8. Assignment of Proceeding

John A. Bohn is the assigned Commissioner and Bruce DeBerry is the assigned ALJ in this proceeding.

Findings of Fact

1. D.06-12-040 authorizes Cal Am to recover preconstruction costs for the Water Project through the Surcharge 1 commencing January 1, 2007.

2. As detailed in the Amended Settlement Agreement, Settling Parties agree that Cal Am should be allowed to recover $3,741,714 in 2007 preconstruction costs, and this amount constitutes the entirety of Cal Am's preconstruction costs through December 31, 2007.

3. Settling Parties agree that $309,258.22 represents the full recovery of ASR System charges for work performed through December 31, 2007.

4. Cal Am has provided certain vendor identified Water Project documents to DRA and MPWMD.

5. DRA has determined that the already incurred 2007 preconstruction costs are reasonable.

6. Nothing in the Amended Settlement Agreement affects Cal Am's ability to recover preconstruction costs incurred for the Water Project after December 31, 2007, and tracked in the memorandum account approved in D.03-09-022.

Conclusions of Law

1. Cal Am should be authorized to recover $3,741,714, as compensation in full for all Water Project preconstruction costs incurred through December 31, 2007. These costs should be recovered from ratepayers through the Surcharge 1 authorized by D.06-12-040.

2. The Amended Settlement Agreement between Cal Am, DRA and MPWMD is reasonable, consistent with the law, and in the public interest and should be approved.

3. This decision should be effective today so that the Amended Settlement Agreement may be implemented expeditiously.

4. A.08-04-019 should be closed.

ORDER

Therefore, IT IS ORDERED that:

1. The Amended Settlement Agreement between California-American Water Company (Cal Am), the Division of Ratepayer Advocates (DRA), and the Monterey Peninsula Water Management District (MPWMD), attached to this decision as Attachment A, is approved without modification.

2. Cal Am is authorized to recover $3,741,714, as compensation in full for all Coastal Water Project (Water Project) preconstruction costs incurred through December 31, 2007, using the Special Request 1 Surcharge (Surcharge 1) authorized by Decision (D.) 06-12-040.

3. Cal Am is authorized to transfer $3,741,714 of costs incurred for the Water Project through December 31, 2007 from the authorized memorandum account to the Surcharge 1 cost recovery balancing account (SRSBA).

4. Cal Am shall remove $185,893 in labor, labor overhead and related costs incurred through December 31, 2007, from its SRSBA.

5. Cal Am shall provide to DRA and MPWMD vendor documents to the extent that such documents exist as agreed to in the Amended Settlement Agreement.

6. Cal Am shall continue the annual reporting process adopted in D.06-12-040. Cal Am may file annual applications to address preconstruction costs according to the agreed upon schedule as detailed in the Amended Settlement Agreement. These annual applications shall include the documentation agreed upon in the Amended Settlement Agreement, and a budget and schedule for each existing task order contract.

7. Cal Am shall provide in a separate section of its annual applications justification for recovery of any preconstruction costs which occur outside of the annual reporting period (January 1 to December 31 yearly).

8. Cal Am shall provide in its Class A Annual Report to the Commission an accounting of the amounts collected from customers and the total costs charged to the memorandum account for its Surcharge 1 as detailed in the Amended Settlement Agreement.

9. Application 08-04-019 is closed.

This order is effective today.

Dated December 18, 2008, at San Francisco, California.

D0812034 Attachment A

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