XXI. Assignment of Proceeding

Michael Peevey is the Assigned Commissioner and Michael Galvin is the assigned Administrative Law Judge in this proceeding.

Findings of Fact

1. AVR, a water public utility within the context of Pub. Util. Code § 216, is subject to the jurisdiction, control, and regulation of this Commission.

2. AVR is a wholly owned subsidiary of Park, and provides public utility water service in and adjacent to the Town of Apple Valley.

3. AVR sought increases over present rates of $2,775,000 (27.1%) for 2003; $497,839 (3.8%) for 2004; and, $507,422 (3.7%) for 2005.

4. Of the approximately 100 customers who attended PPHs in Apple Valley 30 customers presented their views. The views were generally in opposition to any rate increase.

5. Pursuant to Rule 6.1, by Resolution ALJ 176-3085, the Commission preliminary designated this application as a ratesetting proceeding.

6. D.02-12-063 authorized AVR's test year 2003 rates to become effective January 1, 2003.

7. AVR and ORA filed a joint comparison exhibit with a detailed list of resolved and unresolved estimates. The resolved estimates are reasonable in light of the whole record, consistent with law, and in the public interest.

8. Differences in residential and business customer consumption estimates resulted from the use of different estimating models, time periods, and variables.

9. The acceptable method for estimating customer consumption prior to 1992 was the Committee method established by water utilities and Commission staff.

10. After 10 years of experience with the Econometric method, ORA reverted to the Committee method because of its analysis of prior Econometric model results and actual consumption experience showed that the Econometric model under-forecasted consumption 70% to 80% of the time, while the Committee method produced much better results.

11. AVR affirms that ORA's consumption estimates for residential and business customers are correct calculations.

12. Although the Committee and Econometric method of calculating customer consumption estimates have been used in prior proceedings, the Commission has adopted neither method.

13. D.00-07-018 set forth a procedure for a sharing mechanism between ratepayers and shareholders for non-tariff leases.

14. AVR's 2002 payroll base reflects actual payroll.

15. Pursuant to Rule 51.8, adopted settlements do not constitute approval of, or precedent regarding any principle or in the proceeding or in any future proceeding.

16. AVR based its insurance estimates on actual insurance premiums for its policy year 2002-2003.

17. AVR incurred $129,000 in regulatory expense by the end of September 2002. AVR provided no estimate of the additional cost it incurred subsequent to September of 2002 for its participation in the November evidentiary hearing and filing of a joint comparison exhibit and opening and closing briefs.

18. AVR included $5,000 in test years 2003 and 2004 to complete an evaluation of vulnerability assessment it expects to be completed in 2003.

19. It has been the Commission policy to allow water utilities with multiple districts to file a main office rate case on a three-year cycle.

20. A DHS letter to AVR showed that AVR's maximum day demand requirement is only 18,930 gpm and that AVR has the ability to produce only 19,087 gpm from its active wells and 17,096 gpm if the largest active well is taken out of service.

21. The information provided by DHS affirms that AVR needs an additional well.

22. AVR's rate base treatment of its Mojave Basin Adjudication cost is consistent with the Uniform System of Accounts for Water Utilities adopted by this Commission and prior Commission ratemaking treatment.

23. Section 116555 of the California Health and Safety Code requires each public water system to ensure that its system provides a reliable and adequate supply of potable water to its consumers at all times.

24. DHS delegated the assessment of need for emergency power generators to the individual water utilities.

25. D.01-04-006 denied water utilities an exemption from power outages because water utilities already had a limited exemption and reasonably prepared for power interruptions with backup generation for the distribution and storage of water during power interruptions.

26. AVR needs to recoat its Desert Knolls tank.

27. The legal standard for setting the fair ROE has been established by the United States Supreme Court in the Bluefield and Hope cases.

28. An ROE is set at a level of return commensurate with market returns on investments having corresponding risks, and adequate to enable a utility to attract investors to finance the replacement and expansion of a utility's facilities to fulfill its public utility obligation.

29. Quantitative financial modes are commonly used in ROE proceedings as a starting point to estimate investors' expectations for ROE. Although these financial models are objective, the results are dependent on subjective inputs.

30. It is the application of informed judgment, not the precision of quantitative financial models, which is the key for selecting a specific ROE.

31. The Commission concluded in D.01-04-034 that water utilities' risks were not comparable to the risks faced by energy utilities.

32. AVR used gas utilities as a proxy for its DCF and RP financial models, the results of which were reduced by 50 basis points to provide for potential differences between water and gas utilities.

33. AVR's water CAPM model result was based on a sample of two water utilities.

34. D.99-03-032 authorized AVR a 30 basis point premium in its ROE to fairly compensate its investors for perceived risk.

35. Park's 60% equity ratio is slightly higher than the average of AVR's proxy groups and the 48% average of ORA's proxy group.

36. EPA has undertaken a review of its Radon regulation, which impacts all water utilities.

37. Section 739.8 of the Public Utilities Code requires the Commission to consider rate relief programs for low-income ratepayers.

Conclusions of Law

1. The Committee method used by ORA should be used to estimate residential and business consumption.

2. The ratepayer/shareholder sharing mechanism set fort in D.00-07-018 should be used for passive non-tariff revenues.

3. AVR's payroll estimates should be adopted.

4. Insurance expense should be based on a trending method for this proceeding.

5. Regulatory commission expenses should provide AVR with sufficient funds to cover its cost.

6. It is not reasonable to include $5,000 in outside service for a vulnerability assessment in test year 2004 because AVR expects to complete that assessment in 2003.

7. The use of Park's Central Basis Division adopted main office cost for estimating AVR's share of main office expense is reasonable.

8. AVR should be authorized to construct a new well in the summer of 2003.

9. AVR's rate base treatment of Mojave Basin Adjudication cost should be consistent with the Uniform System of Accounts for Water Utilities adopted by this Commission and prior Commission ratemaking treatment.

10. Backup generators should be allowed in rate base to the extent they are deemed necessary and useful.

11. AVR should provide additional information on its backup generators in its next GRC, as specified in the preceding text.

12. AVR should be allowed to file an advice letter for the recovery of reasonable costs incurred in recoating its Desert Knolls tank after the project is completed.

13. A subjective 9.21% to 11.22% ROE range is just and reasonable for AVR, based on financial model results, cost of debt, and capital structure.

14. A 10.10% ROE is reasonable for each of AVR's test years. This ROE is based on the lower quarter of the ROE range found reasonable and increased by 30 basis points for added risk perceived by investors.

15. The Director of the Commission's Water Division should monitor EPA's review of its radon regulation and upon any changes to those regulations, assess the feasibility of issuing a generic investigation into compliance of the revised Radon regulation.

16. AVR should assess the feasibility of establishing reduced rates for its low-income customers.

17. AVR should be authorized to file the rates set forth in Appendix C.

ORDER

IT IS ORDERED that:

1. Apple Valley Ranchos Water Company (AVR) is authorized to file the revised schedules attached to this order as Appendix B and to concurrently cancel its present schedules for such service. This filing shall comply with General Order (GO) 96 and be approved by the Commission's Water Branch. The effective date of the revised schedule shall be January 1, 2003 and apply only to service rendered on or after this effective date, as set forth in Decision (D.) 02-12-063. In order to recover the authorized rates from January 1, 2002 to August 26, 2003, the date of the Water Division's processing of the filed revised schedules, AVR is authorized to add to the quantity rate a surcharge of $0.091 per Ccf as specified in special condition 3 of the General Metered Service Tariff Schedule in Appendix B.

2. On or after November 5, 2003 and November 5, 2004, AVR is authorized to file an advice letters in conformance with GO 96-A, with appropriate supporting workpapers, requesting the step rates authorized in Appendix C of this decision for 2004 and 2005, respectively. If the rate of return on rate base for AVR, taking into account the rates then in effect and normal ratemaking adjustments for the twelve months ending September 30, 2003 and September 30, 2004, respectively, exceeds the lower of (a) the rate of return found reasonable by the Commission for any district of Park Water Company for the corresponding period in the most recent decision, or (b) the rate of return found reasonable in this order, then AVR shall file for a lesser increase. The requested rates shall be reviewed by the Commission's Water Division and shall go into effect after Water Division's determination that they conform to this order. Water Division shall inform the Commission if it finds that the proposed rates do not conform to this order or other Commission decisions. The revised tariff schedules shall be effective no earlier that January 1, 2004 and January 1, 2005, respectively, and shall apply to service rendered on and after their effective date.

3. AVR shall provide information in its next general rate case (GRC) to support the inclusion of backup generators in rate base. That additional information shall include, but not be limited to, the identity of each generator by horsepower, facility intended to backup, year purchased, rate base amount, actual time placed in service as a backup facility, and actual amount of time tested by year since acquired.

4. AVR is authorized to file an advice letter seeking Commission authorization for the recovery of reasonable costs incurred in recoating its Desert Knolls tank after the project is completed.

5. AVR shall gather demographic information about its customers for the purpose of determining the feasibility of offering reduced rate programs for its low-income customers and include those results and a recommendation for a low-income program in its next GRC. If AVR determines that such a program is not feasible, it shall explain why.

6. The Director of the Commission's Water Division shall monitor EPA's review of its radon regulation and upon any changes to those regulations assess the feasibility of issuing a generic investigation into compliance of the revised Radon regulation.

7. The summaries of earnings presented in Appendix A, and the quantities and calculations included in Appendix D, which underlie them, are adopted.

8. Application 02-03-046 is closed.

This order is effective today.

Dated August 21, 2003, at San Francisco, California.

MICHAEL R. PEEVEY

President

CARL W. WOOD

LORETTA M. LYNCH

GEOFFREY F. BROWN

SUSAN P. KENNEDY

Commissioners

APPENDIX A

APPENDIX A
1 of 2
APPLE VALLEY RANCHOS WATER COMPANY
Test Year 2003
Summary of Earnings
		(At Present Rates)											ADOPTED
		AVR			ORA						At Present						At Authorized
		Updated			Updated						Rates						ROR
		'(Dollars in Thousands)									(Dollars in Thousands)
Operating Revenues:
	Water	10,384.5			10,455.9									10,743.5					12,343.8
	Deferred	(1.6)			(1.6)									(1.6)					(1.6)
Total Revenues		10,386.1			10,457.5									10,745.1					12,345.4
Expenses:
O&M Expenses
	Payroll-Operations	465.0			330.1									465.0					465.0
	Operations-Other	112.1			112.1									112.1							112.1
	Purchased Power	1,064.4			1,237.1									1,237.1							1,237.1
	Leased Water Rights	207.9			252.7									252.7							252.7
	Replenishment Charges	151.4			149.0									149.0							149.0
	Chemicals	16.8			16.8									16.8							16.8
	Payroll-Customer	256.9			182.4									256.9							256.9
	Customers-Other	87.3			87.3									87.3							87.3
	Payroll-Maintenance	213.1			151.3									213.1							213.1
	Maintenance-Other	1,069.6			1,071.1									1,069.6							1,069.6
	Uncollectibles 0.46%	47.8			48.1									49.4							56.8
	Subtotal O&M	3,692.2			3,637.9									3,909.0							3,916.4
A&G Expenses
	Payroll	758.0			566.9									758.0							758.0
	Payroll-Benefits	463.5			430.5									463.5							463.5
	Insurance	472.9			349.8									446.2							446.2
	Uninsured Property Damage	1.6			1.6									1.6							1.6
	Regulatory Commission Expenses	58.3			48.7									48.7							48.7
	Outside Services	98.3			93.3									98.3							98.3
	Office Supplies	177.4			177.4									177.4							177.4
	A&G Transferred	(205.0)			(205.5)									(205.0)							(205.0)
	Miscellaneous	28.4			28.4									28.4							28.4
	Franchise Requirements 1.05%	109.1			109.8									112.8							129.6
Main Office Allocation
	A&G Expenses	715.0			595.4									715.0							715.0
	Data Processing	155.9			123.3									155.9							155.9
	Subtotal A&G	2,833.4			2,319.6									2,800.8							2,817.6
	Ad Valorem Taxes	326.4			333.8									326.2							326.2
	Payroll Taxes	164.6			130.4									159.7							159.7
	Depreciation Expenses	1,227.7			1,192.3									1,217.1							1,217.1
	California Income Tax	104.2			177.6									120.3							259.6
	Federal Income Tax	410.5			697.4									466.7							1,002.6
Total Operating Expenses		8,759.1			8,489.0									8,999.80							9,699.20
Net Operating Revenue		1,627.0			1,968.5									1,745.3							2,646.1
Rate Base		27,903.5			23,862.9									27,883.0							27,883.0
Rate of Return		5.83%			8.25%									6.26%							9.49%

APPENDIX A 2 of 2
APPLE VALLEY RANCHOS WATER COMPANY
Test Year 2004
Summary of Earnings
				(At Present Rates)																ADOPTED
				AVR							ORA						At Present						At 2003						At Authorized
				Updated							Updated						Rates						Rates						ROR
				'(Dollars in Thousands)																			(Dollars in Thousands)
Operating Revenues:
	Water			12,779.6							11,044.2						10,950.6						12,588.3						12,897.9
	Deferred			(1.3)							(2.5)						(2.5)						(2.5)						(2.5)
Total Revenues				12,780.8							11,046.7						10,953.1						12,590.8						12,900.4
Expenses:
O&M Expenses
	Payroll-Operations			491.7							341.0						491.7						491.7						491.7
	Operations-Other			115.4							115.4						115.4						115.4						115.4
	Purchased Power			1,080.8							1,257.4						1,257.4						1,257.4						1,257.4
	Leased Water Rights			226.3							273.9						273.9						273.9						273.9
	Replenishment Charges			152.2							150.0						150.0						150.0						150.0
	Chemicals			13.7							13.7						13.7						13.7						13.7
	Payroll-Customer			271.7							188.4						271.7						271.7						271.7
	Customers-Other			89.4							89.4						89.4						89.4						89.4
	Payroll-Maintenance			225.3							156.3						225.3						225.3						225.3
	Maintenance-Other			1,074.0							1,076.6						1,074.0						1,074.0						1,074.0
	Uncollectibles 0.46%			58.8							50.8						50.4						57.9						59.3
	Subtotal O&M			3,799.5							3,712.9						4,012.9						4,020.4						4,021.8
A&G Expenses
	Payroll	796.6							561.8						796.6						796.6						796.6
	Payroll-Benefits			489.2							448.9						489.2						489.2						489.2
	Insurance			557.5							373.8						509.5						509.5						509.5
	Uninsured Property Damage			1.7							1.6						1.7						1.7						1.7
	Regulatory Commission Expenses			58.3							48.3						48.3						48.3						48.3
	Outside Services			102.0							97.0						102.0						102.0						102.0
	Office Supplies			182.5							182.5						182.5						182.5						182.5
	A&G Transferred			(164.5)							(168.8)						(164.5)						(164.5)						(164.5)
	Miscellaneous			29.2							29.2						29.2						29.2						29.2
	Franchise Requirements 1.05%			134.2							116.0						115.0						132.2						135.5
Main Office Allocation
	A&G Expenses			736.5							613.1						736.5						736.5						736.5
	Data Processing			159.5							112.9						159.5						159.5						159.5
	Subtotal A&G			3,082.7							2,436.3						3,005.5						3,022.7						3,026.0
	Ad Valorem Taxes			342.6							296.7						342.0						342.0						342.0
	Payroll Taxes			173.9							115.6						168.7						168.7						168.7
	Depreciation Expenses			1,338.5							1,288.1						1,327.9						1,327.9						1,327.9
	California Income Tax			294.8							204.7						95.6						238.2						265.2
	Federal Income Tax			1,027.9							717.8						327.0						828.0						931.7
Total Operating Expenses				10,059.9							8,772.0						9,279.60						9,947.90						10,083.30
Net Operating Revenue				2,721.0							2,274.7						1,673.5						2,642.9						2,817.1
Rate Base				29,740.3							25,555.7						29,715.7						29,715.7						29,715.7
Rate of Return				9.15%							8.90%						5.63%						8.89%						9.48%

(END OF APPENDIX A)

APPENDIX B

APPENDIX B

Page 1 0f 6

APPLE VALLEY RANCHOS WATER COMPANY

Schedule No. 1

GENERAL METERED SERVICE

APPLICABILITY

Applicable to all metered water service.

TERRITORY

Town of Apple Valley and vicinity, San Bernardino County.

RATES

Quantity Rates:

For all water delivered, per 100 cu. ft. $ 1.320

Per Meter

Per Month

Service Charge:

For 5/8 x ¾-inch meter $ 18.56

For ¾-inch meter 27.85

For 1-inch meter 46.40

For 1 ½-inch meter 92.80

For 2-inch meter 148.50

For 3-inch meter 278.40

For 4-inch meter 464.00

For 6-inch meter 928.00

For 8-inch meter 1,484.80

For 10-inch meter 2,134.40

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

SPECIAL CONDITIONS

1. A late charge will be imposed per Schedule No. LC.

2. In accordance with Section 2714 of the Public Utilities Code, if a tenant in a rental unit leaves owing the company, service to subsequent tenants in that unit will, at the company's option, be furnished on the account of the landlord or property owner.

3. To the above quantity rate a surcharge of $0.091 per Ccf should be added to make (N) the adopted rates become effective January 1, 2003. This surcharge will be in (N) effect for a 24-month period starting with the effective date of August 27, 2003 (N) and ending on August 26, 2005. (N)

APPENDIX B

Page 2 0f 6

APPLE VALLEY RANCHOS WATER COMPANY

Schedule No. 2

GRAVITY IRRIGATION SERVICE

APPLICABILITY

Applicable to all water service from the Company's gravity irrigation system.

TERRITORY

Within the entire service area of the Company.

RATES

Quantity Rates:

For all water delivered, per 100 cu. ft. $ 0.450

Per Meter

Per Month

Service Charge:

For 5/8 x ¾-inch meter $ 18.56

For ¾-inch meter 27.85

For 1-inch meter 46.40

For 1 ½-inch meter 92.80

For 2-inch meter 148.50

For 3-inch meter 278.40

For 4-inch meter 464.00

For 6-inch meter 928.00

For 8-inch meter 1,484.00

For 10-inch meter 2,134.40

SPECIAL CONDITIONS

1. Service under this schedule is limited to lands not developed for residential use.

2. All outlets for this water shall be protected by sings stating: NON-POTABLE WATER - NOT FOR HUMAN CONSUMPTION.

3. A late charge will be imposed per Schedule No. LC.

4. All bills are subject to the Public Utilities Commission Reimbursement Fee set forth on Schedule No. UF.

APPENDIX B

Page 3 of 6

APPLE VALLEY RANCHOS WATER COMPANY

Schedule No. 4

NON-METERED FIRE SERVICE

APPLICABILITY

Applicable for water service to privately-owned fire hydrant and fire sprinkler systems where water is to be used only for the purpose of fire suppression or for periodic system testing.

TERRITORY

Town of Apple Valley and vicinity, San Bernardino County.

RATES

Per Service

Size of Service Per Month

2-inch ....................................................................................... $ 21.60

3-inch ....................................................................................... 32.45

4-inch ....................................................................................... 43.20

6-inch ....................................................................................... 64.80

8-inch ....................................................................................... 86.40

SPECIAL CONDITIONS

1. The fire protection service connection shall be installed by the utility at the cost paid by the applicant. Such payment shall not be subject to refund.

2. The minimum diameter for fire protection service shall be two (2) inches, and the maximum diameter shall be not more than the diameter of the main to which the service is connected.

3. If a distribution main of adequate size to serve a private fire protection system in addition to all other normal service does not exist in the street or alley adjacent to the premises to be served, then a service main from the nearest main of adequate capacity shall be installed by the utility and the cost paid by the applicant. Such payment shall not be subject to refund.

4. Service hereunder is for private fire systems which are regularly inspected by the local fire protection agency having jurisdiction and to which no connections for other than fire suppression purposes shall be made. Service shall be installed according to specifications of the utility and shall be maintained to the satisfaction of the utility. The utility will install the detector meter listed by the Underwriters Laboratories, Inc. or other device to indicate unauthorized use, leakage, or waste of water. The cost of such installation and the cost of the meter or other device shall be paid by the applicant.

5. The utility undertakes to supply water only at such pressures as may be available at any time through the normal operation of its system.

APPENDIX B

Page 4 of 6

APPLE VALLEY RANCHOS WATER COMPANY

Schedule No. 4

NON-METERED FIRE SERVICE

6. Any unauthorized use of water, other than for fire extinguishing purposes, shall be charged for at the regular established rate as set forth under Schedule No.1, and/or may be the grounds for the immediate disconnection of the service without liability to the Company.

7. A late charge will be imposed per Schedule No. LC.

8. All bills subject to the reimbursement fee set forth on Schedule No. UF

APPENDIX B

Page 5 of 6

APPLE VALLEY RANCHOS WATER COMPANY

Schedule No. LC

LATE PAYMENT CHARGE

APPLICABILITY

Applicable to all service.

TERRITORY

Within the entire service area of the Company.

RATES

Late Charge: A late charge of 1.5% on unpaid balance subject to special

conditions and minimum charge below:

Minimum Charge: The minimum charge is $1.00

SPECIAL CONDITIONS

1. The balance is unpaid and subject to a late charge if the bill is Past-Due, or delinquent, as defined in Rule No. 11, Section B.1.a.

2. The late charge should be imposed only once on a delinquent bill since the account would be shut off before a subsequent bill and then subject to the reconnection fee as authorized by Tariff Rule No. 11.

3. All bills shall be subject to the reimbursement fee as set forth on Schedule No. UF.

APPENDIX B

Page 6 of 6

APPLE VALLEY RANCHOS WATER COMPANY

Schedule No. UF

SURCHARGE TO FUND

PUBLIC UTILITIES COMMISSION

REIMBURSEMENT FEE

APPLICABILITY

This surcharge applies to all water and sewer bills rendered under all tariff rate schedules authorized by the Commission, with the exception of resale rate schedules where the customer is a public utility.

TERRITORY

This schedule is applicable within the entire territory served by the utility.

RATES

A 1.4% (.014) surcharge shall be added to all customer bills.

In 1982, the Legislature established the Public Utilities Commission Reimbursement Fee to be paid by utilities to fund their regulation by the Commission (Public Utilities (PU) Code Section 401-443). The surcharge to recover the cost of that fee is ordered by the Commission under authority granted by the PU Code Section 433.

(END OF APPENDIX B)

APPENDIX C

APPENDIX C

Page 1 0f 3

Schedule No. 1

GENERAL METERED SERVICE

AUTHORIZED STEP INCREASES

Rates to be Effective

2004 2005

Quantity Rates:

For all water delivered, per 100 cu. ft. $ 0.020 $ 0.007

Service Charge:

For 5/8 x ¾-inch meter $ 0.75 $ 1.12

For ¾-inch meter 1.15 1.65

For 1-inch meter 1.90 2.80

For 1 ½-inch meter 3.75 5.60

For 2-inch meter 6.00 8.95

For 3-inch meter 11.25 16.80

For 4-inch meter 18.75 28.00

For 6-inch meter 37.50 56.00

For 8-inch meter 60.00 89.60

For 10-inch meter 86.25 128.80

APPENDIX C

Page 2 0f 3

Schedule No. 2

GRAVITY IRRIGATION SERVICE

AUTHORIZED STEP INCREASES

Rates to be Effective

2004 2005

Quantity Rates:

For all water delivered, per 100 cu. ft. $ 0.002 $ 0.001

Service Charge:

For 5/8 x ¾-inch meter $ 0.75 $ 1.12

For ¾-inch meter 1.15 1.65

For 1-inch meter 1.90 2.80

For 1 ½-inch meter 3.75 5.60

For 2-inch meter 6.00 8.95

For 3-inch meter 11.25 16.80

For 4-inch meter 18.75 28.00

For 6-inch meter 37.50 56.00

For 8-inch meter 60.00 89.60

For 10-inch meter 86.25 128.80

APPENDIX C

Page 3 0f 3

Schedule No. 4

NON-METERED FIRE SERVICE

AUTHORIZED STEP INCREASES

Rates to be Effective

2004 2005

Service Charge:

For 2-inch meter $ 0.90 $ 1.30

For 3-inch meter 1.30 1.95

For 4-inch meter 1.75 2.60

For 6-inch meter 2.60 3.90

For 8-inch meter 3.45 5.25

(END OF APPENDIX C)

APPENDIX D

APPENDIX D
Page 1 of 5
APPLE VALLEY RANCHOS WATER COMPANY
ADOPTED QUANTITIES
NET-TO-GROSS MULTIPLIER						1.7763
Uncollectible Rate						0.46%
Franchise Fee						1.05%
Federal Tax Rate						34.00%
State Tax Rate						8.84%
						2003	2004
DOMESTIC WATER CONSUMPTION (KCcf)
Domestic Water Sales						5,734.5	5,844.7
Unaccounted Water (10%)						637.2	649.4
Total Water Production (KCcf)						6,371.7	6,494.1
Make-up ($130/AF)						$91,000	$91,000
Administrative ($2.35/AF)						$33,618	$34,386
Biological ($0.56/AF)						$8,011	$8,194
Total Replenishment Cost						$132,629	$133,580
Water Rights Lease (AF)						3,887	4,214
Lease Water Costs ($70/AF)						$252,681	$273,930
PURCHASED POWER
Pumping Cost
Electric						$1,169,267	$1,188,989
Gas						$29,509	$30,087
Total						$1,198,776	$1,219,076
Cost per A.F.
Electric						$73.75	$73.75
Gas						$69.50	$69.50
DOMESTIC WATER CONSUMPTION (Ccf/Customer)
Residential						305.7	305.7
Business						768.5	768.5
Public Authority						7,939.0	7,939.0
Pressure Irrigation (Landscape)						2,748.3	2,748.3
Industrial						317.2	317.2
Appendix D - Page 2 of 5 APPLE VALLEY RANCHOS WATER COMPANY ADOPTED QUANTITIES
						2003	2004
IRRIGATION WATER CONSUMPTION (Ccf)
Water Sales						297,547	297,547
Unaccounted Water (71.2%)						737,003.0	737,003.0
Total Water Production (Ccf)						1,034,550.0	1,034,550.0
Make-up ($130/AF)						$9,100	$9,100
Adminstrative ($2.35/AF)						$5,581	$5,581
Biological ($0.56/AF)						$1,704	$1,704
Total Replenishment Cost						$16,385	$16,835
PURCHASED POWER
Pumping Cost
Electric						$38,324	$38,324
Cost per A.F.						$16.14	$16.14
Water Consumption (Ccf/ Irrigation Customer)
Metered Service						148,773.7	148,773.7

Appendix D - Page 3 of 5 APPLE VALLEY RANCHOS WATER COMPANY ADOPTED QUANTITIES
				Utility Plant In Service
				(Dollars in Thousands)
				2003	2004
UTILITY PLANT IN SERVICE
Beginning Of Year Balance				48,217.1	52,190.6
Additions				4,380.0	3,520.0
Retirements				406.6	520.8
End Of Year Balance				52,190.6	55,189.7
Average Balance				50,203.8	53,690.1
				Apple Valley Ranchos Water Company
				Depreciation Reserve
				(Dollars in Thousands)
DEPRECIATION RESERVE
Beginning Of Year Balance				10,752.9	11,633.9
Annual Accrual				1,287.6	1,385.5
Net Retirements				406.6	520.8
End Of Year Balance				11,633.9	12,498.5
Average Balance				11,193.4	12,066.2

Appendix D - Page 4 of 5 APPLE VALLEY RANCHOS WATER COMPANY ADOPTED QUANTITIES
				Adopted Rate Base Summary
				(Dollars in Thousands)
	RATE BASE
AVERAGE BALANCES
PLANT IN SERVICE				50,203.8	53,690.1
WORK IN PROGRESS				0.0	0.0
MATERIALS & SUPPLIES				145.5	147.1
WORKING CASH				802.6	776.9
SUBTOTAL				51,151.96	54,614.12
LESS:
DEPRECIATION RESERVE				11,193.4	12,066.2
ADVANCES				8,648.5	9,296.0
CONTRIBUTIONS				1,379.9	1,302.9
UNAMORTIZED ITC				105.0	100.1
DEFERRED INCOME TAX				2,944.9	3,131.5
SUBTOTAL				24,271.62	25,896.71
PLUS:
METHOD 5 ADJUSTMENT				31.4	27.1
NET DISTRICT RATE BASE				26,911.8	28,744.5
MAIN OFFICE ALLOCATION				971.2	971.2
TOTAL RATE BASE				27,883.0	29,715.7

Appendix D - Page 5 of 5 APPLE VALLEY RANCHOS WATER COMPANY ADOPTED QUANTITIES
				Adopted Income Tax Calculations
				(Dollars in Thousands)
	INCOME TAX			2003	2004
OPERATING REVENUES				12,345.4	12,900.4
EXPENSES
	OPERATIONS & MAINTENANCE			3,859.6	3,962.5
	UNCOLLECTIBLES .46%			56.8	59.3
	ADMINISTRATIVE & GENERAL			2,888.0	2,890.6
	FRANCHISE FEES 1.05%			129.6	135.5
	AD VALOREM TAXES			326.2	342.0
	PAYROLL TAXES			159.7	168.7
	MEALS ADJUSTMENT			-8.5	-8.7
	SUBTOTAL			7,211.4	7,549.8
DEDUCTIONS
	CA TAX DEPRECIATION			1,237.6	1,331.7
	INTEREST			959.2	1,019.2
CA TAXABLE INCOME				2,937.2	2,999.6
CCFT @ 8.84%				259.6	265.2
DEDUCTIONS
	FED. TAX DEPRECIATION			1,103.9	1,329.7
	INTEREST			959.2	1,019.2
	CA TAX			120.3	265.2
FIT TAXABLE INCOME				2,950.6	2,742.0
FIT (BEFORE ADJUSTMENT) 34.00%				1,003.2	932.3
	PRORATED ADJUSTMENT
	INVESTMENT TAX CREDIT			-0.6	-0.6
NET FEDERAL INCOME TAX				1,002.6	931.7

(END OF APPENDIX D)

APPENDIX E

APPENDIX E

APPLE VALLEY RANCHOS WATER COMPANY

ATTRITION CALCULATION FOR 2005

Financials

Rate of Return Adopted Authorized for 2005 9.47%

Rate of Return Adopted Authorized for 2004 9.48%

Difference: -0.01%

Operational

2003 Rate of Return at Present Rates 6.26%

2004 Rate of Return at Present Rates 5.63%

Difference: 0.63%

Total Attrition 0.62%

Net to Gross Multiplier 1.776297000

2004 Rate Base $29,715,666

2005 Attrition = Total Attrition x 2004 Rate Base x Net-to-Gross $327,260

Operating Revenues for 2005 = (2004 Operating Revenue + 2005 Attrition)

Operating Revenue for 2004 $12,900,400

Operating Revenue for 2005 $13,227,660

Increase from 2004 to 2005 2.5368%

APPENDIX F

APPENDIX F APPLE VALLEY RANCHOS WATER COMPANY 2003 BILL COMPARISON APPLE VALLEY AND VICINITY
Comparison of typical bills for residential metered customers of various usage level and
average level at present and authorized rates for bi-monthly billing.
		General Metered Service (5/8X3/4-inch meter)
		TEST YEAR 2003
		Bi-Monthly	Present	Authorized	Percent
		Usage (Ccf)	Rates	Rates	Increase
		0	$33.10	$37.12	12.2%
		20	$55.64	$63.52	14.2%
		50 (Avg)	$89.45	$103.12	15.3%
		60	$100.72	$116.32	15.5%
		80	$123.26	$142.72	15.8%
		TEST YEAR 2004
		Bi-Monthly	Present	Authorized	Percent
		Usage (Ccf)	Rates	Rates	Increase
		0	$37.12	$38.62	4.0%
		20	$63.52	$65.42	3.0%
		50 (Avg)	$103.12	$105.62	2.4%
		60	$116.32	$119.02	2.3%
		80	$142.72	$145.82	2.2%
		(END OF APPENDIX F)