ALJ/MAB/hkr Mailed 6/17/2004

Decision 04-06-018 June 9, 2004

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Order Instituting Rulemaking on the Commission's Own Motion to Evaluate Existing Practices and Policies for Processing General Rate Cases and to Revise the General Rate Case Plan for Class A Water Companies.

Rulemaking 03-09-005 (Filed September 4, 2003)

INTERIM ORDER ADOPTING RATE CASE PLAN

TABLE OF CONTENTS

Title Page

INTERIM ORDER ADOPTING RATE CASE PLAN 22

I. Summary 22

II. Background 22

III. Discussion 44

A. Changes Necessary to Implement
the Three-Year Rate Case Cycle Created by § 455.2 44

B. Components of The New Three-Year Rate Case Cycle 55

1. "Test Year" as Used in § 455.2 66

2. Test Year for Forecasting 88

3. Updates 99

4. Escalation of Labor and Non-Labor Expenses, Rate Base Additions 1010

5. General Office Allocations 1616

C. Access to Utility Information 1717

1. While No Application or Proposed Application Is Pending 1717

2. While ORA Is Reviewing the Proposed Application 1818

3. After the Application Is Filed 1919

D. Common Forecasting Methodology 2020

E. Interim Rate Relief 2121

F. "Companion" Order Instituting Investigation 2424

G. Changes to GRC Filing Schedule 2525

H. Memorandum Accounts 2727

I. Phase II Issues 2828

IV. Need for a Hearing 3030

V. Comments on Draft Decision 3030

VI. Assignment of Proceeding 3232

Findings of Fact 3333

Conclusions of Law 3333

APPENDIX

INTERIM ORDER ADOPTING RATE CASE PLAN

I. Summary

This decision adopts a revised Rate Case Plan (RCP) that requires Class A water utilities (i.e., those with more than 10,000 service connections) to submit general rate case (GRC) applications on a three-year cycle as required by § 455.2.¹ To accommodate this cycle, we must timely complete our review. We adopt two major process changes designed to ensure that we complete the process within the designated review period. First, we require water utilities to provide all necessary information at the initial stage of the proceeding, rather than over a several month period. Second, we adopt a simplified, inflation-based escalation methodology for two years of the three-year cycle. With these changes, and others reflected in the RCP, the three-year GRC cycle is feasible.