STATE OF CALIFORNIA GRAY DAVIS, Governor
PUBLIC UTILITIES COMMISSION
505 VAN NESS AVENUE
SAN FRANCISCO, CA 94102-3298
December 31, 2002 Agenda ID #1589
TO: PARTIES OF RECORD IN APPLICATION 02-04-022
This is the proposed decision of Administrative Law Judge (ALJ) McVicar, previously designated as the principal hearing officer in this proceeding. It will not appear on the Commission's agenda for at least 30 days after the date it is mailed. This matter was categorized as ratesetting and is subject to Pub. Util. Code § 1701.3(c). Pursuant to Resolution ALJ-180 a Ratesetting Deliberative Meeting to consider this matter may be held upon the request of any Commissioner. If that occurs, the Commission will prepare and mail an agenda for the Ratesetting Deliberative Meeting 10 days before hand, and will advise the parties of this fact, and of the related ex parte communications prohibition period.
The Commission may act at the regular meeting, or it may postpone action until later. If action is postponed, the Commission will announce whether and when there will be a further prohibition on communications.
When the Commission acts on the proposed decision, it may adopt all or part of it as written, amend or modify it, or set it aside and prepare its own decision. Only when the Commission acts does the decision become binding on the parties.
Parties to the proceeding may file comments on the proposed decision as provided in Article 19 of the Commission's "Rules of Practice and Procedure." These rules are accessible on the Commission's website at http://www.cpuc.ca.gov. Pursuant to Rule 77.3 opening comments shall not exceed 25 pages. Finally, comments must be served separately on the ALJ and the assigned Commissioner, and for that purpose I suggest hand delivery, overnight mail, or other expeditious method of service.
/s/ CAROL A. BROWN
Carol A. Brown, Interim Chief
Administrative Law Judge
CAB:tcg
ALJ/JCM/tcg DRAFT Agenda ID # 1589
Ratesetting
Decision PROPOSED DECISION OF ALJ MCVICAR (Mailed 12/31/02)
BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA
In the Matter of the Application of the California-American Water Company (U210W) for an Order Authorizing it to Increase its Rates for Water Service in its Monterey Division to Increase Revenues by $5,725,300 or 22.47% in the Year 2003; $1,772,100 or 6.94% in the Year 2004; and $996,500 or 3.02% in the Year 2005. |
Application 02-04-022 (Filed April 15, 2002) |
Lenard G. Weiss, Attorney at Law, Lori Anne Dolqueist, Attorney at Law, and David P. Stephenson, for California-American Water Company, applicant.
Laura Tudisco, Attorney at Law, and Yoke Chan, for the Commission's Office of Ratepayer Advocates, protestant.
David A. McCormick, Attorney at Law, for United States Department of Defense and Federal Executive Agencies; David C. Laredo, Attorney at Law, for Monterey Peninsula Water Management District; Darryl D. Kenyon, for Del Monte Forest Property Owners Association, and Monterey Commercial Property Owners Association; interested parties.
OPINION RESOLVING GENERAL RATE CASE
OPINION RESOLVING GENERAL RATE CASE.............................................2
Summary 2
Background 2
Monterey Division 3
CalAm's Monterey Peninsula Water Supplies 3
CalAm's Application 5
Discussion 7
Summary of Earnings 7
Operating Revenues 7
Operation Expenses 7
Pumping 7
Transmission and Distribution - Meters 8
Transmission and Distribution - Miscellaneous 8
Maintenance Expenses 9
Pumping Equipment 9
Transmission and Distribution Mains 9
Transmission and Distribution - Meters 10
Administrative and General Expenses 10
Office Supplies and Other Expenses 10
Employees' Pensions and Benefits 11
Regulatory Commission Expenses 11
Outside Services 12
Miscellaneous General Expenses 13
Payroll Expense 13
Plant in Service 14
Security Improvements 14
Carmel Valley Filter Plant Clearwell 15
Water Treatment Improvements 15
Ambler Park Improvements 16
Small Main Replacements 16
Middle Canyon Road and Carmel Way Mains 18
Carmel Valley System Improvements 18
Endangered Species Act Expenditures 19
San Clemente Dam Retrofit, and Carmel River Dam Project 19
Other Projects 19
Depreciation Expense and Reserve, and Rate Base 20
Taxes 20
General Office 21
Salaries 21
Legal Services 25
Auditing & Other Services 27
Customer Service & Information Expense 27
Office Rental 29
Dues & Memberships 29
Group Insurance & Pensions 30
Employee Welfare 30
Depreciation Expense and Interest Expense 31
Payroll Taxes 31
Data Processing 31
Rate Base 35
Special Rate Requests 37
Special Rate Request #1 37
Special Rate Request #2 39
Pre-1/1/02 Expenditures 40
Post-1/1/02 Expenditures 40
Special Rate Request #2 Discussion 41
Special Rate Requests #3 and #8 43
Special Rate Request #4 45
Special Rate Request #5 47
Special Rate Request #6 47
Special Rate Request #7 48
Special Rate Request #9 50
Special Rate Request #10 51
Special Rate Request #11 53
Special Rate Request #12 54
Cost of Capital 56
Capital Structure 57
Cost of Debt 57
Cost of Equity 58
ORA's Recommended Return on Equity 59
CalAm's Recommended Return on Equity 61
Return on Equity Discussion 62
Rate of Return 66
Step and Attrition Increases 66
Rate Design 68
Service Quality 71
MPWMD's "Extraordinary" Requests 73
Comments on Proposed Decision 76
Assignment of Proceeding 76
Findings of Fact 76
Conclusions of Law 78
ORDER 78
LIST OF APPENDICES
Appendix A Summary of Earnings
Appendix B Authorized Tariffs and Step Rates
Appendix C Bill Comparison
Appendix D Adopted Quantities
OPINION RESOLVING GENERAL RATE CASE
Summary
California-American Water Company (CalAm) is authorized a $2,642,100 (10.36%) general rate increase in its Monterey Division for test year 2003, $948,410 (3.37%) for test year 2004, and $714,320 (2.46%) for attrition year 2005. We continue Monterey Division's per-capita rate design where it now applies, establish a new four-block rate design to promote conservation in Hidden Hills and Ryan Ranch, and combine Ambler Park and Bishop rates into a single tariff. CalAm is authorized to establish two new conservation and rationing-related memorandum accounts, and to extend its Water Revenue Adjustment Mechanism (WRAM) balancing account and its State Water Resources Control Board (SWRCB) Order WR 95-10 memorandum account. There is insufficient information in the record to determine that the amounts in CalAm's WRAM balancing account, its SWRCB Order WR 95-10 memorandum account, its Endangered Species Act memorandum account, and its expense balancing account are reasonable and should be recovered from ratepayers.
