17. Services-Account 345

SGV plans to construct or replace water services, particularly plastic services which leak and are no longer serviceable.

The proposed expenditures are $1,600,000 for 2008, $1,600,000 for 2009, $2,030,000 for 2010 and $1,600,000 for 2011.

The settlement uses SGV's proposal.

17.1. Positions of Parties

Prior to the settlement, DRA supported SGV's proposal.

COF states that SGV has not provided a cost-benefit analysis or otherwise justified replacing services that do not leak. COF recommends that replacement of services be funded at the historical amount of $1,000,000 per year.

FUSD agrees with the position taken by COF.

SGV represents that its budget is based on recent experience for services.

17.2. Discussion

During the 1970's, SGV began using polyethylene pipe in constructing services. By 1995, SGV began experiencing problems with these services. Over time, the pipe becomes brittle and prone to rupture. As a result, SGV no longer uses polyethylene pipe and has begun replacing it when a leak is detected. Additionally, when a leak is found on a particular street where other services were constructed at the same time using polyethylene pipe, it replaces all of the services on the street.

SGV's replacement strategy is reasonable given the problems with polyethylene pipe. It avoids multiple repairs of the same services and future repairs of other services with the same vintage of polyethylene pipe. This, in turn, avoids frequent excavation and patching of the street in the same area and resulting customer complaints. SGV's proposed costs for 2009-2011 are below the costs for 2007, slightly above the costs for 2006 and far below the costs for 2008. The settlement amount is reasonable.