2. Background

2.1. Procedural History

SCWC filed this general rate case (GRC) application pursuant to Pub. Util. Code § 454,¹ which governs proposed rate changes. The company requests Commission authorization to increase rates in its Region III Customer Service Areas, which include Orange County, Claremont, San Dimas, San Gabriel Valley, Barstow, Calipatria-Niland, Desert and Wrightwood. In addition, SCWC requested authority to increase current authorized revenues for the General Office for certain other CSAs that are not in for a GRC at this time.

The Office of Ratepayer Advocates (ORA) and the Orcutt Area Advisory Group filed protests to the application. Also, the Cities of Claremont and San Dimas sent a joint letter, to the assigned administrative law judge (ALJ) for this proceeding, indicating their opposition to the rate increases. A Prehearing Conference (PHC) was held on January 31, 2002. SCWC, ORA and the City of Claremont filed appearances.

The Assigned Commissioner's Scoping Memo and Ruling was issued on February 28, 2003. That ruling set forth the scope, schedule, category, assignment of the principal hearing officer and ex parte communications rules for this proceeding, pursuant to Rule 6.3 of the Commission's Rules of Practice and Procedure (Rules).

On March 21, 2003, an ALJ ruling granted the requests of the City of San Dimas and the City of Ojai to intervene as interested parties. A similar request by the Wrightwood Property Owners Association (WPOA) was granted in a March 28, 2003 ruling.

On April 8, 2003, ORA, the City of Claremont, the City of San Dimas and the WPOA issued testimony addressing SCWC's request.

Public participation hearings (PPHs) were held the morning and evening of April 28, 2003, in Claremont and the afternoons and evenings of April 29, 2003, in Stanton and April 30, 2003, in Barstow. Approximately 400 ratepayers attended the two Claremont hearings, with 45 persons speaking. In afternoon and evening sessions, there were approximately 20 attendees in Stanton, with eight speaking, and approximately 50 ratepayers attending in Barstow, with 12 speaking. The Cities of Claremont and San Dimas participated at the Claremont hearings, while representatives of WPOA spoke at the afternoon session in Barstow.

The participation of public speakers was wide and varied. Mayors, city council members, chamber of commerce representatives, members and leaders of a number of civic groups as well as individual ratepayers representing themselves made their views known. At Claremont, the ALJ was presented with a petition signed by approximately 600 citizens, who opposed the proposed increases. At the Claremont and Stanton hearings, discussion focused on the comparison of rates for neighboring cities and water companies. In Barstow, water quality was a principal issue. In all three PPHs, the issue of regional, as opposed to district specific, rates was discussed. The proportionally high nature of the service charges² and the plight of senior citizens and low-income residents were also central themes.

On May 1, 2003, SCWC issued rebuttal testimony. An evidentiary hearing on the application was conducted over five days beginning on May 12, 2003. The company, ORA, the City of Claremont, and the City of San Dimas presented witnesses. Opening briefs were filed on June 16, 2003 and reply briefs on June 30, 2003. SCWC and ORA were the only parties that participated in the briefing.

On June 11, 2003, the Commission's Water Division issued its Report on Southern California Water Company's Regionalization of Rates in Region III.³ On July 8, 2003, comments on the Water Division report were filed by SCWC, ORA, the City of San Dimas and the City of Claremont. This matter was deemed submitted for decision as of that date.

Additionally, hearing was held on June 17, 2003 to consider a proposed joint SCWC/ORA stipulation exhibit. A motion to accept the Stipulation was then filed by SCWC/ORA on July 14, 2003. No comments were received.

2.2. SCWC's Request

Following is a summary of SCWC's requested rate increase, as reflected in its application.

District	2003		2004		2005
Region III
Orange	$7,953,900	30.39%	$4,579,300	13.39%	$2,786,400	7.19%
Claremont	3,279,200	30.47%	156,100	1.11%	1,008,400	7.09%
San Dimas	4,082,000	31.92%	165,100	0.98%	1,209,800	7.10%
San Gabriel	2,266,000	36.02%	406,300	4.77%	648,500	7.26%
Barstow	1,978,600	29.99%	1,032,900	12.14%	612,600	6.42%
Calipatria-Niland	266,000	25.57%	5,800	0.44%	62,500	4.76%
Desert	-		-		-
Wrightwood	-		-		-
Total Region III	19,825,700	29.79%	6,345,500	7.31%	6,328,200	6.81%
Arden-Cordova	732,743	10.71%	301,625	3.98%	301,625	3.83%
Bay Point	140,995	2.94%	68,972	1.40%	68,972	1.38%
Clearlake	46,200	3.38%	22,648	1.60%	22,648	1.58%
Los Osos	91,957	4.67%	42,207	2.05%	42,207	2.01%
Metropolitan	4,055,241	5.32%	1,851,958	2.31%	1,851,958	2.25%
Ojai	108,092	4.35%	54,560	2.10%	54,560	2.06%
Santa Maria	358,913	5.57%	169,857	2.50%	169,857	2.43%
Simi Valley	422,421	5.31%	195,078	2.33%	195,078	2.27%
Total Company	25,782,662	14.75%	9,034,705	5.86%	9,033,105	5.49%

2.3. ORA's Recommendation

Following is a summary of ORA's recommended rate increase as modified by the errata contained in Exhibit 52, dated June 1, 2003.

In its testimony, ORA recommended that rates be determined on a district specific basis rather than the current regional basis. Additionally, ORA recommended that SCWC's request for an incremental general office increase for Regions I and II be rejected. ORA supports an attrition increase for 2005, based on its recommended attrition mechanism, but did not quantify that amount.

2.4. Position of the City of Claremont

The City of Claremont recommended that the Commission reject SCWC's application to increase rates. The concerns expressed included the high rates of the Claremont CSA compared to that charged by agencies providing water in neighboring communities, SCWC's history of significant rate increase requests and the subsidizations caused by regional rates.

2.5. Position of the City of San Dimas

The City of San Dimas opposed the rate increases proposed by SCWC. The concerns highlighted were the proposed return on equity and regional rates.

2.6. Position of WPOA

WPOA supported the continuation of the single tariff rate structure that was authorized by the Commission for Region III in 2000.