California American Water
2015 General Rate Case
July 1, 2013 California American Water (Cal Am) filed its Application
with the CPUC requesting approval to increase customer rates from 2015 – 2017:
$18.5 million or 9.55% increase
$8.3 million or 3.90% increase
$6.7 million or 3.02% increase
its application, Cal Am reported the following residential bill impacts if the
requested rate increase is granted:
District: A residential customer who uses 10 ccf of water per month will
see approximately 4.2% increase in the base water bill (excluding
surcharges) in 2015 from $73.84 to $76.96.
County District: A customer who uses the district’s average of 6 ccf
of water per month will see approximately a 9.2% increase in the base water
bill (excluding surcharge) in 2015 from $33.91 to $37.03.
District: A residential customer who uses the district’s average of 14
ccf of water per month will see approximately a 10.3% increase in the base
water bill (excluding surcharges) in 2015 from $50.23 to $55.42.
California Area: A residential customer who uses the area’s average of
17 ccf of water per month will see approximately a 9.6% increase in the base
water bill (excluding surcharges) in 2015 from $57.42 to $62.92.
main drivers of the proposed rate increases are capital investments,
depreciation, general office costs, operating and maintenance costs, taxes, and
reduced water sales.
October 9, 2013 Cal Am filed its 100 day Update to
its Application. On October 1, 2013, Cal Am filed Supplemental Testimony with
its rate design proposal for all districts except Monterey. On December 1,
2013, Cal Am filed its Testimony with
its rate design
proposal for the Monterey District.
CPUC held Public Participation Hearings in Cal Am districts from April 23 –
May 19, 2014.
hearings were held at the CPUC in June 2014.
Proposed Settlement & Litigated Issues
July 25, 2014 ORA, Cal Am, the City of Pacific Grove, Las Palmas Wastewater
Committee, and Monterey Peninsula Water Management District filed a partial Settlement
requesting CPUC approval to adjust customer rates for 2015 to $3.353
million or a 1.64% increase. A number of contested issues also
CPUC Proposed Decision on Cal Am's General Rate Case
March 6, 2015, the CPUC issued a Proposed
Decision that would partially grant
the proposed Settlement Agreement, including the revenue requirement
increase of $3.5 million for 2015. However, the Proposed Decision would deny the
Settlement’s request for:
of lost revenues related to Pacific Grove Projects, as they could be sought
in Cal Am’s next GRC.
Cal Am Consumption Adjustment Mechanism, which would adjust the adopted
sales forecast for escalation years of 2016 and 2017 if recorded
aggregate sales for the past year are more than 5% different (higher/lower)
than adopted test year sales.
Proposed Decision would resolve the remaining contested issues:
ORA’s proposal to require Cal Am to file 2016 and 2017 escalation year
filings for each district.
ORA’s proposal to require Cal Am to use its recorded ratebase up to, but
not to exceed, the authorized ratebase to calculate its 2017 attrition year
Cal Am’s request to capture any costs in a new memorandum account that are
imposed by Placer County Water Agency as a result of the new purchased water
agreement in the Sacramento District.
Cal Am’s request to record Placer County Water Agency’s peaking charges
in its Purchased Water Balancing Account.
CPUC Final Decision
ORA issued its Final
Decision on April 9, 2016.
CPUC Decision on Cal Am Rule 1 Violations
April 2015, the CPUC issued a Final
Decision finding that Cal Am violated Rule 1.1 of the CPUC’s Rules
of Practice and Procedure regarding
Ethics. Rule 1.1 states:
person who signs a pleading or brief, enters an appearance, offers testimony
at a hearing, or transacts business with the Commission, by such act
represents that he or she is authorized to do so and agrees to comply with the
laws of this State; to maintain the respect due to the Commission, members of
the Commission and its Administrative Law Judges; and never to mislead the
Commission or its staff by an artifice or false statement of fact or law.
Authority cited: Section 1701, Public Utilities Code. Reference: Section 1701,
Public Utilities Code.”
Proposed Decision found that by failing to file accurate Minimum Data
Requirements in its General Rate Case Application and not promptly correcting
this material misstatement, Cal Am violated the CPUC’s Rule 1.1. The scope of
the discrepancy between information initially provided by Cal Am in the Minimum
Data Requirements and information provided in response to ORA’s data requests
was sufficiently severe that the Proposed Decision would order Cal Am to pay a
fine of $870,000 to the General Fund of the State of California.
ORA Policy Position
supports the Settlement because it allows Cal Am to operate its system safely
and reliably, yet appropriately reduces cost. ORA’s analysis of Cal Am’s
original request found that Cal Am over-estimated its needs in these key areas:
ORA used 5-years of recorded consumption data, compared with Cal Am’s 3
years, and found that given Cal Am’s revenues from proposed fees and
higher water consumption that forecasted revenue should be 5% higher than
the utility estimates.
Office Expenses: ORA finds that this expense should be 19% lower than Cal
Am’s estimate, given that the utility’s legal and administrative
forecasts are more than double the average of other comparable water
Operating Expenses: ORA removed duplicative multipliers which inflated Cal
Plant & Ratebase: While ORA included more than 90% of Cal Am’s plant
estimates in this category, given the magnitude of the utility’s plant and
infrastructure costs in this area, this category accounts for ORA’s
largest proposed decreases to revenue estimates.
also supports the Settlement because it will benefit customers by establishing
clear policies and targets for reducing water losses in a cost-effective manner.
For example, the Settlement Agreement would authorize:
3-year combined budget total of $3,551,802 for conservation.
Am to continue tracking conservation expenses in a capped, one-way balancing
account with any unspent funds refunded to ratepayers.
non-revenue water loss penalty/reward program for Monterey and multi-tiered
block rate designs in several districts.
is litigating the unresolved issues because:
rate filings should be mandatory for Cal Am to ensure that districts in
which Cal Am is over-earning will receive appropriate rate decreases.
Am should be required to calculate the attrition year using recorded rate
base to ensure that customers are protected against paying for Cal Am’s
return on rate base for projects that Cal Am does not build.
Am’s request to capture any costs imposed by Placer County Water Agency in
the purchased water balancing account for the Sacramento District would
ignore the CPUC’s previous determination that Cal Am has not presented any
rationale as to why the CPUC’s ruling should be overturned.
Am’s request for a memorandum account to track costs associated with the
Sacramento / Placer County purchased water supply is duplicative of Cal
Am’s existing balancing account and these costs do not meet the criteria
for establishing a new memorandum account.
Table by Cal Am water district.
also addresses numerous Cal Am special requests, which are outlined in ORA’s
ORA’s March 28, 2014 Testimony
for full details of ORA’s findings and positions.
ORA’s August 5, 2013 Protest.
ORA's Motion to Open an Investigation
fall 2013, ORA conducted field visits to Cal Am’s various service territories,
offices, and plants as part of its audit of Cal Am’s request to increase
customer rates. During these visits, it came to ORA’s attention that Cal
Am had failed to complete a significant number of previously authorized projects
– far more than the five projects Cal Am had identified in its CPUC
Application, for which Cal Am customers had already paid.
ORA filed a Motion with the CPUC to open a companion proceeding to investigate
Cal Am as potentially violating the CPUC’s Rule 1.1, which requires the
utilities it regulates to be forthcoming and not mislead the Commission.
ORA's March 17, 2014 Brief.
ORA's March 28, 2014 Reply
ORA’s November 12, 2013 Motion
for a Companion Order Instituting an Investigation.
ORA Cal Am Archives