Comments on Draft Decision

Pursuant to Rule 77.7(f)(9) of the Commission's Rules of Practice and Procedure, we determine that the public necessity requires a reduction in the 30-day period for public review and comment. Comments on the Draft Decision were due on July 6, 2004, and no reply comments were permitted.

CalAm, Pebble Beach Company, and IRWUG filed comments supporting the draft decision and suggesting wording changes to clarify our intent with respect to golf course customers and reclaimed water rates. We have made those changes. IRWUG also requests we fix the amount of water golf courses would receive in the first tier at 30 acre-feet per month. As CalAm noted in its earlier reply, CalAm will establish a monthly allotment for golf course customers and is currently in the process of doing so. We decline to assume that amount should be 30 acre feet per month, or that it is identical for all Monterey Peninsula courses, so we have not made the change.

Findings of Fact

1. Absent significant reductions in its customers' Monterey District water usage during the months of July, August and September 2004, CalAm is likely to exceed its SWRCB-imposed water production limits and be in violation of SWRCB's Order 95-10 for the water year ending September 30, 2004.

2. Violation of SWRCB Order 95-10 could expose CalAm to significant fines that CalAm would likely seek to pass through to its Monterey District water customers.

3. CalAm's compliance with SWRCB-imposed water production limits established in SWRCB's Order 95-10 is in the public interest.

4. Increasing upper block quantity rates is an effective method for promoting water conservation.

5. The modified rate structures and increases CalAm proposes are aimed primarily at decreasing excessive outdoor water usage and water waste. Users of normal amounts of water indoors and those who do not waste water would be largely unaffected.

6. No party has filed a formal protest to the application. Where parties' responses have posed objections to the specific rate structure set forth in the application, CalAm has agreed to changes to address their concerns.

7. The rates we establish today are extraordinary, temporary, and intended only for promoting conservation. Any increased revenues CalAm receives as a result of the rate increases authorized in this order will automatically accrue to CalAm's previously-authorized WRAM account and eventually be applied to customers' benefit.

8. Substituting reclaimed water for potable water under the Monterey Reclamation Project has been and continues to be helpful to CalAm in achieving its potable water conservation goals.

9. Golf courses using potable water for flushing away the salts from reclaimed water have little flexibility to reduce their base potable water usage, and are thus not similarly situated to other potable water users.

10. The rates MPWMD charges users for reclaimed water under the Monterey Reclamation Project are tied by contract to CalAm's rates for potable water. Whether to revise those reclaimed water charges based on the temporary conservation rates authorized in this order is not a determination to be made by the Commission. This order is not intended to affect charges for reclaimed water.

11. CalAm should be required to file an application seeking to impose a moratorium on new water connections and expansion of existing water connections in the shortage-affected areas of its Monterey District.

12. Water utilities' unaccounted for water usage levels and main replacement programs are major drivers in establishing their revenue requirements and setting rates. The Commission typically examines those items in water utilities' GRCs.

13. No hearing is required.

Conclusions of Law

1. The rate increases authorized in this order are justified and the resulting rates are reasonable.

2. The modified conservation rate design and resulting rates proposed by CalAm and set forth in Appendix A to this order are in the public interest and should be approved.

3. Public necessity requires that the 30-day comment period of Pub. Util. Code § 311(g) be reduced so that CalAm can implement its new rates and begin achieving their conservation benefit as soon as possible. We have balanced the public interest in avoiding harm to the public welfare resulting from delay in considering this decision against the public interest in having the full 30-day period for review and comment required by Section 311(g). We conclude that the public interest in adopting the former outweighs the latter. Accordingly, we should reduce the comment period.

4. This decision should be made effective immediately to begin reducing Monterey District water usage as soon as possible.

ORDER

IT IS ORDERED that:

1. California American Water Company (CalAm) shall file in accordance with General Order 96 and make effective on the date of filing the revised Tariff Schedule MO-1 sheet included as Appendix A to this order. The revised schedule shall apply to service rendered between its effective date and October 31, 2004, unless sooner revised, extended or canceled. On November 1, 2004, CalAm shall return to the rate structure and rates that would otherwise have been in effect absent this change.

2. CalAm shall within 90 days of the date this decision is mailed file an application seeking to impose a moratorium on new water connections and expansion of existing water connections in the shortage-affected areas of its Monterey District.

3. CalAm's requests in Application (A.) 04-06-020 are granted as set forth above, and in all other respects are denied.

4. A.04-06-020 is closed.

This order is effective today.

Dated July 8, 2004, at San Francisco, California.

I will file a concurrence.

/s/ LORETTA M. LYNCH

Commissioner

Schedule No. MO-1

Monterey District Tariff Area

GENERAL METERED SERVICE

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