Comments on Proposed Decision

The principal hearing officer's proposed decision was filed with the Commission and served on all parties in accordance with Section 311(d) of the Public Utilities Code and Rule 77.1 of the Rules of Practice and Procedure. Peters, Water Division and Arrowhead filed comments.

Peters supports the proposed decision as written, and urges the Commission to move swiftly to remove Arrowhead's current management.

Water Division also supports the decision as written, but would have the Commission add language stating that any penalties levied by DHS, or by any other state regulatory agency, are Arrowhead's obligations and may not be recovered from its ratepayers. Other than our discussion of penalty interest levied by DWR, this is a new topic not previously addressed in the proceeding record. We note that the rates we approve today do not include recovery of any such penalties, and the Commission would have to approve any future rate increase requests based on the record developed at that time. It is not necessary or helpful to add the statement Water Division seeks.

Arrowhead uses its comments as an opportunity to reargue its position based on new, untested information not in evidence in the proceeding. It does attempt to make two points that, as the rules require, "focus on factual, legal or technical errors in the proposed decision." First, Arrowhead implies that the proposed decision errs by stating that the SDWBA loan contract requires that Arrowhead be held responsible for refunding or applying on behalf of customers any surcharge revenues not applied to repaying the loan. In fact, that provision is not in the SDWBA loan document, nor does the draft decision state that it is. Rather, as the proposed decision notes in two places, it was the Commission's D.92178 (in Ordering Paragraph 3) that imposed that condition in approving the SDWBA loan. Second, Arrowhead submitted figures attempting to show that the SDWBA surcharge rates we approve and set forth in Attachment C are not high enough to generate the revenue Arrowhead will need to make its semiannual payments to DWR. We have evaluated the figures Arrowhead submitted in its comments and found a major error in the number of metered customers it assumed. We have rechecked our figures and they are correct.

Only minor changes to correct typographic errors have been made in the proposed decision.

Findings of Fact

1. Arrowhead is a California corporation. The late Lance L. Johnson was its only stockholder.

2. No party in this proceeding has advocated sanctions specific to Lance L. Johnson as an individual.

3. The number of complaints made by Arrowhead customers to the Commission and to DHS since 1990 has been unacceptably high.

4. Arrowhead's customer complaint levels have gone down since 1999, but are still at unacceptably high levels.

5. Arrowhead has frequently failed to return customer complaint calls, to make repairs once a customer did reach the company, and to respond to DHS calls and letters.

6. Arrowhead does have a system for receiving, recording, dispatching and tracking customer complaints, but has nonetheless not been effective in handling and resolving those complaints..

7. Arrowhead has failed to cooperate with the Commission's process and orders involving customer formal complaints.

8. Arrowhead has not been sufficiently responsive to its customers, DHS, and the Commission.

9. More of Arrowhead's customer complaints are due to system leaks than to any other cause. Arrowhead's high incidence of system leaks is a result of the deteriorated condition of the older section of its system.

10. Arrowhead's leak repair performance, and its responsiveness to customers' leak repair complaints, has improved during the past year, due at least in part to rate relief and the memorandum accounts ordered in the interim decision in this proceeding.

11. The most recent Deficiency List from the DHS October 2001 Annual Inspection of Arrowhead's system listed approximately 30 current health-related deficiencies.

12. DHS has cited Arrowhead numerous times for failure to comply with various health-related regulations and requirements. Arrowhead has still not complied with the requirements of at least four of those citations.

13. Many, but not all, of Arrowhead's health-related deficiencies cannot be corrected without a large infusion of construction financing. Arrowhead has not been able to obtain the needed financing.

14. Financial hardship is not an acceptable reason for noncompliance with health-related requirements.

15. Arrowhead has not complied with applicable health-related orders of the Commission and regulations and orders of the Department of Health Services.

16. After Lance Johnson purchased Arrowhead in 1988, Arrowhead received no benefit from its ITC arising from SDWBA plant construction, and ratepayers suffered no losses because of Arrowhead's failure to track ITC utilized in a balancing account. All investment tax credits have now expired. There is no longer any ratepayer advantage to reconstructing that account today, and Arrowhead's scarce financial resources would be better applied in other areas.

17. Arrowhead has executed a new fiscal services agreement and opened a trust account with California Bank and Trust Company, Inc., in Sacramento. DWR approved that agreement on November 9, 2000.

18. Revenues from Arrowhead's SDWBA surcharge were less than the annual DWR payments in every year from 1985 through 1992.

19. Arrowhead caused or allowed its fiscal services agreement and trust account to be terminated in 1995 without timely replacement. The bank paid the $1,783 remaining balance to DWR.

20. From 1995 on, with one exception, a $50,000 lump sum payment Arrowhead made to DWR from company funds in 1998, Arrowhead made no significant payments to an SDWBA trust account or to DWR.

21. Arrowhead's SDWBA surcharge continued to generate revenues for the company between 1995 and 2000 By the time Arrowhead discontinued the surcharge in April 2000 at the Commission's direction in I.00-03-016, Arrowhead had collected $321,557 more in SDWBA surcharges, including interest at the three-month commercial paper rate, than it had paid out.

22. Arrowhead co-mingled SDWBA surcharge revenues with its regular operating revenues rather than depositing them in a trust account, and used those SDWBA surcharge revenues for purposes other than repaying the SDWBA loan.

23. Arrowhead has been unwilling and/or unable to refund to its customers or apply on their behalf those surcharge revenues which were not applied to repaying the loan.

24. Arrowhead and Water Division have stipulated to a set of figures, Attachment A to this decision, defining certain amounts at issue in the investigation. Their figures are suitable for our purposes in this proceeding.

25. On April 11, 1990 the Commission issued Resolution W-3488 granting Arrowhead an offset increase for purchased water expense, and ordered Arrowhead to establish a purchased water balancing account. Arrowhead did so.

26. The Commission has not since Resolution W-3560 in May 1991 considered whether an adjustment or other action is appropriate with respect to the balance in Arrowhead's purchased water balancing account.

27. Arrowhead has suffered financial losses in operating its water system in recent years.

28. Arrowhead's water system is in need of rehabilitation.

29. Arrowhead's owners since 1988 have been unable to cope with the challenges inherent in running a small water utility.

30. The best long-term solution for Arrowhead's service, health, and SDWBA problems would be the voluntary sale of Arrowhead's system to a willing and capable buyer. If no such sale were forthcoming, the next best solution would be putting its water system into the hands of a capable receiver.

31. Whoever manages Arrowhead's water system will need a strong cash flow to overcome the neglects of the past decade and longer.

32. Penalizing Arrowhead for its service, health, and SDWBA problems by further reducing or eliminating its net return would lead to degraded service, more severe operating problems, greater rate shock for customers in the future, greater problems for any receiver that might be appointed, and a lower likelihood that Arrowhead could transfer its water system to a willing and qualified buyer.

33. It is reasonable to grant Arrowhead a general rate increase which includes a net return derived using a 15% operating ratio.

34. The purchased water memorandum account and contract repair work memorandum account provisions of D.00-07-036 have been beneficial to both Arrowhead and its customers. Both would benefit by extending those provisions.

35. Our order in D.00-07-036 that Arrowhead stop billing SDWBA surcharges has served its purpose: to halt the diversion of SDWBA revenues and to allow time to develop an evidentiary record leading to this order.

36. The longer Arrowhead's SDWBA surcharge is suspended, the greater will be the interest and penalties that accumulate on its SDWBA loan.

37. Both Arrowhead and its customers would benefit by reinstating SDWBA surcharges and resuming SDWBA repayments to DWR, provided that Arrowhead is properly monitored to ensure the funds collected are put to the use intended.

38. The SDWBA surcharges included in the tariffs in Attachment C to this decision are reasonable and necessary to allow Arrowhead to resume making payments on its SDWBA loan, and to accumulate the two-payment reserve fund over the next ten years that Arrowhead's SDWBA contract with DWR requires.

39. The figures Arrowhead and Water Division have agreed to in their Motion for Adoption of Stipulation are sufficiently reliable for our purposes here, but given the considerations discussed in this decision, not sufficiently certain to justify ordering a rate surcharge or surcredit based on any small arithmetic difference there may be between them.

40. Arrowhead should receive credit for an undercollection in its purchased water balancing account. Arrowhead should be held liable to its customers for the full amount of past SDWBA surcharge revenues collected from customers and not applied toward the SDWBA repayments for which the SDWBA surcharge was authorized. The two amounts are, to the extent they can be determined, approximately equal and offsetting.

41. It would be unreasonable to allow Arrowhead to recover in rates any late payment penalties imposed by DWR.

42. To achieve full compliance with service and health requirements, Arrowhead will need a comprehensive, long-range plan for system infrastructure and operational improvements.

43. The revised rates authorized in this decision are reasonable, and the rate increases are justified.

44. Requiring the GRC increases and SDWBA surcharges we authorize today to expire automatically 45 days after each SDWBA loan payment is due if DWR not has received payment in full by 30 days after the due date, as described in the body of this order, will provide needed assurance that SDWBA surcharges are applied as intended.

45. The summary of earnings presented as Attachment B to this decision and the quantities included in Attachment E are reasonable for ratemaking purposes.

Conclusions of Law

1. The Commission's G.O. 103 requires Commission-regulated water utilities to comply with the laws and regulations of the state or local Department of Health Services. Arrowhead's failure to comply with DHS requirements constitutes failure to comply with the orders of this Commission.

2. Arrowhead is in compliance with Ordering Paragraphs 2 through 7 of I.00-03-016.

3. D.92178 required Arrowhead to establish and maintain a balancing account to include SDWBA surcharge revenues and the value of ITC it was able to utilize on SDWBA plant. Ordering Paragraphs 3 and 4 of D.92178 required ITC on SDWBA plant to be flowed through to ratepayers as it was used.

4. D.92178 authorized Arrowhead to enter into a specific contract with DWR to borrow SDWBA funds. Together, the decision and DWR contract required Arrowhead to establish and maintain a balancing account to track SDWBA surcharge revenues collected from customers and paid to DWR; to open a trust account with a financial institution that would serve as a fiscal agent to hold and disburse funds to DWR in repayment of the loan; and to make timely loan payments to DWR as called for in the contract. As a condition of establishing the SDWBA surcharge, the decision put Arrowhead on notice that it would be held responsible for refunding or applying on behalf of customers any surcharge revenues not applied to repaying the loan.

5. By abandoning the use of its SDWBA trust account and later closing that trust account without replacing it; by failing to deposit all of its SDWBA surcharge collections into the trust account and failing to make the necessary semi-annual loan payments to DWR; and by applying the SDWBA surcharge collections from customers to uses other than repaying loan principal and interest, Arrowhead violated the Commission's requirements set forth in D.92178 and the DWR contract the Commission approved in that decision.

6. The three-year statute of limitations set forth in Section 737 for utilities to backbill lawful tariff charges does not apply to amounts accumulated in balancing accounts and awaiting Commission action, because those amounts are not lawful tariff charges and do not become lawful tariff charges unless and until the Commission authorizes their recovery in rates through inclusion in the utility's tariffs.

7. Section 792.5 requires the Commission to consider whether an adjustment or other action is appropriate with respect to the balance in Arrowhead's purchased water balancing account when it sets Arrowhead's rates.

8. Arrowhead has been unable or unwilling to adequately serve its ratepayers, and has been unresponsive to the rules and orders of the Commission. The Commission's General Counsel should be directed to petition the Superior Court of San Bernardino County to appoint a receiver for Arrowhead's water system, in accordance with Section 855.

9. Arrowhead should be authorized to resume collecting an SDWBA surcharge, provided that Arrowhead is properly monitored to ensure that the funds collected are put to the use intended.

10. The Commission is not a party to Arrowhead's SDWBA loan contract with DWR.

11. Arrowhead's SDWBA loan contract with DWR does not contain provisions allowing Arrowhead to delay or miss payments because Arrowhead for any reason has insufficient funds available.

12. All penalties imposed by DWR on Arrowhead for failure to make timely loan payments are Arrowhead's obligations under its DWR contract. They are not incurred to benefit ratepayers and should not be recovered from ratepayers.

13. The Commission lacks jurisdiction over DWR.

14. Arrowhead should be required to prepare and submit to the Water Division a comprehensive, long-range plan for system infrastructure and operational improvements, as described in the body of this decision.

15. Inability to obtain financing for needed improvements is an indication that a water utility is unable to adequately serve its ratepayers.

16. Arrowhead should be authorized to file the revised tariffs in Attachment C to this decision.

17. This order should be made effective today so that Arrowhead can implement a program of infrastructure, service and health compliance improvement measures as soon as possible.

ORDER

IT IS ORDERED that:

1. The November 6, 2000 Motion for Adoption of Stipulation filed by Arrowhead Manor Water Company, Inc., (Arrowhead) and Water Division is granted. The Stipulation, Attachment A to this decision, is adopted for the purposes described in the body of this decision.

2. Arrowhead is authorized to file in accordance with General Order 96 Series and make effective on not less than five days' notice the tariff sheets in Attachment C to this decision. The revised rates shall apply to service rendered on and after their effective date. The corresponding existing sheets shall not be canceled, but shall remain in Arrowhead's tariffs for use if and when the new sheets expire.

3. The general rate case increases and Safe Drinking Water Bond Act (SDWBA) loan surcharges authorized in this order shall expire automatically 45 days after each semi-annual California Department of Water Resources (DWR) loan payment is due, if not extended. Arrowhead is authorized to submit an advice letter not sooner than the date the payment is actually made and not later than 30 days after the payment is due to reset the expiration clock for an additional six months (i.e., a new expiration date 45 days after the next semi-annual payment is due), after which the process shall be repeated for each subsequent payment due date until further order of the Commission. Those advice letters shall become effective upon Water Division's confirmation with DWR that DWR has received the corresponding semi-annual payment in full.

4. The full current balance due to Arrowhead from past undercollections in its purchased water balancing account is hereby offset against the full current balance of SDWBA surcharge revenues Arrowhead has collected from customers and did not apply for the purpose intended. As a result, Arrowhead's purchased water balancing account balance shall be reset to zero; and its debt to customers for having diverted SDWBA surcharge revenues is discharged. This ordering paragraph does not relieve Arrowhead of any obligation to DWR arising under their SDWBA loan contract, including its obligations to repay principal, interest, and penalty amounts. This ordering paragraph also does not convey to Arrowhead a right to retain for itself any amounts currently in its SDWBA trust account.

5. Arrowhead shall continue to maintain until further Commission order the purchased water memorandum account and the contract repair work memorandum account required in Decision (D.) 00-07-036. The previously established conditions and procedures relating to those accounts shall continue to apply.

6. The summary of earnings presented in Attachment B to this decision and the quantities included as Attachment E are adopted.

7. The requirement set forth in D.92178, Ordering Paragraph 4, to track the value of investment tax credits on SDWBA construction as utilized is canceled. Arrowhead shall comply with Ordering Paragraph 3, Ordering Paragraph 4 as modified, and Ordering Paragraph 5 of that decision.

8. The Commission's General Counsel is directed to petition the Superior Court of San Bernardino County to appoint a receiver to assume possession of and operate Arrowhead's water system, in accordance with Public Utilities Code Section 855.

9. Within nine months of the effective date of this decision Arrowhead shall prepare and submit to the Commission's Water Division a comprehensive, long-range plan for system infrastructure and operational improvements. The plan shall include cost estimates and identify sources of funding. If low interest rate state funding is not available, the plan shall identify realistic, alternative sources. If Arrowhead is unable to obtain financing, that may be taken as an additional indication that it is financially unable or unwilling to adequately serve its ratepayers.

10. Application 99-10-027 and Investigation 00-03-016 are closed.

This order is effective today.

Dated July 17, 2002, at San Francisco, California.

LORETTA M. LYNCH

President

HENRY M. DUQUE

CARL W. WOOD

GEOFFREY F. BROWN

MICHAEL R. PEEVEY

Commissioners

ATTACHMENT ABEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Application of Arrowhead Manor Water Company for a General Rate Increase.	A.99-10-027
Investigation on the Commission's own motion into the operations, practices, and water quality of the Arrowhead Manor Water Company and to evaluate whether the utility properly handled its Safe Drinking Water Bond Act Surcharge Revenues	I.00-03-016

STIPULATION

1. The parties to the Stipulation ("Parties") are the Ratepayer Representation Branch ("RRB") of the Water Division and the Arrowhead Manor Water Company ("AMWC").

2. The Parties agree that no signatory hereto nor any member of the staff of the Public Utilities Commission assumes any personal liability as a result of the Stipulation. The Parties agree that no legal action may be brought in any state or federal court, or in any other forum, against any individual signatory representing the interests of the Parties, RRB, or its attorneys, or the RRB itself regarding the Stipulation. All rights and remedies are limited to those available before the California Public Utilities Commission.

3. The Parties acknowledge that RRB is charged with representing the interests of customers of public utilities in the State of California, as required by Public Utilities Code Section 309.5, and nothing in the Stipulation is intended to limit the ability of RRB to carry on that responsibility.

4. The Parties agree to fully support this Stipulation inasmuch as their negotiations have resulted in the resolution of the following issues raised with respect to the Commission's investigation as shown in the attached appendices:

· APPENDIX A The amount collected from customers by surcharges to repay AMWC's loan it received under the Safe Drinking Water Bond Act (SDWBA), the amounts paid into the trust account where the funds were deposited and payments made directly to Department of Water Resources (DWR) by AMWC, and the amounts unremitted with and without interest.

· APPENDIX B The amount remitted from the trust account and directly from AMWC in repayment of its loan including the year in which paid.

· APPENDIX C The amount that currently is due on the SDWBA loan.

· APPENDIX D The under-collection in the balancing account established by Resolution No. W-3488, dated April 11, 1990.

ARROWHEAD MANOR WATER COMPANY

By ___________________________

LANCE L. JOHNSON

President

29135 Hook Creek Road

P.O. Box 699

Cedar Glen, CA 92321

(909) 337-1641

RATEPAYER REPRESENTATION BRANCH OF THE WATER DIVISION

By __________________________

DANIEL R. PAIGE

Public Utilities Commission of California

320 West 4^th Street, Suite 500

Los Angeles, CA 90013

(213) 576-7048

						APPENDIX A
ARROWHEAD MANOR WATER COMPANY
Computation of SDWBA Surcharge Revenues Collected and Paid to Trust Account and DWR Direct.
For the Period from 1981 through First Quarter of 2000
( a )	(b)	( c )	( d )	(e)	(f)	(g)
	Total	Payment			Averaged	Unremt.Surch.
	Surcharge	To	Unremitted	Interest	Annual interest	& Interest
Year	Collected	Trust & DWR	Surcharge	Rate	(Beg+End)/2xInt%	Beg+Add+Int
1981	60,234	15,789	44,444	15.34%	3,409	47,853
1982	63,353	85,010	(21,657)	11.90%	4,406	30,602
1983	64,355	116,537	(52,182)	8.88%	401	(21,179)
1984	61,607	62,550	(943)	10.12%	(2,191)	(24,313)
1985	33,956	32,800	1,156	7.95%	(1,887)	(25,044)
1986	49,189	51,300	(2,111)	6.49%	(1,694)	(28,849)
1987	49,844	51,230	(1,386)	6.82%	(2,015)	(32,249)
1988	49,583	21,000	28,583	7.66%	(1,376)	(5,041)
1989	50,463	73,347	(22,884)	8.99%	(1,482)	(29,407)
1990	54,592	47,813	6,779	8.06%	(2,097)	(24,725)
1991	50,981	51,617	(636)	5.87%	(1,470)	(26,831)
1992	52,594	51,071	1,523	3.75%	(978)	(26,286)
1993	60,179	59,144	1,035	3.22%	(830)	(26,081)
1994	49,664	26,447	23,217	4.66%	(674)	(3,538)
1995	57,296	-	57,296	5.93%	1,489	55,247
1996	65,699	301	65,398	5.41%	4,758	125,402
1997	63,512	-	63,512	5.60%	8,801	197,715
1998	58,675	50,000	8,675	5.37%	10,850	217,240
1999	58,139	-	58,139	5.22%	12,857	288,236
2000	15,474	-	15,474	6.03%	17,847	321,557
Total	1,069,387	795,957	273,432		48,125

					APPENDIX B
ARROWHEAD MANOR WATER COMPANY
Paid To Department of Water Resources From Trust Account and Direct
For the Period from 1981 through June 2000
(a)	(b)	(c)	(d)
	Paid from	Direct Pay	Received
Year	Trust	to DWR	by DWR
1981	-	-	-
1982	-	16,722	16,722
1983	58,753	25,387	84,140
1984	58,903	-	58,903
1985	58,893	-	58,893
1986	58,899	-	58,899
1987	58,899	-	58,899
1988	58,900	-	58,900
1989	58,893	-	58,893
1990	88,340	-	88,340
1991	29,450	-	29,450
1992	58,896	-	58,896
1993	56,439	2,464	58,903
1994	58,899	-	58,899
1995	1,783	-	1,783
1996	-	-	-
1997	-	-	-
1998	-	50,000	50,000
1999	-	-	-
2000	-	-	-
Total	705,948	94,573	800,521

							APPENDIX C
ARROWHEAD MANOR WATER COMPANY
Capitalized Interest and Recomputation of SDWBA Loan Principal
From 1 January 1998 through 1 July 2000
References: Repayment Schedule and Data Requests
	Date		Amount Due,	Cumulative	Loan Principal		Explanation
			Adjustment	Interest Due
Year	Month	Day	or Payment
1998	Jan	1	30,680.59	212,992.10	829,205.16		Accrued interest and outstanding principal.
	Apr	28	(50,000.00)	162,992.10			Payment made directly to DWR.
	Jul	1	30,680.59	193,672.69			Annual accrued interest.
1999	Jan	1	30,680.59	224,353.28			Annual accrued interest.
	Jul	1	30,680.59	255,033.87			Annual accrued interest.
2000	Jan	1	30,680.59	285,714.46			Annual accrued interest.
		1	(285,714.46)	-	285,714.46		Accrued interest capitalized.
					1,114,919.62		Restated Loan Principal
2000	Jul	1					Delinquent penalty of $34,574.01 is not capitalized and remains due and owing.
		1	41,252.03	41,252.03			Semi-annual interest at 7.4%
Caveat:
Interest accumulates at $41,252.03 semi-annually and delinquent interest accumulates at a progressive rate.
Above information received over the phone. For official position of DWR data, please obtain from DWR.

						APPENDIX D
ARROWHEAD MANOR WATER COMPANY
Balancing Account for Purchase Water
For the Period April 11, 1990 to August 31, 2000
Purchase Water	4/11/1990	1991	1992	1993	1994	1995
Recorded	$ 21,887	$ 30,949	$ 31,569	$ 18,155	$ 59,327	$ 60,009
Adopted ($)	$ 14,963	$ 20,525	$ 20,850	$ 20,850	$ 30,907	$ 33,685
Interim Increase	$ -	$ 1,902	$ 2,980	$ 2,980	$ 1,078	$ -
Contract Work-Repairs
Under/Over Collection	$ 6,925	$ 8,522	$ 7,739	$ (5,675)	$ 27,343	$ 26,324
Interest	$ -	$ -	$ -	$ -	$ 637	$ 3,478
Balance Account (EOY)	$ 6,925	$ 15,446	$ 23,185	$ 17,510	$ 45,490	$ 75,291
Interest Rate					4.66%	5.93%
Purchase Water	1996	1997	1998	1999	8/31/2000
Recorded	$ 56,220	$ 76,011	$ 77,466	$ 132,895	$ 98,315
Adopted ($)	$ 33,685	$ 33,685	$ 33,685	$ 33,685	$ 28,259
Interim Increase	$ -	$ -	$ -	$ 10,686	$ 38,539
Contract Work-Repairs					$ (627)
Under/Over Collection	$ 22,535	$ 42,326	$ 43,781	$ 88,524	$ 30,890
Interest	$ 4,683	$ 6,926	$ 9,325	$ 13,005	$ 18,530
Balance Account (EOY)	$ 102,509	$ 151,761	$ 204,868	$ 293,392	$ 342,812
Interest Rate	5.41%	5.60%	5.37%	5.22%	6.00%

(END OF ATTACHMENT A)

ATTACHMENT BArrowhead Manor Water Company

Summary of Earnings

Test Year 2000

	Utility		Branch
	Former	Requested	Former	Recommended	Adopted
	Rates	Rates	Rates	(Settlement)	Rates
Operating Revenues				Rates
Metered Rate	$61,346	$143,680	$62,794	$107,697	$125,828
Flat Rate	89,453	208,717	84,452	170,970	199,749
Fire Protection	1,271	2,939	1,353	2,570	3,003
Other Water Revenue	2,818	2,818	2,800	2,800	3,272
Total Revenue	$154,888	$358,154	$151,399	$284,037	$331,852
Operating Expenses
Purchased Water	$150,480	$150,480	$130,600	$132,000	$132,000
Purchased Power	11,242	11,242	8,430	8,430	8,430
Other Volume Related Expense	180	180	180	260	260
Employee Labor	0	0	7,800	7,800	7,800
Materials	4,000	4,000	2,040	3,000	3,000
Contract Work--Repairs	20,000	20,000	10,400	10,400	10,400
Contract Work--Water Testing	3,200	3,200	2,625	2,625	2,625
Contract Work--DHS	0	0	720	720	720
Transportation Expense	6,051	6,051	5,600	5,600	5,600
Other Plant Maintenance	420	420	1,030	1,660	1,660
Office Salaries	29,508	29,508	25,000	26,000	26,000
Management Salaries	38,900	38,900	28,800	35,500	35,500
Employee Pension & Benefits	7,600	7,600	7,000	5,630	5,630
Uncollectibles	3,500	3,500	757	2,840	2,840
Office Services & Rentals	14,868	14,868	6,000	8,800	8,800
Office Supplies	4,500	4,500	4,420	5,670	5,670
Professional Services	1,000	1,000	2,400	2,400	2,400
Insurance	3,800	3,800	3,800	3,960	3,960
Regulatory Expenses	0	0	230	2,510	2510
General Expenses	2,312	2,312	1,000	1,000	1,000
Subtotal	$301,561	$301,561	$248,832	$266,806	$266,806
Franchise Fee	0	0	0	0	0
Depreciation Expense	9,000	9,000	0	7,000	7,000
Property Taxes	1,022	1,022	1,022	2,960	2,960
Payroll Tax	6,478	6,478	7,528	6,471	6,471
Income Taxes	9,037	9,037	800	800	7,544
Total Deductions	$327,098	$327,098	$258,182	$284,037	$290,781
Net Revenue	($172,210)	$31,056	($106,783)	$0	$41,071
Average Plant	$102,166	$102,166	$264,752	$264,536	$264,536
Avg. Accumulated Depreciation	0	0	174,100	177,600	177,600
Net Plant	102,166	102,166	90,652	86,936	86,936
Less: Advances	0	0	0	0	0
Contributions	0	0	10,774	10,774	10,774
Plus: Working Cash	0	0	0	0	0
Materials & Supplies	0	0	2,000	2,000	2,000
Rate Base	$102,166	$102,166	$81,878	$78,162	$78,162
Rate of Return	(loss)	30.40%	(loss)	0.00%	(15% Op. Ratio)

(END OF ATTACHMENT B)

ATTACHMENT C

Attachment C

Page 1 of 3

Arrowhead Manor Water Company

Schedule No. 1A

ANNUAL METERED SERVICE

APPLICABILITY

Applicable to all metered water service furnished.

TERRITORY

The unincorporated community of Cedar Glen and vicinity located one mile southeast of Lake Arrowhead, San Bernardino County.

RATES *

Quantity Rate:

All water, per 100 cubic feet $ 5.24 (I)

Per Service Connection Per Year

Service Charge: Service Charge SDWBA Surcharge (T)

Direct Benefit Non-Benefit (T)

For 5/8 x 3/4 inch meter $ 209.00 $ 248.52 (I) $ 131.28 (I)

For 3/4 inch meter 313.50 372.84 │ 196.80 │

For 1 inch meter 522.50 621.36 │ 328.08 │

For 1-1/2 inch meter 1,045.00 1,242.60 │ 656.16 │

For 2 inch meter 1,672.00 1,988.16 (I) 1,049.76 (I)

The Service Charge is a readiness to serve charge, which is applicable to all metered service and to which is to be added the quantity charge computed at the Quantity Rates.

* Rates on this sheet take precedence over other rates in this tariff. These rates apply to service rendered on and before February 15, 2003. This sheet expires on February 16, 2003 unless extended.

(continued)

*

Attachment C

Page 2 of 3

Arrowhead Manor Water Company

Schedule No. 2RA

ANNUAL RESIDENTIAL FLAT RATE SERVICE

APPLICABILITY

Applicable to all flat rate water service. (T)

TERRITORY

The unincorporated community of Cedar Glen and vicinity, located one mile southeast of Lake Arrowhead, San Bernardino County.

RATES *

Per Service Connection Per Year

Flat Rate SDWBA Surcharge (T)

Direct Benefit Non-Benefit (T)

For a single family

residential unit, including

premises $ 580.00 (I) $ 248.52 (I) $ 131.28 (I)

For each additional single-

family residential unit on

the same premises and

served from the same

service connection 387.00 (I) 161.54 (I) 85.33 (I)

* Rates on this sheet take precedence over other rates in this tariff. These rates apply to service rendered on and before February 15, 2003. This sheet expires on February 16, 2003 unless extended.

(continued)

Attachment C

Page 3 of 3

Arrowhead Manor Water Company

Schedule No. 4A

PRIVATE FIRE PROTECTION SERVICE

APPLICABILITY

Applicable to all water service rendered for private fire protection purposes.

TERRITORY

The unincorporated community of Cedar Glen and vicinity located one mile southeast of Lake Arrowhead, San Bernardino County.

RATES *

Per Service Connection Per Year

For each 4-inch connection or smaller $ 940.00 (I)

For each 6-inch connection 1,880.00 │

For each 8-inch connection 3,002.00 (I)

(D)

* Rates on this sheet take precedence over other rates in this tariff. These rates apply to service rendered on and before February 15, 2003. This sheet expires on February 16, 2003 unless extended.

SPECIAL CONDITIONS

(Special Conditions 1 through and including 6 remain in effect.)

(END OF ATTACHMENT C)

ATTACHMENT D

COMPARISON OF RATES

A comparison of the present rates and the rates adopted by this Decision are shown below:

(Does not include SDWBA surcharges.)

Per Service Per Year

Present Adopted

Rates Rates Increase

General Metered Service:

Service Charge:

For 5/8 x 3/4 inch meter $ 209.00 $ 209.00 0.0%

For 3/4 inch meter 313.50 313.50 0.0%

For 1 inch meter 522.50 522.50 0.0%

For 1-1/2 inch meter 1,045.00 1,045.00 0.0%

For 2 inch meter 1,672.00 1,672.00 0.0%

Quantity Rate:

All water, per 100 cubic feet $ 4.03 $ 5.24 30.0%

Flat Rate Service:

For a single family residence $ 497.00 $ 580.00 16.7%

For each additional unit 331.00 387.00 16.9%

A comparison of annual bills for a metered customer with a 5/8 x 3/4-inch meter consuming various quantities of water is shown below:

Consumption Present Adopted

in Ccf Rates Rates Increase

0 $ 209.00 $ 209.00 0.0%

20 289.60 313.80 8.3%

40 370.20 418.60 13.1%

55 430.65 497.20 15.5%

75 511.25 602.00 17.8%

100 612.00 733.00 19.8%

250 1,216.50 1,519.00 24.9%

(END OF ATTACHMENT D)

ATTACHMENT E

ADOPTED QUANTITIES

Test Year 2000

Expenses

1. Purchased Power

Southern California Edison Company

Rate Schedule PA-1

kWh Used 71,950 per year

Total Charge $ 8,430 per year

Average cost per kWhr. $ 0.1172

2. Purchased Water

Crestline Lake Arrowhead Water Agency

Quantity 115 Acre-Feet

Rate $ 1,150 per Acre-Foot

Total Charge $ 132,000 per year

3. Property Taxes:

Tax Rate 1.25%

Total Charge $ 2,960 per year

4. Service Connections

Metered Customers:

5/8 x 3/4 inch meter 209

3/4 inch meter 5

2 inch meter 1

Total: 215

Metered consumption 15,067 Ccf per year

Flat Rate customers:

Single residence customers 342

Additional Units 3

Total 345

Private Fire Service:

8-inch connection 1

(END OF ATTACHMENT E)