16. Implementation of Conservation Rate Design Settlements

Park and DRA raise concerns regarding coordinating implementation of settlement rate designs 90 days after adoption by the Commission with the utilities' attrition or escalation factor for their revenue requirements. The settlements' rate designs are based on the revenue requirements in effect at the time of the agreement. If those rates are adopted and/or implemented after the attrition or escalation factor adjustment, they will not reflect the utilities' current revenue requirement.

Park proposes that the conservation rates in its settlement be recalculated to generate the 2008 revenue requirement and that the recalculated conservation rates be provided to the Commission as a late-filed joint exhibit with DRA or as an amendment to the settlement. Park states it is likely that revision of the rate design parameters would not be necessary, since the escalation increase is likely to be in the 2%-3% range. Park also proposes that the 90-day implementation period would run from acceptance of the recalculated conservation rates. DRA prefers submission of the recalculated rates by advice letter because an informal filing imposes less of an administrative burden on the parties and the Commission. DRA does not oppose Park's suggestion that implementation be timed by when the recalculated rates are deemed approved. DRA proposes that all attrition adjustments for the utilities be handled in a similar manner. DRA states we should require the utilities to consult with DRA before the recalculated rates are submitted.

We concur with Park and DRA that the settlement agreements must be modified to incorporate a procedure consistent with ensuring that the conservation rates reflect the utilities' current revenue requirement. The compliance advice letter process provides the most efficient vehicle. The advice letters will be classified as Tier 1 under General Order 96B and will be subject to Water Division review and disposition.

We will require the utilities to work with DRA in the development of the recalculated rates and to state in the advice letter whether DRA has approved the attached rates.⁴² The 90-day implementation of the settlements shall run from the date the advice letter is deemed approved.

⁴² DRA clarifies that the parties to the Park and CalWater settlements intended to pass through surcharges and/or surcredits and calculate net balance on a total customer basis. DRA further clarifies that the Suburban settlement does not include volumetric surcharges and/or surcredits and that Suburban concurs with this approach. Since the parties concur on these mechanisms but did not explicitly address them in the settlement agreements, the parties shall clarify them in the compliance advice letters.