ALJ/JLG/hf1/jva Mailed 12/19/2003

Decision 03-12-039 December 18, 2003

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

In the Matter of the Application of Great Oaks Water Company (U 162-W) for an Order authorizing it to increase rates for water service for its total service area by $2,811,000 or 35.5% in the year 2003; by $978,000 or 9.0% in the year 2004; and by $978,000 or 9.0% in the year 2005; and by $978,000 or 9.0% in the year 2006.

Application 02-11-048 (Filed November 27, 2002)

Lenard G. Weiss, Attorney at Law,

and Christine H. Jun, Attorney at Law,

for Great Oaks Water Company, applicant.

Charlyn A. Hook, Attorney at Law,

for the Commission's Office of Ratepayer Advocates, protestant.

OPINION RESOLVING GENERAL RATE CASE

TABLE OF CONTENTS

Title Page

OPINION RESOLVING GENERAL RATE CASE 3

1. Summary 3

2. Background 3

3. Discussion 4

a. Burden of Proof 5

b. Customers' Concerns 5

c. Results of Operations 5

(1) Operating Expenses 6

(a) Payroll 6

(b) Groundwater Charges 8

(c) Transmission and Distribution Supervision and Engineering Expense 9

(d) Hydrant Maintenance 9

(e) Customer Records and Collection 10

(f) New 401K Plan 10

(g) Regulatory Commission Expenses 11

(h) Legal Fees Relating to City of San Jose Litigation 13

(i) Public Relations Expense 13

(j) Directors' Fees 14

(2) Rate Base 14

(a) Coyote Creek Pump Station Project 15

(b) County Park Project 16

(c) Edenvale/Hayes Project 17

(d) Santa Teresa Project 17

(e) New Well and Pumping Equipment 17

(f) Additional 4,290 Feet of Pipeline 18

(g) Hydrant Replacement 19

(h) SCADA System Upgrades 19

(i) New SCADA Sites 20

(j) Personal Computer Replacements 20

(k) Vehicles 21

(3) Cost of Capital 21

(4) Memorandum Account Amortization 24

(5) MTBE Contamination Proceeds 24

4. Comments on Proposed Decision 25

5. Assignment of Proceeding 26

Findings of Fact 26

Conclusions of Law 28

ORDER 28

Appendix A-E

OPINION RESOLVING GENERAL RATE CASE

1. Summary

Great Oaks Water Company (Great Oaks) is authorized a $482,054 revenue increase for total company operations for 2003, $737 for 2004, and no increase for 2005 and 2006. We approve the Santa Teresa Project and related expenditures, $1,838,000 for 2003 and $1,061,000 for 2004, and the Coyote Creek Pump Station project, $120,000 for 2003, subject to Great Oaks filing an advice letter when the projects are placed in service. In 2003, a residential customer with 5/8 x 3/4-inch metered service using 20 hundred cubic feet (Ccf) will pay $34.57 instead of the present rate of $33.80, a 2.26% increase. Rates will not increase in 2004.