VII. Assignment of Proceeding
Susan P. Kennedy is the Assigned Commissioner and Michael J. Galvin is the assigned Administrative Law Judge in this proceeding.
1. The old Chico operations center office had excessive mold and moisture levels causing allergic responses.
2. The Chico District has grown by 62% or nearly 10,000 customers since 1986 and is expected to grow at an annual 2.5% rate in the future.
3. The old Chico operations center office provided an average of 128 square feet of space for each of its 22 employees working in the building, a smaller square footage allowance than most of CWS other districts.
4. The old Chico customer center office provided an average of 241 square feet of work space for each of its eight employees working in the building, a smaller work allowance than most of its other districts.
5. Land use, local building, zoning, and Americans with Disabilities Act requirements have become more restrictive since the old operations and customer centers were constructed.
6. Total cost of the new combined Chico customer center was $3,109,694.
7. The new operations center has approximately 5,105 square feet of space compared to 2,688 square feet at the old operations center.
8. The new warehouse has approximately 5,655 square feet of indoor storage space compared to limited outdoor storage space at the old operations center.
9. The new customer center has approximately 7,240 square feet of office space compared to 1,925 square feet at the old customer center.
10. The consolidation of its operations center, customer center, and warehouse at one location has enabled CWS to increase efficiencies and to better serve its customers.
11. The old operations center real property contained a well, pump house, and water tank that are still necessary and useful for public utility duties. The remaining real property is no longer necessary or useful, and has been separated from the useful real property.
12. The old customer center real property contained a well and water tank that are still necessary and useful for public utility duties. The remaining real property is no longer necessary or useful, and has been separated from the useful real property.
13. Section 790 treatment of gain on sales is an issue in R.04-09-003.
14. CWS seeks authority to establish a HIMA to record the net proceeds of the sale of its real properties between January 1, 1996 and December 31, 2003.
15. The real properties included in the HIMA of CWS were not sold or transferred while in UPIS or PHFU.
16. Real properties included in the HIMA remained out of rate base an average of six years prior to either being sold outright or transferred at fair market value by CWS to its affiliate CWS Utility Services.
17. CWS established a real estate program to realize value from its increasing inventory of non operating real properties through reinvestments into its utility infrastructure and disposition of nuisance real property.
18. Over half of the real properties included in the HIMA were reclassified out of rate base prior to the establishment of the real estate program in 1997 and remained on the accounting books of CWS as NUP until subsequently sold outright or transferred to its affiliate at fair market value. NUP consists of property not currently being used for a utility purpose and having no definitive plan for a future utility purpose.
19. CWS is a Class A water utility subject to the USOA adopted by the Commission and prescribed for Class A Water Utilities.
20. Of the 60 real properties included in the HIMA, 47 are well sites, the majority of which were acquired by CWS more than 30 years ago at a time when land use requirements were minimal and acceptable contaminant levels were much less restrictive than they are now.
21. CWS increased the minimum square footage requirement for its well sites to 10,000 square feet from 6,000 to allow space to install treatment facilities to meet DHS increasing water-quality requirements.
22. Of the 47 well sites included in the HIMA, 38 had less than 10,000 square feet of space, and 10 had less than 6,000 square feet of space.
23. The issue of necessity or usefulness is a factual one that the Commission may review.
24. ORA reviews real property CWS classifies no longer necessary or useful as part of ORA's Master Data Request to CWS and ORA's analyses of rate base in CWS's GRCs.
25. CWS has not notified the Commission when its real properties, including each of the real properties listed in its HIMA, have been out of service for nine consecutive months.
26. The reporting requirement for real properties out of service at least nine consecutive months pertains only to those water production facilities that the Commission determines to be a major facility of the utility, and does not include any facility determined by the Commission to constitute a PHFU.
27. The definition of major facility is being considered in R.04-09-003.
28. There is no opposition to CWS establishing a prospective IMA.
1. CWS has complied with Ordering Paragraph 11 of D.03-09-021's requirement to seek Commission authority to replace its Chico Operational Center.
2. Land use restrictions, local building codes and zoning requirements, and the Americans With Disabilities Act requirements made the rebuilding of office buildings at the old Chico operations center and customer center not cost-effective or infeasible.
3. CWS should be allowed to include in rate base the remaining $1,182,462 of the Chico customer center costs not yet in rate base and allowed an opportunity to earn on return on that additional rate base.
4. Treatment of the entire $519,751 net sale proceeds from the two real properties comprising of the old Chico operations and customer centers in accordance with Section 790 should be deferred pending resolution of the water utilities gain on sale issues being addressed in R.04-09-003.
5. The criteria CWS used to reclassify its UPIS and PHFU real properties to NUP are reasonable and consistent with the requirements of the USOA for Class A Water Utilities adopted by this Commission.
6. The real properties CWS included in its HIMA were appropriately classified as NUP prior to being sold or transferred to CWS Utility Services.
7. CWS did not engage in real property speculation.
8. CWS must seek Section 851 approval for the sale of real properties necessary or useful in the performance of its public utility duties.
9. The Commission should continue to treat the issue of necessity or usefulness as a factual one that the Commission may review at any time.
10. CWS's HIMA is reasonable and should be established as requested.
11. The properties included in the HIMA are not subject to Section 851.
12. Real properties included in the HIMA did not have a significant impact on the ability of CWS to provide public water service.
13. Section 455.5(b) requires CWS to notify the Commission of any portion of its water production facility which, after having been placed in service, remains out of service for nine or more consecutive months.
14. The Commission is proposing in R.04-09-003 to define a major facility as it pertains to Section 455.5.
15. CWS has not violated Section 455.5.
16. CWS should be authorized to establish its prospective IMA.
17. CWS has complied with Ordering Paragraph 13 of D.03-09-021 by explaining its Real Estate program and seeking authority to establish its IMA.
18. Section 790 requires CWS to establish an IMA to tack the net proceeds of real properties sold that was at any time, but no longer necessary or useful in the performance of its public utility duties. Section 790(b) requires all utility infrastructure acquired by investments from the HIMA and IMA to be included among CWS other utility property upon which the Commission authorizes CWS an opportunity to earn a reasonable return.
19. CWS should continue to track its HIMA and IMA net sale proceeds pending the Commission's resolution of gain on sales issues in R.04-09-003.
20. CWS should include its IMA as part of its GRC filings.
21. Today's order should be made effective immediately.
IT IS ORDERED that:
1. California Water Service (CWS) is authorized to include in rate base the remaining $1,182,462 of the new Chico District customer center not yet in rate base.
2. CWS shall implement the Chico District revenue requirement change authorized by this decision through an advice letter filing, as set forth in the body of this order. If the Water Division suspends any tariffs in that filing, such tariffs shall become effective on the date the Water Division confirms that the tariffs are in compliance.
3. Treatment of the $519,751 net sale proceeds from the two real properties comprising the old operations center and customer center no longer necessary or useful shall be deferred pending resolution of the water utilities' gain on sale issues being addressed in the Commission's Rulemaking (R.) 04-09-003.
4. CWS is authorized to file an advice letter with the Water Division to establish its historical infrastructure memorandum account (HIMA) and prospective infrastructure memorandum account (IMA), as addressed in this order. CWS shall continue to track the net sale proceeds in its HIMA and IMA pending R.04-09-003 resolution of gain on sales issues.
5. CWS shall update its IMA, since last reviewed by the Commission, as part of its ongoing general rate case filings until the Commission establishes a report procedure for all water utilities. The update shall include, for properties newly added to the IMA, the parcel numbers, original book value, date purchased, date placed into utility plant in service or plant held for future use, date transferred to non-utility property, fair market value at date sold, name or purchaser, sales price, net book value at date sold, market value at date sold, net sale proceeds, and amount of the net proceeds reinvested into the infrastructure of the water system.
6. Applications (A.) 03-12-008 and A.04-08-017 are closed.
This order is effective today.
Dated December 1, 2005, at San Francisco, California.
MICHAEL R. PEEVEY
President
GEOFFREY F. BROWN
SUSAN P. KENNEDY
DIAN M. GRUENEICH
JOHN A. BOHN
Commissioners
