XVI. Comments on Proposed Decision

The proposed decision of the ALJ in this matter was mailed to the parties in accordance with Pub. Util. Code § 311(d) and Rule 77.1 of the Commission's Rules of Practice and Procedure. An alternate decision by the assigned Commissioner was filed concurrently with the proposed decision. Comments and reply comments were filed by San Gabriel, DRA, the City, and the District. The filings of the City and district follow the issues raised by DRA and need not be separately discussed. The comments of San Gabriel and DRA reargued factual disputes, which we decline to modify. They also noted areas of the opinion which needed clarification, which we have modified.

Substantive changes have been made to clarify the timing and content of advice letters pertaining to the Sandhill Water Treatment facility to rate base and the collection of connection fees. San Gabriel raised the issue of the timing of the first advice letter with respect to the Sandhill facility. Due to the timing of this decision, the company is directed to file an advice letter filing by November 15, 2007, to be effective on January 1, 2008. Filings for subsequent years are due by November 15 to be effective January 1. San Gabriel sought clarification that the investment in the new headquarters building was exempt from the ratebase cap. This is not the case. Changes are made to clarify that the new headquarters investment is not given advice letter treatment and that the addition to CWIP resulting from the investment in a new headquarters would count against the 10% rate cap. In response to concerns raised by the City of Fontana, and others at the oral argument the decision is changed to clarify proceeds from the facilities fees should be first used to offset the increase in ratebase resulting from the inclusion of the Sandhill treatment plant and then, if sufficient, to offset other ratebase increases subject to the cap so that the effect of the offset is not to create more room under the cap.

In response to San Gabriel's comments the decision also clarifies that the facilities fees may be paid by those requesting the facility such as developers, builders, and customers.

The City of Fontana commented for an allocation of the various proceeds "more favorable to ratepayers." (City of Fontana Comments on AD at page 13.) The alternate proposed decision is revised to reflect a 67% allocation of the contamination proceeds to ratepayers. This will result in a lower ratebase, lower rates and a larger refund than that originally proposed in the alternative proposed decision.

In response to comments raised by the City of Fontana and DRA regarding the cost effectiveness, additional analysis is included in the decision regarding the cost effectiveness and net benefits to ratepayers of the Sandhill Facility.

In response to concerns raised regarding the Rate Base Cap raised in comments (Comments of the City of Fontana, page 6) language has been added to the alternate to require proponents of continuing a ratebase cap to provide compelling evidence that such a cap is a useful regulatory tool.

In response to comments of San Gabriel regarding the timing of the advice letters, we have clarified the advice letter filing dates for inclusion in rates of Sandhill inclusion into ratebase. The first such advice letter is due by November 15, 2007 to be effective January 1^st 2008. We further clarify that the advice letter to adjust rates for inclusion of the facilities fees in CAIC should be filed on the same timetable. Additionally, the alternate now requires that the refund advice letter be effective January 1, 2008, so as to reduce the number of rate changes and to help mitigate the impacts on rates to consumers of increases in rates that result from the inclusion of the Sandhill facility in ratebase.

There were additional changes made to correct errors and to clarify this order.