VIII. Proposal to Issue Financing Order

DWR requests that we determine the CPA for each utility as part of an order, and that we acknowledge that the Department may rely upon this determination for purposes of Section 80130 of the Water Code. DWR further proposes that upon its written acceptance thereof, our order would constitute an agreement between DWR and the Commission within the meaning of Water Code Section 80110. That statute provides in relevant part that:

"The commission may enter into an agreement with the department with respect to charges under Section 451 for purposes of this division, and that agreement shall have the force and effect of a financing order adopted in accordance with Article 5.5 (commencing with Section 840) of Chapter 4 of Part 1 of Division 1 of the Public Utilities Code, as determined by the commission."

This provision must be read in conjunction with Water Code Section 80130, which provides in relevant part that:

"In addition, before the issuance of bonds, the department shall establish a mechanism to ensure that the bonds will be sold at investment grade ratings and repaid on a timely basis from pledged revenues. This mechanism may include, but is not limited to, an agreement between the department and the commission as described in Section 80110."

The Legislature clearly anticipated that the Commission and DWR would enter into necessary agreements to ensure the marketability of the bonds. Determination of both the CPA and the annual revenues produced by the CPA are key steps in determining the maximum amount of bonds that may be issued. DWR should be able to rely upon these determinations. Accordingly, with respect to our determination of the CPA rate and the annual revenues generated by the CPA, we propose to accept DWR's request. Upon their written acceptance by the department, the determinations of both the CPA and the annual revenues produced by the CPA made herein would constitute a rate agreement between DWR and the Commission within the meaning of Section 80110 of the Water Code, and such agreement would have the full force and effect of a financing order.