ALJ/RMD/rbg Date of Issuance 2/1/2008

Decision 08-01-043 January 31, 2008

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

In the matter of the Application of the GOLDEN STATE WATER COMPANY (U133W) for an order authorizing it to increase rates for water service by $2,812,100 or 32.61% in 2008; by -$178,700 or -1.51% in 2009; and by $109,900 or 0.92% in 2010 in its Arden Cordova Customer Service Area.

Application 07-01-009
(Filed January 5, 2007)

And Related Matters.

Application 07-01-010
Application 07-01-011
Application 07-01-012
Application 07-01-013
Application 07-01-014
Application 07-01-015
(Filed January 5, 2007)

OPINION GRANTING RATE INCREASES FOR SEVEN DISTRICTS IN THE REGION I SERVICE AREA OF GOLDEN STATE WATER COMPANY

OPINION GRANTING RATE INCREASES FOR SEVEN
DISTRICTS IN THE REGION I SERVICE AREA OF
GOLDEN STATE WATER COMPANY 2 2

1. Summary 2 2

2. Background 4 4

3. Procedural History 4 4

4. Public Participation 6 6

5. DRA/Golden State Stipulation & Standard of Review 9 9

6. Summary of Rate Increase for Region I 12 12

7. Common Issues for All Seven Districts 13 13

7.1. Water Usage/Consumption 13 13

7.2. Water Loss and Unaccounted for Water 14 14

7.3. Number of Customers 15 15

7.4. Operating Revenues 15 15

7.5. Administrative and General Expenses 16 16

7.6. Operation and Maintenance Expenses 17 17

7.7. Labor Expenses 19 19

7.7.1. Vacant Positions 20 20

7.7.2. Request for New Positions 21 21

7.7.3. Northern District Water Conservation Coordinator 21 21

7.7.4. Coastal District Engineering Technician III 22 22

7.7.5. Los Osos Water Supply Operator II & Simi Valley
Water Supply Operator II 22 22

7.7.6. Merit Increase 24 24

7.8. General Office Allocation A.06-02-023 24 24

7.9. Master Plans 24 24

7.10. Property, Payroll and Local Taxes 26 26

7.11. Income Taxes 27 27

7.12. Plant 28 28

7.13. Depreciation and Amortization 29 29

7.14. Construction Work in Progress 30 30

7.15. Capital Budget Overhead 31 31

7.16. Overhead Pool Account 32 32

7.17. Capital Budget Contingency Rate 34 34

7.18. Rate of Return 34 34

7.19. Cost of Capital & Capital Structure 36 36

7.20. Low-Income Rates for Region I 38 38

7.21. Rate Design 39 39

7.22. Escalation Year 2009 and Escalation Year 2010 39 39

7.23. Tariff Map Modifications 40 40

7.24. Water Quality 40 40

8. District Specific Issues 41 41

8.1. Rates for the Seven Districts 41 41

8.2. Arden Cordova CSA 42 42

8.3. Bay Point CSA 43 43

8.4. Clearlake CSA 46 46

8.5. Los Osos CSA 48 48

8.5.1. Lewis Lane Electrical Improvements 49 49

8.5.2. Cuesta-by-the-Sea Loop Closures 50 50

8.5.3. Interconnection with LOCSD 51 51

8.5.4. Rosina Plant and Pipelines for Nitrate Treatment 52 52

8.6. Ojai CSA 52 52

8.6.1. City of Ojai 54 54

8.6.2. Well Pump Replacement 54 54

8.6.3. Main and Valve Replacements 55 55

8.6.4. Installation of Services 55 55

8.7. Santa Maria CSA 56 56

8.7.1. Sisquoc System-Foxen Canyon Well Pump 57 57

8.7.2. Nipoma System-La Serena Plant Site Work 58 58

8.7.3. Miscellaneous Bowl Replacement 58 58

8.7.4. Orcutt Well and Orcutt Hill Reservoir Capacity 59 59

8.7.5. Woodmere Plant-Backup Power 60 60

8.8. Simi Valley CSA 60 60

8.8.1. Rebecca Plant Improvements 62 62

8.8.2. Miscellaneous Bowl Replacement 62 62

8.8.3. Runkle Canyon Storage Tank 63 63

8.8.4. Fire Hydrant Replacements 63 63

8.8.5. Service Line Replacement 64 64

8.8.6. Crater Tanks 64 64

8.8.7. Niles Study Upgrades and Improvements 65 65

9. Comments on Proposed Decision 65 65

10. Assignment of Proceeding 66 66

Findings of Fact 66 66

Conclusions of Law 71 71

ORDER 76 76

ATTACHMENTS

Attachment A

DRA/Golden State Stipulation - August 17, 2007

Attachment B

Summary of Earnings for Test Year 2008

Attachment C

Test Year 2008 Rate Schedule

Attachment D

Adopted Quantities

Attachment E

Bill Comparisons

Attachment F

Adopted Rate Base

Attachment G

Income Tax Calculation

OPINION GRANTING RATE INCREASES
FOR SEVEN DISTRICTS IN THE REGION I SERVICE
AREA OF GOLDEN STATE WATER COMPANY

1. Summary

This decision approves various general rate increases for the years 2008, 2009, and 2010 for seven Golden State Water Company (Golden State) customer service areas (CSAs). These seven CSAs are Arden Cordova, Bay Point, Clearlake, Los Osos, Ojai, Santa Maria, and Simi Valley. Together, these CSAs are referred to as Region I of Golden State's service area. While the rates for year 2008, the test year, are set by this decision, the rate adjustments for the second and third years, 2009 and 2010, will be specifically determined when advice letters for those two years are filed prior to years 2009 and 2010. Golden State's requested rate increases and our adopted rates for 2008 are set forth below in Table 1.

Table 1

Adopted Rate Increases

Requested Rate Increase

Adopted Increase

2008

2009

2010

2008

Application

District

$

%

$

%

$

%

$

%

A.07-01-009

Arden Cordova

2,812,100

32.61

178,700

1.51

109,900

.92

1,928.0

22.05

A.07-01-010

Bay Point

492,400

8.57

122,500

1.94

160,000

2.47

355.2

6.18

A.07-01-011

Clearlake

214,200

12.99

20,500

1.10

32,800

1.72

151.6

9.09

A.07-01-012

Los Osos

1,107,00

52.69

69,900

2.17

145,400

4.43

909.8

43.24

A.07-01-013

Ojai

1,432,900

43.95

-$89,500

-1.89

33,000

0.71

1,138.9

34.92

A.07-01-014

Santa Maria

2,937,400

36.15

455,100

4.09

310,900

2.67

1,119.4

13.65

A.07-01-015

Simi Valley

1,605,100

16.96

113,300

1.02

222,000

1.97

767.5

7.69

In today's decision, we also approve low-income rates for each of the seven districts.

In addition, this decision finds the Stipulation filed by DRA and Golden State on August 17, 2007 (Stipulation) consistent with Rule 12.1 of the Commission's Rules of Practice and Procedure (Rules) and we adopt it.

Where DRA and Golden State failed to agree, we adopt Golden State's requests for rate recovery for a number of capital projects and additional new positions. Overall, these capital projects and new positions will result in customers experiencing rate increases. However, the approved capital projects and new positions are needed to achieve the goals set forth in the Water Action Plan 2005 to improve water quality, service reliability, and upgrade aging infrastructure.

On several issues, we reject Golden State's request. Golden State's request for a higher contingency rate is not adopted and, instead, we adopted a lesser amount. Regarding overhead rate, we also adopt different amounts than requested by Golden State.

On the issue of water quality and customer service, consistent with the goals of the Water Action Plan 2005, we find that Golden State's performance has been sufficient. However, we expect Golden State to make certain improvements, as noted below. Golden State is also specifically directed to file an advice letter to inform the Commission of the costs of fluoridating the water delivered to the Bay Point CSA.

In response to concerns raised by numerous city officials from the City of Ojai, we also impose a specific meet and confer requirement on Golden State to meet with the City Manager of Ojai to resolve any outstanding disagreement on water quality and reliability.

This proceeding is closed.

Attachment A	DRA/Golden State Stipulation - August 17, 2007
Attachment B	Summary of Earnings for Test Year 2008
Attachment C	Test Year 2008 Rate Schedule
Attachment D	Adopted Quantities
Attachment E	Bill Comparisons
Attachment F	Adopted Rate Base
Attachment G	Income Tax Calculation


		Requested Rate Increase						Adopted Increase
		2008		2009		2010		2008
Application	District	$	%	$	%	$	%	$	%
A.07-01-009	Arden Cordova	2,812,100	32.61	178,700	1.51	109,900	.92	1,928.0	22.05
A.07-01-010	Bay Point	492,400	8.57	122,500	1.94	160,000	2.47	355.2	6.18
A.07-01-011	Clearlake	214,200	12.99	20,500	1.10	32,800	1.72	151.6	9.09
A.07-01-012	Los Osos	1,107,00	52.69	69,900	2.17	145,400	4.43	909.8	43.24
A.07-01-013	Ojai	1,432,900	43.95	-$89,500	-1.89	33,000	0.71	1,138.9	34.92
A.07-01-014	Santa Maria	2,937,400	36.15	455,100	4.09	310,900	2.67	1,119.4	13.65
A.07-01-015	Simi Valley	1,605,100	16.96	113,300	1.02	222,000	1.97	767.5	7.69