2. Background
In its application, Cal Water filed for water rate increases in all of its 24 California Districts. In eight of those districts - Chico, East Los Angeles, Livermore, Los Altos, Mid-Peninsula, Salinas, Stockton and Visalia (collectively, the Eight Districts) - Cal Water sought rate increases attributable to increases in expenditures in those districts, as well as to increases in Cal Water's General Office expenses. In the remaining 16 districts, Cal Water sought rate increases attributable only to General Office expense increases.
DRA participated actively in all aspects of the proceeding. Young intervened with regard to the allocation of General Office expenses in the Redwood Valley district; Mangold intervened with regard to the Mid-Peninsula district; and Los Altos intervened with regard to issues in its own district. Administrative Law Judge (ALJ) Thomas granted each of these parties' motions to intervene, limiting their participation to the issues in their districts.1
The Commission sponsored Public Participation Hearings covering the Eight Districts listed above, and took public comment with regard to the proposed rate increases. The Commission also received communications by letter and e-mail from members of the public wishing to weigh in on the proposed rate increases.
The assigned Commissioner and ALJ determined that the following issues were within the scope of the proceeding:
1) Appropriateness of all rate increases;
2) Necessity to phase in rate increases to mitigate rate shock;
3) How Cal Water's authorized and actual rates of return have matched up in recent years;
4) Cal Water's accounting for and provision of unregulated services for, without limitation, municipal water district billing contracts, placement of antennae on Cal Water property, and the Extended Service Protection (ESP) program;
5) Whether the infrastructure upgrades Cal Water proposes (including new customer service centers) are reasonable;
6) The appropriateness of Cal Water's vehicle retirements schedule(s);
7) Cal Water's water quality in the Eight Districts;
8) Cal Water's water conservation/efficiency plans, to the extent not covered in the Commission's generic water conservation investigation, Investigation (I.) 07-01-022;
9) Institutional advertising cost allocation;
10) Health care, workers' compensation, and employee benefit cost increases;
11) Impact of prior settlements on later requests related to settled matters;
12) Appropriateness of proposed new employee hiring;
13) Allocation of costs attributable to Sarbanes-Oxley2 compliance and other Sarbanes-Oxley matters;
14) Use of varying year periods to forecast future revenues, costs and other activity, rather than the same period for each forecast;
15) Cal Water's proposed changes in per-lot special facilities fees and fire flow testing fees;
16) Appropriateness of Cal Water's asset/infrastructure upgrade planning for the future;
17) Extent to which Cal Water is working to control costs;
18) Appropriate cost allocation to developers;
19) Matters raised in the ALJ's rulings issued in this case; and
20) Other matters deemed within the proceeding's scope by the assigned ALJ and/or Commissioner.3
Prior to hearings, DRA and Cal Water announced they had reached a settlement of most of the disputed issues that remained between them after their testimony was served. (The pre-settlement testimony also resolved several disputed issues that arose from Cal Water's initial application.) Therefore, the case went to hearing only on the issues remaining in dispute between DRA and Cal Water, and on issues not part of the settlement that Young and Mangold raised. The hearings occurred during the week of February 11, 2008.
After hearings, DRA and Cal Water submitted a motion seeking approval of their settlement,4 and all parties except Los Altos briefed the few issues remaining in dispute. This decision approves the settlement agreement and resolves each of the disputed issues.
1 The Leona Valley Town Council initially intervened, but later withdrew from the proceeding. Since it did not actually participate, the ALJ ruled that it was ineligible for intervenor compensation in the proceeding. Leona Valley is a community in unincorporated Los Angeles County.
2 Sarbanes-Oxley Act of 2002, PL 107-204, 116 Stats. 745.
3 The Cal Water-DRA settlement address Issues 1, 2, 4, 5, 6, 7, 8, 10, 12, 13, 15, 16, and 18 from the Scoping Memo, which we discuss individually in this decision.
4 Joint Motion of the California Water Service Company and the Division of Ratepayer Advocates to Approve Settlement Agreement, filed March 12, 2008, as supplemented by Amendment to the Joint Motion of the California Water Service Company and the Division of Ratepayer Advocates to Approve Settlement Agreement, filed April 1, 2008 (jointly, Motion; all citations herein are to the Amendment filed April 1, 2008).
