Findings of Fact

1. CalAm's WRAM balancing account protects both CalAm and its ratepayers.

2. Allowing all of CalAm's past and ongoing capital expenditures on its San Clemente dam retrofit project, and its Carmel River dam project, as CWIP in rate base is fair to both CalAm and its ratepayers.

3. The adopted summaries of earnings presented in Appendix A, and the quantities and calculations included as Appendix D which underlie them, are reasonable for ratemaking purposes.

4. It is not necessary at this time to establish an additional memorandum account to track funds CalAm may be required to expend on Plan B.

5. There is insufficient information in the record to determine in this proceeding that the amounts in CalAm's WRAM balancing account, its State Water Resources Control Board Order WR 95-10 memorandum account, its ESA memorandum account, and its expense balancing account, are reasonable and should be recovered from ratepayers.

6. The capital structure, cost of debt, rate of return on equity, and rate of return on rate base shown in Table 3 are reasonable for ratemaking.

7. No party has made a persuasive argument for changing the Commission's standard method for determining whether to postpone or reduce step increases.

8. CalAm's per-capita rate design is still needed and should be continued in those Monterey Division areas where it now applies.

9. CalAm's proposed four-block rate design is needed to promote conservation in the Hidden Hills and Ryan Ranch area.

10. Combining Ambler Park and Bishop into one tariff will reduce administrative costs and be fair to affected customers.

11. Maintaining the quantity rate for the first block at 50% of the second block rate in the per-capita rate design is justified as a simple and effective means of providing a conservation incentive.

12. Temporary water sales may reasonably be priced at higher than the standard rate to produce additional revenue and to provide a conservation incentive.

13. Recovering WRAM balancing account undercollections from all customers despite the fact that only residential customers give rise to them is fair to non-residential customers, in part because non-residential customers' quantity rates in the highest block are lower than those for residential customers.

14. The TY2003 rates and the TY2004 and AY2005 step increases in Appendix B have been designed to produce revenues consistent with the Monterey Division summaries of earnings adopted in this order.

15. There is some evidence of service quality problems in Monterey Division, but it is not sufficient to justify a rate of return penalty. There is no persuasive evidence of what the underlying causes of CalAm's service problems might be, or how they should be corrected.

16. The orders MPWMD would have us issue through its "extraordinary requests" are outside the scope and not sufficiently supported by the record of this GRC proceeding.