V. Relief Requested
CalAm seeks interim rate relief for the purpose of mitigating the potential rate impacts of the Coastal Water Project's currently estimated cost of $191 million, which could produce a near doubling of current rates in CalAm's Monterey District. Specifically, CalAm requests that the Commission issue an order authorizing the surcharges described in Special Requests 1 and 2 below.2 CalAm proposes that the surcharges be calculated as percentages of the overall customer bill, exclusive of other surcharges, such as those to true-up memorandum accounts or fund MPWMD. CalAm would treat the revenues generated by the surcharges as a contribution, thus reducing the capitalized portion of the Coastal Water Project or alternative long-term supply solution.
Special Request 1: Recovery of Preconstruction Costs
The purpose of the Special Request 1 Surcharge is to recover the Coastal Water Project preconstruction costs that CalAm is tracking in the memorandum accounts approved in D.03-09-022. CalAm proposes that the Commission allow it to recover these costs (plus interest at CalAm's authorized rate of return) through a three-phase surcharge. CalAm proposes that the surcharge begin on January 1, 2007, with a 4% surcharge on customer water bills. Then, beginning July 1, 2007, CalAm would increase the surcharge to 7%. Starting January 1, 2008, CalAm would increase the surcharge to 10%, which is expected to remain in place through 2014, unless the full amount is recovered sooner. At that point, CalAm would add any remaining uncollected preconstruction costs to the overall Coastal Water Project or alternative long-term supply solution costs.
Special Request 2: Offset Costs of a Long-Term Water Supply Solution
The purpose of the Special Request 2 Surcharge is to generate revenues to offset the ultimate cost of a long-term water supply solution for CalAm's Monterey District, whether it is the Coastal Water Project or an alternative. CalAm proposes that the surcharge be implemented as follows: (1) a 15% surcharge on all customer bills beginning January 2007; (2) an increase to a 30% surcharge in September 2007; and (3) a further increase to a 45% surcharge in April 2008. If the Coastal Water Project (or alternative long-term water supply solution) has not been completed by January 2009, CalAm would increase the surcharge to 60% of the customer's bill and would continue at that level until the Coastal Water Project, or other approved long-term supply solution, is completed.3
2 While CalAm's July 14, 2005 motion made four special requests for surcharges and a connection fee to recover costs of the Coastal Water Project, CalAm subsequently withdrew this request and replaced it with the above request to implement two surcharges.
3 The term "completed" is used by DRA and CalAm to mean online or used and useful. In other words, once a long-term water supply solution is operational, the surcharge would be replaced with an alternative cost recovery mechanism.
