5. Reasonableness of Requested Compensation

Felton FLOW requests $68,894.95 for its participation in this proceeding. With corrections for mathematical calculation errors of $1,498.20, following is a summary of the request:

Work on Proceeding
Attorney/Staff	Year	Hours7	Hourly Rate	Total8
O'Neill, E., Attorney	2005	107.2	$470.00	$ 50,384.00
O'Neill, E., Attorney	2006	6.2	$485.00	$ 3,007.00
Gray, Jeff, Attorney	2005	4.3	$310.00	$ 1,333.00
Hilen, C., Attorney	2006	8.9	$325.00	$ 2,892.50
Pau, J., Paralegal	2005	10.7	$145.00	$ 1,551.50
Pau, J., Paralegal	2006	2.5	$150.00	$ 375.00
Subtotal Work on Proceeding:				$ 59,543.00
Preparation of NOI and Compensation Request
Attorney/Staff	Year	Hours	Hourly Rate	Total
O'Neill, E., Attorney	2005	7.4	$235.00	$ 1,739.00
	2006	24.00	242.00	$ 5,808.00
Subtotal NOI and Request:				$ 7,547.00
TOTAL hourly fees:				$ 67,090.00
Expenses:				$ 306.75
TOTAL REQUEST:				$ 67,396.75

In general, the components of this request must constitute reasonable fees and costs of the customer's preparation for and participation in a proceeding that resulted in a substantial contribution. The issues we consider to determine reasonableness are discussed below.

5.1. Hours and Costs Related to and Necessary
for Substantial Contribution

We first assess whether the hours claimed for the customer's efforts that resulted in substantial contributions to a Commission decision are reasonable by determining to what degree the hours and costs are related to the work performed and necessary for the substantial contribution.

Felton FLOW documents the claimed hours of its attorneys and paralegal by presenting a daily breakdown of the hours and a brief description of each activity. As required by the Commission, Felton FLOW allocates its time by specific issue to the extent feasible. On two issues, customer service and public acquisition of the Felton District, it chose to voluntarily reduce the amount it is requesting by 50%, due to the fact that the economic savings to ratepayers it achieved on these issues as a result of its participation is not as significant as it hoped to achieve.

We find the hourly breakdown submitted by Felton FLOW reasonably supports the claim for total hours.

Of importance, Felton FLOW is not requesting any compensation for the considerable time and expense incurred by its members in participating in this proceeding. Numerous members devoted significant time to conducting interviews with ratepayers, reviewing Cal-Am's filing, obtaining and analyzing additional documents, preparing testimony, and attending hearings and Commission meetings.

5.2. Market Rate Standard

We next take into consideration whether the claimed fees and costs are comparable to the market rates paid to experts and advocates having comparable training and experience and offering similar services.

Felton FLOW uses the 2004 hourly rates previously established for each person and applies these rates to 2005 work. In accordance with D.07-01-009, Felton FLOW increases its 2005 hourly rates by a 3% cost-of-living adjustment (COLA) for work performed in calendar year 2006.

For attorneys Edward O'Neill, Jeffrey Gray, and Chris Hilen and paralegal Judy Pau, Felton FLOW requests the 2004 hourly rates approved for them in D.06-04-018 be applied to 2005, with a 3% increase for 2006. Using the 2004 rates approved in D.06-04-018, we find it reasonable here to approve a 2005 rate of $470 for Mr. O'Neill, $310 for Mr. Gray, $315 for Mr. Hilen, and $145 for Ms. Pau. In accordance with D.07-01-009, we approve a 3% increase to 2005 rates for work performed in 2006.

Felton FLOW requests these rates for time spent on substantive issues and requests one-half of the hourly rate for time spent on travel and intervenor compensation. This is consistent with our policy in previous decisions. We find these rates and the methodology by which they are applied reasonable.

5.3. Productivity

D.98-04-059 directed customers to demonstrate productivity by assigning a reasonable dollar value to the benefits of their participation to ratepayers. The costs of a customer's participation should bear a reasonable relationship to the benefits realized through their participation. This showing assists us in determining the overall reasonableness of the request.

Felton FLOW quantifies the economic benefits of its participation as follows:

(1) rejection of Cal-Am's request for a 50 basis point "leverage adjustment" to the return on equity for the Felton and Monterey Districts, which Felton FLOW estimates represents savings to ratepayers of approximately $145,000 in the Monterey District and approximately $6,000 in the Felton District;

(2) a reduction of $50,000 in the amount included in Felton District rates for the Highway 9 main replacement project;

(3) 5% reductions in employee related O&M, A&G and General Office expenses included in Felton District rates which, according to the comments of Commissioner Bohn, results in a reduction of approximately $14,000 in Felton District payroll costs;

(4) additional reductions of $91,000 in A&G expenses as a result of Cal-Am's failure to adequately explain the increase over 2003 actual A&G expenses; and

(5) Cal-Am's agreement to forgo recovery from ratepayers of $100,000 in costs incurred to complete the compliance audit ordered by the Commission.⁹

In addition to these quantifiable economic benefits, Felton FLOW's participation also contributed to the following economic and non-economic benefits that cannot be easily quantified:

(1) the Commission's finding that Cal-Am has significant customer service problems and order requiring additional tracking and reporting regarding customer service;

(2) the Commission's order that General Office expenses were not adequately explained and requiring additional information concerning these expenses in Cal-Am's next general rate case;

(3) the Commission's finding that Cal-Am's justification for including an acquisition adjustment for the Citizens' acquisition was "weak" and order requiring additional justification in Cal-Am's next general rate case;

(4) the Commission's finding that additional investment by Cal-Am in capital projects in the Felton District may unnecessarily increase the cost to the public of a public acquisition and requiring Cal-Am to file an advice letter with the Commission prior to undertaking any additional capital projects;

(5) Cal-Am's agreement to defer further work on the Bull Creek project pending a possible public acquisition; and

(6) the Commission's deferral of a portion of the rate increase in Felton to mitigate rate shock.¹⁰

We find that Felton FLOW's participation in this proceeding provided the Commission the valuable perspective of a community organization. Further, Felton FLOW has clearly demonstrated that the overall quantifiable benefit of its participation exceeds the amount of intervenor compensation it requests here. We find that Felton FLOW's participation was clearly "productive" within the meaning of D.98-04-059.

5.4. Direct Expenses

The itemized direct expenses of $306.75 submitted by Felton FLOW include costs for travel, photocopying, and filing fees. We find these costs reasonable.

⁷ Number of hours in this column reflects a 50% voluntary reduction by Felton FLOW of the hours of work on the issues of customer service and public acquisition.

⁸ Amounts in this column reflect corrections of computation errors made in the request. For example, in some instances, the request indicates hourly fees charged for zero hours of work in 2005 of Christopher A. Hilen (see, Appendix B to the request.).

⁹ January 29, 2007 request at 18.

¹⁰ Id. at 18-19.