Request
Cal-Am seeks authority to establish a Security Memorandum Account to record expenditures for security programs and projects it initiated subsequent to the September 11, 2001 terrorists attacks.1 Cal-Am states that it is incurring those additional expenditures in direct response to government recommendations and mandates2 to address potential terrorist attacks and to Cal-Am management's recognition of its obligation to protect from terrorist activities the water supplies, assets, and facilities of Cal-Am.
Cal-Am argues that none of the security expenditures covered by its application has been included in its prior rate case filings, existing rate case order, or tariffs now in effect. Absent its ability to track and seek recovery of those expenditures through future rates, Cal-Am states that those expenditures will adversely impact its current ability to earn its Commission-authorized rate of return. Also, Cal-Am believes the memorandum account comports with memorandum account threshold requirements, as set forth in the Commission's July 12, 2001 Resolution No. W-4276, which authorized a generator cost memorandum account for all water and sewer system utilities.3
Cal-Am concludes that the Security Memorandum Account is the appropriate means for it to seek future recovery of those expenditures not reflected in its rates while avoiding retroactive ratemaking treatment of those security expenditures being incurred since September 11, 2001. Those additional expenditures are estimated to total approximately $2,068,000 and include both capital and expense costs, as summarized in the following tabulation.
Time Period Capital Expense Total_
9/12/01 - 12/31/01 $ 429,000 $ 143,000 $ 572,000
1/01/02 - 12/31/02 818,000 678,000 1,496,000
Total $1,247,000 $ 821,000 $2,068,000
1 Although Cal-Am did not provide specific details of its new security measures or associated costs, if requested, it will provide such details under seal. 2 The government recommendations and mandates relied on by Cal-Am are the October 10, 2001 Federal Bureau of Investigation (FBI) Statement to Congress, the October 8, 2001 Presidential Executive Order 13228, and the September 14, 2001 Federal Energy Commission (FERC) Statement of Policy. 3 The conditions are that the expenditure is caused by an event of an exceptional nature that is not under the utility's control; the expenditure cannot have been reasonably foreseen in the utility's last general rate case and will occur before the utility's next scheduled rate case; the expenditure is of a substantial nature in the amount of money involved; and, the customers will benefit by the memorandum account treatment.
