Conclusions of Law
1. The ratemaking treatment the Commission accepted in approving settlements in CalAm's previous Monterey Division general rate cases carries no precedential value for the Commission's determination of similar or related issues in this proceeding.
2. Allowing CalAm to recover in rates the past, one-time startup costs associated with American Water Works Service Company's Shared Services Center and Customer Call Center would be prohibited retroactive ratemaking under Public Utilities Code Section 728.
3. The revised rates and step increases set forth in Appendix B are justified.
4. CalAm should be authorized to implement the rate changes set forth in this order.
5. ORA's Motion to Submit Under Seal Section IV.K of Its Concurrent Brief should be granted.
6. This decision should be made effective immediately to allow CalAm an opportunity to earn the return found reasonable for it in TY2003.
IT IS ORDERED that:
1. California American Water Company (CalAm) is authorized to file in accordance with General Order 96, and make effective on not less than five days' notice and not earlier than January 1, 2003, the revised tariff schedules for 2003 included as Appendix B to this order. The revised tariff schedules shall apply to service rendered on and after their effective date.
2. On or after November 5, 2003 and November 5, 2004, CalAm is authorized to file advice letters in conformance with General Order 96, with appropriate supporting workpapers, requesting the step rates authorized in Appendix B of this decision for 2004 and 2005, respectively. If the rate of return on rate base for the Monterey Division, taking into account the rates then in effect and normal ratemaking adjustments for the twelve months ending September 30, 2003 and September 30, 2004, respectively, exceeds the lower of (a) the rate of return found reasonable by the Commission for any non-Citizens district of CalAm for the corresponding period in the most recent decision, or (b) the rate of return found reasonable in this order, then CalAm shall file for a lesser increase. The requested rates shall be reviewed by the Commission's Water Division and shall go into effect after Water Division's determination that they conform to this order. Water Division shall inform the Commission if it finds that the proposed rates do not conform to this order or other Commission decisions. The revised tariff schedules shall made effective no earlier than January 1, 2004 and January 1, 2005, respectively, and shall apply to service rendered on and after their effective date.
3. CalAm is authorized to file advice letters seeking Commission authorization for rate offsets in Monterey Division for the following capital projects when each has been completed and placed in service, no earlier than the year indicated and at costs not to exceed those indicated:
a. Sludge drying beds at Begonia plant (project #2). Test year 2004; maximum cost of $750,000.
b. New well and arsenic treatment at Hidden Hills (project 02-083). Attrition year 2005; maximum cost of $1,750,000.
c. Arsenic treatment at Ambler Park and Luzen wells (project 02-085). Attrition year 2005; maximum cost of $4,100,000.
d. Carmel Valley Road 24" main (project #14). Attrition year 2005; maximum cost of $5,000,000.
4. CalAm is authorized to continue its Water Revenue Adjustment Mechanism balancing account until the effective date of the Commission's general rate case decision in Monterey Division's next general rate case cycle, currently anticipated to be for test year 2006.
5. CalAm is authorized to establish a rationing memorandum account once it is known that rationing is to be declared under Monterey Peninsula Water Management District (MPWMD) Ordinance 92, and thereafter to track in that account its rationing-related expenditures. Only those expense and capital amounts that are incremental to its normal operations and not otherwise already included in rates are to be tracked in the account. CalAm shall submit to the Commission's Water Division approximately 30 days before the effective rationing date notice that the memorandum account is being established and an estimate of the expenditures it expects to book in the account. Authorization to establish and make entries into the account is not intended to assure that any or all expenditures booked in it are recoverable in rates; the Commission will make that determination, and the method for any such recovery, only after it has received CalAm's subsequent request and reviewed its justification.
6. CalAm is authorized to establish a memorandum account to track costs billed to it by MPWMD for MPWMD's actual costs under the Ordinance 92 conservation and rationing plan; or, to the extent it already has such a memorandum account as a result of our prior authorization in D.00-03-053, to continue that account without the previous annual dollar limitation. Authorization to establish and make entries into the account is not intended to assure that any or all expenditures booked in it are recoverable in rates; the Commission will make that determination, and the method for any such recovery, only after it has received CalAm's subsequent request and reviewed its justification.
7. CalAm is authorized to further extend the memorandum account authorized by D.98-08-036 and extended by D.00-03-053 to record fines, if any, due to failure by CalAm to meet the requirements of State Water Resources Control Board Order WR 95-10 and incurred not later than the effective date of the Commission's general rate case decision in Monterey Division's next general rate case cycle. Recovery in rates of any such fines may be allowed provided that the Commission determines that CalAm's management and operations related to those fines has been reasonable and their recovery is justified.
8. CalAm shall account for its Endangered Species Act-related capital expenditures for test year 2003 and beyond as Construction Work In Progress associated with the appropriate capital projects to which they relate.
9. The summaries of earnings presented in Appendix A, and the quantities and calculations included as Appendix D which underlie them, are adopted.
10. ORA's Motion to Submit Under Seal Section IV.K of Its Concurrent Brief is granted. Section IV.K of ORA's Concurrent Brief, along with exhibit CA-15, pages 3A-1 and 3A-2 of exhibit ORA-1A, and the portion of the hearing transcript placed under seal by the Administrative Law Judge, shall remain under seal and shall not be made accessible or disclosed to anyone other than Commission staff and parties to this proceeding except on the further order or ruling of the Commission, the Assigned Commissioner, the assigned Administrative Law Judge, or the Administrative Law Judge then assigned as Law and Motion Judge.
11. CalAm's requests in Application 02-04-022 are granted as set forth above, and in all other respects are denied.
12. Application 02-04-022 is closed.
This order is effective today.
Dated ____________________, at San Francisco, California.
