ALJ/MFG/avs Mailed 12/2/2005

Decision 05-12-002 December 1, 2005

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

In the Matter of the Application of CALIFORNIA WATER SERVICE COMPANY (U 60 W), a corporation, for an order authorizing treatment of net proceeds from real property sales as subject to Public Utilities Code § 790.	Application 03-12-008 (Filed December 4, 2003)
In the Matter of the Application of CALIFORNIA WATER SERVICE COMPANY (U 60 W), a corporation, for an order authorizing replacement of the operations center and customer center in the Chico District and treatment of their net sale proceeds as subject to Public Utilities Code § 790.	Application 04-08-017 (Filed August 17, 2004)

Lynne P. McGhee, Attorney at Law, and
Thomas F. Smegal, for California
Water Service Company, Applicant.

Cleveland Lee, Attorney at Law, for
the Office of Ratepayer Advocates.

OPINION ON TREATMENT OF PROCEEDS FROM SALES
OF PROPERTY FORMERLY INCLUDED IN RATE BASE

TABLE OF CONTENTS

Title Page

OPINION ON TREATMENT OF PROCEEDS FROM SALES OF PROPERTY FORMERLY INCLUDED IN RATE BASE 22

I. Summary 22

II. Background 22

III. Chico District Issues 44

A. The Old Operations Center 44

B. The Old Customer Center 55

C. New Combined Customer Center 66

D. Necessary and Useful 77

IV. Infrastructure Act Memorandum Account 88

A. Real Estate Program 1111

B. ORA's Analysis 1212

C. Discussion 1313

D. Applicability of Section 851 1818

E. Applicability of Section 455.5 2121

F. Applicability of Section 790 2323

V. Procedural Matters 2525

VI. Comment on Proposed Decision 2626

VII. Assignment of Proceeding 2626

Findings of Fact 2727

Conclusions of Law 3030

ORDER 3232

OPINION ON TREATMENT OF PROCEEDS FROM SALES
OF PROPERTY FORMERLY INCLUDED IN RATE BASE

I. Summary

California Water Service Company's (CWS) sale of its old Chico operations and customer centers, which constitute real property no longer necessary or useful for its public utility duties, is not subject to Public Utilities Code Section (Section) 851.¹ The remaining $1,182,462 investment in the new Chico District consolidated operations and customer center investment not yet in rate base shall be included in rate base, and CWS shall have an opportunity to earn a fair return on that investment through a $171,300 revenue requirement change.

CWS is authorized to establish its Historical Infrastructure Memorandum Account (HIMA) and prospective Infrastructure Memorandum Account (IMA). The real properties included in CWS's HIMA were not necessary or useful for public utility purposes and are not subject to Section 851 approval. However, these properties are subject to Section 790, so CWS shall continue to track the net sale proceeds in these memorandum accounts pending resolution of gain on sales issues for all regulated water utilities in Rulemaking (R.) 04-09-003. CWS shall also update the information in its IMA as part of its ongoing rate case filings until the Commission establishes a report procedure for all water utilities.

¹ All statutory references are to the Public Utilities Code unless otherwise stated.