Continuation of the Water Company Cost of Capital Mechanism for all Applicants

In D.09-07-051 in the first consolidated cost of capital proceeding for Class A water companies, the Commission adopted a settlement agreement establishing a WCCM for Cal Water, California-American Water, and Golden State.52 The WCCM is based on the Cost of Capital Mechanism (CCM) of the large investor-owned energy utilities, which the Commission adopted in D.08-05-035 to replace the utilities' annual cost of capital applications53 and to streamline their cost of capital process.54 With some modifications, a WCCM was adopted for San Jose in D.10-10-035.55 As discussed above, each Applicant requested continuation of its respective WCCM. DRA does not oppose continuing the WCCMs, but recommends making San Jose's WCCM consistent with those of the other Applicants.56 The Parties agree that the WCCM adopted in D.09-07-051 fairly balances customer and shareholder interests, and should be adopted for all Applicants for any adjustment to the base year 2012 return on common equity for the subsequent years 2013 and 2014. The new benchmark period should be October 1, 2010 through September 30, 2011.

52 D.09-07-051.

53 D.08-05-035, mimeo. at 3.

54 Id. at 16.

55 D.10-10-035, mimeo. at 62.

56 DRA Exhibit 3 (DRA/Kotyrlo) at 3-6.

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