8. Assignment of the Proceeding

John A. Bohn is the assigned Commissioner and Timothy Kenney is the assigned ALJ in this proceeding.

1. In A.06-12-025, Cal Water requests authority to recover its $9.87 million PBOP regulatory asset over a 15-year period via a surcharge and to roll the surcharge into general rates eventually.

2. AL 1341 set forth Cal Water's proposed accounting, funding, and ratemaking for FAS 106 costs. The Advice Letter indicated that Cal Water intended to (i) establish a 401(h) account as its sole funding vehicle for FAS 106 costs, and (ii) establish a regulatory asset for FAS 106 costs in excess of tax-deductible contributions to the 401(h) account.

3. AL 1341 was the Compliance Filing required by the Conditions of the Settlement Agreement adopted by D.93-08-033. AL 1341 provided all the documents, work papers, and information required by these Conditions.

4. Cal Water provided a copy of AL 1341 to DRA. DRA did not fulfill its obligation under Condition 5 of the Settlement Agreement to review the Advice Letter and report its findings to the Commission.

5. AL 1341 provided all the information necessary for CACD to make an informed decision on whether the FAS 106 accounting, funding, and ratemaking proposed by Cal Water in AL 1341 complied with D.92-12-015 and the Conditions of the Settlement Agreement adopted by D.93-08-033.

6. CACD reviewed AL 1341 and accepted the Advice Letter in June 2004 in accordance with D.92-12-015 and D.93-08-033.

7. Cal Water has followed the accounting, funding, and recovery of FAS 106 costs set forth in AL 1341. In the years since CACD's acceptance of AL 1341, the Commission has repeatedly authorized Cal Water to recover FAS 106 costs in a manner consistent with AL 1341.

1. Cal Water has complied with D.92-12-015 and D.93-08-033.

2. CACD's acceptance of AL 1341 was reasonable.

3. Cal Water has justified its request pursuant to § 454 to implement new rates to recover its PBOP regulatory asset over a 15-year period. Cal Water should initially recover its regulatory asset via a usage-based surcharge that applies to all customers. Cal Water should be authorized to roll the surcharge into general rates in future GRC proceedings.

4. D.92-12-015 requires that all funds collected in rates to fund PBOP to be used for that purpose or returned to ratepayers.

5. The following order should be effective immediately so that Cal Water may begin recovery of its PBOP regulatory asset as soon as possible.

ORDER

IT IS ORDERED that:

1. Application 06-12-025 is granted.

2. California Water Service Company (Cal Water) is authorized to recover its regulatory asset for post-retirement benefits other than pensions (PBOP) over a 15-year period.

3. All funds that Cal Water collects in rates for its PBOP regulatory asset shall be used to make tax-deductible contributions to independent PBOP trusts or returned to ratepayers with interest. The assets in the PBOP trusts shall be used to provide PBOP or returned to ratepayers.

4. Within 20 days from the effective date of this order, Cal Water shall file tariffs to recover its PBOP regulatory asset over a 15-year period via a usage-based surcharge that is the same for all customers in all rate districts. Cal Water shall concurrently file work papers showing the derivation of the surcharge. The tariffs shall be effective pending disposition by Commission staff.

5. The surcharge for each district shall begin with the first full billing cycle for the district following the date that Cal Water files its tariffs. Cal Water may roll the surcharge into general rates in future General Rate Case proceedings.

6. Application 06-12-025 is closed.

This order is effective today.

Dated March 13, 2008, at San Francisco, California.

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