1.00 General Office Expenses

Complement

1.01 ORA's General Office report stated that ORA's general office payroll expenses included 19 new employee positions for 2001 (page 2-5). Included were a CIS Functional Team Member, a CIS Functional Help Desk Member, and a CIS project leader; however, ORA's revenue requirement inadvertently did not include the salaries for the three positions and included the salary for an environmental assistant twice. ORA agrees that its general office payroll expenses should be increased by $182,479 in 2002 and $187,953 in 2003 to reflect these positions.

1.02 After further discussions concerning the responsibilities and comparable compensation for three existing positions (Database Administrator, Network Manager, Network Administrator) that were upgraded in 2001, the parties agree that it is reasonable to add to ORA's estimates $89,000 in 2002 and $91,670 in 2003 to reflect the new assignment of duties and responsibilities.

1.03 During discussions with ORA, Cal Water provided additional detail concerning the duties and responsibilities for three new engineering positions: an electrical engineer in 2002, an electrical technician in 2002, and a production engineer in 2003. Since the majority of salaries for these positions is capitalized (87%) and reflected in the district capital project estimates, ORA accepts and the parties agree that $14,033 in 2002 and $22,011 in 2003 or 13% of the salaries for these positions should be added to ORA's estimates of payroll expenses for in-house expertise in these areas.

1.04 After Cal Water provided additional justification concerning the need to upgrade its web site to meet the Commission's requirements for posting tariffs and filings with the Commission and the customer benefits of accessing customer specific information, ORA accepts and the parties agree that $80,000 in 2002 and $82,400 in 2003 for one senior web developer should be added to ORA's payroll estimates.

Other Operating Expenses

1.05 Cal Water clarified that $43,000 in its capital costs included the annual maintenance expenses for the LIMS system. ORA properly removed this expense as a capital cost, but did not include the estimate in ORA's annual expense estimates. ORA and Cal Water agree that the annual maintenance contract expense should be added to ORA's expense estimates for 2002 and 2003 in account 742.

1.06 Cal Water's representatives from its Informations Systems (IS) department detailed the need for additional data storage and demonstrated that a centralized storage system was the most cost effective alternative. Additionally, the IS representatives provided additional information concerning a Citrix system, which will allow Cal Water to upgrade its windows operating system that will no longer be supported by Microsoft. These projects are more fully discussed under General Office Plant Improvements; however, ORA and Cal Water agree that these capital improvements would save administrative costs of $50,000 in 2002 and 2003. ORA's estimate for Account 792 should be reduced accordingly.

1.07 Cal Water provided additional justification showing that $1 million of the $1.2 million in credit associated with the curtailment of the Dominguez Water Corporation pension plan in 2000 was a one-time saving due to the Cal Water/Dominguez merger and not an ongoing benefit to Cal Water's pension plan. Accordingly, ORA and Cal Water agree that this one-time merger related cost savings should be treated in the same manner as one-time merger related costs and that only $200,000 of the Dominguez pension credit should be reflected in ORA's estimates of account 795. Additionally, ORA and Cal Water agree that a $200,000 adjustment should be spread over three years, the rate case cycle. ORA had reflected its original $1.2 million credit over two years, however, after further analysis and discussion concerning the impact on attrition rates ORA agrees that this adjustment should be evenly spread over the three year rate case cycle. Thus, ORA agrees that its estimate of account 795 should be increased by $533,333 per year.

1.08 As with the pension adjustment above ORA and Cal Water agree that the adjustment to the injuries and damages account should be amortized over three years instead of two as shown in ORA's report. This increases ORA's estimates for account 794 by $67,000 per year.

1.09 ORA and Cal Water corrected calculation errors in account 798 and 799, increasing ORA's estimates in those categories by approximately $75,000 annually and $40,000 annually, respectively.

1.10 ORA and Cal Water clarified that pensions and benefits calculations for general office should be based in part on total company changes to complement. Therefore, ORA and Cal Water agree that $155,600 in 2002 and $272,100 in 2003 Pensions and Benefits should be added to ORA's original position.

Synergies

1.11 In its General Office report ORA removed Cal Water's proposed adjustment for synergies/savings related to the combining of Dominguez Water Corporation's general office functions with Cal Water's general office functions. On March 8, 2002, Cal Water filed a Petition to Modify Decision 00-05-047, the Commission's decision in the Dominguez/Cal Water merger Application 99-02-004, requesting authority to file the first combined rate application for Cal Water's Hermosa-Redondo and Palos Verdes districts and Dominguez' South Bay district in July of 2002. As stated in the petition ORA does not intend to oppose Cal Water's request.

After further discussion concerning Cal Water's first combined application ORA and Cal Water agree that the issue of general office merger related synergies will be addressed in that proceeding. Moreover, since that proceeding will also address synergies related to the combining of Dominguez' South Bay district with the two Cal Water districts, ORA and Cal Water agree to defer the issue of synergies in the instant proceeding pending the outcome of the combined application proceeding. Accordingly, ORA and Cal Water agree that the Commission should authorize Cal Water to establish a memorandum account that will track the revenue requirement associated with Cal Water's proposed synergies adjustment for subsequent recovery, if found reasonable. Furthermore, Cal Water agrees to accept ORA's proposed treatment of general office synergies in the instant proceeding.