ALJ/MAB/jyc DRAFT Agenda ID #2256

Ratesetting

Decision PROPOSED DECISION OF ALJ BUSHEY (Mailed 5/20/2003)

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

In the Matter of the Application of California Water Service Company (U 60 W), a Corporation, for an Order Authorizing It to Increase Rates Charged for Water Service at Each of Its Operating Districts to Recover Increased Operating Expenditures at Its General Office.	Application 01-09-062 (Filed September 10, 2001)
And Related Matters.	Application 01-09-063 Application 01-09-064 Application 01-09-065 Application 01-09-066 Application 01-09-067 Application 01-09-068 Application 01-09-069 Application 01-09-070 Application 01-09-071 Application 01-09-072 Application 01-09-073 Application 01-09-074

McCutchen Doyle Brown & Enersen, LLP, by Gregory Bowling, Attorney at Law; Shawn Heffner; Francis S. Ferraro; and Thomas Smegal; for applicant.

Morgan, Lewis & Bockius, LLP, by  
Anthony Ciasulli, Attorney at Law, for North Ranch Country Club.

James Weil, for Aglet Consumer Alliance, interested party.

Sung Han, for Office of Ratepayer Advocates.

Laura J. Tudisco, Attorney at Law, for Office of Ratepayer Advocates.

TABLE OF CONTENTS

Title Page

OPINION AUTHORIZING RATE INCREASES 22

1. Summary 22

2. Description of Proceeding 55

3. Background and Procedural History 77

4. Removal of Salinas District from Consolidated Proceedings 1010

5. Decision Setting Effective Date 1111

6. Organization of this Decision 1111

7. Applicable Legal Standards 1111

7.1 Burden of Proof 1111

7.2 Standard of Proof 1515

7.3 Standard for Evaluating Joint Recommendations 1616

8. General Office Issues 1717

8.1 Allocation of General Office Costs to Out-of-State
and Affiliate Operations 1818

8.2 Allocation of Capital Costs to Unregulated Operations 2525

8.3 Payroll 2828

8.4 Office Expenses 3131

8.5 Outside Services 3333

8.6 Expenses for the Board of Directors of the California
Water Service Group 3737

8.7 General Office Capital Items 3838

8.8 Cal Water Web Site 4040

8.9 Small Mains 4646

8.10 Postage 5050

8.11 ¾" Meters 5151

8.12 Low-Income Rate Assistance Program 5252

8.13 Rate of Return 5555

9. District-Specific Issues 5656

9.1 District Overview 5656

9.2 Painting Tanks and Reservoirs 5757

9.3 Bear Gulch 5858

9.4 Chico District 6161

9.5 Dixon 7272

9.6 East Los Angeles 7373

9.7 Hermosa-Redondo 7474

9.8 King City 7575

9.9 Livermore 7575

9.10 Los Altos 7777

9.11 Marysville 7878

9.12 Mid-Peninsula District 7979

9.13 Stockton 8181

9.14 Visalia 8282

9.15 Westlake 8383

9.16 Willows 8585

Comments on Proposed Decision 8686

Assignment of Proceeding 8686

Findings of Fact 8686

Conclusions of Law 9191

ORDER 9696

ATTACHMENT A - Comparison of Rate Changes Provided In Cal Water's Applications, ORA's Report, and the Joint Recommendation.

ATTACHMENT B - Joint Recommendations of the Office of Ratepayer Advocates and California Water Service Company.

ATTACHMENT C - Joint Recommendation for Calculation of Reclaimed Water Rates.

ATTACHMENT D - Water Utility Infrastructure Act of 1995, codified as Pub. Util. Code §§ 789.1 and 790.

ATTACHMENTS E - X - Tables

OPINION AUTHORIZING RATE INCREASES

1. Summary

California Water Services Company (Cal Water), is authorized to increase rates as follows:

Bear Gulch District

$514.50 (or 3.67 %) for test year 2002

$461.50 (or 3.18 %) for test year 2003

$423.30 (or 2.83 %) for attrition year 2004

$423.30 (or 2.75 %) for attrition year 2005

Chico District

$1,320.14 (or 15.39 %) for test year 2002

$335.30 (or 3.39 %) for test year 2003

$116.50 (or 1.14 %) for attrition year 2004

$116.50 (or 1.13 %) for attrition year 2005

Dixon District

$74.53 (or 7.21 %) for test year 2002

$34.60 (or 3.12 %) for test year 2003

$25.40 (or 2.22 %) for attrition year 2004

$25.40 (or 2.18 %) for attrition year 2005

East Los Angeles District

$1,176.44 (or 6.76 %) for test year 2002

$321.40 (or 1.73 %) for test year 2003

$283.20 (or 1.50 %)for attrition year 2004

$283.20 (or 1.48 %) for attrition year 2005

Hermosa-Redondo District

$1,838.84 (or 12.14 %) for test year 2002

$210.40 (or 1.24 %) for test year 2003

$105.70 (or 0.61 %) for attrition year 2004

$105.70 (or 0.61 %) for attrition year 2005

King City District

$156.04 (or 14.84 %) for test year 2002

$75.20 (or 6.23 %) for test year 2003

$44.3 (or 3.45 %) for attrition year 2004

$44.3 (or 3.34 %) for attrition year 2005

Livermore District

$98.07 (or 1.02 %) for test year 2002

$370.40 (or 3.79 %) for test year 2003

$202.10 (or 1.99 %) for attrition year 2004

$202.10 (or 1.96 %) for attrition year 2005

Los Altos District

$786.01 (or 6.63 %) for test year 2002

$357.10 (or 2.83 %) for test year 2003

$295.70 (or 2.28 %) for attrition year 2004

$295.70 (or 2.23 %) for attrition year 2005

Marysville District

$246.92 (or 19.22 %) for test year 2002

$130.90 (or 8.55 %) for test year 2003

$125.60 (or 7.55 %) for attrition year 2004

$125.60 (or 7.02 %) for attrition year 2005

Mid-Peninsula District

$901.71 (or 5.09 %) for test year 2002

$191.20 (or 1.03 %) for test year 2003

$144.00 (or 0.77 %) for attrition year 2004

$144.00 (or 0.76 %) for attrition year 2005

Stockton District

$1,238.71 (or 7.53 %) for test year 2002

$328.40 (or 1.86 %) for test year 2003

$271.40 (or 1.51 %) for attrition year 2004

$271.40 (or 1.48 %) for attrition year 2005

Visalia District

$452.89 (or 5.01 %) for test year 2002

$312.80 (or 3.30 %) for test year 2003

$116.70 (or 1.19 %) for attrition year 2004

$116.70 (or 1.18 %) for attrition year 2005

Westlake District

$655.31 (or 8.49 %) for test year 2002

$97.60 (or 1.17 %) for test year 2003

$47.30 (or 0.56 %) for attrition year 2004

$47.30 (or 0.56 %) for attrition year 2005

Willows District

$93.38 (or 10.91 %) for test year 2002

$32.20 (or 3.39 %) for test year 2003

$24.50 (or 2.50 %) for attrition year 2004

$24.50 (or 2.44 %) for attrition year 2005

These increases reflect an 8.9% rate of return in all years. Although we have set attrition increases for 2005, implementation of the increases is subject to change as part of the proceeding required by § 455.2, as discussed below. The low-income assistance rate proposed by Cal Water is rejected due to failure to meet applicable standards.

We have evaluated numerous issues that reflect and relate to the way Cal Water operates its business. Overall, we find that Cal Water is successful in providing safe, reliable, and reasonably priced water service to its customers. Cal Water also has persuaded us that it needs to increase its level of capital projects to ensure the long-term sustainability of its system. Preserving and enhancing the water system is in the best interests of both Cal Water's customers and its shareholders. Because we are authorizing an unprecedented level of capital expenditures, Cal Water must be more forthcoming and comprehensive in its presentations to the Commission so that we can monitor its efforts to see that the programs we authorize come to fruition. Improving its presentations will also assist the Office of Ratepayer Advocates (ORA) and intervenors in performing their duties.

In today's decision, we also find that Cal Water has not been persuasive on several cost components, particularly general office expenses. These costs have been relentlessly increasing. Such increases require thorough and detailed explanations, which have not yet been presented. We encourage Cal Water to review these expenditures and, to the extent management believes that the expenses will benefit ratepayers, to articulate a well-supported rationale in future rate cases.