ALJ/KJB/sbf/acr Date of Issuance 7/18/2012

Decision 12-07-009 July 12, 2012

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Application of California Water Service Company (U60W) for Authority to Establish its Authorized Cost of Capital for the period from January 1, 2012 through December 31, 2014.

Application 11-05-001
(Filed May 2, 2011)

And Related Matters.

Application 11-05-002
Application 11-05-003
Application 11-05-004

DECISION APPROVING SETTLEMENT AGREEMENT

1. Summary

We approve the settlement agreement (Agreement) between the four Class A water companies doing business in California (Applicants) and the Commission's Division of Ratepayer Advocates (DRA). A copy of the Agreement is attached as Appendix A to this decision. The Applicants are California Water Service Company (Cal Water or CWS), San Jose Water Company (San Jose or SJW), California-American Water Company (California-American Water or CAW) and Golden State Water Company (Golden State or GSW) (collectively, together with DRA, Parties). As shown in Table I, the approved Agreement establishes costs of capital (debt and equity), capital structures and rates of return for the Applicants for the period 2011-2014. It also eliminates Temporary Interest Rate Balancing Accounts (TIRBAs) previously authorized for Applicants other than SJW with the results shown in Table II.

Table I

Financial Terms of Approved Settlement Agreement

Company	Cost of Equity	Cost of Debt	Capital Structure	Rate of Return
CWS	9.99 percent	6.24 percent	46.6 percent debt, 53.4 percent equity	8.24 percent
CAW	9.99 percent	6.63 percent	47.0 percent debt, 53.0 percent equity	8.41 percent
GSW	9.99 percent	6.99 percent	45.0 percent debt, 55.0 percent equity	8.64 percent
SJW	9.99 percent	6.68 percent	48.65 percent debt, 51.35 percent equity	8.38 percent

Table II

Disposition of TIRBA Balances

Company

Disposition

CWS

TIRBA balance of $1,141,919 will be amortized over twelve months via a customer surcredit. Within five days of the effective date of this decision, Cal Water shall file a Tier 1 advice letter to implement the surcredit.

CAW

TIRBA balance of negative $2,081,865 will be recovered over 12 months based on the number of 5/8" meter equivalents (with flat-rate and wastewater services considered as 5/8" customers). The current estimated surcharge is $0.66 per 5/8" meter equivalent. Within five days of the effective date of this decision, California-American Water shall file a Tier 1 advice letter to implement the surcharges.

GSW

TIRBA balance of $407,797 will be returned to customers in the form of a one-time surcredit in accordance with Decision 03-06-072. Within five days of the effective date of this decision, Golden State shall file a Tier 1 advice letter to implement the surcredit.

Company	Disposition
CWS	TIRBA balance of $1,141,919 will be amortized over twelve months via a customer surcredit. Within five days of the effective date of this decision, Cal Water shall file a Tier 1 advice letter to implement the surcredit.
CAW	TIRBA balance of negative $2,081,865 will be recovered over 12 months based on the number of 5/8" meter equivalents (with flat-rate and wastewater services considered as 5/8" customers). The current estimated surcharge is $0.66 per 5/8" meter equivalent. Within five days of the effective date of this decision, California-American Water shall file a Tier 1 advice letter to implement the surcharges.
GSW	TIRBA balance of $407,797 will be returned to customers in the form of a one-time surcredit in accordance with Decision 03-06-072. Within five days of the effective date of this decision, Golden State shall file a Tier 1 advice letter to implement the surcredit.