D1206016 Adopting the 2011, 2012, 2013, and 2014 Revenue Requirement for California-American Water Company

ALJ/LRR/acr Date of Issuance 6/14/2012

Decision 12-06-016 June 7, 2012

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Application of California-American Water Company (U210W) for Authorization to Increase its Revenues for Water Service by $4,134,600 or 2.55% in the year 2011, by $33,105,800 or 19.68% in the 2012, by $9,897,200 or 4.92 % in 2013, and by $10,874,600 or 5.16% in the year 2014.

Application 10-07-007

(Filed July 1, 2010)

And Related Matter.

Application 11-09-016

(See Attachment A for a list of appearances)

DECISION ADOPTING THE 2011, 2012, 2013, AND 2014
REVENUE REQUIREMENT FOR
CALIFORNIA-AMERICAN WATER COMPANY

DECISION ADOPTING THE 2011, 2012, 2013, AND 2014 REVENUE REQUIREMENT FOR CALIFORNIA-AMERICAN WATER COMPANY 1 1

1. Summary 2 2

2. Settled Issues Approved in this Decision 3 3

3. Settled Issues Not Approved in this Decision 4 4

4. Disputed Issues Resolved in this Decision 4 4

5. Standards of Review 5 5

5.1. General Standard of Review 5 5

5.2. Commission Rules on Settlements 5 5

6. Discussion of the Settled Issues Approved by This Decision 6 6

6.1. Customers, Non-Revenue Water, and Operating Revenues 7 7

6.2. Operations and Maintenance 8 8

6.3. Adjustments to the General Office Revenue Requirement 9 9

6.4. Conservation 9 9

6.5. Utility Plant in Service 11 11

6.6. Special Requests 11 11

6.6.1. Special Request #1 - Change to Monthly Meter Reading 12 12

6.6.2. Special Request #6 - Continue WRAM/Modified Cost Balancing Account (MCBA) 12 12

6.6.3. Special Request #8 - Ventura Main Break 13 13

6.6.4. Special Request #9 - Eliminate Distribution System Improvement Charge (DSIC) in the Los Angeles District 13 13

6.6.5. Special Request #10 - Duarte Irrigation System Water Use Restriction 14 14

6.6.6. Special Request #12 - Remove the Tariff in Toro 14 14

6.6.7. Special Request #13 - File Plans on All Items Required for General Order 103-A Compliance 14 14

6.6.8. Special Request #14 - Recover all Balancing and Memorandum Accounts 15 15

6.6.9. Special Request #16 - Memorandum Account for
Chromium 6 15 15

6.6.10. Special Request #20 - Amortization of Depreciation Study 16 16

6.6.11. Special Request #21 - Recover All American Water Service Company (Service Company) Costs 16 16

6.6.12. Special Request #23 - Retire the Bradbury Irrigation System 16 16

6.6.13. Special Request #25 - Fire Flow Test Fee 16 16

6.6.14. Special Request #26 - Finalize Citizens Acquisition Premium 17 17

6.6.15. Special Request #27 - Annual Depreciation Updates 17 17

6.6.16. Special Request #30 - Duarte Irrigation Rate Design 17 17

6.6.17. Special Request #33 - Allow Rate of Return on Advice Letter Projects 17 17

6.6.18. Special Request #36 - Low-Income Ratepayer Assistance Program (LIRAP) 18 18

6.7. Low-Income Tariff Consolidation 18 18

6.8. Non-Revenue Water Action Plans 18 18

6.9. Conclusion 20 20

7. Discussion of the Settled Issues Not Approved by this Decision 21 21

7.1. Special Request #15 - Reporting Non-Revenue Water as Volumes Rather Than Percentages 21 21

7.2. Regulatory Expenses 21 21

7.3. Special Request #31 - Walerga Special Facilities Fees 22 22

7.4. Background on the Unique Supply Challenges in the Monterey County District and the Commission's Treatment of Non-Revenue Water 23 23

7.5. Settlement on Non-Revenue Water Amounts for Ratemaking Purposes in the Monterey County District 24 24

7.6. Adopted Non-Revenue Water for Ratemaking Purposes and the Penalty/Reward Mechanism in the Monterey County District 26 26

7.7. Settlement on the Monterey District Penalty/Reward Program 28 28

7.8. Adopted Revision to the Monterey County District Penalty/Reward Program 30 30

7.9. Irrigation Rates, Billing Format, Advanced Metering Infrastructure and Volumetric Rate Structure for Wastewater 31 31

7.10. Increase Low-Income Surcredit 32 32

7.11. Special Request #5 - Establish a WRAM/MCBA for the Sacramento District 33 33

7.12. Conclusion 34 34

8. Disputed Issues 34 34

8.1. Monterey District Plant 35 35

8.1.1. Special Request #19 - Toro Arsenic Treatment Plant 35 35

8.1.2. Supervisory Control and Data Acquisition (SCADA) 38 38

8.1.3. Special Request #32 - Monterey Billing System Modification Costs 39 39

8.2. Income Tax and Related Issues 40 40

8.2.1. Domestic Production Activity Deduction 41 41

8.2.2. Cal-Am Repairs Deduction FIN 48 43 43

8.2.3. Bonus Depreciation 44 44

8.3. Special Requests 45 45

8.3.1. Special Request #4 Requesting Rate of Return on Deferred Balances on Memo and Balancing Accounts 45 45

8.3.2. Special Request #14 Requesting Recovery of Balances on Memorandum and Balancing Accounts 47 47

8.3.3. Special Request #18 Contamination Proceeds 49 49

8.3.4. Special Request #24 to Recover Toro Goodwill 49 49

8.3.5. Special Request #34 to Amortize Balancing Accounts in Rates on an Annual Basis 51 51

8.4. General Office Adjustments 51 51

8.4.1. Labor and Labor-Related Expense 51 51

8.4.2. Pension Expense 53 53

8.4.3. Group Insurance 55 55

8.4.4. Special Request #11 - Business Transformation Memorandum Account 58 58

9. Background of Cal-Am's Service Territory 62 62

9.1. Larkfield District 63 63

9.2. Los Angeles County District 63 63

9.3. Monterey County District 64 64

9.4. Sacramento District 64 64

9.5. San Diego County District 65 65

9.6. Ventura County District 65 65

10. Procedural Background 66 66

11. Comments on Proposed Decision 67 67

12. Assignment of Proceeding 68 68

Findings of Fact 68 68

Conclusions of Law 76 76

ORDER 83 83

ATTACHMENT A: LIST OF APPEARANCES

ATTACHMENT B: THE SETTLEMENTS

ATTACHMENT C: SUMMARY OF EARNINGS

ATTACHMENT D: CORONADO/SAN DIEGO COUNTY DISTRICT

ATTACHMENT E: LARKFIELD DISTRICT

ATTACHMENT F: LOS ANGELES COUNTY DISTRICT

ATTACHMENT G: MONTEREY COUNTY DISTRICT

ATTACHMENT H: MONTEREY WASTEWATER DISTRICT

ATTACHMENT I: SACRAMENTO DISTRICT

ATTACHMENT J: TORO SERVICE AREA

ATTACHMENT K: VILLAGE/VENTURA COUNTY DISTRICT

DECISION ADOPTING THE 2011, 2012, 2013, AND 2014 REVENUE REQUIREMENT FOR CALIFORNIA-AMERICAN WATER COMPANY

0. Summary

This decision authorizes a revenue requirement for California-American Water Company's six districts for the years 2011, 2012, 2013 and 2014. The table below illustrates the revenue requirement for the 12 months beginning January 1, 2012, for each of California-American Water Company's districts.

Test Year 2012	Adopted Revenue Requirement	Percentage Increase
Larkfield	$3,134,300	25.81%
Los Angeles	$27,018,000	18.70%
Monterey	$48,843,800	16.96%
Monterey Wastewater	$3,419,900	8.00%
Sacramento	$48,858,300	25.51%
San Diego	$19,472,100	1.45%
Toro	$724,300	75.16%
Ventura	$29,116,600	-4.96%

This decision grants in part and denies in part three separate joint motions for adoption of partial settlements between various parties to the proceeding on diverse issues. This decision also resolves the remaining issues not covered by the three separate settlement agreements. Only the Summary of Earnings tables are included in this decision as Attachment C, however, all tariff pages will be attached to the final decision.

Applications (A.) 10-07-007, A.11-09-016 remain open for Phase 2.