Procedural History

By Resolution ALJ 176-3016 the Commission preliminarily determined this to be a ratesetting proceeding expected to go to hearing. A prehearing conference was held on June 18, 1999 at which only Applicants and RRB appeared. Assigned Commissioner Henry Duque's July 12, 1999 scoping ruling confirmed the category and need for hearing, defined the issues, established a schedule, and designated assigned Administrative Law Judge (ALJ) McVicar as the principal hearing officer and thus the presiding officer.

ALJ McVicar conducted one public participation hearing session in Carson for Dominguez SBD June 28, 1999, two sessions in Lancaster for AVWC on June 29, and one session each in Kernville and Lake Isabella for KRVWC on June 30. Customer attendance was light in Carson, and heavy in the other locations.

Only four customers spoke at the Carson public participation hearing, and all four either supported Dominguez' proposed overall increase or stated they didn't object to it. One did object to service charges' being based on meter sizes. A representative of Dominguez SBD's largest customer, a refinery, said service has historically been excellent under Dominguez.

In Lancaster, AVWC's customers were very concerned with the magnitude of the proposed increases, coming on top of what many felt were rates already too high. Various speakers noted AVWC's proposal far exceeds inflation since rates were last raised in 1994, and would be difficult for families and those on fixed incomes to bear. Several speakers from Leona Valley pointed out that many in their area have homes on large lots with fruit trees, and the rates AVWC is proposing would impose hardship on their outdoor watering and agricultural activities. Rates, they contended, should reflect the agricultural character of the area. They also expressed disdain for AVWC's having waited so long and then having asked for so much in the first year; better to apply more frequently for less, and to levelize any increase this time over the years to come. A number of speakers had delved into AVWC's supporting figures and decided they didn't hold up to scrutiny. Among the items they cited were specific expense increases that exceed inflation, increases in expenses and depreciation that should generate offsetting tax deductions, and the difference between AVWC's cost of purchased water and the rates charged to customers. Some of those speakers later assisted Leona Valley Town Council (LVTC), which intervened in the proceeding. Other speakers made personal observations to the effect that they and others had paid for the main extensions that serve them, so AVWC should not earn on plant they had contributed. One advocated placing the cost of new facilities on new customers rather than the general body of ratepayers. Several had researched Dominguez Water Corporation on the Internet and found data indicating a steadily rising stock price, level expenses and very favorable financial results they thought contradicted what AVWC was claiming as justification here. Some were concerned over the possible effect the pending California Water Service merger might be having on this request, citing among other things footnotes in Dominguez Water Corporation's financials listing merger-related expenses they felt customers should not be asked to bear. Some made unfavorable comparisons between AVWC's rates and those of surrounding suppliers, both public and private. There was very little concern expressed over water quality, the one customer who brought it up saying his homeowners' association had the water tested in Lancaster a number of years ago and found it to be "the lowest minimum type of water," which he judged inadequate to justify a rate increase. Several speakers discussed the need for good fire flow and more hydrants. There were a number of complaints that the information provided with the rate increase application public notice and AVWC's background material handed out at the public participation hearing were inaccurate and inadequate to allow customers to determine what increases they could expect in their district at their usage level, and that they lacked sufficient detailed data to support AVWC's application.

In the Kernville and Lake Isabella public participation hearings, KRVWC customers were almost uniformly critical of both the current rates and the company's proposed increases, saying rates are already higher than those of surrounding areas, and the increases would far exceed inflation over the years, discourage outside watering, inhibit development and be unaffordable for seniors and those on fixed incomes. Several speakers declared the company negligent in not having sought smaller increases over years past and said it should not hold customers responsible now for the fact they did not. Several others felt that the company must be inefficient, must have known of the problems when they elected to purchase the small systems serving the area, and should not be asking customers to bail them out. There was much skepticism about the impending California Water Service merger and whether it was the root cause of KRVWC's request or would in the future bring yet more increases and higher rates. Several said that every time their water system was sold over the years, rates increased soon after. There was also concern about Safe Drinking Water Bond Act loan surcharges on customers' bills. Hadn't the loans been repaid yet, and if so, why weren't the surcharges lifted? If the funds were really applied for the improvements promised, why this request for higher rates for plant improvements? What happens to Safe Drinking Water Bond Act loan funds after the California Water Service merger? Many wanted to know whether and what specific plant improvements had been made in their neighborhoods. Still others did not understand why current rates vary among KRVWC's systems and felt they were being unfairly charged more, while their counterparts felt their systems were being asked now to subsidize plant deficiencies or past increase-free years in others' areas. Rate design was also a popular plaint. Why not have lifeline rates for the elderly and those on fixed incomes? Why are rates not designed to promote conservation? Why do customers who use little or no water most of the time have to pay such a high service charge? Why shouldn't the increase be primarily on those who are part-time residents? A number of speakers suggested levelizing the increases over more than one year to reduce rate shock. There was also great concern about water quality, and many questions. Customers cited problems with discoloration, cloudiness, minerals, excessive chlorine, poor taste and smell, and possible pathogens and carcinogens in the water. Many mentioned buying bottled water for drinking, and having to install filters which offered only marginal relief. Customers called for more water sampling from parts of the system other than wells and mains, more frequent main flushing, and independent sampling and testing by non-company technicians. In contrast to all of this, one speaker, owner of a local business served by KRVWC, said that despite all its problems, KRVWC had better water quality and lower rates than a nearby independent system that provided water service to her residence. Her hope was that KRVWC would buy the other supplier out. Another observed that KRVWC had managed to improve water availability, improve fire flow and have building moratoriums lifted in several systems. During the course of the evening session, the ALJ accepted a customer petition signed by approximately 35 customers, primarily from the Onyx area, opposed to any KRVWC increase.

On August 5, 1999, LVTC filed a petition to intervene in the proceeding. After LVTC served its prepared direct testimony, the ALJ granted LVTC's request, limiting its participation to matters relating to AVWC's A.99-05-023.

At the first evidentiary hearing September 8, 1999, counsel for Applicants and RRB announced they had reached agreement on all issues and were in the process of drafting settlements which they expected to file no later than October 15, 1999. LVTC, which did not attend, was said to have participated in the negotiations. By agreement, the three parties' pre-served direct testimony was admitted into evidence, reserving all rights to later cross-examination and challenge should no settlement be filed. The evidentiary hearing was reconvened the morning of October 19 at which time Applicants and RRB announced they were on the verge of executing all three settlements but were not yet sure whether LVTC, which again did not attend, would join in signing the AVWC settlement. The hearing was continued to October 29. The Dominguez SBD and KRVC settlements were filed later in the day on October 19^, and the AVWC settlement on October 21 but without LVTC's participation.

The third evidentiary hearing was held on October 29, 1999, again without LVTC in attendance. Applicants' and RRB's representatives discussed and answered the ALJ's questions about the proposed settlements, and it was determined that significant information needed to allow the Commission to carry out its future regulatory responsibilities had not been included in the settlements as filed. The hearing was adjourned with the anticipation of having modified versions filed as quickly as possible.

Applicants and RRB filed three modified settlements on December 20, 1999. All subsequent references will be to these modified settlements. LVTC filed comments in opposition to the AVWC settlement on January 19, 2000 as permitted under the Rules of Practice and Procedure, Rule 51.4, and AVWC and RRB filed a joint reply on February 2. There were no parties eligible to contest the Dominguez SBD and KRVWC settlements, and no comments on them were filed.

In accordance with Rule 51.6, an evidentiary hearing was held on March 1, 2000 to allow LVTC and the settling parties to present evidence on the contested issues and the matter was submitted upon receipt of concurrent briefs due March 20, 2000.

Applicant AVWC and RRB timely filed a joint brief. Shortly before the due date, LVTC informally requested an extension to March 24 and was advised by the ALJ to consult with the other parties and submit its brief with a written motion. On March 30, LVTC did so, stating in the motion that both AVWC and RRB had stipulated to its filing late. AVWC and RRB thereupon filed a joint reply opposing LVTC's motion on the grounds that it offered no explanation or justification for having missed the March 24 date they had agreed to, and that LVTC's accompanying brief was unhelpful in the proceeding. In recognition of LVTC's inexperience in Commission proceedings, the ALJ on submitting the proceeding explicitly directed the parties' attention to Rule 75 which deals with the filing of briefs. Rule 75 provides, "Ordinarily, when a matter has been submitted on concurrent briefs, extensions will not be granted unless a stipulation is filed with the Commission." No stipulation was filed. LVTC's motion offers no explanation for having missed the proceeding submission date and differs with AVWC and RRB, or at best is ambiguous, as to the length of extension agreed to. LVTC's motion and brief were signed by a member of the bar, who cannot claim ignorance of the importance of timely filing. LVTC's motion will be denied.