6. Comments on Proposed Decision

The proposed decision in this matter was mailed to the service list in accordance with Section 311 of the Pub. Util. Code and comments were allowed under Rule 14.3 of the Commission's Rules of Practice and Procedure. Comments were filed on August 13, 2008 by CWS and on August 20, 2008 by DRA.

We also add a new Finding of Fact, Conclusion of Law, and Ordering Paragraph, regarding our discussions in the Proposed Decision: 1) regarding what context a reasonableness review is performed on construction costs; and 2) exclusion of the surcharge and service fees from regulated operating revenue, and the exclusion of the plant financed through the surcharge from rate base, for ratemaking purposes.

6.1 CWS Comments

In its comments on the Proposed Decision, CWS states that the Commission should clarify when the surcharge should initially be implemented and, given that the requested loan amount may change, what the amount of the surcharge should be. In particular, CWS states that, if the Commissions intent is for CWS to begin accruing a reserve in advance of loan payments being made, CWS would recommend that Ordering Paragraph 9 specifically reference the rates in Appendix B to the decision. CWS states that this "would reduce intergenerational equity concerns" and would allow CWS to accrue a reserve of loan payments that would allow them to reduce the surcharge in later years. CWS also recommends corresponding revisions to the Findings of Fact and Conclusions of Law.

The Commission agrees that these issues should be clarified in the Findings of Fact, Conclusions of Law, and Ordering Paragraphs, but does not agree with the timing and amount of the initial surcharge recommended by CWS. Any intergenerational equity concerns should not be resolved by burdening current customers with a higher surcharge rate than may be required in order to reduce the surcharge rate charged to customers in future years. Also, it would not be fair for current customers to pay: 1) a surcharge for a loan payment that may or may not be based on the correct loan amount; and 2) for a loan that CWS is not yet making payments on.

It is clear in the body of the proposed decision that the initial surcharge should not begin until the loan papers are signed and the loan amount is known. In line with the discussion on page 19, we accordingly revise Finding of Fact 29, Conclusion of Law 7, and Ordering Paragraph 9 to require that CWS file an advice letter requesting implementation of the final loan amount within 30 days after signing the final loan agreement.

6.2 DRA Comments

In its comments on the Proposed Decision DRA recommends that the Commission: 1) require a reasonableness review of CWS' construction costs for the Lucerne Treatment Plant, due to the 86% increase of the final estimate of $7,442,700 over CWS' estimate of $3,998,400 in its last GRC; and 2) prohibit CWS from seeking compensation if the Lucerne Treatment Plant is acquired by a public company.

As we have already stated in Section 4.4 of this decision, a reasonableness review is something performed in the normal course of a GRC, and we do not address the reasonableness of the Lucerne Treatment Plant costs in this decision.

Pursuant to Rule 14.3(c) of the Rules of Practice and procedure, comments are limited to factual, legal, or technical errors in the proposed decision, citing specific references to the record. For the first time in this proceeding, DRA raised these issues. These issues were not raised in the current application, and there was no protest to the current application. As such, DRA's comments on these issues do not comply with Rule 14.3(c).