2. Background
In D.06-12-040, the Commission authorized recovery of Water Project preconstruction costs incurred through 2005, and provided for review of Cal Am's engineering and environmental costs through 2005, and preconstruction costs for 2006 and 2007. In D.08-01-0074 the Commission authorized recovery of 2006 preconstruction costs by adopting a settlement agreement between Cal Am and DRA.
On April 10, 2008, Cal Am filed A.08-04-019 (Application) requesting approval of engineering and environmental costs, public outreach costs, legal fees and miscellaneous charges incurred in 2007, and interest related to these charges for the Water Project. Cal Am also requested that the Commission authorize transfer of $3,888,830 of these costs from the authorized memorandum account to its SRSBA.
In A.08-04-019, Cal Am proposed to remove $171,001 in labor and non-labor costs from the SRSBA, and also remove $14,896 of interest. Cal Am also requested that the Commission implement an annual review process for Cal Am's preconstruction costs that would continue through the year in which the Commission issued a decision on a Certificate of Public Convenience and Necessity. This proposal would not require Cal Am to file a new application each year for recovery of preconstruction costs; instead, Cal Am would submit annual reports to address the reasonableness of its preconstruction costs. The annual reports would be subject to review by the Commission and DRA. Cal Am proposed that the Commission would then approve the annual preconstruction costs included in the annual reports.5 Cal Am anticipates that the Water Project preconstruction costs will continue through 2009.6
MPWMD and DRA protested the Application on May 5 and May 16, 2008, respectively. Cal Am responded to these protests on May 27, 2008.
A prehearing conference (PHC) was held on June 9, 2008, and the Parties agreed to hold evidentiary hearings beginning August 27, 2008, followed by the filing of briefs in September and October 2008. At the PHC, Parties also agreed to meet in mediation in an attempt to resolve their disputes. An Assigned Commissioner's Ruling and Scoping Memo was issued on June 16, 2008.
On July 10, 2008, DRA served its Audit Report on California American Water Company's Coastal Water Project 2007 Preconstruction Costs,7 and on July 17, 2008, MPWMD served its testimony.8 On August 8, 2008, Cal Am served rebuttal testimony.9 Parties attended a mediation meeting on August 29, 2008, and on September 12, 2008, submitted a settlement agreement (the September Settlement Agreement).
On September 29, 2008, an evidentiary hearing was held to review the September Settlement Agreement. At the hearing, the Assigned Administrative Law Judge (ALJ) asked how the September Settlement Agreement responded to D.06-12-040 and D.08-01-007, which requested DRA to determine whether Cal Am's 2007 preconstruction costs are reasonable. After some discussion, a representative for DRA stated that DRA found 2007 preconstruction costs reasonable.10
Following the evidentiary hearing, the ALJ requested that Parties modify the September Settlement Agreement for two issues.11 First, parties were asked to delete the provision requesting that the Application remain open for the purposes of future preconstruction cost filings. Second, parties were asked to include a provision for reporting to the Commission the amounts included in the SRSBA, the amounts which have been collected from customers, and an estimate of when the SRSBA might be reduced to a zero balance.
On October 31, 2008, Settling Parties filed a Joint Motion for Adoption of Amended Settlement Agreement between the Settling Parties and a Motion to Waive Comment Period on Settlement Agreement.
4 Cal Am's Application (A.) 04-09-019.
5 Exhibit 3, pp.11-13.
6 Id.
7 See, Exhibit 6.
8 See, Exhibit 7.
9 See, Exhibits 4 and 5.
10 TR 16.
11 See, ALJ e-mail dated October 20, 2008 (ALJ e-mail file).
