3. Discussion
3.1. Status of Phase II Issues in the Wake of the Contamination Proceeds Rulemaking
The September 28, 2009, Assigned Commissioner's Ruling and Scoping Memo identified eight issues for Phase II.1
The first issue, whether any of the subject contamination proceeds have been included in rate base and recovered in present rates, has been resolved by the parties' joint assurance that remediation-related plant items have been removed from rate base.2
The parties have reasonably concluded in their Memorandum of Understanding3 that resolution of the second issue, addressing the relevant and comparative risks assumed by ratepayers and shareholders, should await a future General Rate Case (GRC) occurring after a "determination that litigation has concluded and that all replacement capital improvements have been completed."4 This is appropriate given the fact that the factors set out in D.10-10-0185 to inform the allocation of net proceeds presume a full temporal record of the risks involved.
The third and fourth issues, determining the proper accounting treatment for plant investments made with contamination award proceeds, were resolved in D.10-10-018 (they are to be treated as contributions in aid of construction (CIAC)).6
The fifth issue, expenditure or investment of prospective settlement proceeds arising from post-April 2008 detections of contamination, is resolved by the terms of the memorandum account7 and the parties' agreement that available funds from such detections will be used for the construction or purchase of methyl tertiary-butyl ether (MTBE) treatment and replacement facilities as needed.8
There is no record that the sixth issue, allocation of the contamination settlement proceeds among Cal Water's 24 districts, has been addressed formally to date. Instead Cal Water is making district-by-district9 investments in remediation on the basis of need, with offsetting adjustments to CIAC pursuant to D.10-10-018. This approach, apparently supported by DRA,10 is consistent with the Phase I D.10-04-037 requiring that the available net proceeds "must all be expended for the construction or purchase" of treatment and replacement facilities.11 Further, as noted above, the CIAC accounting treatment accords with the rulemaking D.10-10-018. We conclude that the issue of investments in remediation within and across Cal Water's districts12 is most efficiently addressed in Cal Water's periodic company-wide GRCs.
Issue number seven, whether Cal Water's calculations and estimates of amounts invested, and to be invested, in treatment and replacement plant, are accurate, is not ripe without one or more data requests by DRA,13 which we conclude can occur more efficiently in conjunction with Cal Water's GRCs rather than in this proceeding.
The eighth and final Phase II issue identified in the Scoping Memo asks how the term "net proceeds" should be defined and applied, a query expressly answered in D.10-10-018,14 resolving that issue for purposes of this proceeding.
3.2. Conclusion
As the foregoing discussion reveals, issues previously set for resolution in Phase II of this proceeding either have been recently resolved by actions of Cal Water15 and the generic contamination proceeds rulemaking D.10-10-018,16 are not ripe for resolution17 or can be more efficiently addressed within a future GRC.18 As a result, there is a just and reasonable basis for closing the proceeding as jointly requested by the parties.
1 Ruling and Scoping Memo at 4-5.
2 PHC R.T. 49:11-50:1.
3 At 1, para. 1, and 2, para. 6.
4 Id. at 2, para. 6.
5 At 48-49 (Table 2).
6 D.10-10-018 at 63, O.P. 1 and 2.d.
7 "The Commission will determine the disposition of the [MTBE Memorandum Account] in connection with Cal Water's general rate cases or a separate proceeding." D.10-04-037, Appendix A (Preliminary Statement) at F.1.
8 PHC R.T. 51:23-55:22.
9 Estimated to be four or five districts thus far. PHC R.T. 52:13-28 through 55:22.
10 PHC R.T. 54:26 through 55:27.
11 D.10-04-037 at 12-13, O.P.4.
12 In the Preliminary Statement authorizing the contamination proceeds memorandum account for Cal Water, seventeen of the twenty-four districts are named as candidates for remediation investments.
13 PHC RT 56:5-26.
14 At 64-65, OP 6:
Gross proceeds received minus all (1) reasonable legal expenses related to litigation, (2) costs of remedying plants, facilities, and resources to bring the water supply to a safe and reliable condition in accordance with General Order 103-A standards, and (3) all other reasonable costs and expenses that are the direct result and would not have to be incurred in the absence of such contamination, including all relevant costs already recovered from ratepayers (for which they have been, or will be, repaid or credited).
15 Scoped issues 1 and 6.
16 Scoped issues 3, 4, 5 and 8.
17 Scoped issues 2 and 6.
18 Scoped issues 2, 6 and 7.
