Comments on Draft Decision
The principal hearing officer's proposed decision in this proceeding was filed with the Commission and served on the parties in accordance with Public Utilities Code Section 311(d) and the Commission's Rules of Practice and Procedure, Rule 77.1.
Cypress filed comments recommending the Commission adopt the proposed decision without change. No other comments were filed.
1. Nipomo Community Services District has withdrawn from this proceeding and is no longer a party.
2. As between the two applicants in this proceeding, Rural and Cypress, all parties agree that Rural is the preferred sewer service provider for Cypress Ridge subdivision.
3. Rural is qualified to provide public utility sewer service to Cypress Ridge.
4. Contracting with J. L. Wallace & Associates to operate, maintain and provide related services to the Cypress Ridge sewer system is the most cost-effective operating alternative available to Rural through 2005. Rural should evaluate whether contracting out remains the most attractive option in test year 2006 and beyond as part of its next general rate case proceeding.
5. All necessary plant to provide sewer service today in Cypress Ridge is being contributed by the developer. That plant should be excluded from Rural's rate base for future ratemaking purposes.
6. All necessary titles to real property and easements for Cypress Ridge sewer system should be transferred to Rural, recorded with the appropriate local authorities, and copies provided to the Commission for its records.
7. Rural's sewer rates through 2005 should be set using the operating ratio method with Rural's return set at 15% of operating expenses. Rural should file a test year 2006 general rate case requesting new rates to become effective January 1, 2006.
8. All shared costs for Rural's water and sewer operations should be apportioned between them. Rural's co-located water and sewer facilities serving Cypress Ridge should have their electric power metered separately for sewer and for water.
9. Rural should establish and maintain a separate set of accounts in accordance with the Commission's Uniform System of Accounts for its Cypress Ridge sewer service.
10. Rural should be required to have a complete, separate set of sewer tariffs for its Cypress Ridge sewer service. Rural's residential sewer rates should be on separate tariff schedules from its commercial sewer rates.
11. It is reasonable not to allow Rural to charge sewer connection fees or other up-front charges to customers to obtain sewer service within the Cypress Ridge area for which we are granting Rural a certificate in this proceeding.
12. Rural's insurance expenses are difficult to project accurately between now and approximately 2005 when Cypress ridge is fully built out. It would be reasonable to allow Rural to establish a memorandum account for such expenses, to last through 2005 and thereafter to lapse absent further Commission order.
13. Rural should improve its responsiveness to its customers, to public health and other governmental authorities, and to the Commission staff, by upgrading its telephone system and responding to all inquiries within 24 hours.
14. There is no potential for Rural to sell its Cypress Ridge sewer system treated effluent in the foreseeable future. Disposing of it to the golf course without charge is Rural's only realistic, economical option, and the option of greatest benefit to it and its ratepayers.
15. The Cypress Ridge subdivision, including the golf course and sewage treatment plant, was planned, designed, constructed and permitted as a whole. The golf course and its holding ponds are a feature of the sewage treatment system's overall design. The golf course and sewage treatment facility were always intended to work hand-in-glove to deal with Cypress Ridge's wastewater, and both the subdivision's environmental impact report and the sewer treatment system's RWQCB discharge permit were approved assuming the sewage treatment and effluent disposal arrangement in use today.
16. Rural should discharge its treated effluent to the golf course without charge.
17. To ensure the sewer utility's future effluent discharge rights, the Commission should condition its grant of Rural's certificate on Rural's formalizing an agreement with the owners of the golf course and obtaining an easement guaranteeing Rural's continuing right to discharge effluent to the golf course.
18. For purposes of deriving a relationship between commercial sewer rates and residential sewer rates, it is reasonable to assume that a standard residence produces 80 gallons of effluent per person per day.
19. No party can predict with reasonable certainty when, or if, the Cypress Ridge hotel, restaurant and spa complex discussed in this proceeding will be completed.
20. Setting rates now using an assumption that there will be no hotel, restaurant or spa on the system through 2005, and making provisions for adjusting rates if and when there is, would be equitable to both Rural and its ratepayers.
21. The sewer rates set forth in Appendix B, and the adopted results of operations for test year 2005 in Appendix A upon which those rates are based, are reasonable.
22. Rural will provide public utility sewer service using the same facilities as are now in place and in operation under Cypress. Rural does not anticipate any new construction or changed operating practices in operating and maintaining the sewer system.
23. It can be seen with certainty that there is no possibility that the relief we grant in this proceeding will have a significant impact on the environment.
1. Rural should be granted a certificate of public convenience and necessity to provide public utility sewer service to Cypress Ridge.
2. It is not necessary to examine the applicability of Water Code Section 13550 to any issue in this proceeding.
3. It is neither necessary nor advisable for the Commission in this proceeding to establish requirements for sharing the value of contributed plant at the time of any future sale of Rural's Cypress Ridge sewer system to a public entity; or to attempt to place restrictions on the ratemaking methodology to be used in the event the system is sold to another regulated utility. Those are matters that should be addressed on a case-by-case basis considering the specific facts presented at the time the issues arise.
4. There is no requirement under Public Utilities Code Section 818, or under any other provision of law, for a non-utility such as Cypress to obtain Commission authorization to issue stock.
5. The CEQA project in this proceeding is the issuance of a certificate of public convenience and necessity to Rural and the transfer to and operation by Rural of the existing Cypress Ridge sewer system.
6. Since it can be seen with certainty that there is no possibility that the relief we grant in this proceeding will have a significant impact on the environment, the project qualifies for an exemption from CEQA pursuant to Section 15061(b)(3) of the CEQA guidelines. Therefore, no further environmental review by the Commission is required.
IT IS ORDERED that:
1. Rural Water Company, Inc., (Rural) is granted a certificate of public convenience and necessity to provide sewer service to the Cypress Ridge subdivision in San Luis Obispo County, subject to the requirements of the ordering paragraphs that follow.
2. Cypress Ridge Service Company's (Cypress) application for a certificate of public convenience and necessity to provide sewer service to the Cypress Ridge subdivision and for related relief is dismissed.
3. Cypress and Rural shall arrange to transfer to Rural and record with the appropriate local authorities all necessary titles to real property and easements for Cypress Ridge sewer system. Rural shall by letter to the Commission's Water Division certify that the parties have done so, and shall provide copies of the related documents for the Commission's records
4. All plant contributed by the developer or its affiliates to provide sewer service to Cypress Ridge shall be excluded from Rural's rate base for future ratemaking purposes.
5. Rural shall establish and maintain a separate set of accounts in accordance with the Commission's Uniform System of Accounts for its Cypress Ridge sewer service.
6. All shared costs for Rural's water and sewer operations shall be apportioned between them. Rural's co-located water and sewer facilities serving Cypress Ridge shall have their electric power metered separately for sewer and for water.
7. Rural may not charge sewer connection fees or other up-front charges to customers to obtain sewer service within the Cypress Ridge Community service territory at issue in this proceeding.
8. Rural is authorized to establish a memorandum account for insurance expenses for its public utility sewer service. That memorandum account shall remain in effect only through December 31, 2005 and thereafter shall lapse absent further Commission order.
9. Rural shall improve its responsiveness to its water and sewer service customers, to public health and other governmental authorities, and to the Commission staff, by upgrading its telephone system and responding to all inquiries within 24 hours.
10. Rural shall enter into a formal agreement with the owners of the Cypress Ridge golf course, and shall obtain an easement guaranteeing the sewer utility's continuing right to discharge effluent to the golf course. The provisions of the agreement and easement shall be consistent with those outlined in the discussion section of this decision. The parties to the agreement are free to include a provision binding Rural to providing treated effluent to the golf course without charge.
11. Rural shall file in accordance with General Order 96 an advice letter stating its acceptance of the certificate granted in this order and establishing a complete set of tariffs for its Cypress Ridge sewer service. Rural's sewer service tariffs shall apply the rates included in Appendix B of this order. Rural's sewer service tariffs shall be separate from its water service tariffs, and residential sewer rates shall be on separate schedules from commercial sewer rates. The new tariffs shall be reviewed by Water Division and shall go into effect upon Water Division's determination that Rural has complied with the requirements of this order.
12. Rural shall file in accordance with General Order 96 an advice letter(s) with appropriate work papers establishing rates for any new type(s) of commercial customer taking service after the effective date of this decision, and simultaneously reducing rates for all other customers to produce a zero net revenue effect. The new rates shall be reviewed by Water Division and shall go into effect upon Water Division's determination of compliance with this order.
13. The authority granted in this order shall expire if not exercised within six months of effective date of this order.
14. Application 00-08-056 and Application 01-02-006 are closed.
This order is effective today.
Dated June 6, 2002, at San Francisco, California.
LORETTA M. LYNCH
President
HENRY M. DUQUE
CARL W. WOOD
GEOFFREY F. BROWN
MICHAEL R. PEEVEY
Commissioners
