3. Park's Application

Park's initial request for overall rate increases is shown in Table 1, along with the utility's revised request following hearings and consultation with ORA. Also shown are ORA's initial recommendations and revised recommendations. The differences between Park and ORA estimates are due in large part to ORA's recommendations to eliminate or defer major construction and maintenance projects that ORA felt had not been adequately justified prior to hearing. Table 1 shows the adopted rate increases authorized by this decision.

The Commission is also asked to decide on one of four alternatives for dealing with contaminants detected in some of Park's wells.

Table 1

Revenue Requirement Increases

	2004		2005		2006
	$ (000)	%	$ (000)	%	$ (000)	%
Park Water Company
Application Request	1,775.9	9.83	671.7	3.4	674.3	3.3
Revised Request	860.5	4.73	807.0	4.22	775.4	3.92
ORA
Initial Recommendation	(763.4)	(4.16)	294.0	1.67	264.2	1.48
Revised Recommendation	195.1	1.06	441.3	2.37	356.8	1.90
Adopted	803.1	4.4	513.0	2.7	487.5	2.5

Park prepared its request using a 12% return on common equity, which resulted in a 10.47% rate of return in 2004, a 10.46% rate of return in 2005, and a 10.45% rate of return in 2006. ORA's recommendations used a 9.30% return on common equity. On that basis, ORA calculated a rate of return of 9.00% in 2004; 8.99% in 2005, and 8.98% in 2005. This decision approves a settlement agreement between Park and ORA that adopts a 10.15% return on common equity, with rate of return set at 9.51% in 2004, 9.50% in 2005, and 9.49% in 2006.

In the discussion that follows, we will first address issues on which the parties have reached agreement. We then will deal with unresolved issues. Finally, we will turn to the parties' proposed settlement on rate of return issues.