Assignment of Proceeding

Michael R. Peevey is the assigned Commissioner and Maribeth A. Bushey is the assigned ALJ in this proceeding.

Findings of Fact

1. Cal-Am must implement all measures in the "Mitigation Program for the District's Water Allocation Program Environmental Impact Report" not implemented by the Management District.

2. The Mitigation Program for the District's Water Allocation Program Environmental Impact Report is comprised of mitigation measures for fisheries, riparian vegetation and wildlife, and lagoon vegetation and wildlife.

3. The Management District's 2007-2008 Annual Report for the Mitigation Program shows that the Management District allocated nearly $1 million of costs of its new office building to the Mitigation Program.

4. The Management District's 2007-2008 Annual Report for the Mitigation Program shows the Aquifer Storage and Recovery Project as a component of the user fee Mitigation Program costs and also as a stand-alone additional user fee.

5. Cal-Am is actively pursuing water supply augmentation through its Coastal Water Project and the Management District need not act on Cal-Am's behalf.

6. The rebate program, salaries for the Conservation Office Staff and project expenditures for ordinance enforcement are booked as part of the Mitigation Program, even though such costs are not included in the Management District's 2007-2008 Annual Report for the Mitigation Program. The Management District did not explain whether these booked costs are included in the user fee even though the Commission has approved and separately funded a joint conservation program with the Management District which may include some of the same costs.

7. The testimony supporting the application shows accounting treatment inconsistent with Commission ratemaking standards.

8. The user fee and Carmel River mitigation program have a unique history, including particularly that the funds have been remitted to a government agency, that render reasonable Cal-Am's request to recover the amounts recorded in the account.

Conclusions of Law

1. The testimony supporting the application should be received into evidence.

2. The settlement agreement is not reasonable in light of the record, consistent with the law, or in the public interest.

3. The settlement agreement should not be approved.

4. California American Water Company should be authorized to amend this application within 60 days of the effective date of today's decision by filing and serving one of the following;

A. Joint program proposal for the District to perform the Carmel River Mitigation measures based on an updated version of the budget set out in Attachment 1, and to fund the District's portion of the Aquifer Storage and Recovery Project, or

B. Implementation plan for Cal-Am to assume direct responsibility for the Carmel River Mitigation measures, should the District cease to fund the measures.

The Monterey Peninsula Water Management District User Fee Memorandum should close 60 days after the effective date of this order. Cal-Am should be authorized to file a Tier 2 advice letter to amortize the amounts recorded in that account over 12 months with interest to be calculated based on the 90-day commercial paper rate.

5. Pub. Util. Code § 451 requires all charges or rules pertaining to charges demanded or received by a public utility to be just and reasonable.

ORDER

IT IS ORDERED that:

1. The motion to approve the settlement agreement among California-American Water Company, the Monterey Peninsula Water Management District and the Division of Ratepayer Advocates is denied.

2. California American Water Company is authorized to amend
Application 10-01-012 within 60 days of the effective date of this order by filing and serving one of the following:

Absent such an amendment, the Executive Director is authorized to dismiss this application without prejudice to refiling.

3. The Monterey Peninsula Water Management District User Fee Memorandum Account shall close 60 days after the effective date of this order. California-American Water Company is authorized to file a Tier 2 advice letter to amortize the amounts recorded in that account over 12 months with interest to be calculated based on the 90-day commercial paper rate.

4. The testimony submitted in support of the application is received into evidence.

This order is effective today.

Dated March 24, 2011, at San Francisco, California.

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