ALJ/BDP/eap Mailed 12/18/2006
Decision 06-12-040 December 14, 2006
BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA
In the Matter of the Application of California-American Water Company for a Certificate of Public Convenience and Necessity to Construct and Operate its Coastal Water Project to Resolve the Long-Term Water Supply Deficit in its Monterey District and to Recover All Present and Future Costs in Connection Therewith in Rates. (U 210 W) |
Application 04-09-019 (Filed September 20, 2004) |
(See Appendix A for List of Appearances)
OPINION ON REQUEST FOR INTERIM RATE RELIEF
TABLE OF CONTENTS
Title Page
OPINION ON REQUEST FOR INTERIM RATE RELIEF 1
I. Summary 2
II. Background 3
III. Procedural Summary 4
IV. Public Participation Hearings 5
V. Relief Requested 6
VI. Implementation of Surcharges 7
VII. Reasonableness Review of Preconstruction Costs Through 2005 12
A. Reasonableness Review of Engineering and Environmental Costs 13
B. Reasonableness Review of Public Outreach Costs 15
C. Reasonableness Review of Other Costs 20
D. Recovery of Approved Preconstruction Costs 21
VIII. Interest on Memorandum Account 24
IX. Safeguards for Customer Contributions to Utility Plant 25
X. Monterey County Health Code Section 10.72 28
XI. Surcharge Rate Design 29
XII. PAR Customer Rate Relief 30
XIII. IRWUG Exemption from Surcharges 31
XIV. Future Review of Project Costs 33
XV. Comments on Proposed Decision 33
XVI. Assignment of Proceeding 33
Findings of Fact 33
Conclusions of Law 35
ORDER 38
OPINION ON REQUEST FOR INTERIM RATE RELIEF
I. Summary
The Commission authorizes California-American Water Company's (CalAm) proposed Special Request 1 Surcharge to allow recovery of already incurred preconstruction costs related to its Coastal Water Project. Commencing January 1, 2007, the surcharge will be 4% on customer bills, then beginning July 1, 2007, will increase to 7%. Beginning January 1, 2008, the surcharge will increase to 10% and remain at the 10% level until the full amount authorized for preconstruction costs is collected.
The Commission also authorizes CalAm's proposed Special Request 2 Surcharge commencing after the Commission issues a Certificate of Public Convenience and Necessity (CPCN) for the Coastal Water Project, or alternative long-term supply solution. Initially, the surcharge will be 15% on customer bills, increasing to 30%, 45% and 60%, respectively, on July 1 and January 1 each year, and will remain at the 60% level through completion of the approved long-term water supply project. The revenues collected will be treated as a customer contribution to reduce the capital cost of the approved long-term supply project.
The Commission has reviewed CalAm's Coastal Water Project preconstruction costs through 2005 and concluded that public outreach costs of $1,353,831 and project management costs of $1,639,429 were reasonable, and CalAm is authorized to recover these costs through the Special Request 1 Surcharge. However, at the request of the Division of Ratepayer Advocates (DRA), the Commission deferred review of $5,670,073 in engineering and environmental costs so that DRA could hire a consultant to assist DRA in its review. These 2005 engineering and environmental costs, along with 2006 preconstruction costs, will be reviewed for reasonableness for a Commission decision by year-end 2007.
CalAm is directed to file a new application early in 2008 for reasonableness review of 2007 preconstruction costs, for a Commission decision by year-end 2008.
This proceeding remains open for the reasonableness reviews described above and for the selection of a long-term water supply solution and review of the Environmental Impact Report (EIR) for the project.
