3. Discussion
We affirm the assigned ALJ's ruling denying Great Oaks' surcharge request and ORA's motions to suspend and dismiss. Great Oaks and ORA agree on many results of operations figures. In general, we find those amounts reasonable and adopt them.
a. Burden of Proof
ORA alleges that Great Oaks did not meet its burden of proof to justify its proposed rate increase, because Great Oaks responded tardily to data requests, filed rebuttal testimony just prior to the hearings, and supplied additional information during mid-hearing mediation and post hearing. ORA recommends that the Commission deny rate requests Great Oaks did not justify in its affirmative showing. ORA contends that Great Oaks has failed to meet its burden to justify all of its requested plant additions and estimates for ratebase. In addition, ORA alleges that Great Oaks has not properly recorded expenses related to litigation regarding contamination. The applicant in a rate case, not Commission staff, bears the burden of proof to establish all necessary facts which would justify the requested increase in rates.
b. Customers' Concerns
The Commission's Public Advisor's Office received a total of fourteen letters and e-mails from Great Oaks' customers between March 9 and April 6, 2003 in response to Great Oaks' proposed rate increase. The overwhelming majority of those customers opposed the size of the requested increase as being excessive in relation to the increase in costs. Two customers objected to the increases as failing to support conservation efforts. We will consider this input in reaching our decision on Great Oaks' revenue increase request.
c. Results of Operations
The Great Oaks-proposed, ORA-proposed, and adopted results of
operations are shown in Appendix A. Appendix B contains tariff schedules; Appendix C provides bill comparisons for present, 2003 and 2004 rates; Appendix D contains adopted quantities, rate base, and income taxes; and Appendix E contains attrition rates.
(1) Operating Expenses
(a) Payroll
Great Oaks requests $630,000 for management payroll for TY 2003 and $680,000 for TY 2004. ORA recommends $340,117 for TY 2003 and $347,940 for TY 2004, a net reduction in management payroll expense. Great Oaks has three management employees and twelve field and office employees and will add two field employees in 2003.
Great Oaks' and ORA's salary studies support their differing estimates. Great Oaks' study incorporated salary data from geographically relevant water companies, such as the Santa Clara Valley Water District, City of San Jose Municipal Water Company, Alameda County Water District, San Jose Water Company, and East Bay MUD. (Exhibit 13.) Great Oaks states its management salaries lag behind the other companies' salaries, and that it lost a senior manager due to the level of compensation. (Id.)
ORA based its recommendations on a 2001 study by the American Water Works Association (AWWA), which includes salary information from 88 utilities in California, including municipal and other governmental utilities and one regulated utility. (Exhibit 21.) ORA states the study shows that Great Oaks' managers earn 37.7% more than managers with comparable positions at other utilities. Great Oaks contends that study never was meant to be the sole basis for designing salaries, includes salary information from the Southeast and Southern United States, and offers a letter from the project manager of the AWWA survey to that effect. (Exhibit 13.)
Great Oaks and ORA also disagree on the increase in office and field payroll expense for TY 2004.2 Great Oaks requests $979,500, a 22% increase. ORA recommends an increase using ORA's factor of inflation, $822,492, stating Great Oaks has not justified the larger increase. Great Oaks states that the TY 2004 increase includes the second year of salary increases for field and office employees, as indicated by its salary study, that there is high turnover in field personnel, and that field and office personnel are recruited by other companies, some for executive positions. (Exhibit 13.) Great Oaks considered different elements for each field position, because Great Oaks' field personnel had broader responsibilities than did comparable personnel in other companies. Great Oaks alleges that ORA's recommended disallowance is based on a San Jose Water Company union contract for non-management positions.
Employee retention is a laudable goal in order to ensure the high rate of customer satisfaction that ORA agrees Great Oaks maintains. Under the circumstances, reducing management payroll would be inadvisable. In addition, Great Oaks has pointed out certain deficiencies in ORA's management compensation study. However, Great Oaks' salary study for field and office personnel lists comparative compensation based on function, elements, and compensation from multiple positions, sometimes two to four, where Great Oaks deemed it impossible to use an effective average. Great Oaks has not demonstrated the soundness of its proposed methodology in addressing the perceived need, employee retention, especially where employees have been offered executive positions. Comparable compensation, not composite compensation, is most helpful and less subjective.
Thus, we decline to approve Great Oaks' full request. We will approve Great Oaks' management payroll expense for TY 2003, in conformance with the agreed-to increase for office and field expense. This substantial increase in payroll expense should ensure retention of both management, field, and office personnel.2 We will approve ORA's inflation factor for TY 2004 (approximately 2.3%) for management and office and field payroll expense.
(b) Groundwater Charges
Great Oaks and ORA agree on the original estimates for groundwater charges. Great Oaks states the differences in ORA's and Great Oaks' final estimate is based on updated information Great Oaks provided in the hearing, which indicates that the Santa Clara Valley Water District will increase its groundwater charge in TY 2003. (Exhibit 14.) ORA states the difference is based on calculation methodology. It would have been reasonable to accept the updated estimate provided by Great Oaks during the hearing. However, subsequent to submission of this proceeding, we approved a 13.72% revenue increase requested by Great Oaks to offset a pump tax increase effective July 1, 2003, in Resolution W-4423. We incorporate that increase in this decision. We decline to adopt Great Oaks' proposal to inflate those rates to 2004 levels and follow ORA's recommendation to exclude that inflation. Great Oaks did not justify inflating those rates. In addition, in D.03-06-072 we determined that balancing account-related increases only should be granted if the utility's rate of return does not exceed authorized levels. Forecasting future water supply increases in this GRC would subvert that review process.3 Great Oaks can use the processes adopted in D.03-06-072 to mitigate effects of 2004 increases.
(c) Transmission and Distribution Supervision and Engineering Expense
Great Oaks' and ORA's estimates for transmission and distribution supervision and engineering expense differ by $6,762 in TY 2003 and $6,934 in TY 2004 due to ORA's disallowance of $19,348 recorded in 2000 for updating Great Oaks' system maps as a nonrecurring expense. General Order (GO) 103 requires water companies to prepare and keep current system maps. (GO 103, ¶ I.10.1.) Updating system maps is a required recurring expense and Great Oaks' estimates properly include the expense. We will approve Great Oaks' estimate for transmission and distribution supervision and engineering expense.
(d) Hydrant Maintenance
Great Oaks requests recovery of $100,000 for hydrant maintenance expense in TY 2003 and TY 2004 to assume responsibility for approximately 1,200 City of San Jose hydrants. ORA's estimate is $18,618 in TY 2003 and $18,860 in TY 2004, and is based on the Commission-approved expense of $15.52 per hydrant for San Jose Water Company that similarly assumed responsibility for the City of San Jose hydrants. Great Oaks states that San Jose Water Company has found the City's hydrants were poorly maintained. In addition, Great Oaks contends San Jose Water Company actually received $49.56 per hydrant, not $15.52.
We approved a rate increase for San Jose Water Company for assuming responsibility for the City's hydrants in the amount of $580,746, including $577,918 for increases in hydrant maintenance, and the remainder for local franchise tax and uncollectibles. (Resolution W-4374.) We will approve the same amount, $49.31 per hydrant in maintenance costs, for Great Oaks.
(e) Customer Records and Collection
Great Oaks and ORA agree on estimates for customer records and collection. Great Oaks states that ORA has not recalculated the expense with ORA's escalation factors. Since ORA and Great Oaks agree on this expense, we will approve Great Oaks' estimates of $135,682 for TY 2003 and $139,128 for TY 2004.
(f) New 401K Plan
Great Oaks plans to replace its existing pension plan with a Safe Harbor 401K Plan and seeks full funding of $358,500 in TY 2003 and $414,875 in TY 2004. ORA states Great Oaks has neither described its 401K proposal nor substantiated the increase in expense it would require, so the Commission should reject the expense. ORA notes that Great Oaks currently maintains a fully funded pension plan and is not required to make contributions to it. Great Oaks states the new plan is necessary to make Great Oaks' benefits competitive with those of neighboring water companies, although Great Oaks maintains that the 401K plan will still be less than pension plans at those companies.
Great Oaks provides scant justification for the increased funding associated with the 401K plan. We have disallowed a costly 401K plan that was not well-justified. (In Re Pacific Bell, D.86-07-026, 20 CPUC 2d 237.) Because there is insufficient support for this change in benefits, we will not require ratepayers to fund it.
(g) Regulatory Commission Expenses
ORA agrees with Great Oaks' original regulatory expense request of $25,000 per year for three years. Great Oaks increased its request during the hearings to $50,000 per year for three years based on the costs of litigating its GRC, including what Great Oaks characterizes as excessive data requests, assistance provided to ORA in reviewing the application, additional costs of legal representation, and reconciling data transfer errors where certain expenses incorrectly were charged to Office Supplies instead of Customer Records and Collections. ORA believes Great Oaks' lack of advance preparation caused the increased costs and required ORA to request additional information.
We have not encouraged late-presented estimates for higher GRC costs, because a one-time increase in costs is not typical. (D.03-02-030, 2003 Cal PUC LEXIS 1221 **15-17.) In addition, the amount requested exceeds what we have approved for increased costs for a larger water company. (Id.) Finally, presenting the requested increase at hearings precluded any analysis of the request by ORA. Given the timing of the requested increase, we will not approve it. However, Great Oaks need not incur the additional expense associated with further correction of the data transfer errors. Great Oaks has corrected those errors in this proceeding and need not revise its annual reports.
(h) Legal Fees Relating to City of San Jose Litigation
Great Oaks requests recovery of forecasted expenses related to its litigation with the City of San Jose over water contamination issues. ORA objects because Great Oaks has not justified this expenditure with any description, analysis, or need for the litigation, nor has it shown the probability of prevailing in such a lawsuit. Instead, ORA recommends these expenses should not be authorized but could be tracked in a memorandum account and recovered in the future when Great Oaks demonstrates it has incurred the legal fees and adequately justifies them. ORA's recommendation is consistent with the process we have used for future legal expenses. We have required companies to track legal fees in memorandum accounts in order to review the amounts incurred and the outcome of the litigation. (Re San Gabriel Water Co., D.02-10-058, Cal PUC LEXIS 727 **22-23.) We will require Great Oaks to similarly record these amounts for any future recovery.
(i) Public Relations Expense
Great Oaks requests $24,000 for public relations expense for each of test years 2003 and 2004. ORA states Great Oaks has not demonstrated the need for or benefit of the consultant who will advise on preparing brochures and other material for customer consumption and on how the company should relate to developers, local business, and governmental agencies. ORA recommends the Commission disallow this expense. Great Oaks states it is more cost effective to hire a consultant than to hire an employee. Great Oaks believes governmental and public relations are a vital function.
Great Oaks' salary study states its Chief Operating Officer has special qualifications in public relations, among other areas, in justification for increasing his salary. (Exhibit 13.) Because Great Oaks has in-house expertise in that area, current employee resources should meet any ratepayer interest in public relations expenditures. We disallow Great Oaks' requested public relations expense.
(j) Directors' Fees
Great Oaks requests Board of Directors' fees of $36,000 for each test year, an increase in the annual payment from $6000 to $8000 per year for each director and an allowance of $1000 per director for each quarterly directors' meeting. Currently there is no per meeting allowance. Great Oaks states comparable compensation varies from $6000 to $16,000 in annual payments plus $1000 per meeting. ORA recommends that only the one outside director receive $500 for each meeting, for a total of $2000 per year, and does not recommend any annual payment. Because the other directors are either owners of the company
or a salaried employee, ORA believes they receive adequate compensation from the opportunity to earn on their investment or from salaried employment.
We concur that ratepayers should not additionally "compensate" employees or owners for annual director's fees and will limit recovery of the $8,000 fee to the outside director. We lack information on the amount of time required for directors' meetings and will limit recovery to $500 per director for each meeting.
(2) Rate Base
Great Oaks states that it has submitted full support for its rate base increase requests and that it should be permitted to record those capital items in rate base. Great Oaks requests $5,290,200 for TY 2003 and $1,257,350 for TY 2004. ORA recommends no allowance for most plant addition expenditures, because Great Oaks has not justified the need for these items. ORA issued its data requests in early January but received the bulk of Great Oaks' responses in late February, during the week before ORA's report in this proceeding was due. Thus, ORA had little time to evaluate all of this information. At the conclusion of hearings, the assigned ALJ ordered Great Oaks to furnish the information requested by ORA's witness at the hearing. ORA reviewed the additional information Great Oaks filed in this proceeding but still finds it lacks justification. ORA recommends $540,000 for TY 2003 and $50,400 for TY 2004. We discuss their differences below.
ORA recommends that Great Oaks be permitted to recover the costs for only one project, and to do so by filing an advice letter when the project is completed and placed in service. Great Oaks believes the advice letter process is unnecessary and administratively wasteful. We have used the advice letter process to add plant to rates. (See San Gabriel Valley Water Co., supra at *7.) We have permitted those advice letters to be effective on filing if the costs conform to those approved in our order. (Re Suburban Water Systems, D.03-05-078, 2000 Cal PUC LEXIS 938 **64-65.) We adopt that general approach here; we next discuss issues related to specific projects.
(k) Coyote Creek Pump Station Project
Great Oaks states the Coyote Creek Pump Station Project will pump up to 1000 gallons per minute into Great Oaks' Zone II. Zone II requires the backup source of supply because its sole present supply main is almost 40 years old and there is no alternative supply source. Great Oaks requests $120,000 for TY 2003 only but states the cost may be greater because Great Oaks will need to purchase a small plot of private land to construct the project. ORA recommends disallowing this project.
General Order 103 requires a water company to supply water from a source reasonably adequate to provide a continuous supply of water. (GO 103, ¶ II.1.b (1)(b).) Great Oaks asserts Zone II's supply main no longer is adequate to furnish that continuous source, and there is no contrary evidence in the record. We approve the project and authorize Great Oaks to file an advice letter for the approved or actual costs of the Coyote Creek Pump Station Project, whichever is less, when the project is placed in service. This advice letter will be effective after Water Division's review confirms the advice letter conforms with this order.
(l) County Park Project
The County Park Project, for which Great Oaks has requested $525,000 for TY 2003 only, has three portions, 2,000 linear feet of pipeline, 800-900 linear feet of pipeline that will serve an office building, hotel, and sports complex, and a connection from an existing underground main. The developer will pay approximately $90,000 of the $150,000 estimate for the third portion. The first two portions will cost approximately $300,000 and $75,000, respectively. Great Oaks states that the project will provide fire protection for the development and also increased volume and pressure, reducing a supply deficit, friction loss, and pumping pressure. ORA recommends disallowing this project.
We have insufficient information to approve the cost of this project and thus decline to do so. If Great Oaks seeks our approval for this project in the future, Great Oaks should explain why the beneficiary of the project is not paying the full cost of the project.
(m) Edenvale/Hayes Project
Great Oaks requests $160,000 for TY 2003 only for the project, which consists of a 1,580-foot long main extension. The Hayes Mansion will bear $90,000 of the total cost as a contribution. The project mainly will benefit the convention center and hotel, which lacks sufficient water service, and will provide fire protection to those structures. ORA recommends disallowing the project.
We have insufficient information to approve the cost of this project and thus decline to do so. If Great Oaks seeks our approval for this project in the future, Great Oaks should explain why the beneficiary of the project is not paying the full cost of the project.
(n) Santa Teresa Project
Great Oaks requests approval for $1,838,000 in TY 2003 and $232,000 in TY 2004 for this main extension of approximately 19,000 feet connecting Great Oaks' main service area with the New Well Project and with a remote portion of its service area. ORA recommends that Great Oaks be permitted to recover the costs of this project via the advice letter process when the project is completed.
We will approve the expenditures requested by Great Oaks but will require Great Oaks to file an advice letter for the approved or actual costs of the project, whichever is less, when the Santa Teresa Project is placed in service. This advice letter will be effective after Water Division's review confirms the advice letter conforms with this order.
(o) New Well and Pumping Equipment
Great Oaks requests $400,000 in TY 2004 only to acquire land and to construct and equip with a pump a new well. This request appeared in the appropriate accounts but did not appear in the application due to a defective computer link. (Exhibits 8 and 2.) The project will provide a new source of uncontaminated potable water and will supply water to a main service area that has a higher pump tax rate. The project potentially could save ratepayers in the main Great Oaks' service area approximately $215 per acre foot and a total of about $400,000 per year in pump tax savings by the next rate case cycle. ORA recommends disallowing this project.
Because the project is a part of the Santa Teresa project, which we approve, and because it could result in savings, we will approve the expenditure and will require Great Oaks to file an advice letter for the approved or actual costs of the project, whichever is less, when the project is placed in service. In that advice letter, Great Oaks also shall make necessary adjustments to rates to reflect the savings associated with the project. This advice letter will be effective after Water Division's review confirms the advice letter conforms with this order.
(p) Additional 4,290 Feet of Pipeline
Great Oaks requests $429,000 in TY 2004 only for additional pipeline required because of its inability to acquire City of San Jose facilities. This project will link portions of the Santa Teresa pipeline and is necessary to supply water from the New Well Project to Great Oaks' main distribution system. However, Great Oaks states its negotiations with the City of San Jose to acquire a pipeline that would serve the same purpose are ongoing and may yet result in the acquisition. Great Oaks states it will discount this project, if approved, by the cost of the City's facilities, if acquired. ORA recommends disallowing this project.
We will approve this expenditure, subject to the condition that the cost of this project be discounted if Great Oaks acquires the City's facilities. The pipeline, whether constructed or purchased, is a necessary component of the approved Santa Teresa Project and should be approved. Great Oaks must file an advice letter for the approved or actual costs of the project, whichever is less, when the pipeline is placed in service. This advice letter will be effective after Water Division's review confirms the advice letter conforms with this order.
(q) Hydrant Replacement
Great Oaks requests approval of $40,000 in TY 2003 and TY 2004 for capital expenditures to replace City of San Jose hydrants for which it is assuming responsibility. ORA states it can find no basis for Great Oaks' request. Great Oaks states its request is based on San Jose Water Company's recent experience with City hydrants that have needed replacement, because they simply do not work. Great Oaks provides an attachment to San Jose Water Company's Advice Letter 336, which notes costs for vehicles, equipment, maintenance, and repairs, but does not specify capital expenditures.
Although hydrant replacement may be necessary, we have insufficient information to approve the amount requested by Great Oaks. Thus we decline to approve the expenditure.
(r) SCADA System Upgrades
Great Oaks requests $114,000 for SCADA (remote metering and control system) upgrades for TY 2003. Great Oaks states the SCADA system is eight years old and the manufacturer no longer supports key elements. Great Oaks seeks to upgrade the system by replacing internal electric modules and associated parts in each of its 21 on-site remote SCADA boxes due to changes in voltage requirements. The cost is $4,000 per site for a total of $84,000. In addition, new flow meters at two tank sites, Cla Valve modifications, and software programming are necessary, at a cost of $30,000. ORA did not have sufficient information to analyze Great Oaks' request.
Although we have only Great Oaks' estimate of the costs of upgrading its SCADA system, replacement of obsolete equipment is a necessary capital expenditure and we will approve the upgrades.
(s) New SCADA Sites
Great Oaks requests $22,000 in TY 2003 for two new SCADA monitoring sites so that the SCADA system can be used to control and monitor the new pump station on Coyote Road, as well as the new well in Coyote Valley. ORA recommends a total disallowance.
Because we approve recovery of the projects the SCADA system supports, we approve the new SCADA monitoring sites and authorize Great Oaks to file an advice letter for the approved or actual costs of the sites, whichever is less, when the projects they support are placed in service. This advice letter will be effective after Water Division's review confirms the advice letter conforms with this order.
(t) Personal Computer Replacements
Great Oaks requests $5,000 for each of Test Years 2003 and 2004 for personal computers. Great Oaks states its 14 personal computers have an average age of four years. Great Oaks depreciates these computers over their useful life of five years and requests the expenditure in order to upgrade the computers. ORA recommends disallowing this expenditure, because Great Oaks did not supply sufficient information to support its request.
Replacement of computers is a normal business expense. We will allow Great Oaks' expenditure for personal computers.
(u) Vehicles
Great Oaks seeks to replace one supervisor's truck at a cost of $30,000 in TY 2003, which ORA opposes. Great Oaks also seeks to replace two Rangers ($30,000) and one supervisor's truck ($30,000) in TY 2004. ORA opposes the expenditures, because it lacks sufficient supporting information. Great Oaks states that the expenditures are for the replacement of long-exhausted vehicles, including a vehicle from 1978, that need frequent maintenance.
Replacement of vehicles is a normal business expense. We will approve the expenditures for the two supervisor's trucks and the two Rangers.
(3) Cost of Capital
Great Oaks requests a rate of return of 9.42% for TY 2003 and 9.73% for TY 2004. ORA recommends a rate of return of 8.57% for TY 2003 and 8.89% for TY 2004. Great Oaks and ORA agree to use the imputed capitalization of 34% debt and 66% equity adopted in D.93-10-046, Great Oaks' last GRC. Great Oaks and ORA also agree on the cost of long-term debt, 7.20% for TY 2003 and 8.12% for TY 2004.
ORA recommends 9.28% for return on equity (ROE), while Great Oaks requests 10.95%. ORA's recommended ROE of 9.28% is based on an average of two models, the Discounted Cash Flow (DCF) and Risk Premium (RP) models. Great Oaks relies solely on the RP method. Great Oaks adopted ORA's
RP figure, because ORA's method used a more rigorous calculation than Great Oaks' method.
Great Oaks questioned ORA's use of an average of this RP figure with a DCF figure of 8.00%, because Great Oaks does not believe that the DCF method is appropriate for closely held non-public corporations such as Great Oaks. It believes there is no basis for using a simple average of the RP and DCF models. Great Oaks asserts that the owners of small public utility water companies base their investment decisions on whether or not the increased risk associated with an equity investment makes it worthwhile to reinvest in utility facilities as opposed to corporate bonds or similar fixed investments. The RP method more accurately measures that risk.
ORA states these models are applied to a comparable group of companies in order to average out any company-specific biases. The DCF and RP models require market-based data. Therefore, they are applied to a comparable group of water utilities that are publicly traded and receive 70% of their revenue from water operations. (Exhibit 15.) ORA states two decisions, Re Del Este Water Co., D.91-12-073, 42 CPUC 2d 492, 492-496, and Re Del Este Water Co., D.89-11-063, 33 CPUC 2d 517, 521, support the use of a comparable company and a DCF to determine the appropriate ROE for a company that was not publicly traded.
Although we have relied on the DCF model to compute ROE for comparable companies when the utility is not publicly traded, we have done so when presented with a range of values that closely compared to other methods. Here there is a 295 basis point discrepancy between the DCF and RP models. We recently viewed such a disparity as problematic when requested to adopt an average of the two results. (Re Suburban Water Co., D.03-05-078, 2002 Cal. PUC Lexis 938 * 53.) We decline to adopt a simple average. Because ORA and Great Oaks agree on ORA's RP Model, we will accord more weight to that result and adjust ORA's ROE upwards by 50 basis points to 9.78%.
(4) Memorandum Account Amortization
Great Oaks requests recovery of undercollections in its memorandum and balancing accounts for groundwater charges and purchased power that have accumulated since November 29, 2001. ORA recommends that this issue be resolved according to the procedures adopted in Rulemaking (R.) 01-12-009.
In D.03-06-072, we adopted procedures for resolving undercollections since November 29, 200l. We required water utilities to file advice letters seeking account review for November 29, 2001 through December 31, 2002, within 90 days from the mailing date of D.03-06-072. This decision also specifies the information that the utility must submit, together with the required analysis to perform and the calculation method. Because we established procedures for resolving this issue in R.01-12-009, we will not address the amortization of the undercollection in this proceeding. Subsequent to submission of this proceeding, we approved a 3.11% revenue increase to recover these undercollections in Res. W-4424.
(5) MTBE Contamination Proceeds
Great Oaks proposed split net contamination proceeds, a total to date of $451,016, excluding interest, as one half to Contributions in Aid of Construction and one half into rate base earning a return. We approved a similar split in D.93-09-077, Great Oaks' last GRC, which adopted a settlement agreement. ORA objected to the proposal, because Great Oaks did not establish a memorandum account as ordered in Res. W-4094. Great Oaks has booked the proceeds in deferred accounts. ORA recommended that Great Oaks establish a memorandum account, that the account be considered for amortization at the same time Great Oaks submits its Groundwater Charges and Purchased Power memorandum accounts for amortization. In response to ORA's position, Great Oaks modified its position to request that 100% of the net proceeds be reinvested in rate base.
Great Oaks initiated litigation to address contamination of a well caused by fuel leaks at Chevron's and Tosco's service stations. Great Oaks received $735,000 in settlements and incurred $283,984 in litigation expenses and repair costs for the affected well. By all measures, Great Oaks' litigation was successful. Although we required water utilities to track litigation expenses in memorandum accounts in Res. W-4094, we have not found a regulatory distinction between deferred and memorandum accounts for cost-tracking purposes. (Re So. Cal. Water Co., D.90-11-002, 1990 Cal. PUC LEXIS 987 *28; Res. E-3676, 2000 Cal. PUC LEXIS 456.) Thus we find no basis for adopting ORA's recommendation that Great Oaks shift the proceeds in the deferred account to a memorandum account and will approve Great Oaks' original proposal to split the net contamination proceeds as one half to Contributions in Aid of Construction and one half to shareholders. In the future, Great Oaks should establish a memorandum account for water litigation proceeds.
