STATE OF CALIFORNIA Arnold Schwarzenegger, Governor
PUBLIC UTILITIES COMMISSION
505 VAN NESS AVENUE
SAN FRANCISCO, CA 94102-3298
May 13, 2004 Agenda ID#3568
Alternate to Agenda ID# 3348
Ratesetting
TO: PARTIES OF RECORD IN APPLICATION 02-11-044
Enclosed is the Proposed Alternate Decision of Commissioner Brown to the Proposed Decision of Administrative Law Judge (ALJ) Patrick previously mailed to you.
When the Commission acts on the draft or alternate decision, it may adopt all or part of it as written, amend or modify it, or set aside and prepare its own decision. Only when the Commission acts does the decision become binding on the parties.
Public Utilities Code Section 311(e) requires that an alternate to a draft decision be served on all parties, and be subject to public review and comment prior to a vote of the Commission. Rule 77.6(d) provides that comments on the alternate draft decision be filed at least seven days before the Commission meeting.
Comments on the alternate decision must be filed and served May 20, 2004. Reply comments are due May 25, 2004.
Pursuant to Rule 77.3 comments shall not exceed 15 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/ ANGELA K. MINKIN
Angela K. Minkin, Chief
Administrative Law Judge
AKM:vfw
Attachment
COM/GFB/vfw ALTERNATE DRAFT Agenda ID #3568
Alternate to Agenda ID #3348
Ratesetting
Decision ALTERNATE PROPOSED DECISION OF COMMISSIONER BROWN
(Mailed 05/13/04)
BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA
In the Matter of the Application of SAN GABRIEL VALLEY WATER COMPANY (U337W) for Authority to Increase Rates Charged for Water Service in its Fontana Water Company Division to increase revenues by $11,573,200 or 39.1% in 2003, $3,078,400 or 7.3% in 2004, $3,078,400 or 6.8% in 2005, and $3,079,900 or 6.4% in 2006. |
Application 02-11-044 (Filed November 25, 2002) |
Timothy J. Ryan, Attorney at Law, Daniel A.
Dell'Osa, Nossaman, Guthner, Knox & Elliott,
LLP, by Martin A. Mattes, Attorney at Law,
for San Gabriel Valley Water Company, applicant.
Keith Clements, for himself; Dennis R. Poulsen, for
California Steel Industries, Inc.; Marvin T. Sawyer,
General Counsel, and Endeman, Lincoln, Turek &
Heater, LLP, by James C. Allen, for Fontana Unified School District; interested parties.
Best, Best & Krieger, LLP, by Kendall H. MacVey,
Attorney at Law, for the City of Fontana, protestant.
Travis Foss, Attorney at Law, for the Office of Ratepayer Advocates.
OPINION AUTHORIZING INCREASE IN REVENUE
TABLE OF CONTENTS
Title Page
OPINION AUTHORIZING INCREASE IN REVENUE 2
I. Summary 2
II. Background and Procedural History 3
III. Public Participation Hearing 5
IV. Capital Projects 7
V. Water Sales and Operating Revenues 15
A. Service Connections 15
B. Average Use Per Customer 16
C. Miscellaneous and Construction Revenues 16
VI. Operation and Maintenance Expenses 17
A. Supply Cost Expenses 17
1. Unmetered and Unaccounted for Water 17
2. Reclaimed Water 17
3. Water Purchases from Cucamonga County Water District 18
4. Water Costs 18
5. Purchased Power Costs 19
6. Chemicals Expense 19
7. Plant F10 Treatment Plant Reimbursements 19
8. Labor Costs - New O&M Positions 20
B. Other O&M and A&G Expenses 21
1. Materials & Supplies (M&S) Expense 21
2. Transportation Expense 21
3. Outside Services Expense - Other Than Legal Expenses 22
4. Outside Services - Legal Expenses 22
a) Non-Perchlorate-Related Legal Expenses 22
b) Perchlorate-Related Legal Expenses 23
5. Utilities and Rents Expense 23
6. Employee Pensions & Benefits 24
a) Vacation, Holidays, Sick Leave, and Pensions 24
b) Health Insurance 24
c) Dental Insurance 24
d) d) Business, Property and Umbrella Liability Insurance 25
e) Workers' Compensation Insurance 26
7. Regulatory Commission Expense 26
8. Labor Costs - New A&G Positions 27
VII. General Office 28
A. Officers' Salaries 28
B. Disallowance of Chairman's Salary 30
C. Allocation of Chairman's and President's Salaries 30
D. New Positions in General Office 32
E. Exclusion of Existing Management Positions 33
VIII. Components of Rate Base 36
A. Plant Additions-Overview 36
1. Wellhead Treatment Facilities and Surface Water Treatment 36
2. Wells 37
3. Reservoirs 38
4. Booster Stations 38
5. SCADA System 38
6. Security Equipment 39
7. Emergency Generators 39
8. Water Treatment and Distribution Mains 40
9. Vehicles 40
10. Tools & Equipment 40
11. New Building 41
B. Materials & Supplies (M&S) 41
C. Construction Work in Progress (CWIP) 42
D. Contributions in Aid of Construction (CIAC) 42
E. Fontana Union Water Company Stock 42
F. Working Cash 43
G. Plant Sales/Condemnation Proceeds 43
IX. Cost of Capital 48
X. Revenue Recovery Issues 58
A. Balancing and Memorandum Accounts 58
XI. Alleged Rule 1 Violation 62
XII. Comments on Proposed Decision and Alternate Proposed Decision 63
XIII. Assignment of Proceeding 63
Findings of Fact 64
Conclusions of Law 66
ORDER 67
APPENDIX A - Adopted Summary of Earnings
APPENDIX B - Adopted Quantities
APPENDIX C - Comparison of Bills
APPENDIX D - Adopted Rates
OPINION AUTHORIZING INCREASE IN REVENUE
I. Summary
San Gabriel Valley Water Company (San Gabriel), Fontana Water Company Division (Fontana Division), is authorized to increase revenues by:
$5,705,100 (or 18.0%) for Test Year 20041
$1,497,300 (or 4.0%) for Attrition Year 2005
$1,497,300 (or 3.8%) for Attrition Year 2006
We authorize rate of return on rate base of 9.40% for the years 2004, 2005, and 2006. The return on common equity (ROE) authorized by this decision is 10.10%. As a result of the revenue increase granted by this decision, the monthly bill for the average residential customer (23 hundred cubic feet (Ccf) of water with a 5/8 x 3/4-meter) would increase by $6.90 or 18% from $37.11 to $44.01 in the year 2004.
The major topic of inquiry in this proceeding was the adequacy of Fontana Division's current sources of supply and program to increase supply. The Fontana Division has met its existing water needs, although barely. The evidence shows that even on Fontana's hottest, driest days of the year, San Gabriel `s total water production capacity has matched its usage. Fontana Division is also experiencing ongoing customer growth of over 1,000 connections per year.
To address this situation, San Gabriel proposed a major construction program for plant additions through 2006. We find San Gabriel's proposed construction program to be overly ambitious. In this decision, we find a reasonable amount for construction to be the 3 year average of recorded company funded plant additions for the period 2001-2003. This figure sets a realistic construction program that accounts for continuing infrastructure improvements and customer growth. This does not bar staff from challenging the inclusion of such investments in rate base in a later proceeding once the investments have been made.
Within this limitation, San Gabriel will be able to undertake needed replacement and additions of new mains and services, and to construct needed water production wells, booster pumping systems, and water storage reservoirs.
The program would also provide for construction of needed wellhead treatment facilities at perchlorate-contaminated wells, and of the first 15 million gallons per day (mgd) increment of a conventional surface water treatment facility in the northwestern portion of the service area (Plant F 52). The proposed construction of a new office, garage, and warehouse is deferred because of the rate impact.
