11. Assignment of Proceeding

Timothy Alan Simon is the assigned Commissioner and Seaneen M. Wilson is the assigned ALJ in this proceeding.

1. Based on SJWC's forecast of uses, the forecast of funds needed by SJWC over the period 2010-2014 is $495.4 million. Of this need:

a. $25 million will be provided from current financing authority;

b. $233 million will be provided from cash from internal sources;

c. $69.1 million will be provided from a line of credit;

d. $100 million will be provided from new Debt; and

e. $50 million will be provided from new Common Equity.

2. The proper term for securities issued pursuant to Pub Util. Code § 817 is greater than 12 months.

3. The requested financing authority of $100 million of new Debt and $50 million of new Common Equity appears necessary to provide the external funding required to meet SJWC's projected cash requirements through 2014.

4. The proposed new financing requested by SJWC and the associated money, property, or labor to be procured or paid for with the proceeds of this proposed new financing, are, pursuant to Pub. Util. Code §§ 817 and 818, reasonably required for proper purposes, which purposes are not, in whole or in part, reasonably chargeable to operating expenses or to income.

5. Pub. Util. Code § 818 allows for exceptions to the requirements of Pub. Util. Code § 817.

6. The Commission has authorized exceptions allowed by Pub. Util. Code § 818 in, for example, D.10-09-006 and D.01-06-016.

7. Pursuant to the USOA for Class A water utilities adopted by the Commission in D.50185 and modified in D.57578, Account 414 does not include the cost of issuing and selling common stock.

8. Resolution F-616 requires utilities to issue debt using competitive bids.

9. Resolution F-616 also provides for exemptions from the Competitive Bidding Rule for debt issues of $20 million or less and debt for which competitive bidding is not viable or available.

10. The necessity or reasonableness for ratemaking purposes of SJWC's construction budget, cash requirements forecast, and capital structure, are normally reviewed and authorized in general rate cases or cost of capital proceedings.

11. GO 24-B requires utilities to submit a monthly report to the Commission that contains, among other things: (a) the amount of debt issued by the utility during the previous month; (b) the total amount of debt outstanding at the end of the prior month; (c) the purposes for which the utility expended the proceeds realized from the issuance of debt during the prior month; and (d) a monthly statement of the separate bank account that the utility is required to maintain for all receipts and disbursements of money obtained from the issuance of debt.

12. Notice of A.10-07-022 appeared in the Commission's Daily Calendar on July 29, 2010 and no protests were filed.

13. Resolution ALJ 176-3258 preliminarily categorized A.10-07-022 as ratesetting and determined that a hearing would not be necessary.

1. SJWC should be authorized to issue new Debt of up to $100 million and new Common Equity of up to $50 million, all of which are for proper purposes and consistent with the requirement of Pub. Util. Code §§ 817 and 818.

2. SJWC should be authorized to issue new Debt including: senior notes with or without insurance; First Mortgage Bonds; medium-term notes; project specific financing; secured notes; unsecured senior notes; variable interest rate debt; privately placed debt; and debt securities relating to participation in government or agency taxable or tax exempt debt financing.

3. Pursuant to Pub. Util. Code § 851, SJWC should be authorized to encumber its utility property to secure Debt authorized herein.

4. SJWC should be authorized to issue Debt through government or agency taxable or tax exempt debt financing, authorized herein, whenever SJWC's facilities qualify for such financing under federal or state law. In this structured financing, SJWC should be authorized to unconditionally guarantee or otherwise secure the obligations of the issuer. As a means of securing the issuer's obligations, SJWC should be authorized to issue and pledge or deliver bonds in an equal principal amount to the issuer or a trustee.

5. SJWC should be authorized to issue new Debt that may be redeemable, prior to maturity, at a price based upon the principal amount then outstanding plus accrued interest and a premium. The premium should be based on a percentage of the principal amount decreasing every 12 months from the date the Debt was first sold, or some later date, and should decline in total to zero by the year of maturity, or under some other type of "make-whole" method, or a combination of methods.

6. SJWC should be authorized to include some or all of the following redemption provisions in its new Debt issuances:

· The Debt may be issued with terms that include a non-redemption provision for some period following the issuance date, but such period would be less than the term of the Debt.

· The terms of the Debt may prohibit redemptions for a specified period of time if the redemption is in anticipation of refunding the Debt by the use, directly or indirectly, of funds borrowed by SJWC at an annual cost less than the annual cost of the Debt being redeemed.

· The Debt may be issued with terms that include provision for sinking funds designed to amortize the outstanding amount of Debt to not less than face value at maturity.

7. Pursuant to Pub. Util. Code §818, SJWC should be authorized to amend the terms of its Credit Agreement, and issue short-term debt for a period of up to 24 months.

8. SJWC should record its 24 month short-term debt as short-term debt, and should use it for short-term purposes such as expenses and working cash.

9. SJWC should be granted an exemption from the Competitive Bidding Rule for all issuances of $20 million or less and all debt issuances for which competitive bidding is not viable or available, including bonds, debentures, privately placed debt, direct loans, variable interest rate debt, medium-term notes, and tax-exempt securities.

10. SJWC should file with the Commission, on or before the 25th day of each month, a report under GO 24-B.

11. The order herein is not a finding of the reasonableness of SJWC's proposed construction plan or expenditures, the resulting plant balances in rate base, the capital structure, or the cost of money, nor does it indicate approval of matters subject to review in a general rate case or other proceedings.

12. SJWC should remit a check for $87,000, as required by §§ 1904(b) and 1904.1 of the Pub. Util. Code.

13. The authority granted by this Decision should not become effective until SJWC has paid the fees prescribed by §§ 1904(b) and 1904.1.

14. SJWC should not use the proceeds from the Debt or Common Equity authorized by this decision to fund its capital projects until SJWC has obtained all required Commission approvals for the projects, including any required environmental review under CEQA.

15. The order herein does not involve any commitment to any specific project which may result in a potentially significant impact on the environment; thus it is not a project subject to CEQA.

16. The authority granted SJWC herein is in compliance with Pub. Util. Code §§ 816, 817, 818, 824, and 851.

ORDER

IT IS ORDERED that:

1. San Jose Water Company is authorized to issue new Debt Securities of up to $100 million for terms of greater than 12 months.

2. San Jose Water Company is authorized to issue new Common Equity Securities of up to $50 million.

3. San Jose Water Company is authorized to issue new Debt Securities and new Common Equity Securities in compliance with Pub. Util. Code §§ 816, 817, 818, 824, and 851.

4. San Jose Water Company is authorized to issue new Debt Securities in the form of: senior notes with or without insurance; First Mortgage Bonds; medium-term notes; project specific financing; secured notes; unsecured senior notes; variable interest rate debt; privately placed debt; and debt securities relating to participation in government or agency taxable or tax exempt debt financing.

5. Pursuant to Public Utilities Code Section 851, San Jose Water Company is authorized to encumber its utility property to secure the Debt Securities authorized herein.

6. San Jose Water Company is authorized to issue Debt Securities through a government or agency to obtain taxable or tax exempt debt financing authorized herein, whenever San Jose Water Company's facilities qualify for such financing under federal or state law. In this structured financing, San Jose Water Company may unconditionally guarantee or otherwise secure the issuer's obligations to its debt holders. As a means of securing the issuer's obligations, San Jose Water Company may issue and pledge or deliver bonds in an equal principal amount to the issuer or a trustee.

7. San Jose Water Company is authorized to issue new Debt Securities that may be redeemable, prior to maturity, at a price based upon the principal amount then outstanding plus accrued interest and a premium. The premium may be based on a percentage of the principal amount decreasing every 12 months from the date the Debt Securities were first sold, or some later date, and declining in total to zero by the year of maturity, or under some other type of "make-whole" method, or a combination of methods.

8. San Jose Water Company is authorized to include some or all of the following redemption provisions in its issuance of new Debt Securities:

9. Pursuant to Public Utilities Code Section 818, San Jose Water Company is authorized to modify its Credit Agreement, and issue short-term debt for a period of up to 24 months.

10. San Jose Water Company must record its 24-month short-term debt as short-term debt, and must use it for short term purposes such as expenses and working cash.

11. San Jose Water Company is granted an exemption from the Competitive Bidding Rule for issuance of all Debt Securities of $20 million or less and issuance of all Debt Securities for which competitive bidding is not viable or available, including bonds, debentures, privately placed debt, direct loans, variable interest rate debt, medium-term notes, and tax-exempt securities.

12. San Jose Water Company must report on a monthly basis all the information required by General Order 24-B with respect to securities issued pursuant to this Order.

13. San Jose Water Company may not use the proceeds from the Debt Securities and Common Equity Securities authorized by this decision to fund its capital projects until it has obtained all required Commission approvals for the projects, and has complied with all environmental laws and regulations applicable to the projects.

14. San Jose Water Company must remit a check for $87,000, as required by §§ 1904(b) and 1904.1 of the Public Utilities Code, to the Commission's Fiscal Office at 505 Van Ness Avenue, Room 3000, San Francisco, CA 94102. The number of this Decision must appear on the face of the check. The authority granted by this Decision is effective once San Jose Water Company has paid the fees prescribed by § 1904(b).

15. Application 10-07-022 is closed.

This order is effective today.

Dated January 27, 2011, at San Francisco, California.

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