15. Assignment of Proceeding

Carl W. Wood is the Assigned Commissioner and Glen Walker is the assigned Administrative Law Judge in this proceeding.

1. Park's Central Basin Division provides public utility water service to 27,088 customers in the cities of Norwalk, Santa Fe Springs, Lynwood, Bellflower, Artesia and Compton, and in unincorporated areas in southern Los Angeles.

2. The last general rate increase for Park's Central Basin Division occurred in 2001, as authorized in D.01-03-078.

3. Park water rates in its general areas of service are higher than the rates of other water agencies in and around those service areas.

4. Park's water system facilities are in good condition, and service complaints are few.

5. Retained earnings used for investments are not in rate base.

6. Park's methodology to estimate its payroll is the same methodology approved by the Commission in D.03-08-069.

7. Park over the past five years has pumped an average of 1,882.88 acre feet of well water per year.

8. Volatile organic chemicals have been detected in the Central Basin Aquifer from which Park draws its pumped water.

9. Under D.03-06-072, full recovery of increases in the cost of purchased water is conditioned on a water utility not earning more than its authorized rate of return.

10. The DHS agreed with Park's plan to drill a new well to serve the Bellflower/Norwalk system.

11. DHS has advised Park that low levels of 1,4-dioxane detected in four wells in the Bellflower/Norwalk area do not represent a significant health risk to customers.

12. Park and ORA jointly recommend adoption of a cost of capital that would produce a return on rate base of 9.51% in 2004, 9.5% in 2005 and 9.49% in 2006.

1. The adopted summaries of earnings presented in Appendix A, and the quantities and calculations included as Appendix D that underlie them, are reasonable for ratemaking purposes and should be adopted.

2. A settlement of cost of capital issues proposed by Park and ORA is reasonable in light of the whole record, consistent with the law, and in the public interest, and should be adopted.

3. Park should not be required to add to operating revenues a share of interest earned on investments of retained earnings.

4. Park has not met its burden of proof in showing that a 10% contingency fee should be budgeted for unanticipated laboratory testing costs.

5. For ratemaking purposes, it is appropriate to assume that water supply mix for Park should consist of 1,882.88 acre feet of pumped water.

6. The 2004 purchased water rate of $467 per acre foot should be applied for Test Year 2005 and Attrition Year 2006 because of the protection provided by a memorandum-type balancing account.

7. The task of the Commission is to evaluate the entire record in a general rate case, including rebuttal testimony, and make a judgment on whether the company has met its burden of justifying proposed expenditures.

8. The Commission has found that DHS requirements governing drinking water quality adequately protect the public health and safety.

9. Park should be authorized to implement the rate changes set forth in this order.

10. This decision should be made effective immediately to allow Park opportunity to earn the return found reasonable for it in Test Year 2004.

ORDER

IT IS ORDERED that:

1. Park Water Company's Central Basin Division (Park) is authorized to file in accordance with the General Order 96 series, and make effective on not less than five days' notice, the revised tariff schedules for 2003 included as Appendix B to this order. The revised tariff schedules shall apply to service rendered on and after their effective date.

2. Advice letters for authorized rate increases for 2005 and 2006 may be filed in accordance with the General Order 96 series no earlier than November 1 of the preceding year. The filing shall include appropriate work papers. The increase shall be the amount authorized herein, or a proportionate lesser increase if Park's rate of return on rate base, adjusted to reflect rates then in effect, normal ratemaking adjustments, and the adopted change to this pro forma test, for the 12 months ending September 30 of the preceding year, exceeds the lower of (a) the rate of return on rate base found reasonable by the Commission for Park for the preceding year in the then most recent rate decision, or (b) the return on rate base authorized herein for the preceding year. The advice letters shall be reviewed by the Commission's Water Division for conformity with this decision, and shall go into effect upon Water Division's determination of compliance, not earlier than January 1 of the year for which the increase is authorized, or 30 days after filing, whichever is later. The tariffs shall be applicable to service rendered on or after the effective date. The Water Division shall inform the Commission if it finds the proposed increase does not comply with this decision or other Commission requirements.

3. The joint motion of Park and the Office of Ratepayer Advocates for adoption of a settlement proposal resolving all issues relating to Park's cost of capital is granted.

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

5. Park's requests in Application 03-04-015 are granted as set forth above, and in all other respects are denied.

6. This proceeding is closed.

This order is effective today.

Dated December 18, 2003, at San Francisco, California.

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