10. Assignment of Proceeding

John A. Bohn is the assigned Commissioner and Michael J. Galvin is the assigned Administrative Law Judge in this proceeding.

1. Valencia seeks authority to issue up to $30 million of new Debt Instruments.

2. A protest to this application was filed by SCOPE.

3. Valencia has a reasonable need to issue $30 million of long-term debt to retire senior secured notes due June 15, 2009, and to reimburse its treasury for monies expended and to be expended for the construction, completion, extension, or improvement of utility plant facilities.

4. Valencia seeks authority to issue Senior Secured Notes, Debentures and Notes, Medium-Term Notes, and Loans.

5. Resolution F-616 requires utilities with bond ratings of "A" or higher to issue debt using competitive bids.

6. The Commission will be revisiting the Competitive Bidding Rule and may make changes that could impact Valencia.

7. Valencia does not have a bond rating.

8. GO 24-B requires utilities to submit a monthly report to the Commission that contains, among other things: (i) the amount of debt and preferred stock issued by the utility during the previous month; (ii) the total amount of debt and preferred stock outstanding at the end of the prior month; (iii) the purposes for which the utility expended the proceeds realized from the issuance of debt and preferred stock during the prior month; and (iv) a monthly statement of the separate bank account that the utility is required to maintain for all receipts and disbursements of money obtained from the issuance of debt and preferred stock.

9. The Commission has authorized utilities to report on a quarterly basis the information required by GO 24-B in order to reduce the utilities' administrative and compliance costs.

10. A.08-10-001 does not propose, and today's decision does not authorize, any specific new construction or changes in use of existing assets and facilities.

11. Notice of A.08-10-001 appeared in the Commission's Daily Calendar.

12. In Resolution ALJ 176-3224, the Commission preliminarily determined that this proceeding should be categorized as ratesetting and that a hearing would not be necessary.

1. This is a ratesetting proceeding.

2. There is no need for hearings.

3. The application should be granted as requested.

4. Valencia has fully disclosed its existing and proposed loans in its application and has clearly stated its financing needs.

5. SCOPE's protest is without merit.

6. Approval of this application does not constitute a finding of reasonableness of the resultant capital structure and cost of debt for ratemaking purposes.

7. The authority granted by this decision should not become effective until Valencia has paid the fees prescribed by § 1904(b).

8. Valencia should report on a quarterly basis the information required by GO 24-B.

9. Valencia should continue to adhere to the conditions pertaining to affiliated transactions as enumerated in D.07-09-026.

10. Valencia should not use the proceeds from the debt authorized by this decision to fund capital projects until Valencia has obtained any required authorization for the projects, including any required environmental review under CEQA.

11. Valencia is not subject to the Commission's competitive bidding rule at this time.

12. Valencia should be required to comply with any subsequent changes made to the Competitive Bidding Rule, if applicable, in exercising its authorized but unused financing authority.

13. The authority granted by this decision should not become effective until Valencia has paid the fees prescribed by §§ 1904(b) and 1904.1.

14. The following Decision should be effective immediately so that Valencia may issue as soon as needed the debt authorized herein.

ORDER

IT IS ORDERED that:

1. Valencia Water Company (Valencia) is authorized to issue $30 million of negotiated long-term debt to retire its senior secured notes due June 15, 2009, and to reimburse its treasury for monies expended and to be expended for the construction, completion, extension, or improvement of utility plant facilities.

2. To the extent that Valencia has not exercised its entire requested financing authority upon the effective date of any changes to the Competitive Bidding Rule, Valencia shall be required to comply with those changes, if applicable, in exercising its remaining financing authority.

3. Valencia may encumber utility property to secure Debt Instruments authorized by this Decision to improve the terms and conditions of the Debt Instruments and to lower Valencia's overall cost of money for the benefit of ratepayers.

4. Valencia shall make a showing of reasonableness for ratemaking purposes of the capital structure and cost of debt resulting from the transactions, including retirement of debt, as part of its next cost of capital or general rate case proceeding.

5. Valencia may report on a quarterly basis all the information required by General Order 24-B with respect to debt issued pursuant to this Decision.

6. Valencia shall continue to adhere to the conditions pertaining to affiliated transactions as enumerated in Decision 07-09-026.

7. Valencia shall pay a fee on only $19 million of its new $30 million debt instruments ($30 million less $11 million to be used to retire existing debt). If Valencia actually uses any of the $11 million for purposes other than the retirement or refund of indebtedness previously issued, it shall notify the Commission in writing, pay the corresponding fee, and identify in its next Debt Instruments report after issuance how it used the $11 million of long-term debt earmarked to replace existing long-term debt.

8. Valencia shall remit to the Commission's Fiscal Office a check for $15,500 as required by § 1904(b) of the Pub. Util. Code. The decision number of this Decision shall appear on the face of the check.

9. The authority granted by this Decision shall not become effective until Valencia remits $15,500 to the Commission's Fiscal Office.

10. Valencia shall comply with all applicable environmental laws and regulations when planning and implementing any capital expenditure programs that are financed, in whole or in part, with the proceeds from the debt authorized by this Decision.

11. Application 08-10-001 is closed.

This order is effective today.

Dated March 12, 2009, at San Francisco, California.

D0903008 Appendix A

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