandum account.

3.3.4. Adoption of Conservation Rate Design and Pricing Adjustment Mechanism Settlement Agreement

We have reviewed the conservation rate design and pricing adjustment settlement and CFC's objections to the specific rate design and pricing adjustment mechanism. We find San Jose's trial conservation rate design will advance our conservation objectives; it incorporates increasing block rates for residential customers and nonresidential customers'rates, although unchanged, exceed CUWCC's requirements. We will review this rate design to determine whether it meets targeted reductions in consumption. If it does not meet these goals or is unlikely to meet future goals, San Jose will propose rate designs that will accomplish these goals.33

3.3.5. Customer Education and Outreach, Data Collection and Reporting

San Jose and the Joint Consumers agree that San Jose will implement customer outreach prior to conservation rates going into effect. San Jose will provide customers with conservation rate notices as a bill insert and will explain the impact of conservation rates on customers' bills in English, Spanish, and Vietnamese.34 The notice will provide key information in large type. San Jose will provide information on customer bills referring to the insert in English, Spanish, and Vietnamese. San Jose's website will post notices regarding the new conservation rates in a clear and conspicuous manner, which will be accessible to screen readers. San Jose will provide TTY information on its bill. San Jose will take out newspaper ads and provide in-language flyers to targeted communities. San Jose will provide information on conservation rates and the low-income water ratepayer assistance program (WRAP) to community based organizations and will provide information about these organizations on its website.35

San Jose will provide an annual report on conservation rates and its price-based revenue adjustment mechanism that will provide data concerning the number of customers in each customer class, with residential and non-residential customers broken out, and monthly customer usage in billing units and by customer class. The report also will include monthly usage for the current month of the current year versus prior year, using average customer profiles. The report also will include monthly reconnections, disconnections, and 48-hour shut-off notices.36 This information also will be provided for WRAP customers in an annual report. The WRAP report will include an estimated annual penetration rate, change in participation after notices, the total number of customer accounts over 30 days past due and the total dollar value of the past due accounts.

The San Jose and Joint Consumer settlement was not opposed. The settlement provides a comprehensive customer education program, which advises customers of the benefits of conservation and the impacts of conservation rates. It requires comprehensive data collection and reporting that will assist in monitoring the impact of the trial program. The settlement is reasonable in light of the whole record, consistent with the law, and in the public interest. Thus, we shall adopt the settlement. Implementation of the settlement is conditioned on adoption of the conservation rate design settlement.

8 CFC did not object to the amendment to the settlement.

9 The parties do not propose conservation rate designs for three ratemaking areas in Region I, Ojai, Arden Cordova, and Clearlake, and for two ratemaking areas in Region III, Wrightwood and Desert, including Apple Valley and Morongo.

10 GSWC provides service to approximately 250,000 customers in three regions which are comprised of nine ratemaking areas.

11 Rates will not change for other sales and services, other utilities for resale, flat-rate service connections and reclaimed/recycled customer classes.

12 The three other categories formerly included as residential were two three or four dwelling units served by one meter, five to twenty dwelling units served by one meter, and twenty-one or more dwelling units served by one meter. Exhibit 1, Exhibit (Attachment) 2.

13 We make no determination whether a cost allocation study would have been preferable to developing rates based on the existing allocation between residential and nonresidential customers.

14 CFC also is concerned that there is insufficient data to determine the impact of the proposed nonresidential conservation rates and recommends that additional data be collected. The proposed data collection and reporting settlement, discussed infra, includes usage information for nonresidential customers and should, at least in part, satisfy CFC's concerns.

15 CFC applauds the settlement's categorization of multi-family households as nonresidential, since CFC recommended that approach in Phase 1A. In its testimony in this proceeding, CFC recommended that two GSWC categories of multi-family dwelling units be categorized as nonresidential. Exhibit 8, p. 4.

16 The variable costs included in the WRAM are variable costs other than purchased power, purchased water, and pump tax.

17 Fire service, unmetered service and other non-general metered service revenues are not included.

18 CFC's concerns about reduction in business risk and the impact on return on equity will be discussed in the return on equity adjustment section.

19 Significant changes occur when the annual volume of purchased water in a region is greater than 10% of the purchased water adopted in the most recently adopted test year for that region.

20 Remaining balances will be addressed in GRCs.

21 GSWC shall submit the proposed notice to the Commission's Public Advisor's office for review.

22 GSWC also will distribute flyers in Spanish if the Commission approves tracking of costs for preparation and distribution of the flyers.

23 This commitment is subject to space limitations on the bill.

24 Notices will be submitted to the Public Advisor and will be distributed 30-60 days before conservation rates go into effect.

25 GSWC will provide additional information on a quarterly basis including separately compiled information on the number of residential and LIRA accounts, the number of accounts over 30 days past due and the dollar value of those accounts; the number of disconnection notices, the number of customers who have had service discontinued for non-payment and the number who have had service restored after discontinuance for non-payment.

26 San Jose provides water service in one ratemaking area that consists of approximately 199,000 residential and about 16,000 nonresidential customers. All of San Jose's customers are metered, bills are provided on a bi-monthly basis, and San Jose has a Water Rate Assistance Program for low-income customers.

27 Nonresidential customers include business, industrial, public authority, resale, private fire, and reclaimed/recycled.

28 San Jose's water supply mix adopted in D.06-00-015 includes 46% or more of its supply from SCVWD.

29 San Jose's service charge was modified in 2006 in its last GRC decision, D.06-11-015.

30 The balancing account will track the actual water amount sold in a month and apply the single quantity rate to result in an adjusted revenue amount for that month. The difference between the adjusted revenue and the actual revenue will be reflected in the balancing account. The account will not track revenues recovered through the service charge.

31 Recovery of under-collections and refunds of over-collections will be passed on to ratepayers through volumetric surcharges and surcredits.

32 DRA and San Jose state the amount authorizes for conservation expenses was $236,000 for 2007, as noted in Attachment E at p. 1. Attachment E to D.06-11-015 states conservation expenses were $61,600 for 2007.

33 San Jose notes that its proposed conservation rates should be updated to reflect San Jose's rate changes subsequent to its adopted 2006 revenue requirement. The mechanism adopted in D.08-02-036, a Tier I compliance advice letter with prior DRA review and subject to Water Division review and disposition, should be used to update the settlement's proposed rates.

34 San Jose shall submit the proposed notice to the Commission's Public Advisor's office for review.

35 Notices will be distributed 30-60 days before conservation rates go into effect.

36 In its next GRC, San Jose will seek modification of its systems to provide additional information monthly on the number of residential and WRAP accounts over 30 days past due and the dollar value of those accounts; the number of disconnection notices, and the number of customers who have had service disconnected for non-payment. In addition, weather-normalized monthly usage data will be made available in San Jose's GRC at parties' request.

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