DWA/RSK/KOK/DLW/SMW
Decision 08-09-002 September 4, 2008
BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA
In the matter of the application of CALIFORNIA WATER SERVICE COMPANY (U-60-W), |
Application 07-11-020 |
DECISION CONDITIONALLY GRANTING
CALIFORNIA WATER SERVICE COMPANY
AUTHORITY TO BORROW FROM
THE SAFE DRINKING WATER STATE REVOLVING FUND
WITH REPAYMENT THROUGH A CUSTOMER SURCHARGE
IN ITS LUCERNE SERVICE AREA
TABLE OF CONTENTS
Title Page
4. Authority Sought and Discussion 1010
4.2 Cash Requirements Forecast 1616
4.3 Effect of Proposed Loan on Capital Structure 1717
4.4 Permissible Purposes for Loan 1818
4.5 Surcharge and Service Fee 2020
6. Comments on Proposed Decision 2727
7. Assignment of Proceeding 2929
Appendix B - Surcharge Schedule
DECISION CONDITIONALLY GRANTING
CALIFORNIA WATER SERVICE COMPANY
AUTHORITY TO BORROW FROM THE
SAFE DRINKING WATER STATE REVOLVING FUND
WITH REPAYMENT THROUGH A CUSTOMER SURCHARGE
IN ITS LUCERNE SERVICE AREA
1. Summary
This decision conditionally authorizes the California Water Service Company (CWS) to enter into a loan contract, with the California Department of Public Health (CDPH) and the Department of Water Resources (DWR), for the purposes of borrowing up to $7,442,700 from the Safe Drinking Water State Revolving Fund (SDWSRF) and to encumber its assets in connection with this loan. The proceeds of this loan will be used exclusively to finance the construction of a water treatment plant in the CWS Lucerne service area.
CWS is authorized to impose a temporary surcharge on the water rates of the ratepayers in the Lucerne service area, to repay the SDWSRF loan. The surcharge for a typical residential customer, with a 5/8 x ¾ inch meter, based on the requested loan amount, is estimated to be $17.37 per month (see attached Appendix B - Surcharge Schedule), an estimated increase of approximately 22%. The surcharge will need to be adjusted downwards if the CDPH does not approve the full requested loan amount of $7,442,700. In addition, CWS is authorized to impose a service fee, chargeable to new customers requesting future service to currently undeveloped lots.
In order to facilitate CWS' full request, in the event that CDPH reduces the SDWSRF funding from the amount CWS requested, we modify Decision (D.) 04-09-002. We expand the uses of the proceeds, authorized in that decision, to include reimbursing CWS' treasury for expenditures related to the construction of the Lucerne Treatment Plant that CDPH does not authorize for reimbursement with SDWSRF loan proceeds.
Furthermore, CWS is authorized to establish a separate balancing account to be credited (increased) with revenue collected through the surcharge, service fees, and interest earned on funds deposited with the fiscal agent. The balancing account will be debited (reduced) with payments of principal on the loan and with any charges for the services of the fiscal agent.
The conditions we impose include the following: 1) CWS must retain invoices for the work completed and maintain adequate records to enable an audit of the surcharge, revenues collected through the surcharge, and payments of principal on the loan and fiscal agent fees; 2) CWS must receive CDPH and DWR approval and comply with all CDPH and DWR rules and regulations for all expenditures made for this project; 3) CWS must utilize the services of a fiscal agent approved by DWR; 4) CWS is limited to charging a $2,000 service fee to new customers requesting future service to currently undeveloped lots; 5) If the total loan amount granted by CDPH is less than $7,442,700, within 30 days of entering into the loan contract, CWS must file an advice letter requesting revision to the surcharge; and, 6) CWS must provide the Commission's Director of the Division of Water and Audits (DWA) with a copy of the loan contract within 30 days of entering into the contract.
The Commission recognizes the economic position of many of CWS' customers in the Lucerne area. In that respect, the loan authorized in this decision is a zero-interest loan, the lowest cost financing available to CWS to construct the Lucerne Treatment Plant. It should also be noted that the construction of this treatment plant is required to address the CDPH's list of deficiencies, dated June 4, 2002, and its Compliance Order of September 7, 2006. Furthermore, the CDPH reviews the plans for this treatment plant before providing funding and takes steps to ensure that the construction is of high quality and low cost. Therefore, we conclude that the loan authorization in the current decision is reasonable and required by CDPH order. We do not, though, make a finding as to the reasonableness of the treatment plant costs in this decision. This type of review is normally performed during a general rate case proceeding (GRC).
