3. Alternate Conservation Rate Design Proposal
The conservation rate design settlements before us include increasing block rates for residential customers. The Park and CalWater settlements reduce the fixed service charge for commercial and industrial customers and include full decoupling WRAMs and MCBAs for all districts and all customer classes. These WRAMs permit recovery or crediting of the difference between actual and adopted quantity charge revenues. The MCBAs permit recovery or crediting of the difference between actual and adopted variable costs for purchased power, purchased water and pump tax. The Suburban settlement does not include commercial and industrial customer classes and contains a Monterey-style WRAM, which limits recovery or crediting of revenues to the difference between actual sales at proposed and single quantity rates. The settlements are trial programs, which will be in effect until the companies' next general rate cases (GRC).
CFC offers a counterproposal. CalWater and Park should implement the increasing block rates proposed in their applications.9 Suburban should implement its application's increasing block rates, but rates should be differentiated between meter sizes and multi-family dwellings should be treated as commercial customers. The utilities should implement Monterey-style WRAMs, if they demonstrate they have an incentive to promote water sales. CFC states we should decide several policy issues before implementing settlement rates in order to accomplish statewide conservation objectives: whether Tier 1 should represent a subsistence level of water or average use, what level of usage should dictate additional tiers, and what price difference between rate tiers should be required.
CFC advances certain pricing proposals. The first tier of increasing block rates should be set by establishing an allowance for essential needs for residential customers and should use a commercial or industrial customer's usage to set an allowance. Second tier rates should reflect current costs and rate cases should develop future costs for Tier 3. Rates should be set for peak demand even if summer usage is not more than twice the amount of winter usage. Costs should be allocated among customer classes once residential customers reduce demand under increasing block rates.
We acknowledge the concerns that prompt CFC's policy recommendations and alternate proposal. CFC does not believe the settlements treat residential customers and multi-family units fairly and are not likely to send the appropriate price signals. While we support equitable treatment of customer classes and rates designed to prompt conservation, we decline to adopt the rates found in the CalWater, Park, and Suburban applications. We further decline to adopt specific rate objectives. As discussed above, we permitted the negotiation of settlement agreements among the parties for trial programs and did not require specific break points or percentage differences for increasing block rates. CFC's concerns do not prompt us to reconsider that choice. However, we do find it necessary to expand upon one objective in our Water Action Plan (WAP)--to strengthen water conservation programs to a level comparable to those of energy utilities.
9 Specifically, CalWater should implement the rates in its application, as modified by the settlement with DRA and TURN, for the eight districts addressed in D.06-08-011.
