ALJ/DUG/jva Mailed 12/16/2005

Decision 05-12-020 December 15, 2005

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

In the Matter of the Application of Apple Valley Ranchos Water Company (U346W) for Authority to Increase Rates Charged for Water Service by $2,748,100 or 18.56% in 2006, $496,580 or 2.69% in 2007, and $1,075,879 or 5.46% in 2008.

Application 05-02-005
(Filed February 1, 2005)

Fulbright & Jaworski, L.L.P., by David A. Ebershoff, Attorney at Law,
and Edward N. Jackson, Park Water Company, applicants.

Jason Reiger, Attorney at Law, for Office of Ratepayer Advocates.

OPINION ADOPTING TEST YEAR 2006 REVENUE REQUIREMENTS
FOR APPLE VALLEY RANCHOS WATER COMPANY

Table of Contents

Title Page

OPINION ADOPTING TEST YEAR 2006 REVENUE REQUIREMENTS FOR APPLE VALLEY RANCHOS WATER COMPANY 2 2

1. Summary 2 2

2. Background 2 2

3. Hearing and Record 3 3

4. Legal Authority 4 4

B. Burden of Proof 5 5

5. Issues 5 5

6. ORA's Recommendations 7 7

7. Escalation Rates 7 7

8. Comparison Exhibit 9 9

9. Cost of Capital 9 9

10. Capital Additions 15 15

A. New Wells 15 15

11. Depreciation in Working Cash 21 21

12. Five-year Average 23 23

13. Low-Income Ratepayer Assistance 24 24

A. Discussion 27 27

1. Eligibility 28 28

2. Current Eligibility Criteria 29 29

3. CARW Discount Balancing Account 30 30

4. CARW Implementation Memorandum Account 31 31

Table of Contents

Title Page

14. Unresolved Ratemaking Issues 33 33

A. Customers, Water Sales and Operating Revenues 33 33

D. Insurance - Operating Expense 37 37

E. Insurance - Main Office 38 38

F. Gravity Irrigation Rate Design 38 38

G. Unaccounted for Water 41 41

H. Pump Efficiency Improvement 42 42

15. Infrastructure Improvement Act 42 42

16. Justification of Back-up Generators 43 43

17. Comments on the Proposed Decision 44 44

18. Assignment of Proceedings 47 47

Findings of Fact 47 47

Conclusions of Law 51 51

ORDER 52 52

Appendix A Summary of Earnings Test Year 2006

Appendix B Schedule No. 1 - General Metered Service
Schedule No. 2 - Gravity Irrigation Service
Schedule No. 4 - Non-Metered Fire Service
Schedule No. LC - Late Payment Charge
Schedule No. UF - Surcharge to Fund

Appendix C Comparison of Rates Test Year 2006

Appendix D Adopted Quantities

OPINION ADOPTING TEST YEAR 2006 REVENUE REQUIREMENTS
FOR APPLE VALLEY RANCHOS WATER COMPANY

1. Summary

Apple Valley Ranchos Water Company seeks a significant rate increase in 2006 and approval of a method to adjust rates for Escalation Years 2007 and 2008. This decision adopts a test year revenue requirement of $ $16,331,400, an increase of 9.19%, for 2006 and approves the formulaic adjustment method for 2007 and 2008 consistent with the existing water company rate case plan, Decision (D.) 04-06-018. The rate of return for Test Year 2006 is 9.45% including a 10.15% return on equity. In addition, this decision adopts a low-income ratepayer assistance plan consistent with Pub. Util. Code § 739.8, granting a $5/month bill credit to Apple Valley customers who meet income eligibility requirements. (Citations to statute refer to the Public Utilities Code unless otherwise noted.) This proceeding is closed.