ALJ/SRT/rbg Date of Issuance 7/14/2008

Decision 08-07-008 July 10, 2008

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

In the Matter of the Application of CALIFORNIA WATER SERVICE COMPANY (U60W), a corporation, for an order authorizing it to increase rates charged for water service in its Chico District by $6,380,400 or 49.1% in July 2008, $1,651,100 or 8.5% in July 2009, and by $1,651,100 or 7.9% in July 2010; in its East Los Angeles District by $7,193,200 or 36.5% in July 2008, $2,034,800 or 7.6% in July 2009, and by $2,034,800 or 7.0% in July 2010; in its Livermore District by $3,960,900 or 31.2% in July 2008, $942,200 or 5.6% in July 2009, and by $942,200 or 5.4% in July 2010; in its Los Altos-Suburban District by $5,172,500 or 30.5% in July 2008, $1,189,100 or 5.4% in July 2009, and by $1,189,100 or 5.1% in July 2010; in its Mid-Peninsula District by $5,435,100 or 23.7% in July 2008, $1,634,200 or 5.8% in July 2009, and by $1,634,200 or 5.5% in July 2010; in its Salinas District by $5,119,700 or 29.8% in July 2008, $3,636,900 or 16.3% in July 2009, and by $2,271,300 or 8.7% in July 2010; in its Stockton District by $7,474,600 or 29.0% in July 2008, $1,422,400 or 4.3% in July 2009, and by $1,422,400 or 4.1% in July 2010; and in its Visalia District by $3,651,907 or 28.4% in July 2008, $3,546,440 or 21.3% in July 2009, and by $3,620,482 or 17.6% in July 2010.

Application 07-07-001 (Filed July 3, 2007)

(See Attachment D for List of Appearances.)

DECISION APPROVING SETTLEMENT AGREEMENT BETWEEN CALIFORNIA WATER SERVICE COMPANY AND DIVISION OF RATEPAYER ADVOCATES, AND RESOLVING DISPUTED ISSUES

TABLE OF CONTENTS

Title Page

DECISION APPROVING SETTLEMENT AGREEMENT BETWEEN CALIFORNIA WATER SERVICE COMPANY AND DIVISION OF
RATEPAYER ADVOCATES, AND RESOLVING DISPUTED ISSUES 22

1. Summary 22

2. Background 33

3. The Cal Water-DRA Settlement's Provisions on Key Issues 66

4. Analysis of Key Settlement Provisions 1010

4.1. Rate Increases 1010

4.2. New Employees 1212

4.3. Conservation Budgets 1616

4.4. Water Quality 2121

4.5. Infrastructure Planning - Surcharge 2323

4.6. Additional Commission Review for Infrastructure Projects 2525

4.7. Workers' Compensation 2626

4.8. PBOPs 2727

4.9. Other Settled Issues 2828

4.9.1. Limit on Ratepayer Funding of Certain Meals, Dues and Moving Expenses for Cal Water Employees 2828

4.9.2. Rate Relief to Certain Livermore Customers Who
Pay Rates Based on 1-Inch Connection Necessary
for Fire Protection 3030

4.9.3. Phase-In of Rate Increases for the Visalia and Salinas Districts to Mitigate Rate Shock 3232

4.10. Vehicle Replacements 3535

4.11. Cost Allocation for Unregulated Contracts 3636

5. The Cal Water-DRA Settlement Should Be Approved 3636

6. Issues Not Settled 3737

6.1. Per-Lot Special Facilities Fees (Cal Water/DRA) 3838

6.2. Health Care Escalation (Cal Water/DRA) 4343

6.3. Allocation of General Office Expense to Coast Springs Area
of the Redwood Valley District (Cal Water/Young) 4545

6.4. Other General Office Allocation Issues (Cal Water/Young) 4949

6.5. Proposed Wells in Mid-Peninsula District
(Cal Water/Mangold) 5151

7. Comments on Proposed Decision 5353

8. Assignment of Proceeding 5555

Findings of Fact 5555

Conclusions of Law 5959

ORDER 6161

Attachment A	Infrastructure Projects Subject to Settlement
Attachment B	Conservation Settlement Explanation
Attachment C	Rate Tables
Attachment D	Service List

DECISION APPROVING SETTLEMENT AGREEMENT BETWEEN CALIFORNIA WATER SERVICE COMPANY AND DIVISION OF RATEPAYER ADVOCATES, AND RESOLVING DISPUTED ISSUES

1. Summary

This decision approves a settlement of this California Water Service Company (Cal Water) General Rate Case (GRC) between Cal Water and the Division of Ratepayer Advocates (DRA). It also resolves a few disputed issues that remain among Cal Water, DRA, and two other intervenors, Arthur Mangold (Mangold) who raised issues pertinent to Cal Water's Mid-Peninsula district, and Jeffrey Young (Young), who focused on the Redwood Valley/Coast Springs district. The final intervenor, the City of Los Altos (Los Altos), did not actively oppose the settlement, and did not raise disputed issues.

The settlement results in rate increases that are lower than those proposed; reduces Cal Water's request to add new employees by almost half; increases conservation to a level consistent with the Commission's Water Action Plan directive to enhance water conservation programs in California; phases in rate increases for the Salinas and Visalia districts at issue in this case; and accomplishes several other changes that enhance ratepayer benefits.

Two disputed issues remain between Cal Water and DRA. We find in Cal Water's favor on the first, and grant its request to increase per-lot special connection facilities fees in the Chico, Salinas and Visalia districts so new customers pay their share of costs to connect them to the system. DRA's proposal to revamp the way we calculate such fees, while interesting, should be raised in the context of a rulemaking so that all interested parties may participate.

On the second issue, health care escalation, we find that our existing method of calculating increases is sound, as DRA asserts, and reject Cal Water's proposal to use a new index for such increases.

We by and large reject the claims asserted by Mangold and Young.

This proceeding is closed.