2. Background

In Decision (D.) 10-12-017, the Commission authorized increases in revenue requirement for the Selma District of $1,000,100 or 29.4% for 2011, $57,200 or 1.3% for 2012, and $53,600 or 1.2% for 2013. These increases were a result of settlement discussions by the active parties in the proceeding at that time.

After the Commission-approved rate increase was implemented on January 1, 2011, the Mayor of the City of Selma (City), the City Council, and City residents expressed high levels of concern about the financial hardship posed by the rate changes. California Water Service Company (Cal Water) was invited to discussions addressing the City's concerns on March 7 and March 18, 2011. City officials informed Cal Water about the increased unemployment rate in the City, lower revenues from sales and lower property taxes, and fewer building permits issued. This information indicated that the City and its residents are suffering a financial crisis.

To alleviate this crisis, Petitioners propose the following phased-in rate increase as a modification to D.10-12-017. First, beginning in September 2011, the water rates for all City customers would be reduced for a ten-month period. Instead of the 29.4% increase, Cal Water would collect only 16% of the revenue increase authorized in D.10-12-017, or approximately $3,954,000. The revenue requirement during the ten-month period decreases approximately $393,000 with this proposal. The average monthly bill for the typical residential customer would go down from the current $45.26 to $40.54.

Second, on July 1, 2012, rates would return to the level authorized in D.10-12-017. Also, Cal Water would begin collecting the deferred 2011 revenue through a surcharge that would start on July 1, 2012, for a period of three years. Under this proposal, a flat monthly surcharge of $2.19 would be applied to all customer bills. This surcharge includes interest for the deferred revenue collection at 8.58%, which is Cal Water's current authorized rate of return. (See D.10-12-017, attachment B.)