Comments on Proposed Decision

The principal hearing officer's proposed decision was filed with the Commission and served on all parties in accordance with Section 311(d) of the Public Utilities Code and Rule 77.1 of the Rules of Practice and Procedure.

Findings of Fact

1. Each applicant has entered into a separate settlement with RRB for its application. Each settlement resolves every issue between that applicant and RRB in this proceeding.

2. LVTC timely filed comments in opposition to the proposed AVWC settlement.

3. LVTC's brief was late-filed, no related stipulation among the parties was filed, and AVWC and RRB actively opposed LVTC's motion to accept late-filed brief.

4. The levelized rates AVWC and RRB propose for test year 2000 and 2001 and attrition year 2002 would, if put into effect on January 1 of each year, recover over the three-year rate case cycle interest-adjusted revenues equivalent to the revenues implicit in the settling parties' agreed-upon summaries of earnings and attrition allowance. Because those levelized rates will not become effective on January 1, 2000, the revenues actually collected will be significantly lower than those requested in AVWC's application. The same is true with respect to the KRVWC settlement and its levelized rates and revenues.

5. AVWC and RRB no longer advocate the positions set forth in their pre-settlement direct testimony and exhibits.

6. LVTC has not stated a position on many of the technical items ordinarily used in setting water rates in the absence of a settlement.

7. The record contains no credible evidence that AVWC or RRB attempted to thwart LVTC's input or participation in settlement negotiations or at any other stage of this proceeding.

8. The KRVWC and Dominguez SBD settlements each command the sponsorship of all active parties eligible to participate with respect to them in this proceeding.

9. The active parties with respect to the KRVWC and Dominguez SBD settlements are fairly reflective of the affected interests in this proceeding.

10. No term of the KRVWC settlement or the Dominguez SBD settlement contravenes statutory provisions or prior Commission decisions.

11. The KRVWC and Dominguez SBD settlements each convey sufficient information to permit the Commission to discharge its future regulatory obligations with respect to the parties and their interests.

12. There is no known opposition to approving the KRVWC and Dominguez SBD settlements.

13. The summaries of earnings presented in Appendix A to each of the three settlements and the quantities and calculations included in Appendix C which support them are reasonable for ratemaking purposes.

Conclusions of Law

1. LVTC's participation in this consolidated proceeding has been properly limited to matters relating to AVWC's A.99-05-023.

2. LVTC's motion to accept late-filed brief does not meet the requirements of Rule 75 and should be denied. LVTC's late-filed brief should be rejected.

3. The KRVWC and Dominguez SBD settlements are uncontested settlements as defined in Rule 51(f) and all-party settlements under San Diego Gas & Electric.

4. The AVWC settlement is a contested settlement as defined in Rule 51(e).

5. The parties to the AVWC settlement have met the notice requirements of Rule 51.1(b).

6. The fact that affected party LVTC opposes the AVWC settlement need not lead to a conclusion that the settlement is not in the public interest.

7. Each element of a settlement need not be independently justified and derivable from supporting data before a settlement may be approved.

8. All three settlements are reasonable in light of the whole record, consistent with law, and in the public interest.

9. All three settlements should be adopted.

10. The revised rates, step increases, and tariff rule revisions set forth in Appendix B to each settlement are justified.

11. This decision should be made effective immediately to enable Applicants to implement their settlements without delay.

ORDER

IT IS ORDERED that:

1. Leona Valley Town Council's (LVTC) motion to accept-late filed brief is denied. LVTC's late-filed brief is rejected.

2. The three joint Motions for Adoption of Settlement between Kern River Valley Water Company (KRVWC) and Ratepayer Representation Branch of the Commission's Water Division (RRB), between Antelope Valley Water Company (AVWC) and RRB, and between Dominguez Water Company (Dominguez) and RRB, are granted. The three settlements included with this decision as Attachments A, B and C are adopted.

3. KRVWC, AVWC and Dominguez are authorized to file in accordance with General Order 96 Series (G.O. 96) and make effective on not less than five days' notice tariffs containing the test year 2000 increases and the tariff rule revisions shown in Appendix B to their respective settlements, Attachments A, B, and C respectively to this order. The revised rates and rules shall apply to service rendered on and after the tariffs' effective date.

4. KRVWC and AVWC are authorized to file in accordance with G.O. 96 and make effective on not less than 30 days' notice and not sooner than January 1, 2001, revised tariffs implementing the step rate increases for 2001 shown in Appendix B to their respective settlements. The revised rates shall apply to service rendered on and after the tariffs' effective date.

5. KRVWC and AVWC are authorized to file in accordance with G.O. 96 and make effective on not less than 30 days' notice and not sooner than January 1, 2002, revised tariffs implementing the step rate increases for 2002 shown in Appendix B to their respective settlements. The revised rates shall apply to service rendered on and after the tariffs' effective date.

6. On or after November 1, 2000, Dominguez is authorized to file in accordance with G.O. 96 an advice letter, with appropriate work papers, requesting the increase for 2001 shown in Appendix B to its settlement, or to file for a lesser increase in the event that Dominguez South Bay Division's (Dominguez SBD) rate of return on rate base, adjusted to reflect rates then in effect and normal ratemaking adjustments for the 12 months ended September 30, 2000, exceeds the rate of return settled upon in this proceeding for test year 2000. The requested rates shall be reviewed by the Water Division to determine their compliance with this order and shall go into effect upon the Water Division's determination of compliance but not earlier than January 1, 2001, and shall apply only to service rendered on or after their effective date. The Water Division shall inform the Commission if the requested rates are not in accordance the Commission's decision.

7. On or after November 1, 2001, Dominguez is authorized to file in accordance with G.O. 96 an advice letter, with appropriate work papers, requesting the increase for 2002 shown in Appendix B to its settlement, or to file for a lesser increase in the event that Dominguez SBD's rate of return on rate base, adjusted to reflect rates then in effect and normal ratemaking adjustments for the 12 months ended September 30, 2001, exceeds the rate of return settled upon in this proceeding for test year 2001. The requested rates shall be reviewed by the Water Division to determine their compliance with this order and shall go into effect upon the Water Division's determination of compliance but not earlier than January 1, 2002, and shall apply only to service rendered on or after their effective date. The Water Division shall inform the Commission if the requested rates are not in accordance the Commission's decision.

8. Dominguez is authorized to file for Commission consideration an advice letter seeking to recover in rates the reasonable plant costs, up to $630,000, of: (a) extending a main over Interstate 405 at Del Amo Boulevard; and (b) removing its 750,000-gallon overhead tank in Torrance.

9. Dominguez is authorized to file for Commission consideration an advice letter seeking to recover in rates the reasonable plant costs, up to $2,600,000, of: (a) constructing a second new well; (b) constructing a reservoir having a capacity not to exceed 1,7500,000 gallons; and (c) rehabilitating its administrative office at a recoverable plant cost not to exceed $1,000,000.

10. The summaries of earnings presented in Appendix A to each settlement, and the quantities and calculations included as Appendix C which support them, are adopted.

11. Application (A.) 99-05-020, A.99-05-023 and A.99-05-024 are closed.

This order is effective today.

Dated , at San Francisco, California.

ATTACHMENT A

BEFORE THE PUBLIC UTILITIES COMMISSION

OF THE STATE OF CALIFORNIA

Application of Kern River Valley Water )

Company (U-295-W) for authority to )

Increase Rates Charged for Water Service as ) Application

Authorized by NOI 99-03-055. ) 99-05-020

____________________________________________)

SETTLEMENT

1.0 Introduction

1.01 The parties to this Settlement are the Ratepayer Representation Branch ("RRB") of the Water Division and the Kern River Valley Water Company ("KRV")--collectively, the "Parties."

1.02 The Parties agree that no signatory hereto nor any member of RRB assumes any personal liability as a result of the Settlement. The Parties agree that no legal action may be brought in any state or federal court, or in any other forum, against any individual signatory representing the interests of RRB, its attorneys, or the RRB itself regarding the Settlement. All rights and remedies are limited to those available before the California Public Utilities Commission.

1.03 The Parties acknowledge that RRB is charged with representing the interests of customers of public utilities in the State of California, as required by Public Utilities Code Section 309.5, and nothing in the Settlement is intended to limit the ability of RRB to carry on that responsibility.

1.04 As shown in the attached Appendices, negotiations of the Parties have resulted in resolution of all issues raised in Application 99-05-020 and in RRB's reports dated August 19, 1999. Highlighted in the paragraphs that follow are areas that require clarification relative to the estimates used to derive the stipulated figures.

2.0 Revenue: Pages 1 and 2 of Appendix A show stipulated Operating Revenues for the Test Years 2000 and 2001. The Par-ties agree that revenues should reflect higher fees for the fol-lowing items: Deposits to Establish Credit (Rule No. 7, Paragraph A.1.a.), Charge for Returned Check (Rule No. 9, Paragraph B.1.), and Charge for Reconnecting Service (Rule No. 11, Para-
graph C.1.). The revised Rules appear in Appendix B. The Parties also agree that revenues should also reflect 50% of KRV's net earnings from providing nonregulated services.

Unless indicated otherwise, each item discussed in Paragraphs 3.01 through 3.04 is listed in the Summary of Earnings at Pres-ent and Proposed Rates, Settlement column, Appendix A, pages 1 and 2.

3.0 Operation and Maintenance

3.01 Purchased Power: The Parties agree that Purchased Power should be based on an average of the annual expense of the past three years plus an additional $20,700 starting in 2001 to reflect the expense of operating a new treatment plant. The Parties agree that no reduction is warranted at this time given the uncertainties of restructuring of the electric industry.

3.02 Other Expenses: The Parties agree that Other Expenses of Operation and Maintenance should be estimated by applying RRB's escalation to KRV's average recorded expenses for the past three years.

3.03 Unaccounted Water: The Parties agree that Unaccounted Water should be 13.13% of Total Production as shown in Appendix D, page 1 of 2.

3.04 Uncollectibles: The Parties agree Uncollectibles should be 0.75% of revenue based on the level KRV now experiences.

4.00 Administrative and General Expenses-Payroll: For the Test Years, the Parties agree to use KRV's total payroll for the 12 months ended June 30, 1999, adjusted to incorporate RRB's escalation.

5.00 General Office

5.01 Common Expenses of Dominguez Water Company (DWC) relating to the operation of KRV are allocated according to the four factors of average plant, operating expenses, average number of customers, and payroll. The Parties agree that the total Common Expenses for DWC are $1,157,000 for Test Year 2000 and $1,179,000 for Test Year 2001 of which 8.29% should be allocated to KRV, or $95,900 for 2000 and $97,700 for 2001.

5.02 Ratebase: The Parties agree that the Common Ratebase of DWC should be allocated in the same manner as Common Expenses. The Common Ratebase is $601,000 of which $49,900 should be allocated to KRV's Ratebase for each Test Year.

6.00 Plant

6.01 Wells: The Parties agree that an additional well is required in Kernville based on the recent failure of a well that required KRV to transport water by truck to replenish its supply.

6.02 Remote Metering and Control: The Parties agree that no addition to plant for Remote Metering and Control should be authorized for the Test Years.

6.03 Treatment: The Parties agree that $19,000 will be required in 2000 to complete the installation of a chlorine generator and other apparatus for the Treatment Plant in Kernville.

6.04 Storage: Based on additional information from KRV, the Parties agree that $75,000 should be authorized for new storage in the Southlake System and $10,000 for initial painting of a new tank in the Mountain Shadows System.

6.05 Replacement of Mains: The Parties agree that a connection to the Countrywood System, estimated to be $32,500, should be constructed in 2000 and that expenditures for Replacement of Mains should continue at the average expenditures over the past three years of $90,000. The resulting estimated additions to plant for mains is $122,500 for 2000 and $90,000 for 2001.

6.06 Hydrants: Based on information from the Kern County Fire Department, the Parties agree to a program to expend $50,000 each Test Year to install hydrants.

6.07 Transportation: The Parties agree that KRV may replace any vehicle which a) is at least six years old and has been driven 100,000 miles, b) has been driven 125,000 miles, or c) is eight years old.

6.08 Office: After review of additional information, the Parties agree that $24,500 should be authorized in 2000 and $2,000 in 2001 for equipment and software.

7.00 Depreciation: The Parties agree to modify the schedule for depreciation to reflect an average life of 40 years for structures, 25 years for equipment used for treatment, 50 years for reservoirs, and 25 years for meters.

8.00 Cost of Capital: The Parties agree to a ratio of 42.15% debt to 57.85% equity. The Parties also agree on a cost of debt of 8.30% for Test Year 2000 and 8.24% for Test Year 2001 and a cost of equity of 9.95%, which includes a premium of 0.25% to reflect a portion of the savings ratepayers receive from the acquisition by Dominguez Water Company of various small systems. Combining the cost of debt and equity yields a rate of return of 9.26% for 2000 and 9.23% for 2001. The original positions of Dominguez Water Company and RRB for Return on Common Equity are

9.00 Future Rates: Rates for 2001 and 2002 should not be subject to any adjustment because KRV agrees to spread the overall increase uniformly over three years. Increases shown in Appendix B, Page 3 of 4, would become effective on the dates noted.

RATEPAYER REPRESENTATION KERN RIVER VALLEY WATER BRANCH OF THE WATER DIVISION COMPANY

By _______________________ By _________________________

Dated ____________________ Dated _______________________

ATTACHMENT B

BEFORE THE PUBLIC UTILITIES COMMISSION

OF THE STATE OF CALIFORNIA

Application of Antelope Valley Water )

Company (U-281-W) for Authority to )

Increase Rates Charged for Water Service as ) Application

Authorized by NOI 99-03-057. ) 99-05-023

____________________________________________)

SETTLEMENT

1.00 Introduction

1.01 The parties to this Settlement are the Ratepayer Representation Branch ("RRB") of the Water Division and the Antelope Valley Water Company ("AVW")-- collectively, "the Parties."

1.02 The Parties agree that no signatory hereto nor any member of RRB assumes any personal liability as a result of the Settlement. The Parties agree that no legal action may be brought in any state or federal court, or in any other forum, against any individual signatory representing the interests of RRB, its attorneys, or the RRB itself regarding the Settlement. All rights and remedies are limited to those available before the California Public Utilities Commission.

1.03 The Parties acknowledge that RRB is charged with representing the interests of customers of public utilities in the State of California, as required by Public Utilities Code Section 309.5, and nothing in the Settlement is intended to limit the ability of RRB to carry on that responsibility.

1.04 As shown in the attached Appendices, the negotiations of the Parties have resulted in the resolution of all issues raised in Application 99-05-020 and RRB's reports dated August 19, 1999. Highlighted in the paragraphs that follow are areas that require clarification relative to the estimates used to derive the stipulated figures.

2.00 Revenue: Pages 1 and 2 of Appendix A shows stipulated Operating Revenues for the Test Years 2000 and 2001. The Parties agree that revenues should reflect higher fees for the following items: Deposits to Establish Credit (Rule No. 7, Paragraph A.1.a.), Charge for Returned Check (Rule No. 9, Paragraph B.), and the Charge for Reconnecting Service (Rule No. 11, Paragraph C.1.). The revised Rules appear in Appendix B. The Parties also agree that revenues should also reflect 50% of AVW's net earnings from providing nonregulated services.

Unless indicated otherwise, each item discussed in Paragraphs 3.01 through 3.06 is listed in the Summary of Earnings at Present and Proposed Rates, Settlement column, Appendix A, pages 1 and 2.

3.00 Operation and Maintenance

3.01 Purchased Power: The Parties agree that Purchased Power should be based on the rates charged by Southern California Edison Company. The Parties agree that no reduction is warranted at this time in view of the uncertainties of restructuring of the electric industry.

3.02 Purchased Water: The Parties agree that Purchased Water should be based on the average annual amount recorded for the past three years multiplied by the current charge of $171.00 per acre-foot levied by the Antelope Valley-East Kern Water Agency.

3.03 Maintenance of Wells: The Parties agree that the expense for Maintenance of Wells should be based AVW's average recorded expenses for the past three years.

3.04 Other Expenses: The Parties agree that Other Expenses of Operation and Maintenance should be calculated by applying RRB's escalation to AVW's average recorded expenses for the past three years.

3.05 Unaccounted Water: The Parties agree that Unaccounted Water should be 8.67% of the Total Production as shown in Appendix D, page 1 of 2. 8.67% is the average loss for the past five years.

3.06 Uncollectibles: The Parties agree that Uncollectibles should be 0.75% of revenue based on the level AVW now experiences.

4.00 Administrative and General Expenses-Payroll: For the Test Years, the Parties agree to use AVW's total payroll for the 12 months ended June 30, 1999, adjusted to incorporate RRB's escalation.

5.00 General Office

5.01 Expenses: Common Expenses of Dominguez Water Company (DWC) relating to the operation of AVW should be allocated according to four factors of average plant, operating expenses, average number of customers, and payroll. The Parties agree that the total Common Expenses for DWC are $1,157,000 for Test Year 2000 and $1,179,000 for Test Year 2001 of which 3.74% should be allocated to AVW, or $43,300 for 2000 and $44,100 for 2001.

5.02 Ratebase: The Parties agree that the Common Ratebase of DWC should be allocated in the same manner as Common Expenses. The Common Ratebase is $601,000 of which $22,500 should be allocated to AVW's Ratebase for each Test Year.

6.00 Plant

6.01 Remote Metering and Control: The Parties agree that no addition to plant for Remote Metering and Control should be authorized for the Test Years.

6.02 Replacement of Mains: The Parties agree on a program to replace mains, based on the average expenditure over the past three years, at a level of $34,000 for each Test Year.

6.03 Transportation: The Parties agree that AVW may replace any vehicle which a) is at least six years old and has been driven 100,000 miles, b) has been driven 125,000 miles, or c) is eight years old.

6.04 Standby Generator: The Parties agree that a standby generator for Lake Hughes is not required due to infrequent failures of service by Southern California Edison Company.

7.00 Depreciation: The Parties agree to modify the schedule for depreciation to reflect an average life of 40 years for structures, 25 years for equipment used for treatment, 50 years for reservoirs, and 25 years for meters.

8.00 Cost of Capital: The Parties agree to a ratio of 42.15% debt to 57.85% equity. The Parties also agree on a cost of debt of 8.30% for Test Year 2000 and 8.24% for Test Year 2001 and a cost of equity of 9.95%, which includes a premium of 0.25% to reflect a portion of the savings ratepayers receive from the acquisition by Dominguez Water company of various small systems. Combining the cost of debt and equity yields a rate of return of 9.26% for 2000 and 9.23% for 2001. The original positions of Dominguez Water Company and RRB for Return on Common Equity are

9.00 Future Rates: Rates for 2001 and 2002 should not be subject to any adjustment from 2000 because the AVW agrees to spread the overall increase uniformly over three years. Increases shown in Appendix B, Page 5 of 6, would become effective on the dates noted.

RATEPAYER REPRESENTATION

BRANCH OF THE WATER ANTELOPE VALLEY WATER

DIVISION COMPANY

By _______________________ By _________________________

Daniel R. Paige John S. Tootle

Program and Project Representative

Supervisor

320 West 4th Street, Suite 500 21718 So. Alameda Street

Los Angeles, CA 90013 P.O. Box 9351

(213) 576-7048 Long Beach, CA 90810

(310)834-2625

Dated_____________________ Dated_______________________

ATTACHMENT C

BEFORE THE PUBLIC UTILITIES COMMISSION

OF THE STATE OF CALIFORNIA

Application of Dominguez Water Company )

(U-330-W) for Authority to Increase Rates )

Charged for Water Service in the South Bay ) Application

Division as Authorized by NOI 99-03-056. ) 99-05-024

____________________________________________)

SETTLEMENT

1.00 Introduction

1.01 The parties to this Settlement are the Ratepayer Representation Branch ("RRB") of the Water Division and the Dominguez Water Company ("DWC")--collectively, the "Parties."

1.02 The Parties agree that no signatory hereto nor any member of the RRB assumes any personal liability as a result of the Settlement. The Parties agree that no legal action may be brought in any state or federal court, or in any other forum, against any individual signatory representing the interests of RRB, its attorneys, or the RRB itself regarding the Settlement. All rights and remedies are limited to those available before the California Public Utilities Commission.

1.03 The Parties acknowledge that RRB is charged with representing the interests of customers of public utilities in the State of California, as required by Public Utilities Code Section 309.5, and nothing in the Settlement is intended to limit the ability of RRB to carry on that responsibility.

1.04 As shown in the attached Appendices, the negotiations of the Parties have resulted in resolution of all issues raised in Application 99-05-024 and in RRB's reports dated August 19, 1999. Highlighted in the paragraphs that follow are areas that require clarification relative to the estimates used to derive the stipulated figures.

2.00 Consumption and Revenue

2.01 Consumption: The Parties agree to the quantities shown in Appendix D, page 1 of 3, for Test Years 2000 and 2001. Consumption by customers using volumes of water in excess of 35,000 Ccf per year is estimated on the basis of mathematical analysis.

2.02 Revenue: Pages 1 and 2 of Appendix A show stipulated Operating Revenues for the Test Years 2000 and 2001. The Parties agree that revenues should reflect higher fees for the following items: Deposits to Establish Credit (Rule No. 7, Paragraph A.1.a.), Charge for Returned Checks (Rule No. 9, Paragraph B), and Charge for Reconnecting Service (Rule No. 11, Paragraph C.1.). The revised Rules appear in Appendix B. The Parties also agree that Schedules No. 5, 5-A, 5-B, and 5-C, relating to Public Fire hydrant Service, and Schedule No. 9CF, Construction Flat Rate Service, are obsolete and should be removed.

2.03 Unaccounted Water: The Parties agree that Unaccounted Water should be 2.6% of Total Production as shown in Appendix D, page 1 of 3. 2.6% is the average loss for the past five years based upon corrected data submitted by DWC.

3.00 Operation and Maintenance: Unless indicated otherwise, each item discussed in Paragraphs 3.01 through 3.06 is listed in the Summary of Earnings at Present and Proposed Rates, Appendix A, pages 1 and 2.

3.01 Payroll: The Parties agree to use the total payroll for Operations and Maintenance for the 12 months ended June 30, 1999, with the addition of the expense of a Utility Worker adjusted to incorporate RRB's escalation. The Parties agree that 12% of Payroll should be capitalized.

3.02 Purchased Power: The Parties agree that Purchased Power should be based on the consumption of energy estimated for the Test Years using the rates currently charged by Southern California Edison Company. The Parties agree that no reduction is warranted at this time given the uncertainties of restructuring of the electric industry. Total KWHs for each Test Year are shown in Appendix D, page 1 of 3.

3.03 Charges for Replenishment: The Parties agree to estimate Charges for Replenishment based on the present charge of $139.00 per acre-foot levied by the Water Replenishment District of Southern California multiplied by the estimated acre-feet to be pumped during the Test Years.

3.04 Chemicals: The Parties agree to base the estimate of Chemicals on more recent data relating to DWC's use. The total is $184,000 for 2000 and $186,900 for 2001.

3.05 Maintenance of Wells: The Parties agree that the expense for Maintenance of Wells should be $192,000 for Test Year 2000 and $195,000 for 2001 which includes amounts for rehabilitation that had been recorded as additions to plant instead of as an expense to be amortized over three years.

3.06 Other Expenses: After review of the most recent three years of recorded data, the Parties agree that Other Expenses for Operation and Maintenance shown on pages 1 and 2 of Appendix A should be estimated by escalating an average of DWC's recorded expenses for the past three years by RRB's factors, plus an addi-tional allowance for increased expenses for postage, telephone, and outdoor lighting. The total for Other Expenses, except for Charges to Subsidiaries and Uncollectibles, is $1,098,600 for 2000 and $1,111,900 for 2001.

4.00 Administrative and General Expenses: Unless indicated otherwise, each item discussed in Paragraphs 4.01 through 4.13 is listed in the Summary of Earnings at Present and Proposed Rates, Appendix A, pages 1 and 2.

4.01 Payroll: The Parties agree to use the total payroll of administrative and general operations for the 12 months ended June 30, 1999, adjusted to incorporate RRB's escalation. The Parties also agree that 12% of total payroll should be capitalized.

4.02 Transportation: The Parties agree to estimate Transportation on the basis of recorded expenses for the 12 months ended December 31, 1998, adjusted to incorporate RRB's factors for escalation.

4.03 Outside Services-Legal: The Parties agree to base the estimates for legal expense on the average of the three years of billings except for DWC's corporate counsel for whom a retainer of $4,000 per month is reasonable. The balance of Outside Service-Legal is $27,000 for 2000 and $28,200 for 2001.

4.04 Other Outside Services: The Parties agree to estimate Other Outside Services on the basis of recorded expenses for the 12 months ended December 31, 1998, including the expense of a survey of customers, which should be amortized over six years. The total for Other Outside Services is $187,300 for 2000 and $190,200 for 2001.

4.05 Safety and Damages: The Parties agree to base the expenses relating to Safety and Damages on DWC's proposed program of training and instruction of employees during each of the Test Years. The stipulated amount agreed is $17,000 for each Test Year.

4.06 Materials and Supplies: The Parties agree to estimate Materials and Supplies on the basis of recorded expenses for the 12 months ended December 31, 1998. The stipulated amount is $57,500 for 2000 and $58,300 for 2001.

4.07 Trade Associations: The Parties agree to base expenses for Trade Associations on 38% of the expense of membership in the California Water Association and 100% of the expense of membership in the National Association of Water Companies. The stipulated amount is $30,400 for 2000 and $30,900 for 2001.

4.08 Telephone: The Parties agree to estimate expenses for Telephone on the basis of recorded expenses for the 12 months ended December 31, 1998, adjusted to incorporate RRB's factors for escalation. The stipulated amount is $23,900 for 2000 and $24,300 for 2001.

4.09 Directors' Fees: The Parties agree to an allowance of $350 per director per monthly meeting.

4.10 Stock Transfer Agent: The Parties agree to estimate the expense of the Stock Transfer Agent on the 12 months ended December 31, 1998.

4.11 Travel: The Parties agree to estimate the expense of Travel on the basis of recorded expenses for the 12 months ended December 31, 1998, less expenses related to the pending application to merge with California Water Service. The stipulated amount is $27,500 for 2000 and $27,900 for 2001.

4.12 Education and Public Relations: The Parties agree to estimate the expense of Education and Public Relations on the ba-sis of recorded expenses for the 12 months ended December 31, 1998 of recorded expenses less charitable donations. The stipulated amount is $13,000 for 2000 and $13,200 for 2001.

4.13 Pensions and Benefits: The Parties agree to base the estimates for Pensions and Benefits on RRB's ratio of Pensions and Benefits to total Payroll multiplied by the stipulated Payroll.

5.00 General Office: Unless indicated otherwise, each item discussed in paragraphs 5.01 and 5.02 is listed in the Summary of Earnings at Present and Proposed Rates, Appendix A, pages 1 and 2.

5.01 Common Expenses relating to the operation of DWC and its subsidiaries are allocated according to the four factors of average plant, operating expenses, average number of customers, and payroll. On this basis, the Parties agree on total Common Expenses of $1,157,000 for Test Year 2000 and $1,179,000 for Test Year 2001. Under this method, 83.75% is allocated to DWC, or $969,000 for 2000 and $987,400 for 2001.

5.02 The Parties agree that the Common Ratebase of DWC should be allocated in the same manner as Common Expenses. The total Common Ratebase is $601,000 of which $503,300 is allocated to DWC's Ratebase for each of the Test Years.

6.00 Plant

6.01 Wells: The Parties agree that a new well is required in Test Year 2000 based on recent information concerning DWC's dif-ficulty in continuing to lease property on which two of its wells are located. The estimated cost of this well is $900,000 includ-ing the site. The Parties further agree that the Commission should authorize DWC to file an Advice Letter to recover the reasonable costs of a second well to be constructed by 2002. The estimated cost of the second well is $1,100,000 including the site.

6.02 Replacement of Mains: Due to the uncertainties of scheduling, the Parties agree that the Commission should authorize DWC to file an Advice Letter to recover the reasonable costs of extending a main over Interstate 405 at Del Amo Boulevard when a bridge is constructed there by the Department of Transportation. The estimated cost of this main is $500,000.

6.03 Rerouting Main Over Compton Creek: Based on revised plans, the Parties agree that $250,000 is a reasonable cost for rerouting a main now carried on a bridge over Compton Creek.

6.04 Remote Metering and Control: The Parties agree that no addition to plant for Remote Metering and Control should be authorized for the Test Years.

6.05 Storage: Recent studies show that DWC's overhead tank in Torrance with a capacity of 750,000-gallons fails to meet current seismic standards. Accordingly, the Parties agree that the Commission should authorize DWC to file an Advice Letter to recover the reasonable costs of removing the tank in 2000 and replacing it in 2001 with a reservoir having a capacity not to exceed 1.75 million gallons. The estimated cost for removing the tank is $130,000 and for constructing it $500,000.

6.06 Booster Station: The Parties agree that rehabilitation of the Booster Station in Torrance should be authorized in the amount of $250,000 in 2000 and $350,000 in 2001.

6.07 Standby Generator: The Parties agree that a standby generator is required for DWC's main office in Long Beach in case of an electrical outage. The estimated cost for the generator and related equipment is $80,000.

6.08 Transportation: The Parties agree that DWC may replace any vehicle which a) is at least six years old and has been driven 100,000 miles, b) has been driven 125,000 miles, or c) is eight years old.

6.09 Administrative Office: The Parties agree that the Commission should authorize DWC to file an Advice Letter to recover the reasonable cost, not exceeding $1,000,000, to rehabilitate its administration office rather than constructing a new office.

7.00 Depreciation: The Parties agree to modify the schedule for depreciation to reflect an average life of 40 years for structures, 25 years for equipment used for treatment, 50 years for reservoirs, and 25 years for meters.

8.00 Cost of Capital: The Parties agree to a ratio of 42.15% debt to 57.85% equity. The Parties also agree on a cost of debt of 8.30% for Test Year 2000 and 8.24% for Test Year 2001 and a cost of equity of 9.95%, which includes a premium of 0.25% to reflect a portion of the savings ratepayers receive from the acquisition by DWC of various small systems. Combining the cost of debt and equity yields a rate of return of 9.26% for 2000 and 9.23% for 2001. The original positions of DWC and RRB for Return on Common Equity are

9.00 Future Rates:

9.01 The Parties agree that on or after November 1, 2000, DWC should be authorized to file an advice letter, with appropriate work papers, requesting the increase for 2001 attached to this settlement as Appendix B, page 3 of 3, or to file for a lesser increase in the event that DWC's rate of return on ratebase, adjusted to reflect rates then in effect and normal ratemaking adjustments for the 12 months ended September 30, 2000, exceeds the rate of return adopted in this proceeding for Test Year 2000. This filing should comply with General order 96-A. The requested rates would be reviewed by the Water Division to determine their compliance with the order in this application and shall go into effect upon the Water Division's determination of compliance. The Water Division would inform the Commission if the requested rates are not in accordance the Commission's decision. The effective date of the revised rates should be no earlier than January 1, 2001. The revised rates should apply only to service rendered on or after the effective date.

9.02 The Parties further agree that on or after November 1, 2001, DWC should be authorized to file an advice letter, with ap-propriate work papers, requesting the increase for 2002 attached to this settlement as Appendix B, page 3 of 3, or to file for a lesser increase in the event that DWC's rate of return on rate-base, adjusted to reflect rates then in effect and normal ra-temaking adjustments for the 12 months ended September 30, 2001, exceeds the rate of return adopted in this proceeding for Test Year 2001. This filing should comply with General order 96-A. The requested rates would be reviewed by the Water Division to deter-
mine their compliance with the order in this application and shall go into effect upon the Water Division's determination of compliance. The Water Division would inform the Commission if it finds the requested rates are not in accordance the Commission's decision. The effective date of the revised rates should be no earlier than January 1, 2002. The revised rates should apply only to service rendered on or after the effective date.

9.03 In addition, the Parties agree that DWC should be authorized to file an advice letter seeking authorization to include as addition to plant up to $630,000 in 2000 and $2,600,000 in 2001. The Water Division would verify that the additions have been completed and shall inform the Commission that the requested adjustment is appropriate and in conformance with the Commission's order.

RATEPAYER REPRESENTATION

BRANCH OF THE WATER

DIVISION DOMINGUEZ WATER COMPANY By _______________________ By _________________________ Dated _____________________ Dated _____________________

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