III. Procedural History

By Resolution ALJ 176-3121 (October 16, 2003), the Commission preliminarily determined the South San Francisco and Bakersfield applications to be ratesetting proceedings. The Commission expected the proceedings to go to hearing. Only ORA protested the applications during the protest period.

A. Prehearing Conferences (PHCs)

Administrative Law Judge (ALJ) John E. Thorson conducted the initial PHC on December 3, 2003, with CWS and ORA counsel and representatives in attendance. With no objection, the ALJ consolidated all separate applications into one proceeding. During the PHC, the issues raised in the applications and protests were identified, a schedule was discussed, and other issues relating to the proceeding were addressed. Assigned Commissioner Susan Kennedy's December 5, 2003, Scoping Ruling confirmed the categorization and need for hearing, defined the issues, established a schedule, and designated ALJ Thorson as the principal hearing officer and thus the presiding officer.

During the PHC, water quality issues and interim rate increase were also discussed. CWS's applications indicated possible exceedances in some wells of the state Department of Health Services' action level for 1,2,3 Trichloropropane (TCPA). An expedited evidentiary hearing was scheduled on this issue so that the Commission received more information before the Salinas, Mid-Peninsula, and Stockton applications were dismissed. The expedited evidentiary hearing on TCPA levels was held on February 10, 2004. Subsequently, we adopted Interim D.04-05-060 (May 28, 2004) making certain water quality determinations and approving the dismissal of the Salinas, Mid-Peninsula, and Stockton applications. We directed the assigned ALJ to hold an additional hearing to determine whether our findings and determinations in Interim D.04-05-060 constitute a violation of General Order (GO) 103 and, if so, whether sanctions should be imposed against CWS. The assigned ALJ has conducted that hearing and will submit his proposed decision to us separately.

B. Intervenors

The Utility Workers Union of America, AFL-CIO, make a defective effort to intervene in this proceeding. When contacted to correct the filing, the union representative indicated on April 15, 2004, that the union no longer wished to intervene. No other persons have sought to intervene in the proceeding.

C. Interim Rate Relief

CWS, as part of this ratemaking proceeding, filed a motion on February 2, 2004, requesting an interim rate increase for the South San Francisco and Bakersfield districts effective July 1, 2004. The motion was unopposed by ORA.

Section 455.2 of the Public Utilities Code, enacted in 2002, provides for an inflation-indexed interim rate increase in the event a water general rate case is not completed in the time contemplated by the Commission's water rate case plan. On two recent occasions, the Commission has issued interim decisions resolving the basic implementation questions resulting from the enactment of Section 455.2. See In re California Water Service, D.03-10-072 (Oct. 30, 2003); In re San Jose Water Co., D.03-12-007 (Dec. 4, 2003).

The Assigned ALJ ruled on March 2, 2004, that this general ratemaking proceeding would not be completed within the time specified by the general rate case plan and that CWS was entitled to interim rate relief. Normally, the effective date for CWS's rate adjustment for these districts would be January 1, 2004. Because CWS filed late ratesetting applications, the presiding officer is empowered under Section 455.2(b) to set an effective date for the interim rate relief. CWS proposed July 1, 2004, and that recommendation was adopted by the ALJ. The interim increased is based on the rate of inflation as compared to existing rates for each of the districts (the rate of inflation to be calculated using the most recent Consumer Price Index maintained by the U.S. Department of Labor). Pursuant to the ALJ Ruling, CWS filed interim rate increase advice letters for both districts on July 21, 2004. In the future, however, the Commission will approve by decision such interim rate increases.

D. Public Comment

Afternoon and evening public participation hearings (PPHs) were held in Bakersfield on March 11, 2004. Accompanied by CWS and ORA personnel, the ALJ visited the Bakersfield new water treatment facility between the afternoon and evening sessions. A total of 23 people spoke at the Bakersfield hearings. Most of the comments concerned the magnitude of the requested rate increase and recent rate-shock due to increases resulting from a series of advice letter filing previously approved by the Commission. Many speakers indicated they and other customers were on fixed incomes and would be detrimentally affected by the proposed increases.

Speakers also spoke about their concerns for water quality (e.g., sulfur smells), the relationship between groundwater quality and the new water treatment plant, water pressure, leaks and hydrant flushing, differences between flat- and metered-rate service, rate impacts on senior and low-income citizens, system expansion costs paid by developers, and pipe repairs and replacement.

At the Bakersfield PPH, the ALJ directed CWS to file a report on certain water leaks and how customers, especially Spanish-speaking ratepayers, are counseled concerning the relative advantages of flat-rate and metered-rate service. CWS complied with this ruling.

A PPH was held for the South San Francisco District in a Commission hearing room on the afternoon of March 24, 2004. No one sought to be heard, and the PPH was adjourned.

Additionally, a total of 50 letters or e-mails were sent to the Commission's Public Advisor about these applications. All of these communications concerned Bakersfield, and all of them opposed the Bakersfield application.

E. Settlement Discussions

On February 23, 2004, ORA served its reports relating to the two districts and notified CWS that a settlement conference would be held beginning March 12, 2004. CWS served its rebuttal testimony on March 8, 2004.

CWS and ORA held settlement conferences on March 12, 15, and 15, 2004. As a result of the extensive negotiations between the parties during four days of discussions, CWS and ORA reached a settlement as to all of the issues in this proceeding. On April 19, 2004, CWS and ORA filed the proposed settlement and a joint motion to approve the settlement. See Settlement (April 19, 2004), Attachment A.

On April 20, 2004, a hearing was held to present the settlement to the ALJ. The record was left open for the submission, by stipulation, of other exhibits. The record was closed and the matter was submitted on May 11, 2004.