2. Background and Procedural History

Through its Central Basin Division (which is the subject of this application), Park provides public utility water service to 27,088 customers in the southeastern section of Los Angeles County. Park also owns two subsidiary public utilities, the Apple Valley Ranchos Water Company, which provides water service in San Bernardino County, and Mountain Water Company, which provides water service in Missoula, Montana.

The Central Basin Division consists of three separate service areas. It serves customers in the cities of Norwalk, Santa Fe Springs, Lynwood, Bellflower, Artesia, and Compton, and in unincorporated areas in southern Los Angeles. Park does not expect any significant growth in number of customers.

Most of the water supply for the Central Basin Division is purchased from the Central Basin Municipal Water District, a subagency of the Metropolitan Water District of Southern California (MWD). The remainder is obtained from 15 company-owned wells. Park also serves recycled water for non-potable purposes, primarily irrigation.

Park's last general rate increase occurred in 2001, as authorized in Decision (D.) 01-03-078. Park filed this General Rate Case on April 11, 2003. On May 19, 2003, the Commission's Office of Ratepayer Advocates (ORA) protested the utility's request for increased rates. A Prehearing Conference was conducted on June 11, 2003, and Assigned Commissioner Carl Wood issued a Scoping Memo on June 18, 2003, concluding that a hearing was required.

A public participation hearing attended by about 30 persons was conducted in Bellflower on August 18, 2003. The Commission heard from nine ratepayers, including Lynwood Mayor Fernando Pedroza, who objected to what Park concedes are the highest water rates in the general areas of its service. One speaker, Anthony Kingsley, outlined a detailed study he had done of Park's annual reports. The Administrative Law Judge (ALJ) ordered Park to respond to the study during the evidentiary hearing. Another speaker, Rod White of Lynwood, asked that he be permitted to repeat his remarks during the evidentiary hearing, and that permission was granted. The Commission also received City Council Resolution 1805 of the City of Artesia declaring its opposition to Park's rate increases.

Four days of hearing were conducted in Los Angeles on August 19-22, 2003, and two days of hearing dealing primarily with a proposed settlement of cost of capital issues were conducted in San Francisco on August 28 and 29, 2003. The Commission heard from 15 witnesses and received 42 exhibits into evidence. Final briefs were filed on October 8, 2003, when the case was deemed submitted for Commission decision. A joint exhibit comparing the recommendations of Park and ORA was submitted on October 10, 2003.