11. Assignment of Proceeding
1. May 20, 2011, Cal-Am and NRDC filed a motion to adopt a partial settlement agreement on various issues.
2. DRA filed comments on the Cal-Am and NRDC partial settlement agreement.
3. Mark West filed comments on the Cal-Am and NRDC partial settlement agreement.
4. On July 28, 2011, Cal-Am, DRA, and TURN filed a motion to adopt a partial settlement agreement on revenue requirement issues.
5. On July 28, 2011, Cal-Am, DRA and TURN filed a motion to adopt a partial settlement agreement on non-revenue issues.
6. Mark West filed comments on the Cal-Am, DRA and TURN partial settlement agreement on non-revenue issues.
7. The settlement proposes that non-revenue water be reported volumetrically rather than as a percentage.
8. In the settlement, the parties agree to defer $3,364,185 of regulatory expense related to this proceeding and amortize $1,121,395 annually over the three-year period of this rate case cycle.
9. In the settlement, the parties agree to defer the rate case expenses of $4,215,000 for the 2015-2017 rate case and amortize the expense over the three-year rate case cycle of 2015 -2017.
10. Recovering total regulatory expense of $6,736,185, amortized over the three year rate case cycle of this proceeding will move Cal-Am from recovering regulatory expenses on a deferred basis to a fully forecasted recovery basis.
Special Request #31 - Walerga Special Facilities Fees
11. The Walerga Special Facilities Fee issue has been moved to Phase 2 of this proceeding.
Background on Supply Challenges in the Monterey County District
12. The Monterey District County water supply situation is desperate and requires continuous reductions in water waste on both the company and customer sides of the meter.
13. The Commission created a non-revenue penalty/reward mechanism based on a 9% non-revenue water target. If Cal-Am reduced its non-revenue water below the 9% mark, it would receive a reward. If Cal-Am failed to achieve the 9% non-revenue water standard, it would incur a penalty.
14. The per-acre-foot amount of $1,820.30 was adopted for use in calculating the non-revenue water financial penalty/reward.
Settlement on Non-Revenue Water Amounts for Ratemaking Purposes in the Monterey County District
15. The settlement on non-revenue water for ratemaking purposes in the Monterey County District is inconsistent.
16. The settlement uses different methods to calculate non-revenue water for ratemaking purposes and non-revenue water for the penalty/reward mechanism in the Monterey County District.
17. D.09-07-021 adopted non-revenue water percentages for most of the Monterey County District systems for the penalty/reward mechanism.
18. Target non-revenue water amounts for Hidden Hills, Ambler and Ralph Lane for the penalty/reward mechanism have been reduced to the industry average of 10% for Hidden Hills and Ambler and 11% for Ralph Lane.
Settlement on the Monterey County District Penalty/Reward Mechanism
19. The settlement proposes that the amount used to calculate the non-revenue water penalty/reward amount be reduced from $1,820.30 per acre-foot to $275 per acre-foot based on the marginal cost of water production at the Ord Grove Plant.
20. The marginal water production cost at the Sand City Plant is $2,599 per acre-foot.
21. The parties state that the non-revenue water penalty incurred by Cal-Am is unrealistic and excessively high.
22. The Commission set 9% as the non-revenue water target amount in the Monterey Main system, but the actual non-revenue water continues to approach 12%.
Irrigation Rates, Billing Format, Advanced Metering Infrastructure and Volumetric Rate Structure for Wastewater
23. The settlement adopts irrigation rates, billing format changes, advanced metering infrastructure and a volumetric rate structure for wastewater.
24. The settlement adopts an increase to the low-income surcredit from 15% to 20% in the Larkfield, Los Angeles County, Sacramento, San Diego County and Ventura County Districts and the Ambler Park, Ralph Lane and Toro service areas of the Monterey County District.
25. The settlement recommends that, with the exception of the Monterey County District (other than Ambler Park, Ralph Lane and Toro service areas) and Monterey Wastewater District, Cal-Am administer and recover the net costs of the low-income assistance program on a statewide basis via a meter surcharge on all non-low-income customers.
Special Request #5 - Establish a WRAM/MCBA in the Sacramento District
26. The settlement establishes a WRAM/MCBA in the Sacramento District.
27. Parties state that metering, like tiered rates, can significantly reduce consumption.
28. Converting from flat to metered rates is not the same as implementing tiered conservation rates.
29. A WRAM/MCBA review will occur in Phase 2 of this proceeding.
30. Cal-Am seeks to include $1,955,300 in rate base for the cost of the Pureflow coagulation/filtration system in the Toro arsenic treatment facility.
31. A settlement agreement adopted by D.09-07-021 included $685,000 for the Siemens filtration bid.
32. Both the Pureflow System and the Siemens System bring the Toro water quality to acceptable levels.
33. The Siemens System's total annual costs are $173,592.
34. The Pureflow System's total annual costs are $238,838.
SCADA
35. Cal-Am requests $1,953,000 for improvements to the Monterey County District SCADA system to standardize the software, update hardware and provide SCADA to sites that currently do not have it.
36. Cal-Am states that 57% of the budget is to provide SCADA coverage for sites that currently do not have coverage.
Special Request #32 - Monterey Billing System Modification Costs
37. Cal-Am seeks to include as plant in service $960,000 for Monterey Billing System Modifications.
38. D.09-07-021 in Cal-Am's last general rate case for the Monterey County District included a settlement between Cal-Am and DRA on administrative and general expenses, including the billing system modification costs.
39. Cal-Am's petition to modify D.09-07-021 to recover the additional billing system modification costs via advice letter was denied.
40. Cal-Am claims it is in a net operating loss position and therefore ineligible for the DPAD.
41. Cal-Am is seeking approximately $13 million in California Corporation Franchise Tax and Federal Income Tax.
42. Cal-Am uses one tax position for ratemaking purposes and a different tax position for tax reporting purposes.
43. Cal-Am inadvertently excluded the FIN 48 in its application but will accept the full repairs deduction, which will increase deferred taxes.
44. Cal-Am has elected not to take the bonus depreciation for 2011.
45. The bonus deduction was taken in 2010 and is anticipated for 2012.
46. To impute the bonus depreciation would be an interference with Cal-Am's normalization of its taxes and result in a substantially higher rate base.
47. Cal-Am seeks authority to earn its rate of return rather than the 90-day commercial paper rate on its deferred balances in excess of its $33 million short-term debt limit.
48. Cal-Am's deferred balances currently represent 20% of its requested rate base of $421 million for 2012.
49. Granting a blanket approval to earn rate of return on all memorandum and balancing accounts denies the Commission the opportunity to evaluate the individual facts of each account.
Special Request #14 Requesting Recovery of Balances on Memorandum and Balancing Accounts
50. Cal-Am includes billing adjustments in its Monterey County District WRAM balances claiming the losses are a result of the steeply tiered conservation rates.
51. DWA rejected Cal-Am's advice letters 735 and 838 to recover the WRAM balances. DWA rejection letters included instructions for Cal-Am to follow prior resubmitting.
52. The losses are due to Cal-Am's billing adjustment practices rather than the conservation rates.
53. Cal-Am and DRA entered into a settlement agreement for the purchase of the Toro system for the price of $408,000. The purchase price exceeded the book value by $105,403.
54. Cal-Am seeks $155,000 for goodwill in addition to the settlement agreement of $408,000, stating that nothing in the settlement agreement mentioned goodwill.
Special Request #34 Amortize Balancing Accounts in Rates on Annual Basis
55. Phase 2 of this proceeding includes a full review of the WRAM.
56. Cal-Am's budget-based labor and labor related expenses assume that positions never remain vacant and the vacancy rate is zero.
57. DRA's position imputes a one-day headcount as the basis for Cal-Am's labor expense.
58. Cal-Am's pension expense is based on ERISA forecasts for the Cal-Am and Cal Corp employees.
59. The Cal-Am and Cal Corp allocated portion of American Water Service Company's pension expense is based on FAS 87.
60. Cal-Am's request continues the pension expense calculation based on ERISA adopted in D.10-06-038.
61. Cal-Am provides employee life insurance, medical, dental, prescription drug, vision, accidental death and dismemberment insurance, long-term disability insurance, and short-term managed disability insurance.
62. Cal-Am requests group insurance expense of $4,010,255 to cover current and forecast program expense increases.
63. From 2007 to 2010, Cal-Am's insurance expenses exceeded the industry trend except for 2009 when non-Union employee's costs were below the industry average by 0.1%.
64. Cal-Am employees contribute 23% toward health care coverage, less than the 2009 industry average of 32.2%.
Special Request #11 - Business Transformation Memorandum Account
65. Cal-Am requests a memorandum account to track the difference between the business transformation project's original costs and actual costs.
66. Cal-Am requests to earn its rate of return on the memorandum account tracking business transformation project costs.
67. Cal-Am seeks to have the memorandum account track savings generated by the business transformation project.
68. Cal-Am's projected savings generated by the business transformation project were presented to the American Water Works board of directors.
69. Cal-Am states the savings presented to the board of directors are preliminary estimates and of limited predictive value.
70. DRA and TURN object to Cal-Am's request for memorandum account treatment since the costs are within Cal-Am's control.
71. DRA and TURN request that the estimated savings be recognized as a reduction to revenue requirement for each year of this rate case cycle.
The Settlements
1. Rule 12.1(d) provides that the Commission will not approve settlements, whether contested or uncontested, unless the settlement is reasonable in light of the whole record, consistent with law, and in the public interest.
2. The settlements, with the exceptions noted below, are reasonable in light of the whole record.
3. The settlements, with the exceptions noted below, are consistent with law.
4. The settlements, with the exceptions noted below, are in the public interest.
5. The settlements, with the exceptions noted below, should be adopted.
Settled Issues Not Adopted
Special Request #15 - Reporting Non-revenue Water as Volumes Rather than Percentages
6. Both volumetric and percentage measures provide meaningful information.
7. The settlement's request to present non-revenue water in a volumetric measure only, is not in the public interest and therefore is not reasonable.
8. The settlement on reporting non-revenue water as volumes only should not be adopted.
9. Non-revenue water should be reported as percentages as well as volumes.
Regulatory Expense
10. The settlement defers recovery of rate case expense to future rates, which constitutes retroactive ratemaking.
11. Allowing Cal-Am to defer rate case expense is not consistent with Commission practice.
12. The settlement's treatment of regulatory expense should not be adopted.
13. Cal-Am should recover regulatory expense on a fully forecasted recovery basis.
14. Cal-Am's regulatory expense of $6,736,185, amortized over the three year rate case cycle in this proceeding, should be adopted.
Special Request #31 - Walerga Special Facilities Fees
15. The settlement on the Walerga Special Facilities Fee should not be adopted.
Settlement on Non-Revenue Water Amounts for Ratemaking Purposes in the Monterey County District
16. The record does not support one non-revenue water calculation for ratemaking purposes and another non-revenue water calculation for the penalty/reward mechanism in the Monterey County District.
17. The settlement on non-revenue water amounts for ratemaking purposes in the Monterey County District is not in the public interest and therefore is not reasonable.
18. The settlement on non-revenue water amounts for ratemaking purposes in the Monterey County District should not be adopted.
Adopted Non-Revenue Water for the Monterey County District
19. The settlement's proposal to calculate non-revenue water targets for the penalty/reward mechanism using the 2009 actual non-revenue water amounts is not in the public interest and therefore is not reasonable.
20. The settlement on non-revenue water amounts for the penalty/reward mechanism should not be adopted.
21. Calculating the non-revenue water targets for the penalty/reward mechanism using Cal-Am's estimated 2012 production is in the public interest and therefore reasonable.
22. The non-revenue water targets for the penalty/reward mechanism should be calculated using Cal-Am's estimated 2012 production.
Settlement on the Monterey County District Penalty/Reward Mechanism
23. Reducing the non-revenue water penalty mechanism from $1,820.30 per acre-foot to $275 per acre-foot will not result in a greater reduction of non-revenue water.
24. The proposed reduction of the non-revenue water penalty from $1,820.30 to $275 is not reasonable in light of the whole record, consistent with the prior Commission decision or in the public interest.
25. The settlement reducing the non-revenue water penalty from $1,820.30 to $275 should not be adopted.
26. The non-revenue water target amount based on the percentage of Cal-Am's 2012 estimated production, with a 5% dead band added before the penalty is triggered, promotes the Commission's goal of reducing non-revenue water and is therefore in the public interest.
27. The non-revenue water target amount based on the percentage of Cal-Am's 2012 estimated production, with a 5% dead band added before the penalty is triggered, is reasonable and should be adopted.
Irrigation Rates, Billing Format, Advanced Metering Infrastructure and Volumetric Rate Structure for Wastewater
28. The settlement on these issues is not supported by the record and is silent on the cost and ratepayer impact.
29. The settlement's proposals on irrigation rates, billing format, advanced metering infrastructure and volumetric rate structure for wastewater should not be adopted.
Increase Low-Income Surcredit
30. The settlement lacks an analysis of the ratepayer impact of increasing the low-income surcredit from 15% to 20%.
31. The settlement's proposal to increase the low-income surcredit from 15% to 20% should not be adopted.
32. The issue of increasing the low-income surcredit should be moved to Phase 2 of the proceeding, where parties can provide additional analysis of the proposal in the context of rate design.
Special Request #5 - Establish a WRAM/MCBA in the Sacramento District
33. Implementing a WRAM/MCBA in the Sacramento District prior to the full review of the WRAM in Phase 2 of this proceeding would be premature.
34. The settlement establishing a WRAM/MCBA in the Sacramento District should not be adopted.
35. Special Request #5 should be resolved in Phase 2 of this proceeding.
36. The schedule for supplemental testimony on Special Request #5 will be set by ALJ Ruling.
Disputed Issues
Special Request #19 - Toro Arsenic Treatment Plant
37. Cal-Am's installation of the Pureflow System is not reasonable.
38. The $1,955,300 cost of the Pureflow System should not be included in rate base.
39. The $685,000 cost of the Siemens System is reasonable.
40. The $685,000 cost of the Siemens System should be included in rate base.
41. The $18,660 annual operation and maintenance cost of the Pureflow System is reasonable.
42. The $18,660 annual operation and maintenance cost of the Pureflow System should be included in revenue requirement.
SCADA
43. Cal-Am's request for $1,953,000 for improvements to the Monterey County District SCADA system is not reasonable.
44. Cal-Am's request to provide SCADA coverage to areas not currently covered is reasonable.
45. The $793, 210 to provide SCADA to sites not currently covered should be included in revenue requirement.
Special Request #32 - Monterey Billing System Modification Costs
46. Cal-Am's request to reclassify the additional billing system modification costs and recover them in this proceeding is retroactive ratemaking and therefore is not reasonable.
47. Cal-Am's request to include $960,000 for Monterey Billing System Modifications as plant in service should be denied.
DPAD
48. Cal-Am's tax position for ratemaking purposes resulted in income tax, therefore it is reasonable to apply the DPAD for ratemaking purposes.
49. DRA's calculation of the DPAD is reasonable and should be applied to Cal-Am's taxable income.
Repairs Deduction FIN 48
50. Cal-Am should take the repairs deduction FIN 48 and remove from rate base the increased accumulated deferred income tax for 2010, 2011 and 2012 associated with its FIN 48 recorded deferred income tax.
Bonus Depreciation
51. Cal-Am's election not to take the bonus depreciation is reasonable.
52. Bonus depreciation should not be imputed on Cal-Am.
Special Requests
Special Request #4 - Requesting Rate of Return on Deferred Balances on Memorandum and Balancing Accounts
53. Cal-Am's request to earn rate of return on all deferred balances is not reasonable.
54. Cal-Am's request to earn rate of return on all deferred balances should be denied.
Special Request #14 - Requesting Recovery of Balances on Memorandum and Balancing Accounts
55. Including billing adjustments in WRAM is not reasonable.
56. Cal-Am should remove all billing adjustments from its WRAM account in the Monterey County District and file a Tier 2 advice letter for recovery complying with DWA instructions or requests related to advice letters 735 and 838.
Special Request #24 - Toro Goodwill
57. It is reasonable for DRA to infer that the purchase price in excess of the book value represented goodwill.
58. Cal-Am's claim for an additional $155,000 for goodwill is not reasonable.
59. Cal-Am should not recover an additional $155,000 for Toro goodwill.
Special Request #34 - Amortize Balancing Accounts in Rates on an Annual Basis
60. Cal-Am's request to amortize balancing accounts in rates on an annual basis should be denied.
General Office Adjustments
Labor and Labor-Related Expense
61. For determining labor and labor-related expenses, neither Cal-Am's budget-based labor expense nor DRA's one-day headcount is reasonable.
62. Imputing some reduction to the budget-based labor expense for ongoing vacancies is reasonable.
63. Labor and labor-related expenses should be reduced by 22 positions, the decline calculated by Cal-Am, to account for ongoing vacancies.
Pension Expense
64. Cal-Am's pension expense based on the February 2011 ERISA forecast for the Cal-Am and Cal Corp employees is reasonable.
65. Cal-Am's pension expense for American Water Service Company based on FAS 87 is reasonable.
66. Continuing Cal-Am's pension expense balancing account to track the difference between the authorized pension expense and the actual expense, with recovery capped at ERISA minimums, is reasonable.
67. Cal-Am's pension expense balancing account to track the difference between the authorized pension expense and the actual expense, with recovery capped at ERISA minimums, should be continued.
Group Insurance
68. Cal-Am's request for $4,010,255 in group insurance expense is not reasonable.
69. Cal-Am's request for $4,010,255 in group insurance expense should not be granted.
70. Group insurance expense based on the labor escalation rate pursuant to D.04-06-08 is reasonable.
71. Cal-Am should recover group insurance expense based on the labor escalation rate pursuant D.04-06-018.
Special Request #11 - Business Transformation Memorandum Account
72. Cal-Am's request for a memorandum account to track the difference between the business transformation project's original costs and actual costs is not reasonable.
73. Cal-Am's original estimate of the business transformation costs is reasonable.
74. Cal- original estimate of business transformation project costs should be moved into rate base via a Tier 2 advice letter filing once each phase is complete, used, and useful.
75. Cal-Am's projected savings from the business transformation project are reasonable.
76. Cal-Am's projected savings for 2012 from each phase of the business transformation project should be included in its initial Tier 2 advice letter filings as offsets to the costs associated with the rate base additions. The projected savings for 2013 and 2014 should be reflected as expense offsets in the 2013 and 2014 attrition advice letter filings.
77. The next general rate case should include a review of the business transformation project for savings that are projected by Cal-Am to occur after this rate case cycle.
IT IS ORDERED that:
1. The joint motion of California-American Water Company and the Natural Resources Defense Council to adopt the May 20, 2011 settlement is granted to the extent set forth in this order and denied to the extent set forth in this order.
2. The joint motion of California-American Water Company, the Division of Ratepayer Advocates and The Utility Reform Network to adopt the July 28, 2011 settlement on revenue requirement issues is granted to the extent set forth in this order and denied to the extent set forth in this order.
3. The joint motion of California-American Water Company, the Division of Ratepayer Advocates and the Natural Resources Defense Council to adopt the July 28, 2011, settlement on non-revenue issues is granted to the extent set forth in this order and denied to the extent set forth in this order.
4. California-American Water Company is authorized to file a Tier 1 advice letter to recover the difference between the 2011 interim and final rates from its customers in the San Diego County and Ventura County Districts. This calculation will be based on the 2011 rate tariff schedules attached to this decision that would have been implemented under the present rate design. California-American Water Company will also recalculate the 2011 Water Revenue Adjustment Mechanism/Modified Cost Balancing Account balance for these districts to include the final revenue requirement adopted today and the recorded revenue California-American Water Company would have received if final rates had been effective on January 1, 2011. California-American Water will update its 2011 Water Revenue Adjustment Mechanism/Modified Cost Balancing Account annual report to the Commission for changes resulting from today's order and is authorized to file a Tier 1 advice letter for the revised 2011 Water Revenue Adjustment Mechanism/Modified Cost Balancing Account balance. California-American Water Company will also update its Pension and Other Post Employment Benefits balancing account to account for the variations in rate case authorizations for 2011. The implementation of the name convention change should be made simultaneously with the filing of the Tier 1 advice letter.
5. California-American Water Company is authorized to file by Tier 1 advice letter the revised tariff schedules for 2012 attached to this decision for the Sacramento, Monterey County (except Toro service area) and Monterey County Wastewater Districts and to concurrently cancel its present schedules for such service. This filing shall be subject to approval by the Commission's Division of Water and Audits. The effective date of the revised schedule shall be no earlier than five days after the effective date of this decision, and shall apply only to service rendered on or after the effective date for these districts. For these districts, California-American Water Company is authorized to file a Tier 1 advice letter to recover the difference between the 2012 interim and final rates from its customers for the period January 1, 2012 to the implementation date of the tariffs included in this order. Calculation of final rates shall be based on the revenue requirement as authorized herein and the rate designs currently in effect. For the Monterey County District, California-American Water Company will incorporate the final revenue requirement adopted today and the recorded revenue California-American Water Company would have received if final rates had been effective on January 1, 2012 in its 2012 Water Revenue Adjustment Mechanism/Modified Cost Balancing Account. Unlike the revenue requirements granted today, the final rate design that is approved for Monterey will not be retroactive back to January 1, 2012. California-American Water Company will also update its Pension and Other Post Employment Benefits balancing accounts to account for the variances in rate case authorizations for 2012.
6. The 2012 revenue requirement for the San Diego County, Ventura County, Los Angeles County, Larkfield Districts and Toro service area shall be effective back to January 1, 2012 in accordance with the interim rates process. However, California-American Water Company shall continue to bill customers at interim rates until the final rate designs for each district are adopted and attached to a final decision in Phase 2 of the proceeding. At that time, California-American Water Company shall file by Tier 1 advice letter the revised tariff schedules for 2012 based on the final rate designs, and concurrently cancel it present schedules for such service. These filings shall be subject to approval by the Commission's Division of Water and Audits. California-American Water Company is then authorized to file a Tier 1 advice letter to recover the difference between the 2012 interim and final rates from its customers in these districts for the period January 1, 2012 to the implementation date of final rates. Unlike the revenue requirements granted today, the rate designs approved for these districts are not retroactive back to January 1, 2012. Therefore, for the purpose of the interim rate true-up calculation, California-American Water Company shall calculate final rates by running the adopted revenue requirements through the current rate designs in each district, a copy of which is attached to the decision for calculation of the interim rate true-ups. Finally, California-American Water Company will incorporate the final revenue requirement and the recorded revenue caw would have received if final rates had been effective on January 1, 2012 in its 2012 Water Revenue Adjustment Mechanism/Modified Cost Balancing Account. California-American Water Company will also update it pension and Other Post Employment Benefits balancing accounts to account for the variances in rate case authorizations for 2012.
7. For escalation years 2013 and 2014, California-American Water Company shall file Tier 2 advice letters in conformance with General Order 96-B proposing new revenue requirements and corresponding revised tariff schedules for each district. The filing shall include rate procedures set forth in the Commission's Rate Case Plan (Decision 07-05-062) for Class A Water Utilities and shall include appropriate supporting workpapers. The revised tariff schedules shall take effect no earlier than January 1, 2013 and January 1, 2014, respectively and shall apply to service rendered on and after their effective dates. The proposed revisions to revenue requirements and rates shall be reviewed by the Commission's Division of Water and Audits. The Division of Water and Audits shall inform the Commission if it finds that the revised rates do not conform to the Rate Case Plan, this order, or other Commission decisions, and if so, reject the filing. Should a delay in Phase 2 of this proceeding prevent the implementation of the final rate designs, California-American Water Company is authorized to file its 2013 escalation filing based on the current rate designs and implement its step filings upon Commission approval.
8. California-American Water Company shall submit the results of its annual depreciation updates to the Division of Water and Audits by July 1st each year.
9. California-American Water Company is authorized to file a Tier 2 advice letter to establish a Low Income Ratepayer Assistance Program memorandum account for the Monterey County District.
10. California-American Water Company is authorized to file a Tier 1 advice letter with consolidated low-income tariffs which will become effective 5 days after the advice letter is filed.
11. California-American Water Company is authorized to file a Tier 1 advice letter to establish a memorandum account to track the costs of engineering and financial evaluations and studies of measures to reduce non-revenue water in each district.
12. California-American Water Company shall report non-revenue water as percentages as well as volumes.
13. California-American Water Company's revenue requirement will include $6, 736,185 in regulatory expense.
14. California-American Water Company is authorized to file a Tier 1 advice letter to establish a memorandum account to track engineering costs and financial evaluation and studies of measures to reduce non-revenue water in each district. Recovery of expenses tracked in the memorandum account shall be sought in California-American Water Company's next general rate case.
15. California-American Water Company's estimated 2012 production shall be used as the basis for calculating the Monterey County District non-revenue water targets for the penalty/reward program.
16. The Monterey County District's non-revenue water target amounts will be increased by a 5% dead band. California-American Water will only be subject to the penalty if the non-revenue water amount exceeds the 5% dead band.
17. Increasing the low-income surcredit from 15% to 20% will be reviewed in Phase 2 of this proceeding. An Administrative Law Judge's ruling will establish the schedule for filing supplemental testimony.
18. Special Request #5 - Establishing a Water Revenue Adjustment Mechanism in the Sacramento District will be resolved in the Phase 2 of this proceeding. An Administrative Law Judge's ruling will establish the schedule for filing supplemental testimony.
19. The $685,000 annual cost of the Siemens System is included in California-American Water Company's rate base and the $18,660 annual operation and maintenance cost of the Pureflow System is included in California-American Water Company's revenue requirement.
20. California-American Water Company's revenue requirement will include $793,210 to provide Supervisory Control and Data Acquisition to sites not currently covered.
21. California-American Water Company's taxable income shall be reduced by the Domestic Production Activities Deduction calculated using the Division of Ratepayer Advocates' methodology.
22. California-American Water Company will take the repairs deduction Federal Accounting Standards Board Interpretation Number (FIN) 48 and remove from rate base the increased accumulated deferred income tax for 2010, 2011 and 2012 associated with its FIN 48 recorded deferred income tax.
23. California-American Water Company may file a Tier 2 advice letter seeking amortization of its Water Revenue Adjustment Mechanism balance in the Monterey County District once it has removed billing adjustments from the Water Revenue Adjustment Mechanism account and complies with the Division of Water and Audits instructions contained in the letters rejecting advice letters 735 and 838.
24. California-American Water Company's labor and labor-related expenses are reduced by 22 positions to account for ongoing vacancies.
25. California-American Water Company shall continue its pension expense balancing account to track and recover the difference between the level of pension expenses authorized in rates and the actual costs. California-American Water Company's recovery for ratemaking purposes shall be capped at the minimum level of expenses calculated according to the minimum funding levels in the Employee Retirement Income Security Act, updated by the Pension Protection Act.
26. California-American Water Company's group insurance expense shall be increased according to the labor escalation rates pursuant to Decision 04-06-018.
27. California-American Water Company is authorized to file a Tier 2 advice letter to move project costs into rate base when each phase of the business transformation project is complete, used and useful. Total recovery for the business transformation project will be capped at $14 million, reduced by 5.3% in recognition of the benefits of the business transformation project that inure to the parent company's unregulated affiliates.
28. California-American Water Company's initial Tier 2 advice letter to move costs associated with the first live phase of Enterprise Resource Planning will include the savings of $111,066 as an expense offset to the rate base.
29. California-American Water Company's projected savings for 2013 of $998,037 and 2014 of $1,777,056, attributable to Enterprise Resource Planning, will be included in the advice letter filing for the attrition years as expense offsets.
30. California-American Water Company's Tier 2 advice letter to move costs associated with the first phase of Customer Information Systems will include the savings of $873,996, as an expense offset.
31. Applications 10-07-007 and 11-09-016 remain open for Phase 2.
This order is effective today.
Dated June 7, 2012, at San Francisco, California.
MICHAEL R. PEEVEY
President
TIMOTHY ALAN SIMON
MICHEL PETER FLORIO
CATHERINE J.K. SANDOVAL
MARK J. FERRON
Commissioners
ATTACHMENT A
LIST OF APPEARANCES
Applicants:
Sarah E. Leeper, Vice President, Legal, Regulatory
((415) 863-2057
sarah.leeper@amwater.com)
For: California-American Water Company
333 Hayes Street, Suite 202
San Francisco CA 94102
Lori Anne Dolqueist, ((415) 291-7452,
ldolqueist@manatt.com)
Manatt Phelps & Phillips LLP
One Embarcadero Center, 30th Floor
San Francisco CA 94111-3719
Interested Parties:
Nina Suetake ((415) 929-8876 X 308,
nsuetake@turn.org), Christine A. Mailloux, ((858) 558-7930,
cmailloux@turn.org.), and Regina Costa ((415) 929-8876 X312,
rcosta@turn.org)
For: The Utility Reform Network
115 Sansome Street, Suite 900
San Francisco CA 94104)
James Bouler, ((707) 546-3097,
jbouler@comcast.net )
For: Mark West Area Community Services Committee,
133 Eton Court
Santa Rosa CA 95403
Doug Obegi, Staff Attorney, Water Program, ((415) 875-6100,
dobegi@nrdc.org) and
Edward R. Osann, ((310) 434-2300,
eosann@nrdc.org)
For: Natural Resources Defense Council
111 Sutter Street, 20th Fl.
San Francisco CA 94104
Fran Farina and David Loredo, Attorneys at Law,
((805) 681-8822,
ffarina@cox.net and
(831) 646-1502 ,
dave@laredolaw.net)
De Lay & Laredo, 606 Forest Avenue, Pacific Grove CA 93950-4221
For: Monterey Peninsula Water Management District.
Division of Ratepayer Advocates:
Joyce Steingass, Representative,
Consumer Protection & Safety Division RM. 2106
(415) 355-5532,
jws@cpuc.ca.gov
Martha Perez, Attorney at Law, Legal Division RM. 4107,
(415) 703-1219
mpg@cpuc.ca.go )
Linda Barrera, Attorney at Law, Legal Division RM. 4107
(415) 703-1477,
lb3@cpuc.ca.gov
Daryl Gruen, Attorney at Law, Legal Division RM. 4107
(415) 703-1973,
djg@cpuc.ca.gov
For: Division of Ratepayer Advocates
California Public Utilities Commission
505 Van Ness Avenue
San Francisco CA 94102 3298
ATTACHMENT B
THE SETTLEMENTS
On May 20, 2011, Cal-Am and NRDC filed a settlement on nine items resolved by the parties. 61 The items are:
· Special Request #1 requesting monthly meter reading;
· Establishing Irrigation rates for all districts except Toro, and the Sacramento and Monterey Districts;
· Billing format modifications;
· Advanced Metering Infrastructure;
· Low-Income tariff consolidation;
· Increase low-income customer surcredit;
· Special Request #5 - Establish a WRAM/MCBA in the Sacramento District; and
· Establish a volumetric rate structure for waste water customers; and
· Water loss reporting.
Mark West Comments on the Cal-Am/NRDC Settlement
On June 20, 2011, Mark West filed comments on the settlement between Cal-Am and NRDC objecting to the settlement on Special Request #5.
Cal-Am, DRA and TURN Settlement on Revenue Requirement
Issues
On July 28, 2011, DRA, Cal-Am and TURN filed a motion for adoption of a partial settlement agreement on revenue requirement issues. 62 The settlement on revenue requirement issues encompasses most of the issues in the proceeding, resulting in a 363 page document and 4 appendices.
The issues settled between Cal-Am, DRA and TURN include:
· Water consumption and revenue;
· Customer Service;
· Operations and Maintenance;
· Administrative and General Expenses;
· Adjustments to General Office expenses;
· Conservation Program Budgets;
· Depreciation Reserves;
· Taxes;
· Utility Plant in Service; and
· Special Requests.
Mark West Comments on Cal-Am, DRA and TURN Settlement on Revenue Requirement Issues
Cal-Am Mark West's comments on the settlement focus on three issues related to the Larkfield District; the continuation of the Water Revenue Adjustment Mechanism and the associated Modified Cost Balancing Account, the necessity of the Faught Road Well and the special facilities fee or connection fee proposal.
Cal-Am, DRA and NRDC Settlement on Non-Revenue Issues
On July 28, 2011, DRA, Cal-Am and NRDC filed a partial settlement agreement on non-revenue issues. 63 The issues settled between Cal-Am, DRA and NRDC include:
· Establishing non-revenue water target amounts;
· Special Request #15 - converting non-revenue water from percentages to volumetric measures;
· Establishing annual report of non-revenue water program accomplishments;
· Revising the non-revenue water penalty/reward mechanism amount; and
· Supporting Cal-Am/NRDC settlement on developing Water Action Plans.
(END OF ATTACHMENT B)
ATTACHMENT C
SUMMARY OF EARNINGS
(END OF ATTACHMENT C)
ATTACHMENT D: CORONADO/SAN DIEGO COUNTY DISTRICT
TABLE B-3
CALIFORNIA-AMERICAN WATER CO.
SAN DIEGO DISTRICT
WATER SALES PER AVERAGE CUSTOMER ESCALATION YEAR 2013
CCF
STAFF UTILITY UTILITY EXCEEDS UPDATED
ITEM ORIGINAL REVISED BRANCH REVISED FILING ADOPTED
DIFFERENCE
Residential |
138.9 |
124.5 |
0.0 |
124.5 |
133.2 |
124.5 |
Commercial |
848.2 |
824.4 |
0.0 |
824.4 |
865.5 |
824.4 |
Public Authority |
2,759.6 |
2,029.3 |
0.0 |
2,029.3 |
2,128.3 |
2,029.3 |
Industrial |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
Irrigation |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
Construction |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
Other |
1,158.1 |
706.7 |
0.0 |
706.7 |
978.5 |
706.7 |
Unmetered |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
Private Fire Service |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
TABLE D-1
CALIFORNIA-AMERICAN WATER COMPANY SAN DIEGO DISTRICT
TOTAL SALES AND SUPPLY TEST YEAR 2011
STAFF UTILITY UTILITY EXCEEDS UPDATED
ITEM ORIGINAL REVISED BRANCH REVISED FILING ADOPTED
DIFFERENCE
METERED SALES KCCF Residential |
2,540.7 |
2,251.3 |
0.0 |
2,251.3 |
2,409.2 |
2,251.3 |
Commercial |
1,782.4 |
1,692.5 |
0.0 |
1,692.5 |
1,776.9 |
1,692.5 |
Public Authority |
869.3 |
639.2 |
0.0 |
639.2 |
670.4 |
639.2 |
Industrial |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
Irrigation |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
Construction |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
Other 26.6 16.3 0.0 16.3 22.5 16.3 | ||||||
TOTAL METERED SALES |
5,219.0 |
4,599.3 |
0.0 |
4,599.3 |
4,879.0 |
4,599.3 |
UNMETERED SALES |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
PRIVATE FIRE SERVICE |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
Non Revenue Water |
93.5 |
130.6 |
0.0 |
130.6 |
215.4 |
130.6 |
TOTAL WATER REQUIREMENTS-KCCF |
5,312. |
4,729.9 |
0.0 |
4,729. |
5,094.4 |
4,729. |
TOTAL WATER REQUIREMENTS-AF |
12,195.8 |
10,858.4 |
0.0 |
10,858.4 |
11,695.2 |
10,858.4 |
PRODUCTION -KCCF |
||||||
Purchased water- |
5,313.4 |
4,730.6 |
0.0 |
4,730.6 |
5,094.4 |
4,730.6 |
Company Wells (0.9) (0.7) 0.0 (0.7) 0.0 (0.7)
Total WATER REQUIREMENTS-KCCF |
5,312.5 |
4,729.9 |
0.0 |
4,729.9 |
5,094.4 |
4,729.9 |
(END OF ATTACHMENT D)
ATTACHMENT E: LARKFIELD DISTRICT
(END OF ATTACHMENT E)
ATTACHMENT F: LOS ANGELES COUNTY DISTRICT
(END OF ATTACHMENT F)
ATTACHMENT G: MONTEREY COUNTY DISTRICT
(END OF ATTACHMENT G)
ATTACHMENT H: MONTEREY WASTEWATER DISTRICT
(END OF ATTACHMENT H)
ATTACHMENT I: SACRAMENTO DISTRICT
(END OF ATTACHMENT I)
ATTACHMENT J: TORO SERVICE AREA
(END OF ATTACHMENT J)
ATTACHMENT K: VILLAGE/VENTURA COUNTY DISTRICT
(END OF ATTACHMENT K)
61 http://docs.cpuc.ca.gov/efile/MOTION/135724.pdf
62 http://docs.cpuc.ca.gov/efile/MOTION/141195.pdf
63 http://docs.cpuc.ca.gov/efile/MOTION/140665.pdf
