10. Comments on Proposed Decision
The proposed decision of the assigned ALJ in 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. Cal Water, Aglet, and ORA filed comments and Aglet and Cal Water filed reply comments.
In their respective comments ORA and Aglet supported the overall outcome but both recommended clarifications and correction of minor errors, the bulk of which have been incorporated. ORA also recommended that the Chico service center issue be set for a subsequent phase of this proceeding. Given the need for substantial additional information, a separate application and docket is a more efficient approach. Aglet requested that we include a discussion of the attrition mechanism. Due to the complexity of that topic, we decline to do so at this time.
Cal Water's comments identified 12 issues on which it disagreed with the proposed decision. Each issue is addressed below:
1. Official Notice of Cal Water's Annual Report and Web Site. Cal Water stated that had it been properly informed of the Commission's intent to take official notice of these items, it would have provided additional information to the Commission. The assigned ALJ responded by allowing another round of comments. In its comments, Cal Water restated its procedural objections to taking official notice but offered no substantive analysis disputing that the record shows no allocation of web site costs among the affiliates, and that Cal Water has significant numbers of unregulated customers. Cal Water has not shown that the web site or annual report is inaccurate, unreliable, or otherwise not suitable for official notice. Cal Water requested that we reopen the record to take evidence but gave no hint as to what that evidence it might offer. Similarly, Cal Water requested the right to cross-examine witnesses but both officially noticed items were produced entirely by Cal Water, thus it is not at all clear what witnesses Cal Water would seek to cross examine.28 In taking official notice, these two documents are considered part of the administrative record for the proceeding, and we rely on the documents for limited purposes. The annual report is used only to show that Cal Water has substantial unregulated operations, and the web site only to show that it contains substantial amounts of affiliate and/or institution or goodwill advertising. Cal Water has not demonstrated that these facts are reasonably subject to dispute.
2. Allocation of General Office Costs to Out-of-State, Nontariffed, and Affiliate Operations. Cal Water objected to using a cost allocation methodology other than its four-factor method in future rate cases, and to apply time-keeping and billing requirements to management and employee time on nontariffed endeavors. For the reasons stated in today's decision, we will not adopt Cal Water's four-factor test. We will similarly not exempt Cal Water's managers and employees from billing time to nontariffed projects. Cal Water contended that D.00-07-018 prohibited allocating management and employee time spent on nontariffed projects to shareholders. As quoted in today's decision, however, D.00-07-018 requires that all incremental costs of nontariffed endeavors be assigned to shareholders. Management and employee time dedicated to such projects is not available for regulated operations, and therefore represents an incremental, or additional, cost to regulated operations. Put another way, but for the nontariffed project, the manager's or employee's time would be directed towards serving regulated customers. We therefore decline to make any changes to the proposed decision.
3. Allocation of General Office Capital Costs. Cal Water explained that the 7% adjustment to general office capital costs to account for out-of-state and affiliate operations was "an independent number arrived at by Cal Water and ORA" and was not the result of adding Cal Water's 4.595% and ORA's 3%. Cal Water provided no calculations or documents to support the 7%. We have modified the text to reflect the basis for the 7%.
4. Outside Services. Cal Water contended, and Aglet agreed, that Rule 51.8 prevented the Commission from relying on outside services amounts previously adopted via settlement. The decision has been modified to adopt Aglet's recommendation, which results in a higher revenue requirement for Cal Water. Due to time constraints, the tables attached to today's decision could not be corrected to reflect this relatively minor change. When Cal Water files its tariffs implementing the new rates authorized by today's decision, Cal Water shall also file corrected tables.
5. Cal Water's Web Site. Cal Water contended that the web site provided benefit to customers, that it plans to add features that will enhance the benefits to customers, and that shareholders should not bear all of the costs. Cal Water did not, however, offer any explanation or documentation that the costs of the web site have been properly allocated among affiliates and regulated operations, or that institutional advertising had been excluded. Pending such revisions, we cannot require ratepayers to fund this website.
6. Increased Postage Costs. Cal Water contended that the Commission should "flexibly" interpret its rule limiting updates to allow for revised postage costs. Aglet opposed such an interpretation, and we see no reason to set aside the rule.
7. Low-Income Rate Assistance Program. Cal Water disagreed with the directive to file a revised program and instead asks that the Commission institute a generic proceeding to address the issue. Pending such a proceeding, however, we will retain the requirement that Cal Water file a revised program.
8. Rent for Bear Gulch District Office. Cal Water objected to the Commission finding that subsequent declines in rental rates should render its contract rate unreasonable. Today's decision, however, focuses on Cal Water's conduct in response to the changed market, that is, failing to even attempt to renegotiate the lease. It is Cal Water's response that forms the basis for this disallowance, not the mere fact of changed market conditions.
9. Chico District Customer Service Center. Cal Water objected to filing an application to set up a memorandum account to track all real property that was at any time in Cal Water's rate base and has been sold because, Cal Water asserted, it is unnecessary. Cal Water provided no further explanation. Given the significant responsibilities entrusted to the Commission pursuant to § 790, we will retain this requirement.
10. Mid-Peninsula Contract Maintenance and Customer Operations Center. Cal Water opposed adoption of ORA's estimate for contract maintenance expenses, and contended that such an outcome was result-driven. Cal Water and ORA both used five-year averages to arrive at their estimate. Cal Water used the most recent five years. ORA's five-year period went back one more year and discarded the most recent year due the anomalously high amount. Both estimates are equally reasonable, but Cal Water bears the burden of proof. Similarly, Cal Water has not presented a convincing rationale for considering a million-dollar new customer operations center via the advice letter process. Such a project requires broader review than the abbreviated advice letter process will provide.
11. Removing Salinas District from Consolidated Docket. Cal Water contended that the removal was unwarranted because any rate changes required by the pending issues related to the Salinas District will have a negligible impact on rates. We will not prejudge the outcome of the pending issues and will resolve all Salinas issues in the separate docket.
12. Other Requested Changes. Cal Water requested that additional ordering paragraphs be added to restate agreements in the Joint Resolution with regard to memorandum accounts and advice letter filings for capital projects. It is not necessary to restate these items as Ordering Paragraph one adopts the Joint Recommendation, except as modified in the decision. Cal Water also made a new request for permission to file an advice letter to recover the retroactive amounts pursuant to D.03-04-033, which we will grant.
28 The Commission requires that parties seeking cross-examination demonstrate, at a minimum, the existence of disputed issues of material fact. See Rulemaking on the Commission's Own Motion to Consider Adoption of Rules Applicable to Interexchange Carriers for the Transfer of Customers Including Establishing Penalties for Unauthorized Transfer; Investigation on the Commission's Own Motion to Consider Adoption of Rules Applicable to Interexchange Carriers for the Transfer of Customers Including Establishing Penalties for Unauthorized Transfer, D.00-03-020, (March 2, 2000), mimeo at 6 -11, and cases cited therein.
