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WATER/SNR/MRB:jrb

PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

WATER & AUDITS DIVISION RESOLUTION W-4628

RESOLUTION

(RES. W-4628), TAHOE PARK WATER COMPANY (TPWC). ORDER AUTHORIZING A GENERAL RATE INCREASE PRODUCING ADDITIONAL ANNUAL REVENUE OF $145,925 OR 70.6% IN 2006.

BY DRAFT ADVICE LETTER ACCEPTED ON APRIL 21, 2006

SUMMARY

This Resolution grants TPWC an increase in gross annual revenue of $145,925 or 70.6%, for test year 2006. The increase will provide a 13.0% rate of return on rate base for Test Year 2006.

BACKGROUND

TPWC, by draft advice letter accepted on April 21, 2006, requested authority under Section VI of General Order (G.O.) 96-A and Section 454 of the Public Utilities Code to increase overall rates for water service by $172,000 (84.1%) in Test Year 2007. TPWC's request shows year 2006 gross revenue of $205,458 at present rates increasing to $377,364 at proposed rates to produce a 14% rate of return on rate base.

TPWC's present rates became effective on June 13, 2006 pursuant to Resolution W-4562, which authorized an increase in revenue of $6,205 or 3.4%, to cover a Consumer Price Index increase and increased electric rates.1 The last General Rate Increase was granted on January 5, 1995, pursuant to Resolution W-3905, which authorized an increase of $11,950 or 10.28% in gross revenues. This resulted in an 11.55% return on the 1994 rate base.

System Description

TPWC is a Class C water utility and serves approximately 520 customers in two noncontiguous service areas near Lake Tahoe, approximately two miles south of Tahoe City. Considered separately, each of the two service areas (Tahoe Park Main service area [TPSA], with approximately 435 customers and Skyland-Nielsen Service Area [SNSA] with approximately 85 customers) would be Class D water utilities. The water company has grown by annexing smaller areas. The Skyland area and the Nielsen area at one time were separate mutual companies which requested service from Tahoe Park Water; later these two areas were joined by a main to become the Skyland-Nielsen service area. The SNSA is about one mile away from the TPSA.

The majority of connections in TPWC are residential, with 9 commercial customers and 3 connections to parks. TPWC currently has three flat rate tariffs: one for Tahoe Park Main, one for Skyland-Nielsen2 and one for private fire service connections. TPWC also has a metered rate tariff, for Tahoe Park Main only. Most connections are flat rate, with 38 metered connections in the TPSA. One meter has recently been installed in the SNSA; the customer is being charged a flat rate until a metered rate tariff is approved for the SNSA.

Each district has one well to provide all its water. The wells were built to replace the former intakes from Lake Tahoe, as required by the Department of Health Services' Surface Water Treatment Rule, which was issued around 1990. The Rule requires that surface water cannot be provided without treatment which includes filtration, except in an emergency such as a fire. A spring in the TPSA, a former water source, is currently a standby source for fire flow.

In addition to wells, over 7,000 feet of 6" and 8" main have been added or have replaced other pipe since 1995. The two service areas have about 28,000 feet of mains.

Tahoe Park Main has an old 10,000-gallon redwood tank, a 40,000-gallon steel tank and a 4,000-gallon hydropneumatic tank at the Washoe well. Skyland-Nielsen has a 20,000-gallon redwood tank and a 2,000-gallon hydropneumatic tank at the Nielsen well. Since the Tahoe Park Main system does not have enough storage to provide adequate pressure or fire flow, the system operator is considering building a 200,000-gallon tank.

TPWC's maximum and average demands are unknown, because the system did not use production meters when pumping from Lake Tahoe. Water sales show that metered customers used about 38,000 Ccf last year. Staff's rough estimate of total production per year is about 200,000 Ccf, with a 3/4" X 3/4" meter customer using 415 Ccf per year.

System Ownership

On February 28, 1997, Mr. Rick Dewante applied to purchase TPWC from David R. Robertson. Commission Decision 97-08-021 denied the application without prejudice. Mr. Dewante has been operating and managing the company since then. Branch considers Mr. Dewante to be the operator rather than the owner. He intends to reapply to the Commission in 2007 for ownership of TPWC.

General Office

TPWC's general office is at 1759 Washoe Way, Tahoe City, CA 96145. Some TPWC records are kept in El Dorado, California, where Mr. Dewante has an office for another business.

Service Moratorium

On December 13, 2006, the California Department of Health Services imposed a service moratorium on TPWC, directing it to not add any new service connections or issue any "will serve" letters to potential water users. The moratorium order requires a plan to provide an emergency generator for the Washoe Well, which serves TPSA, and a plan to provide water from an approved source to the TPSA system when the Washoe Well is out of service for repairs or maintenance. If a non-approved source is used before an emergency generator is installed, the company must immediately issue a "Boil Water Advisory" notice. The order forbids use of the lake intake during a power or water outage except in the event of a major emergency such as fire or earthquake.

DISCUSSION

In 1990 and 1991, Mr. Robertson constructed a building with a large garage on the lower level and an apartment for his personal use on the upper level. The garage is used for Tahoe Park equipment and materials. The garage has been in rate base since 1992, and the apartment has been excluded from rate base since 1992 as not used or useful for utility operations. Tahoe Park depreciation and taxes have been paid on the property since 1992. Water Branch has subtracted apartment-related expenses in making its rate calculations.

Summary of Earnings

The Branch made an independent analysis of TPWC's summary of earnings. Appendix A shows TPWC's and the Branch's estimates of the summary of earnings at present, requested, and recommended rates for Test Year 2006. The final column shows the revenues and expenses recommended by the Branch.

Branch's estimate of revenues at present rates is $1,122 higher than TPWC's. Branch calculated revenues based on current tariff rates and customers, and excluded the Commission user fee because it is not revenue to the company.

Branch's estimate of revenues at proposed rates is $24,859 lower than TPWC's because:

1. TPWC's estimate of rate base is about $55,450 less than the Branch rate base;

2. TPWC's estimated operating expenses and deductions are about $22,810 less than Branch;

3. TPWC requests a 14.0% return on rate base while Branch recommends 13.0%;

4. TPWC's estimate of revenue includes the Commission user fee. Branch excludes it; and

5. TPWC's list of recoverable expenses includes $47,630 of interest. Branch excludes it.

Operating Expenses

Account 615 - Purchased Power

TPWC's estimated purchased power for 2006 is $31,311. Adjusted power bills reviewed for 2006 add up to $33,965. Branch deducted $480 from this amount, the estimated cost of electricity for the apartment above TPWC's garage, which is not part of plant in service. Pumping costs for SNSA customers in 2006 were $11,755, averaging $138.29 per connection. Costs for TPSA in 2006 were $22,211, averaging $51.06 per connection.

Account 630 - Employee Labor

TPWC's salaries as shown included payroll taxes. Branch figures use the same salaries without payroll taxes. Those are included in Taxes Other Than Income.

Account 670 - Office Salaries

TPWC's salaries as shown included payroll taxes. Branch shows the same salaries without payroll taxes. Those are included with Taxes Other Than Income.

Account 671 - Management Salaries

TPWC's salaries as shown include payroll taxes. Branch shows those salaries without payroll taxes. Those are included with Taxes Other Than Income.

Account 682 - Professional Expenses

TPWC contracts with another firm for handling customer billing, payroll, payables, receivables, tax return preparation, and engineering services. This takes the place of having separate staff and office facilities to do this in Tahoe City. Branch accepts TPWC's estimate of $16,000 per year for professional expenses.

Account 684 - Insurance Expense

TPWC estimated $4,419 for insurance. Branch deducted $801 from this amount, which covers insurance on the apartment above the garage.

Account 689 - General Expense.

TPWC's workpapers show an entry for Account 689 - "General Expense, Plus Interest". Under the Uniform System of Accounts, Account 689 is simply "General Expenses". Branch moved the interest portion of TPWC's estimate from Account 689 to Account 427 - Interest Expense, which is below the line and not used for ratemaking purposes.

Account 403 - Depreciation Expense

Branch calculated a combined depreciation rate for TPWC's depreciable plant in service, and found a net depreciable plant of $970,515 (depreciable plant minus contributions and advances) as of February 28, 2006. Branch calculated a new combined depreciation rate for 2005-2006 of 2.70% on net depreciable plant. Branch's depreciation expense of $26,204 is $2,934 more than TPWC's expense. TPWC used various depreciation rates. The depreciation expense shown in their informal advice letter did not match the amount shown in their workpapers.

Account 408 - Taxes Other Than Income

Branch's estimate is $3,993 higher than that of TPWC because payroll taxes on employee labor, office salary, and management salary are included in Branch's estimate but not in TPWC's and because Branch deducted $509 from TPWC's estimate of property taxes for the apartment above the garage.

Account 409 - Income Taxes

The Branch estimate for taxes is $19,221 more because Branch estimates a higher net income before taxes. Branch does not show interest expense as a tax deduction.

Account 427 - Interest Expense

Branch did not allow $47,630 of interest expense as an operating expense for ratemaking purposes. Loans for which TPWC requested interest have not been approved by the Commission.3 The loans consist of promissory notes by Rick Dewante acting for TPWC to other businesses owned by Mr. Dewante.

Rate Base

Branch rate base is $55,454 more than that of TPWC. Branch calculations show $37,799 less for plant in service, primarily because TPWC had included an apartment which is not a used and useful part of plant in service. Branch shows $6,859 more for contributed plant, and $6,837 less for working cash. Branch shows $106,949 less for depreciation reserve; TPWC did not deduct retired plant in service from the depreciation reserve and incorrectly included amortization of contributed plant. To estimate working cash, TPWC used one month's expenses and deductions minus power costs; Branch used 6 months' expenses minus advance payments for water service.

Plant-In-Service

Intangible Plant

Branch disallowed $4,701 of 1996 legal costs associated with system purchase and a lawsuit against Tahoe Area Regional Transportation. Per the Uniform System of Accounts this is an expense item and cannot be capitalized.

Structures

Branch deducted $31,364 from TPSA structures; this is half the cost of the garage/apartment built in 1991. The apartment, which was formerly the residence of Mr. Robertson, has never been in rate base. Branch also subtracted $500 for a pump house at Sierra Estates Beach which no longer exists.

Reservoirs, Tanks and Standpipes

Branch included $4,160 for Skyland-Nielsen tanks not listed by TPWC and subtracted $1,000 for a tank which was demolished with the Sierra Estates beach pump house.

Other Equipment

Branch disallowed $2,000 of non-equipment plant.

Annual Reports

TPWC has not filed a regular Annual Report since 1995. A report covering the period from January 1, 1997 through December 31, 2005 was received on April 3, 2006. It is not complete or correct. TPWC's Annual Report for 2006 needs to show the correct adopted Plant-In-Service, and the correct list of storage facilities, water mains, meters and services, contributions and depreciation reserve. TPWC must also file new service area maps for the tariff book, showing all lots served and excluded.

FIELD INVESTIGATION, NOTICE, CUSTOMER COMPLAINTS, AND PUBLIC MEETING.

Field Investigation

On July 9, 2006, Branch inspected TPWC records in El Dorado, California. Records inspected included bills for equipment, for well drilling, for plant in service and for electrical power. On July 10, 2006, Branch looked at the entire service area and inspected well sites, lake water intakes, pumps, workshop and office.

Notice To Customers

On July 12, 2006, a Notice of Proposed Rate Increase was mailed to all customers announcing TPWC's request to increase water rates by 64.6% for the TPSA and by 223.8% for the SNSA. Proposed new rate schedules were included. The notice announced a public meeting for August 8, 2006.

Customer Complaints

Complaints were received at the public meeting, by mail, by e-mail, and by telephone. At the public meeting, customers focused on the unusually large amounts of the proposed increases and lack of communication from Mr. Dewante to customers. They said they would have liked smaller rate increases over the last ten years instead of a sudden extremely large increase. Other complaints included water quality problems, plumbing deterioration due to acidic water (high CO2), a water system outage of 4 days due to power company electrical failure, a lack of fire fighting capacity, and "a huge rate increase that goes on forever."

Protests received by mail, e-mail, and telephone included objections to the proposed amount of increase, complaints about outages, poor water quality, and inadequate communication from water company to customers. Some customers complained about the much higher proposed increase for Skyland-Nielsen residents.

Public Meeting

A public meeting was held on August 8, 2006, between 6:00 PM and 9:30 PM. at the Fairway Community Center in Tahoe City. Attendees included Martin Bragen representing the Commission; Terry Macaulay representing the Drinking Water Program Services, District 9, of the California Department of Health Services (DHS); Rick Dewante representing Tahoe Park Water Company; his consultant, Gary Jennings; and about 50 water company customers.

Mr. Bragen opened the meeting, introduced the DHS representatives and TPWC representatives, and explained the purpose of the meeting and CPUC's role. He then had TPWC representatives explain the reasons for the requested rate increase. Following this, customers' questions were answered by TPWC representatives, Mr. Bragen and Ms. Macaulay.

In addition to complaints, water company customers said they wanted the system improved so an electrical power failure will not result in a water outage. Use of fixed generators, portable generators, storage tanks, and an emergency cross-connection to the Tahoe City Public Utilities District (PUD) were discussed.

Some customers objected to TPWC using well water instead of continuing to use water from Lake Tahoe. Mr. Dewante explained that the State Department of Health Services would no longer allow use of Lake Tahoe water without a filter system. Ms. Macaulay of DHS noted that lake water might contain giardia, bacteria, viruses, and other contaminants from animals or humans. A filter plant would be needed to remove contaminants. Mr. Dewante explained that a filter plant would need land, a trained operator, and maintenance.

Customers using water from the Nielsen well are concerned about their health. Dissolved copper and lead in the water at some homes stains sinks and washing machines and turns hair green.

The current Nielsen well was built to replace a previous well which had no screens and an inadequate pump. After it was built and put in service in 2005, excess carbon dioxide entered the well water making it slightly acidic. According to DHS, the acidity of the water is not a health problem. However, the acidity makes the water corrosive. It leaches copper and lead from customer service lines and plumbing; this causes the water quality problems inside customer houses. TPWC is working with a DHS consultant to find ways to correct the problem. The previous well was sealed and was removed from plant in service.

Rate Design

TPWC proposes to increase SNSA flat rates by 223.8% and TPSA flat and metered rates by 64.6%. SNSA meter service charges would be 96.7% higher than TPSA rates. There would be no change in the rate for fire protection service. This rate design would have customers in each service area paying for improvements in their own area.

The SNSA and TPSA are not adjacent to each other, and the two water systems are not connected. The argument may be made that improvements made to one service area should not be paid for by customers of the other service area. However, in Resolution W-3905 of January 5, 1995, the Commission accepted the linking of the costs of the two service areas for ratemaking purposes. At that time, rate base, office expenses, maintenance and other expenses per customer except power costs were similar. Power costs for the SNSA were higher than for TPSA primarily due to SNSA's greater vertical distance from Lake Tahoe, the company's water source at that time. The Commission approved basic rates that were similar for ¾" flat rate water customers in both service areas, but included a higher Pumping Zone Adder in SNSA for higher power costs.

Branch proposes that the Commission retain the linking of the costs and rate base of the two service areas for ratemaking purposes, as in 1995 at this time. However, we want to maintain the cost differential between the two service areas and revisit the reasonableness of continued consolidation in the future. Except for power, the office expenses, maintenance, and other expenses per customer are still similar. As plant improvements in TPSA are made in the future, rate base per customer will be similar in both service areas.

Branch proposes to retain cost linking for ratemaking purposes because without this linking, SNSA customers would have a much larger rate increase than TPSA. The water company has not had a general rate increase since January of 1995. Since then, SNSA has added about $244,000 in rate base, primarily for a new well and new mains. Because the SNSA has only 85 customers, rates would have to increase from $275.92 to $933.15 per year for flat rate customers (a 238% increase) if the Skyland-Nielsen service area were treated as a separate unit for ratemaking purposes.

TPSA has added about $492,000 in rate base since 1995, primarily for a new well and mains. Because TPSA has 435 customers, rates would increase from $284.15 to $489.35 per year for ¾" flat rate customers, a 72.2% increase, if TPSA was treated as a separate unit for ratemaking purposes.

With rate bases for TPSA and SNSA combined, and flat rate customers of each service area paying the same rate and paying their own electricity costs, TPSA rates will increase from $284.15 to $538.12 per year for ¾" flat rate customers, an 89.4% increase. Since the cost of electricity for SNSA customers is $87.23 more per year than for TPSA customers, SNSA flat rates will increase from $275.92 per connection to $625.35 per connection. This will be a 126.6% increase.

The rate for private fire protection service will rise from $118.30 to $215.45, an 82.1% increase.

New metered rate schedules for SNSA would be added to the company's tariff schedules. The rates would be the same as TPSA metered rates plus a pumping adder to offset higher electricity expense.

Branch proposes that rates for TPSA metered customers not be changed in this proceeding. Comparison of metered rates and flat rates in TPSA shows that the cost to metered customers is much higher than to flat rate customers. At current rates and average water usage, a customer with a ¾" meter pays $626.46 per year for service charge plus water, while a flat rate customer with the same ¾" connection pays only $284.15. At the Branch-proposed rates for Test Year 2006, the average metered customer with a ¾" meter will still pay $626.46 per year, while a flat rate customer with the same ¾" connection will pay $538.12.

TPWC should meter all its flat rate water customers in the future. Installation of meters will promote conservation of its water resources as well as provide TPWC with information on water losses. TPWC must submit a plan to meter all its flat rate customers at the time of its next general rate case filing.

Cost of Capital

Rate Of Return on Rate Base

TPWC has requested a rate of return on rate base of 14.0%. Effective February 27, 2006, the Water Division's Utility Audit, Finance, and Compliance Branch (A&C) recommends a rate of return on rate base from 12.00% to 13.00% for 100%-equity-financed Class C water companies [those with 500 to 2,000 customers]. TPWC is a Class C water company with 520 active customers. The Water Branch of the Water Division recommends the maximum rate of return on rate base authorized for a Class C water company, 13.0%. With a rate base of $866,303 this would require a net revenue of $112,619 after expenses and deductions.

Rate Of Margin

A&C recommends a rate of margin of 23% for Class C water companies. The rate of margin is a percentage of the sum of operating expenses plus taxes and depreciation. A 23% rate of margin would be $56,468.

Rate of Return on Rate Base Selected

As required by the Commission in Resolution W-4524 of March 17, 2005, both Rate of Return on Rate Base and Rate of Margin must be calculated. Decision 92-03-093 of March 31, 1992 requires that Branch recommend the option which gives the water company the greater return. Rate of Return on Rate Base has been selected because it will provide the greater revenue to the utility.

SDWBA Overcollection

On January, 2005, TPWC made its final payment on a Safe Drinking Water Bond Act (SDWBA) loan. By Resolution W-4562 of September 22, 2005, the Commission authorized termination of the SDWBA surcharge, required an audit of the SDWBA Trust Account, and ordered that TPWC reimburse its customers for any surcharge overages or overcollection when authorized by the Commission. An October 16, 2006 report by the A&C found that there was a balance in the Trust Account of $20,231.04. The report recommended the balance, plus any interest accrued in the bank account until the time of distribution, be distributed back to the ratepayers.

COMMENTS

A draft Resolution was circulated on December 12, 2006. Comments were received from several customers, and from TPWC. Some customers requested that the Commission defer a decision, and one comment requested the Commission state who owns the water company.4 TPWC's comments cited incorrect income tax calculations, disagreement on the amount of plant in service, and a request to base purchased power expenses on 2006 billings. Tax calculations, purchased power expenses, and plant in service were reviewed and changed.

FINDINGS

1. The Branch's recommended summary of earnings (Appendix A) is reasonable and should be adopted.

2. It is reasonable to combine rate bases and expenses for the two service areas for ratemaking purposes.

3. The rate increase proposed by the Branch is justified and the resulting rates are just and reasonable.

4. The rates proposed by the Branch (Appendix B) are reasonable and should be adopted.

5. The quantities (Appendix D) used in preparation of this resolution are reasonable and should be adopted.

6. Repayment of customers for the overcollection of SDWBA surcharge, plus accrued interest, is just and reasonable.

7. TPWC has not filed a correct Annual Report since 1995, and the service area maps in the tariff book are not correct.

8. TPWC has 482 flat rate customers, and 38 customers with meters. The company should have a plan to meter all its flat rate customers.

THEREFORE IT IS ORDERED THAT:

1. Authority is granted under Public Utilities Code Section 454 to Tahoe Park Water Company, to file an advice letter incorporating the summary of earnings and the revised rate schedules attached to this resolution as Appendices A and B, respectively, and concurrently cancel its presently effective rate Schedules Nos. 1A, General Metered Service; 2RA-TP and 2RA-Sky, Residential Flat Rate Service; and 4, Private Fire Protection Service. The effective date of the revised schedules shall be five days after the date of filing.

2. Tahoe Park Water Company is authorized to increase its annual revenues by $145,925 or 70.6% for test year 2006.

3. Rate bases and expenses except electricity for the Tahoe Park Main service area and Skyland-Nielsen service area shall be combined for ratemaking purposes.

4. Tahoe Park Water Company shall correct its Annual Reports to show the adopted quantities, the listing of storage facilities, water mains, meters and services, contributions and depreciation reserve. The Annual Report due March 31, 2007, has not been received.

5. Tahoe Park Water Company shall file new service area maps for the tariff book, showing all lots served and excluded, by July 31, 2007.

6. Tahoe Park Water Company shall give a surcredit to repay customers from the SDWBA Trust Account, until the balance of the overpayment plus interest is zero. Repayment shall be complete by July 31, 2008. Tahoe Park Water Company shall notify Water Branch when repayment has been completed.

7. Tahoe Park Water Company is ordered to submit a plan to meter all its flat rate customers at the time of its next general rate case filing.

8. This resolution is effective today.

I certify that the foregoing resolution was duly introduced, passed, and adopted at a conference of the Public Utilities Commission of the State of California held on May 24, 2007; the following Commissioners voting favorably thereon:

APPENDIX A

TAHOE PARK WATER COMPANY

SUMMARY OF EARNINGS

TEST YEAR 2007

Operating Revenue

Flat Rates $149,346 $274,305 $147,797 $288,599 $288,599

Metered Rates 57,788 106,138 57,005 60,641 60,641

Other Revenue 1,778 3,265 1,778 3,265 3,265

CPUC Fees (3,454) (6,344) -- -- --

Total 205,458 377,364 206,580 352,505 352,505

Operating Expenses

Power 31,311 31,311 27,716 33,485 33,485

Other Volume Related 1,846 1,846 1,846 1,846 1,846

Employee Labor 25,099 25,099 22,770 22,770 22,770

Materials 9,224 9,224 9,224 9,224 9,224

Contract Work 5,314 5,314 5,314 5,314 5,314

Transportation Expense 5,637 5,637 5,637 5,637 5,637

Other Plant Maintenance 1,117 1,117 1,117 1,117 1,117

Office Salaries 3,458 3,458 3,116 3,116 3,116

Management Salaries 18,612 22,000 16,886 19,960 19,960

Employee Pen. & Ben. 4,149 4,149 4,149 4,149 4,149

Uncollectible Expense 1,107 1,107 1,107 1,107 1,107

Office Supplies Expense 4,436 4,436 4,436 4,436 4,436

Professional Services 13,028 16,000 16,000 16,000 16,000

Insurance 4,419 4,419 4,419 3,618 3,618

Regulatory Comm. Exp. 5,430 5,430 5,430 5,430 5,430

General Expense 2,714 2,714 2,714 2,714 2,714

Total Operating Expense 136,903 143,262 130,880 139,923 139,923

Depreciation Expense 23,270 23,270 26,204 26,204 26,204

Other Than Income Tax 3,947 9,981 13,974 13,974 13,974

Income Taxes 600 40,563 8,226 59,784 59,784

Total Deductions 177,112 217,075 179,284 239,885 239,885

Utility Operating Income 28,346 160,289 25,537 112,619 112,619

Interest Expense ( 47,630) (47,630) 0 0 0

Net Income (19,284) 112,659 27,296 112,619 112,619

RATE BASE

Average Plant 1,310,313 1,310,313 1,320,588 1,320,588 1,320,588

Avg. Accum. Deprec. 274,645 274,645 209,738 209,738 209,738

Net Plant 1,310,313 1,310,313 1,110,850 1,110,850 1,110,850

Add: Materials 10,000 10,000 10,000 10,000 10,000

Working Cash 19,253 20,147 13,310 13,310 13,310

Less: Contributions 203,717 203,717 209,107 209,107 209,107

Advances 58,750 57,281 58,750 58,750 58,750

Rate Base 803,923 804,817 866,303 866,303 866,303

Rate Of Return 0.86% +14.0% +3.15% +13.0% +13.0%

APPENDIX B

PAGE 1

TAHOE PARK WATER COMPANY

Schedule No. 1A

ANNUAL METERED SERVICE

APPLICABILITY

TERRITORY

RATES

APPENDIX B

PAGE 2

TAHOE PARK WATER COMPANY

Schedule No. 1B

ANNUAL METERED SERVICE

APPLICABILITY

TERRITORY

RATES

APPENDIX B

PAGE 3

TAHOE PARK WATER COMPANY

Schedule No. 1B

(continued)

ANNUAL METERED SERVICE

SPECIAL CONDITIONS

1. The annual service charge and surcharge apply to service during the 12-month period commencing January 1, and are due in advance. When a customer has been a customer of the utility for at least 12 months, he may elect, at the beginning of the calendar year, to pay prorated service charge and surcharge in advance at intervals of less than one year in accordance with the utility's established billing periods.

2. The opening bill for metered service, except upon conversion from flat rate service, shall be established annual service charge and surcharge for the service. Where initial service is established after the first day of any year, the portion of such annual charge and surcharge applicable to the current year shall be determined by multiplying the annual charge and surcharge by one three-hundred-sixty-fifth (1/365) of the number of days remaining in the calendar year. The balance of the payment of the initial annual charge and surcharge shall be credited against the charges for the succeeding annual period. If service is not continued for at least one year after the date of initial service, no refund of the annual charges and surcharge shall be due the customer.

3. The established billing cycle for water used is every six months. Meters will be read and quantity charges billed in accordance with this billing cycle, except that meters may be read and quantity charges billed during the winter season at greater intervals due to weather.

4. A one-time SDWBA over-collection refund will be made to each customer in proportion to the amounts collected before the surcharge was discontinued.

5. All bills are subject to the reimbursement fee set forth on Schedule No. UF.

APPENDIX B

PAGE 4

TAHOE PARK WATER COMPANY

Schedule No. 2RA - TP

ANNUAL RESIDENTIAL FLAT RATE SERVICE

APPLICABILITY

TERRITORY

RATES

For a single-family residential

unit or small business served

by a 3/4-inch or smaller service

connection, including premises $538.12 (I)

For each additional single-family

residential unit or small business

establishment on the same premises

and served from the same 3/4-inch or

smaller diameter service connection. $430.50 (I)

For 1-inch diameter flat rate service $914.80 (I)

APPENDIX B

PAGE 5

TAHOE PARK WATER COMPANY

ANNUAL RESIDENTIAL FLAT RATE SERVICE

APPLICABILITY

TERRITORY

RATES

For a single-family residential

unit or small business served

by a 3/4-inch or smaller service

connection, including premises $538.12 $ 87.23 (I)

For each additional single-family (N)

residential unit or small business |

establishment on the same premises |

and served from the same 3/4-inch" or |

smaller diameter service connection $430.50 $ 69.78 (N)

For 1-inch diameter flat rate service $914.80 $152.92 (N)

APPENDIX B

PAGE 6

TAHOE PARK WATER COMPANY

Schedule No. 4

PRIVATE FIRE PROTECTION SERVICE

APPLICABILITY

TERRITORY

RATES

APPENDIX C

TAHOE PARK WATER COMPANY

COMPARISON OF RATES

METERED RATES

FLAT RATES

For a single-family residential unit or

small business served by a 3/4-inch or smaller

service connection, including premises $284.15 $538.12 89.4%

For each additional single-family residential

unit or small business establishment on

the same premises and served from the

same 3/4-inch or smaller service connection $228.44 $430.50 88.5%

For 1-inch diameter flat rate service . $473.84 $914.80 93.1%

Per inch of diameter of service connection

for private fire protection service $118.30 $215.45 82.1%

For a single-family residential unit or small

business served by a 3/4-inch or smaller

service connection, including premises $275.92 $625.35 126.6%

For each additional single-family residential

unit or small business establishment on

the same premises and served from the

same 3/4-inch or smaller service connection new $500.28 n/a

For 1-inch diameter flat rate service new $1,067.72 n/a

APPENDIX D

TAHOE PARK WATER COMPANY

ADOPTED QUANTITIES

TEST YEAR 2007

1 In addition, a Safe Drinking Water Bond Act (SDWBA) surcharge was discontinued. A one-time surcharge was approved to reimburse the company for Department of Health Services fees for the years 2003 through 2005, and a one-time surcharge was approved to offset the increased cost of electric power for the last 5 years.

2 The current Tahoe Park Main tariff is $47.03 higher than the Skyland-Nielsen tariff and has a $7.58 pumping zone adder. The current Skyland-Nielsen tariff has a $40.24 pumping adder.

3 The only loans for which Branch would recommend approval would be loans to construct utility plant. TPWC would be entitled to an 8% return on plant built on borrowed money rather than the recommended 13.0% on equity funded plant.

4 Application 06-11-020, filed on November 28, 2006, requested authorization to transfer ownership of the water company from David R. Robertson to Richard M. Dewante. A decision had not been issued as of May 2, 2007.

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