7. Comments on Proposed Decision

The proposed decision of the Administrative Law Judge (ALJ) for the current phase of this matter was mailed to the parties in accordance with Pub. Util. Code § 311(d) and Rule 77.1 of the Rules of Practice and Procedure. In its comments on the proposed decision, SCWC argues that the PRP payments (less the company's litigation expenses) should not be refunded to ratepayers because SCWC probably could not have prevailed in its claim for water rights in the Charnock Basin. SCWC asserts that if the City had successfully shown that its Basin water rates were superior to those of SCWC (because of earlier and substantially greater use by the City), SCWC probably would not have been permitted to pump from the Basin, and ratepayers still would have had to pay for purchased water instead of pumped water. SCWC argues that even if it had prevailed, the availability of pumped water would have applied only to the rate case years beginning in 1999 and would not have amounted to more than $750,000 in savings for ratepayers.

ORA responds that neither the record nor SCWC's previous pleadings support an argument that SCWC's rights to Basin water were worthless. It notes that the City agreed to pay SCWC some $.3675 million as the fair market value of 1,050 acre-feet of uncontaminated Basin water to which SCWC's Charnock wellfield plant (which could only have value if SCWC had Basin water rights). Moreover, ORA asserts, the City agreed to indemnify SCWC against repayment of $5 million that SCWC had received from PRPs, a risk that the City would not have taken unless it concluded that SCWC could demonstrate its water rights. ORA argues that the $750,000 cap on ratepayer damages proposed by SCWC is inconsistent with SCWC's earlier claims that a far greater amount of Charnock water would have been available for a far longer period of time absent the pollution.

We agree with ORA that SCWC's unusual assertion that its claims to Charnock water rights (which it was spending millions of dollars to defend) were unlikely to succeed. SCWC had been tapping Basin water for some 65 years, and it had recently made substantial investments in its Charnock wellfield plant to continue and increase its pumping. SCWC had pumped 577 acre-feet from the Basin in 1995, and the record supports a conclusion that pumping at that or greater levels would have continued in 1996 and later years but for the pollution. The settlement amounts agreed to by the City and ordered by the EPA estimate several millions of dollars that were spent by SCWC (and recovered in rates from ratepayers) because of the unavailability of pumped water. We reject SCWC's conclusory arguments to the contrary.

At the request of SCWC, we will clarify that SCWC may recover from the PRP payments all of its current and pending litigation and consultant costs and fees (estimated at the time of hearing at $800,000) incurred in connection with both the lawsuit against the City and the lawsuit against the PRPs. ORA agrees that recovery of litigation costs from PRP payments is appropriate in this case.