VI. APPENDIX B OF D.03-06-072 IS REVISED TO CLARIFY NEW PROCEDURES FOR RECOVERY OF BALANCING ACCOUNTS

Appendix A of D.03-06-072 sets forth the new procedures water utilities are required to follow for processing of balancing accounts existing on or after November 29, 2001. Appendix B provides an example of the revised procedures. SCWC alleges that the example in Appendix B "makes clear, the new revised procedures are intended not only to deny recovery of balancing account costs, but also to refund utility earnings in excess of adopted levels." (SCWC Rhg. App., p. 9.)

Both of these assertions are inaccurate. The revised procedures neither deny recovery of offset expenses, nor require a refund of over earnings. The revised procedures simply require a utility that is over earning to use such over earnings as a measure by which to reduce offset expenses before being able to recover from the balancing account. If the over earnings equal or exceed the offset expenses, then any offset revenues - not over earnings - that were collected from ratepayers shall be returned to them. Thus, the revised procedures ensure that balancing accounts are being used for their intended purpose - to protect utilities from significant unforeseen expenses - while ensuring that ratepayers don't fund a windfall to utilities. However, we agree that Appendix B needs clarification. Therefore, we delete Appendix B and replace it with Appendix B1 contained in Attachment A of this order. The example in Appendix B1 deals with the case where a utility is over earning, but the over earnings are less than the offset expenses in the balancing account.