VI. Comments on the Proposed Decision

The proposed decision of the Administrative Law Judge (ALJ) in this matter was mailed to the parties in accordance with Section 311(d) of the Public Utilities Code and Rule 77.1 of the Rules of Practice and Procedure.

Bakman, Water Division, and the California Water Association (CWA) filed comments to the proposed decision. CWA is not a party to this application but has filed a motion for leave to file its comments. Because CWA is not a party, we treat its motion as a petition to intervene as well as to file comments, and grant its request.

We make the following changes based on the comments. Additionally, we make changes to improve the discussion and to correct typographical errors.

A. Adjustments to CIAC Related to the Shell Oil Lawsuit Proceeds

The Water Division recommends that the CIAC credit related to the Shell Oil lawsuit proceeds be adjusted to reflect the amount of the SDWBA loan balance that Bakman assumes, rather than the loan balance in existence in December 2002.

Bakman also recommends that this same CIAC credit be adjusted to reflect the income taxes it paid. In that regard, Bakman filed a motion to set aside submission of this proceeding and receive in the record a letter from Bakman's accounting firm dated September 10, 2003. This letter states that the Gallo and Shell lawsuit proceeds were included in taxable income for Bakman's federal and state taxes.

We grant Bakman's petition to set aside submission and receive into the record the September 10, 2003 letter attached to its petition. We modify Section V.A.3.c so that the portion of CIAC attributed to the Shell Oil lawsuit proceeds reflects the income taxes that Bakman paid, as well as the actual SDWBA loan balance that Bakman assumes when the tariffs filed pursuant to this decision become effective.¹⁴ In this way, the CIAC credit will more accurately reflect the parties' expenditures. We do not modify the CIAC amount attributed to the Gallo lawsuit proceeds because we approved a compromise concerning the appropriate amount to credit CIAC in 1993, and do not revisit that outcome now. (See Section V.A.1.) We also modify the proposed decision to adopt Water Division's recommendation to refund the monies in the SDWBA loan reserve account to ratepayers. (See Section V.A.3.c.) This modification is in keeping with the intention of the proposed decision in having Bakman assume future SDWBA loan obligations.

B. Other Modifications

In response to comments from Bakman and CWA, we modify our directives regarding memorandum accounts and make this directive specific to Bakman and any future additional lawsuit proceeds the company receives. (See Section V.A.2.e.) We also eliminate the requirements of Bakman holding accumulated earnings in a retained earnings account. (See Section V.B.)