2. Background

A brief description of Coast Springs and a history of the existing moratorium will help put our discussion in context.

Coast Springs is a division of CalWater Redwood Valley District. CalWater acquired Coast Springs in May 2000 as part of its acquisition of Dominguez Water Company (Dominguez). At the time of the acquisition, Dominguez was under a moratorium imposed by the Department of Health Services (DHS, now the Department of Public Health or DPH) that limited the maximum allowable number of connections for Coast Springs to 250. Dominguez was also under Commission order to make necessary improvements to remove the DHS moratorium. As part of acquiring Dominguez, CalWater assumed all of Dominguez' public utility obligations related to Coast Springs including the obligation to remove the new connection moratorium placed on Coast Springs by DHS.

In March 2002, CalWater filed Application 02-03-032 requesting, among other things, the Commission's authority to establish a moratorium on new connections above 250 (or to any higher limit DHS might subsequently approve) in Coast Springs. In that proceeding, the Commission found that Coast Springs Water System had reached the limit of its capacity and was unable to serve more connections than permitted in its domestic water supply permit without injuriously withdrawing the supply from its current users. The Commission also granted Coast Springs' request for a moratorium in D.03-03-037. The Commission set a three-year connection moratorium on new service connections above 250 for the Coast Springs, and also established a procedure for recording all requests for new service connections during the moratorium. The company was to establish a waiting list and an approved list to identify applications for water service exceeding the moratorium limit and to identify services provided under the moratorium limit without active meter connections. CalWater was to revoke any approved connection if a valid building permit was not provided by the holder of the permit within 18 months of the acceptance of the application for service. In addition, D.03-03-037 provided that the 250 limit would automatically adjust to any new, higher limit permitted by DHS. In July 2003, DHS increased the number of service connections for Coast Springs from 250 to 255. Accordingly, the current moratorium was set at 255.

D.03-03-037 also ordered CalWater to complete a hydrogeologic study by the end of 2003. CalWater hired CH2M HILL as a consultant to conduct the required hydrogeologic study. CH2M HILL issued a report in 2003 and a follow-up report in February 2005, making several recommendations for securing additional supplies in Coast Springs. D.06-04-006 extended the moratorium until further Commission order.

In this application, CalWater asks for Commission authority to continue the service connection moratorium in the Coast Springs that was ordered in D.03-03-037. The Company proposes three alternatives:

1. Installation of a marine desalination unit;

2. Construction of a new well; or

3. Continuation of the moratorium indefinitely if neither Alternative 1 nor 2 is adopted.

A prehearing conference (PHC) was held on February 21, 2007. The Division of Ratepayer Advocates (DRA), and two intervenors, Jeffrey Young (Young) and Marcos Pareas (Pareas), appeared at the PHC. Following the PHC, the assigned Commissioner issued a scoping memo on March 12, 2007 identifying the following issues to be addressed in this proceeding:

1. Should the Commission extend the moratorium?

2. If the moratorium is extended, how long the extension should be?

3. If the moratorium is extended for a specified period of time, what remedies should CalWater seek during that time to improve Coast Springs' water supplies and provide a basis for lifting the moratorium? Is either installation of a marine desalination plant or construction of a new well a viable solution to CalWater's supply issues?

4. Should CalWater be authorized to establish a memorandum account to record the costs associated with the selected project to lift the moratorium?

The scoping memo also indicated that all issues related to the moratorium and remedies to lift the moratorium should be addressed in this proceeding, while the broader issue of who should pay for the remedies, raised by DRA, would be appropriate for future GRC proceedings.

Evidentiary hearings were held on August 21 and 22, 2007. DRA and Pareas submitted testimony. Young also participated in hearings.