2. Issues to be Addressed
Following the September 2006 workshop, we have identified several areas where improvement in the Rate Case Plan is a priority. Appendix A, the Draft Proposed Rate Case Plan for Class A Water Utility General Rate Applications, reflects these improvements and is based on the Commission's experience with the existing Rate Case Plan, the comments of water utilities and other interested persons, and our desire to incorporate aspects of the Water Action Plan into the Rate Case Plan. The major issues to be considered in this proceeding, which are reflected in the proposed Rate Case Plan, are as follows:
· Single Rate Case for Multi-District Utilities. The current practice of having multi-district water utilities file rate cases at different times during the three-year cycle under the existing Rate Case Plan has proved burdensome for the water utilities, and the Commission. Appendix A proposes a schedule to require multi-district companies to file a comprehensive GRC application for all districts at the same time.
· Notice of Rate Increases For Utilities With Bimonthly Billing. The existing Rate Case Plan schedule does not provide sufficient time for the applying utility using bimonthly billing to notify customers of a proposed rate increase in a GRC. Appendix A modifies the schedule to hold PPHs later than the current Rate Case Plan provides. This change should allow utilities sufficient time to notify customers using a bimonthly bill while still complying with the overall GRC schedule.
· Addition of Technical Conference. The schedule set forth in Appendix A adds a technical conference hosted by Water Division in order to ensure that Water Division and all parties have full understanding of the ratemaking models utilized by the company and other parties.
· Cost of Capital Proceeding. Appendix A establishes a separate cost of capital proceeding on a schedule parallel to the company's GRC. Under the proposed schedule, if the company has filed a TY 2009 GRC, its cost of capital application would be filed May 1, 2008. We propose that the utility have the option of filing an application annually to adjust its cost of capital, on the same schedule (similar to the cost of capital proceedings in the energy sector). All Class A water utility cost of capital proceedings filed in a given year would be handled on a consolidated basis. In the first cost of capital proceeding, we will consider whether it is appropriate to adopt an indexing mechanism for annual adjustments to water utility cost of capital, in lieu of an application.
· Minimum Data Requirements. Appendix A sets forth, as attachments, standardized Minimum Data Requirements, to be completed by a utility as part of its GRC and cost of capital testimony. The data requirements cover all important rate and water quality issues and provide enough data to the Water Division, Division of Ratepayer Advocates (DRA), and other potential parties so that additional discovery during the formal rate case will be reduced.
· Water Quality Review. In Hartwell Corp. v. Superior Court, 27 Cal. 4th 256 (2002), the California Supreme Court ruled that the Commission has constitutional and statutory responsibilities to ensure that regulated water utilities provide water that protects the public health and safety. The standardized Minimum Data Requirements, supra, provide information to improve Commission determinations on water quality. Appendix A authorizes the assigned Commissioner and assigned Administrative Law Judge (ALJ) to appoint, at the utility's expense, an independent expert witness to offer evidence in the GRC concerning the water utility's water quality compliance. Additionally, Appendix A requires that the proposed decision in a GRC, whether resulting from an evidentiary hearing, settlement, or both, will make specific findings and recommendations concerning the utility's water quality compliance.
· Reduction of Unaccounted Water. Since 1991, many California water utilities have used Best Management Practice 3 (BMP 3), "System Water Audits, Leak Detection and Repair," to determine whether unaccounted water loss in the system exceeds 10%. BMP 3, which references the American Water Works Association (AWWA) M36 Manual, has been criticized because it is based on a pre-screening test and, if improperly performed or manipulated, allows the water utility to avoid a full audit-even when the recovery of lost water would be economically beneficial. The California Urban Water Conservation Council is considering shifting to a new water loss audit methodology developed by the AWWA and the International Water Association (IWA). (See M.A. Dickinson, "Redesigning Water Loss Standards in California: Using the New IWA Methodology," California Urban Water Conservation Council).
For discussion purposes during this OIR, Appendix A proposes the use of the AWWA/IWA audit methodology. Specifically, Class A utilities would be required to perform and submit the results of a water loss audit as part of the testimony and other required materials supporting the utility's GRC application. The water utility would be required to use the free Water Audit Software developed by the AWWA.3 For more information about the AWWA/IWA audit methodology, see "Applying Worldwide BMPs in Water Loss Control, Journal AWWA, p. 65 (August 2003).
· Interim Rate Relief. Section 455.2, authorizing interim rate relief under certain circumstances during a general rate case, provides little guidance as to procedure and has resulted in separate, time-consuming Commission decisions on each utility request. Appendix A sets forth a procedure under the deviations process, whereby a utility's basic entitlement to interim rate relief is determined, as a threshold matter, by the assigned ALJ. Once that threshold determination is made, the utility completes the processing of the interim rate relief by filing an advice letter, pursuant to General Order 96-B, with the Water Division.
· Rate Case Plan Waiver Process. Section 455.2(c) allows the Commission's Executive Director and a water corporation to waive the requirements of § 455.2(c) pertaining to timing and method of filing a GRC. Decision 06-06-037 indicated that notice and opportunity to comment was necessary to implement a wavier procedure under this code section. Appendix A identifies permitted deviations and waivers, and specifies procedures for implementing such waivers or deviations. Depending on the request, the Executive Director will handle the request or the Water Division will process the advice letter as a Tier 1, Tier 2, or Tier 3 advice letter filing (as further delineated in Appendix A).4 Parties are encouraged to identify other appropriate deviations in their comments.
Participants in the Water Division workshops identified other potential changes to the Rate Case Plan which we consider lower priority and therefore do not address today. In comments on Appendix A, parties may identify other changes to the Rate Case Plan they believe the Commission should consider as high priority changes.
3 The software is available at: http://www.awwa.org/WaterWiser/waterloss/Docs/03IWA_AWWA_Method.cfm
4 Contemporaneously with this Order Instituting Rulemaking, we are considering a draft decision adopting Water Industry Rules, as part of GO 96-B, setting forth this tier structure. See R.98-07-038.
