9. Attrition

SCWC states that an unintended consequence of agreeing to advice letter procedures for certain capital projects, as reflected in the Stipulation, is that exclusion of the advice letter projects from authorized rate base negatively impacts the calculated attrition increase for 2005 by reducing the capital additions covered by the attrition increase. SCWC proposes that for the purpose of calculating the attrition year increase, the weighted average rate base for 2003 and 2004 should include advice letter projects.

ORA argues that SCWC's proposal would result in double recovery of the cost of those advice letter projects, once through the attrition rate increase, and again, through an advice letter rate increase. SCWC claims its proposal would not result in double recovery, but would simply allow SCWC to maintain in 2005 a level of capital improvements similar to that stipulated to for 2003 and 2004.

Due to the manner in which the proposed advice letter projects are considered in this decision, we will not adopt SCWC's proposal.

9.1. Discussion

By this decision, SCWC is authorized to accrue the costs of the Calipatria treatment plant project in a memorandum account and seek rate recovery either through a separate application or in the next GRC for Region III. This is a large project in the range of $10 million to 18 million. It is not reasonable to reflect its effect in the attrition calculation. Projects of this magnitude must be evaluated based on the need and costs of the particular project. Rate recovery should not be accomplished through the attrition mechanism.

By this decision, the remaining proposed advice letter projects are treated as normal plant additions and are estimated as such. Due to the uncertainty of the timing of the projects, this decision assumes that, on average, the operational date for the projects is January 1, 2005. An allowance for the attrition year is therefore already included for these projects.