ALJ/LRR/jt2 Date of Issuance 11/10/2008

Decision 08-11-023 November 6, 2008

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Application of California-American Water Company (U210W) to Decrease Revenues for Water Service in its Coronado District by ($73,100) or (0.46%) in 2008, and Increase Revenues by $266,200 or 1.67% in 2009, and $260,900 or 1.61% in 2010.

Application 07-01-036
(Filed January 22, 2007)

And Related Matters.

Application 07-01-037
Application 07-01-038
Application 07-01-039

DECISION ADOPTING CONSERVATION RATE DESIGN SETTLEMENTS FOR THE CORONADO, VILLAGE, AND LARKFIELD DISTRICTS OF

CALIFORNIA AMERICAN WATER COMPANY

TABLE OF CONTENTS

Title Page

DECISION ADOPTING CONSERVATION RATE DESIGN SETTLEMENTS
FOR THE CORONADO, VILLAGE, AND LARKFIELD DISTRICTS OF CALIFORNIA AMERICAN WATER COMPANY 2 2

1. Summary 2 2

2. Procedural Background 3 3

3. Proposed Settlement 5 5

3.1. Standard of Review for Settlements 6 6

3.2. Terms of the Settlement 6 6

3.2.1. Conservation Rate Design 7 7

3.2.2. WRAM and MCBA Mechanisms 12 12

3.2.3. Return on Equity Adjustment 15 15

3.2.4. Monitoring and Data Collection 17 17

3.3. Action on Proposed Settlement 18 18

4. Reduction of Comment Period 18 18

5. Assignment of Proceeding 18 18

Findings of Fact 18 18

Conclusions of Law 20 20

ORDER 21 21

APPENDIX A - Settlement Agreement between the Division of Ratepayer Advocates and California American Water Company on Conservation Rate Design Issues for the Coronado and Village Districts

APPENDIX B - Settlement Agreement between the Division of Ratepayer Advocates, Mark West Community Services Committee and California American Water Company on Conservation Rate Design Issues for the Larkfield District

DECISION ADOPTING CONSERVATION RATE DESIGN SETTLEMENTS FOR THE CORONADO, VILLAGE, AND LARKFIELD DISTRICTS OF

CALIFORNIA AMERICAN WATER COMPANY

1. Summary

This decision adopts a June 26, 2008 settlement agreement resolving all Phase II rate design issues for the Coronado and Village districts in this proceeding. The decision also adopts the June 30, 2008 settlement agreement resolving all Phase II rate design issues for the Larkfield district in this proceeding. Finally, this decision grants the motions to shorten or waive comments on the settlements.

The settlements propose the first conservation rate designs as Pilot Programs, for customers in the Coronado, Village, and Larkfield districts of California American Water Company (Cal Am). The Pilot Programs incorporate two ratemaking mechanisms that remove any disincentive for Cal Am to implement conservation rates and conservation programs. The Pilot Programs will become effective 90 days after the Commission decision adopting the settlements. The Parties agree to meet and adjust the Pilot Programs if there is a disparate impact on ratepayers or shareholders. The Pilot Programs will be reviewed in Cal Am's next general rate case proceeding for each district.

The Coronado and Village districts settlement is sponsored by Cal Am and the Commission's Division of Ratepayer Advocates (DRA). The Larkfield district settlement is sponsored by Cal Am, DRA, and the Mark West Community Services Committee. No party opposed the settlements. We direct Cal Am to take all necessary steps to implement the new conservation rate designs as soon as possible. These proceedings are closed.