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ALJ/CFG/mph/gp2 Date of Issuance: 12/11/2020

Decision 20-12-007 December 3, 2020

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA In the Matter of the Application of CALIFORNIA WATER SERVICE COMPANY (U-60-W), a California corporation, for an order (1) authorizing it to increase rates for water service by $50,673,500 or 7.6% in Test Year 2020, (2) authorizing it to increase rates on January 1, 2021 by $31,461,900 or 4.4% and on January 1, 2022 by $33,000,700 or 4.4% in accordance with the Rate Case Plan, and (3) adopting other related rulings and relief necessary to implement the Commission’s ratemaking policies.

Application 18-07-001

DECISION APPROVING A PARTIAL SETTLEMENT AGREEMENT, RULING ON POST-HEARING MOTIONS AND AUTHORIZING CALIFORNIA WATER

SERVICE COMPANY’S GENERAL RATE INCREASES FOR 2020, 2021 AND 2022

354617102 1

A.18-07-001 ALJ/CFG/mph/gp2

TABLE OF CONTENTSTitle PageDECISION APPROVING A PARTIAL SETTLEMENT AGREEMENT, RULING ON POST-HEARING MOTIONS AND AUTHORIZING CALIFORNIA WATER SERVICE COMPANY’S GENERAL RATE INCREASES FOR 2020, 2021 AND 2022..........2Summary.....................................................................................................21. Background............................................................................................52. Motion for Adoption of a Partial Settlement Agreement Is Granted.......8

2.1. Standards for Approval.....................................................................82.2. Salient Features of the Settlement Agreement.................................9

2.2.1. The Proposed Rate Increases are Just and Reasonable...............92.2.2. The Proposed Expenses Are Reasonable...................................102.2.3. The Proposed Plant Additions Are Reasonable...........................102.2.4. The Proposed Rate Designs Are Reasonable.............................102.2.5. Cal Water Has Fulfilled 2015 GRC Requirements.......................112.2.6. The Treatment of Health and Safety Obligations

Is Appropriate............................................................................112.2.7. Cal Water’s Emergency Preparedness Plans Are

Adequate...................................................................................122.2.8. The Treatment of Potential Affordability Problems

Is Appropriate............................................................................122.2.9. Conclusion.................................................................................14

3. Significant Controverted Issues............................................................143.1. Should Cal Water Be Required to Replace Its “Full”

Water Revenue Adjustment Mechanism (WRAM) with a “Monterey- Style” WRAM? If Not, Should Changes Be Made in How Cal Water Manages Its Current WRAM?...............................15

3.2. Should Cal Water Be Authorized to Pursue Projects toImprove Water Quality in Its Dominguez District?..........................19

4. Ratemaking Issues Before the Commission.........................................214.1. Should Cal Water Be Ordered to Eliminate from Its

Balancing Accounts the Pension and Health Care Costs Associated with 23 New Employment Positions Filled Between GRCs?.....................................................................22

4.2. Should Cal Water’s Pension Cost and Health Care Cost Balancing Accounts Be Re-Authorized?...................................24

4.3. Should the Cost of Removing Main and Service Lines Be Added to the Cost of Installing New Lines or Continue to Be Included in Depreciation Calculations for the Vintage Lines?.................................................26

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4.4. Should Cal Water Be Required to Use Short Term Interest Rates for Funding Any Portion of Construction Work in Progress (CWIP)?................................................................30

4.5. Should the Methodology Used by Cal Water to Calculate Its “Working Cash” Allowance Be Changed?...................................35

4.6. Should Cal Water Be Required to Prepare A Consolidation Study for Its Next GRC? If so, What Should Be Its Scope and When Should It Be Submitted?.................................................38

5. Plant Issues..........................................................................................415.1. Should Cal Water Be Authorized to Spend $2.92 Million

for AMI Pilot Projects in Bear Gulch, Los Altos and Redwood Valley Districts?...............................................................41

6. Disposition of Post-Hearing Motions.....................................................446.1. Motions Regarding Confidentiality..................................................446.2. Joint Motion to Admit Exhibits.........................................................476.3. Joint Motion to Delay an Increase for

Palos Verdes Ratepayers................................................................486.4. Cal Water’s Motion for a Systemwide Rate Freeze

Due to Covid-19 Impacts................................................................497. Conclusion...........................................................................................508. Comments on Proposed Decision.........................................................509. Assignment of Proceeding....................................................................52Findings of Fact.........................................................................................52Conclusions of Law....................................................................................58ORDER......................................................................................................61

Attachment 1 – Settlement Agreement and Motion for Approval

Appendices A through T – Rate Effects by Area/DistrictAppendix U – Travis Air Force BaseAppendix V – Customer Support Services by Area/DistrictAppendix W – Rate Schedules by Area/DistrictAppendix X – WRAM Preliminary Statements by Area/District

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DECISION APPROVING A PARTIAL SETTLEMENT AGREEMENT, RULING ON POST-HEARING MOTIONS AND AUTHORIZING CALIFORNIA WATER

SERVICE COMPANY’S GENERAL RATE INCREASES FOR 2020, 2021 AND 2022

SummaryThis decision grants a joint and unopposed motion by the

applicant, California Water Service Company (Cal Water) and the Public Advocates Office (Cal PA) for adoption of a partial settlement agreement (Settlement Agreement) which adopts a revenue requirement of $696,501,780 for Test Year 2020, for Cal Water, representing a 0.6% increase ($4,430,367) over the revenue requirement approved in February 2020. Customers in 12 of Cal Water’s 21 ratemaking areas will see a decrease in their respective average customer monthly bills. Although the remaining nine districts will see an increase in their respective average customer bills, customers in Dixon, Willows and Kern River Valley will receive subsidies from the Rate Support Fund. To provide this assistance to Dixon, Willows and Kern River Valley, bills to all Cal Water customers not receiving assistance in some form will be increased by only six tenths of one percent. Table 1, below, shows the billing impact in each of Cal Water’s individual districts and regions.

Table 1Monthly bill comparison for average residential use per district on a 5/8

x 3/4” meter (excluding applicable surcharges)1

District Usage2 Current3 New Change1 This bill comparison includes the Rate Support Fund subsidies for Dixon, Kern River Valley, and Willows. For Palos Verdes, the LA County Region provides a bill impact that does not include the rate increase for the pipeline replacement project known as the “Palos Verdes Peninsula Water Reliability Project.” 2 The monthly average usage is different from the Appendix Table page 11, which used the 2017 r.1ecorded average. This table reflects 2020 adopted average usage.3 The current bill reflects rates that were authorized at the time of the Settlement.

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Bakersfield 20 $57.64 $55.98 -$1.66 -2.9%Bay Area Region 8 $68.67 $69.14 $0.47 0.7%Bear Gulch 21 $179.36 $167.71 -$11.65 -6.5%Chico 18 $46.17 $45.30 -$0.87 -1.9%Dixon 12 $74.44 $90.82 $16.38 22.0%Dominguez 10 $52.81 $51.47 -$1.34 -2.5%East Los Angeles 12 $68.11 $70.32 $2.20 3.2%Hermosa/Redondo 9 $52.66 $51.46 -$1.20 -2.3%Kern River Valley 6 $83.59 $87.01 $3.42 4.1%Livermore 14 $73.84 $76.07 $2.23 3.0%Los Altos 18 $119.03 $113.21 -$5.82 -4.9%LA County Region 20 $116.63 $111.80 -$4.83 -4.1%Marysville 11 $55.06 $55.30 $0.24 0.4%Oroville 12 $67.07 $58.84 -$8.22 -12.3%Salinas Valley Region 10 $51.82 $49.51 -$2.31 -4.5%Selma 17 $52.36 $50.20 -$2.16 -4.1%Stockton 11 $56.23 $58.95 $2.72 4.8%

Travis Flat $149,565$163,93

3$14,367.6

4 9.6%Visalia 17 $35.53 $32.39 -$3.15 -8.9%Westlake 28 $167.12 $141.24 -$25.88 -15.5%Willows 14 $69.74 $76.17 $6.44 9.2%

In the Settlement Agreement, Cal Water and Cal PA also agree to the ratemaking mechanisms as well as the revenue requirements for the post-test years. The resulting estimated increases in rates on a district/area basis for each Cal Water rate area/district for years 2021 and 2022 are shown in Appendices A through X to this decision. Under the Settlement Agreement and this decision, for both 2021 and 2022 the estimated increases in Cal Water’s rates for individual areas/districts in either year fall in a range of 0.8 – 5.4 percent.

This decision also resolves the remainder of the disputed issues, and for this rate proceeding cycle, authorizes Cal Water to:The rates used to calculate the current bill exclude purchased water and rate base offsets that were approved after October 2019.

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Continue use of its full Water Revenue Adjustment Mechanism (WRAM) until its next general rate case, but, for this rate cycle, the annual WRAM surcharges Cal Water adds to customer bills will remain the same as before and its Sales Reconciliation Mechanism will remain the same as before;

• Continue to associate its removal costs with abandoned and replaced pipes;

• Use its authorized rate of return for financing its construction work in progress;

• Continue its current practice for calculating its working cash needs;

• Include 23 new employees in its pension and health care balancing accounts;

• Renew its pension and health care balancing accounts;

• Expand its pilot programs for installing advanced metering infrastructure equipment to include its Bear Gulch, Los Altos and Redwood Valley districts; and

• Proceed with the requested plant improvements for eliminating water quality problems in its Dominguez District.

Finally, this decision also mandates Cal Water to conduct a broad consolidation study and present it with its next general rate case filing.

This proceeding is closed. 1. Background

California Water Service Company (Cal Water) is the largest Class A water company, regulated by the Commission. It provides water service to a total of almost a half million residential, commercial, and agricultural customers in several water districts and regions throughout northern, central, and southern California. Its headquarters are in San Jose. Its water sources are located throughout California.

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Cal Water filed its general rate case application, Application (A.) 18-07-001, on July 2, 2018. Two weeks thereafter, Cal Water amended its application. California Public Advocates Office (Cal PA) filed a protest to the amended application on August 13, 2018.

Between August 7 and November 8, 2018, the cities of Bakersfield, Lancaster and Visalia sought party status to protect the interests of their respective residents and businesses taking service from Cal Water. On March 20, 2019, the Town of Portola Valley sought party status to request that all its residents who are customers of Cal Water receive advanced metering infrastructure, a request tacitly opposed by Cal PA. All four motions for party status were granted. None of the three cities raised issues that had not already been raised by Cal PA.

On November 21, 2018, the assigned Commissioner, Liane Randolph, issued a scoping memo ruling in the proceeding and identified several issues including: (1) whether Cal Water’s proposed rates were reasonable; (2) whether Cal Water’s requested revenue authorization was reasonable; (3) whether Cal Water should maintain a full WRAM and, if so, how should it be managed; and (4) whether consolidation to create a “central region” would be appropriate. Other narrower issues were also included.

During the first quarter of 2019, more than a dozen public participation hearings (PPHs) were held throughout northern, central, and southern California. Included were Lucerne, Willows, Chico, Oroville, Lancaster/Palmdale, Bakersfield, Kern River Valley, Selma, Torrance, Montebello, Dixon, San Carlos, and Stockton. Spanish

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translators were made available in Bakersfield, Selma, and Montebello. These PPHs were generally well attended.4

The most frequent questions and concerns raised at the PPHs involved: (1) water quality; (2) rate increases; and (3) consolidation issues. On the issue of water quality, participants in the PPHs asked if Cal Water was providing water that met minimum state-mandated water quality standards.

Many PPH attendees expressed considerable concern over rate increases. There were cogent requests for lowering rates.5 Residents of Oroville attended PPHs in several locations in northern California to make their case for lower rates in Oroville as often as they could.6 Speakers frequently compared Cal Water’s rates to the rates of nearby municipal water providers which were lower and asked how residential users directly across the street from one another could be paying significantly different rates.7 We understand and emphasize with the customers who must cope with the cost of utility service, especially during this era of Covid-19. In this decision, we will lower Cal Water’s rates in many of its rate districts through the first year of the rate cycle and we will ensure a gradual increase in rates for the

4 In one instance (Oroville), so many attended the PPH, the original venue at Oroville’s town hall could not accommodate the crowd and the PPH was moved to a civic auditorium within walking distance.5 See, e.g., February 11, 2019 PPH Tr. at 254, line 8 – 256, line 17 ( Lucerne); February 14, 2019 PPH Tr. at 479, line 18 - at 481, line 5 (Beth Perkins, Oroville); and February 14, 2019 PPH Tr. at 481, line 10 – at 482, line 13 (Virginia Brazil, Oroville). 6 See February 13, 2019 PPH Tr. at 56, line 13 – at 59, line 9 (Tasha Levinson, Willows); February 12, 2019 PPH Tr. at 314, line 27 – at 371, line 8 (Jack Kiely, Chico); February 14, 2019 PPH Tr. at 463, line 2 – at 465, line 18 (Jack Kiely, Oroville). 7 See, e.g., February 14, 2019 PPH Tr. at 463, line 2 – at 465, line 18 (Jack Kiely, Oroville).

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subsequent years in this rate cycle.8 Furthermore, we recently addressed the question of affordability in a rulemaking proceeding for the water utility industry resulting in D. 20-08-047, which will eliminate certain Cal Water rate surcharges for residential customers in its next rate case cycle. The assigned ALJ advised attendees at the public participation hearings of our efforts in this regard.9

Evidentiary hearings were conducted on July 1, 2 and 3, 2019 and August 6 and 7, 2019. After the evidentiary hearings adjourned, Cal Water and Cal PA jointly requested an extension of time for filing a motion for approval of a partial settlement agreement. That motion was granted.

On September 9, 2019, Cal Water filed its motion for interim rate relief.

On October 8, 2019, the Cal Water and Cal PA jointly filed a motion to approve their partial, but extensive, settlement agreement. No opposition was filed by any of the other parties to this proceeding.

On November 7, 2019, Cal Water’s motion for interim rate relief was granted.

On December 12, 2019, the Commission issued Decision (D.) 19-12-059 extending the statutory deadline until July 1, 2020, to allow time to review and consider the partial settlement agreement reached by Cal Water and Cal PA. Two further extensions reset the deadline to its current November 20, 2020 date.

On March 2, 2020, the proceeding was reassigned solely to Administrative Law Judge Charles Ferguson.

8 Section 6.4, below. 9 See CPUC Proceeding R. 17-06-024; February 11, 2019 PPH Tr. at 256, line 20 – at 257, line 24

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On April 28, 2010, Cal Water and Cal PA jointly moved to reopen the record, citing Covid-19 and seeking to defer the rate increases associated with the replacement of the main pipeline for the City of Palos Verdes. Also, on April 28, 2020, Cal Water moved to freeze rates systemwide. Both motions remain pending and are addressed later in this decision.10, 11

2. Motion for Adoption of a Partial Settlement Agreement Is Granted

On October 8, 2019, Cal Water and Cal PA submitted a joint motion (Joint Motion) seeking our approval of a Partial Settlement Agreement (Settlement Agreement).12 Although this is not an all-party settlement, the Joint Motion is unopposed. As discussed below, the Settlement Agreement resolves the eight general scoping issues set forth in the assigned Commissioner’s November 21, 2018 Scoping Memo and is reasonable in light of the whole record, consistent with the law, and in the public interest. Therefore, we approve it.

2.1. Standards for Approval We must find whether the Settlement Agreement complies with

Commission’s Rules of Practice and Procedure, Rule 12.1(d), which requires that a settlement be “reasonable in light of the whole record, consistent with the law, and in the public interest.”

2.2. Salient Features of the Settlement AgreementThe Settlement Agreement addresses the eight general issues set

forth in the Scoping Memo. They are the most important aspects of the Settlement Agreement from the Commission’s perspective. They are discussed in the sections that follow.10 Section 6.3, below.11 Section 6.4, below.12 A copy of the Settlement Agreement is included in Attachment 1 to this decision.

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2.2.1. The Proposed Rate Increases are Just and ReasonableMost of the issues related to the revenue requirements and rate

design for this rate cycle, including operating expenses, projected sales, customer count and revenue required, were resolved in the Settlement Agreement. Those issues that were not resolved in the Settlement Agreement, we have resolved in subsequent sections of this decision. On pages 6-7 of the Settlement Agreement, the parties state that our resolution of their disputed issues would not change their agreement that the revenue requirements are just and reasonable.

Our resolutions of the contested issues in this decision when taken together with the terms of the Settlement Agreement related to revenue and rate design, result in billing increases and decreases for the Test Year for the average customer in each district and rate area as shown in Table 1, above. Adopted rates (labelled “Proposed Rates”) for each district and rate area for the Test Year 2020, as well as estimated rate increases for the escalation years 2021 and 2022, are shown in Appendices A – X attached to this decision. We find these rates to be just and reasonable for this rate case cycle. We also find the mechanisms set forth in the Settlement Agreement and in this decision for calculating rates for the escalation years to be just and reasonable.

Many of Cal Water’s rate districts and rate areas will experience rate decreases for the Test Year. And, among those districts not experiencing a decrease, at least three will receive rate subsidies from the Rate Support Fund. Accordingly, we find that the revenue requirements for all districts and rate areas are just and reasonable

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and will allow for provision of safe and reliable water service at just and reasonable rates.

2.2.2. The Proposed Expenses Are ReasonableThe testimony sponsored by Cal Water and that sponsored by

Cal PA indicated agreement, to a considerable extent, on Cal Water’s expenses from the very outset of this proceeding. Disputes over payroll expenses, new positions, conservation expenses and the impact of the federal Tax Cuts and Jobs Act were eventually resolved in Chapters 4, 9, 10 and 11 of the Settlement Agreement. These two sources of agreement (the complementary filed testimony of the parties and the Settlement Agreement) resolved many possible expense issues in this proceeding. The few remaining expense issues resolved in the Settlement Agreement are just and reasonable.

2.2.3. The Proposed Plant Additions Are ReasonableThe request for a continued pilot project involving advanced

metering infrastructure, certain well-water treatment projects in the Dominguez District and the appropriate rate to use for construction financing of projects to be completed in 2020-2022 were not resolved by agreement. They are contested issues that we have resolved in subsequent sections of this decision. All the remaining proposed plant additions were resolved by agreement of the parties and are described in the Settlement Agreement. Taken as a whole, these settled expenses represent a reasonable and justified cost for plant additions and we approve of them.

2.2.4. The Proposed Rate Designs Are ReasonableThe parties negotiated a settlement of rate designs in Chapter 3

of their Settlement Agreement. Their arrangement reflects a shift of revenue recovery from quantity rates over to service charges, within

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acceptable Commission norms. This shift and the breakpoints in the tier blocks for those residential customers with tiered rates and the rates applicable to each tier are just and reasonable. As noted earlier, in many districts and rate areas, the rates for the average residential customers’ usages will decrease for the Test Year and in some of the others experiencing a rate increase, there will be subsidies from the Rate Support Fund. The Settlement Agreement also provides for Cal Water to (1) continue its Low-Income Ratepayer Assistance; (2) recalculate the surcharge based on the final adopted rates; (3) implement the recalculated surcharge by filing a Tier 1 advice letter within 30 days of the effective date of this decision; and (4) increase public awareness of the program. We find that the rates for all residential customers are just and reasonable.

2.2.5. Cal Water Has Fulfilled 2015 GRC Requirements In its rebuttal submission, Cal Water provided a table identifying

its compliance activity associated with each of the ordering paragraphs of D.16-12-042.13 Cal PA has not identified any problems with the compliance activities in that table. Accordingly, we find that Cal water has fulfilled its obligations under D.16-12-042.

2.2.6. The Treatment of Health and Safety Obligations Is AppropriateCertain well-water improvement projects in the Dominguez

District triggered a fundamental disagreement between Cal Water and Cal PA concerning when it is appropriate to initiate construction work to diminish a potential risk to the health and safety of customers. In this proceeding, Cal PA takes the position that there are no health or safety risks significant enough to require Cal Water to fix them. Cal PA

13 See Exhs. CW-07, at 225-226; CW-103, at 31-32.

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recommends a finding that all Cal Water systems comply with minimum water quality standards.

On the other hand, Cal Water has identified certain wells in the Dominguez District which present safety and health concerns, in Cal Water’s opinion. In light of the fact that we agree with Cal Water’s concerns and because we will authorize Cal Water to address those concerns with the specific facilities Cal Water has identified, we find that Cal Water’s health and safety programs are in compliance with all applicable laws, both those cited by Cal Water and those cited by Cal PA. The treatment of health and safety concerns in the Settlement Agreement is therefore appropriate.

2.2.7. Cal Water’s Emergency Preparedness Plans Are AdequateCal PA has studied the content of Cal Water’s Emergency

Response Plans and whether those Emergency Response Plans comply with the requirements of the California Division of Drinking Water and Public Utilities Code section 768.6(a). Cal PA concluded that Cal Water is in full compliance. No evidence to the contrary was introduced by any party. We therefore conclude that Cal Water’s Emergency Response Preparedness Plans are adequate and meet all applicable laws.

2.2.8. The Treatment of Potential Affordability Problems Is Appropriate

First, with respect to Cal Water’s recently approved “Travis District,” consisting of the Travis Air Force Base which includes over 900 industrial and administrative facilities, the Settlement Agreement provides that Cal Water will use Cal PA’s methodology to calculate the cost allocation factor used to allocate company-wide costs to each ratemaking area in Cal Water’s system. This will prevent costs that

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Travis Air Force Base should bear being shifted to the other ratemaking areas in Cal Water’s system.

Similarly, the Settlement Agreement protects customers in Cal Water’s Antelope Valley area (a low-income area) from bearing the costs of the mainline pipe replacement project in the Palos Verdes area (a high-income area). Both areas are part of the Los Angeles Area for ratemaking purposes. Chapter 15, section J, of the Settlement Agreement provides detailed rate calculation instructions to prevent the cost of the Palos Verdes pipeline replacement project from bleeding over into the calculation of rates for Antelope Valley customers.

Cal Water’s Low-Income Ratepayer Assistance (“LIRA”) program is described in the Chapter 2 of the Settlement Agreement. Cal PA did not raise any concerns about the credits, surcharges, methodology or any other aspect of the LIRA program. Further, the two parties agreed that Cal Water would improve its outreach to new potential LIRA customers, as is even more appropriate considering the Covid-19 pandemic.

Also located in Chapter 2 of the Settlement Agreement is the parties’ agreement on how to assist customers in the Dixon and Willows districts with increased rates necessary to amortize the costs of chromium-6 capital projects in those districts. Both districts have relatively small populations and significant chromium-6 problems. The Settlement Agreement directs Cal Water to begin directing Rate Subsidy Funds to both Dixon and Willows. According to the Settlement, an average-use customer in Dixon must not see a monthly bill increase greater than $30.58 and the average-use Willows customer should not see a monthly bill increase greater than $5.67.

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2.2.9. ConclusionCal Water and Cal PA balanced a variety of issues of importance

to them individually and they agreed to the settlement as a reasonable way to resolve their differences.

There are no terms in it that would bind the Commission in the future or violate existing law. Pursuant to Rule 12.5, our approval of the Settlement Agreement is binding on all parties to the proceeding; however, our approval does not bind or otherwise impose a precedent in this or any other Commission proceeding.

Public policy in California favors settlement of litigated disputes to avoid costly and protracted litigation. The Settlement Agreement furthers this public policy preference. It resolves competing concerns in a collaborative manner. It avoids the costs and uncertainties of further litigation of the issues in this proceeding and eliminates the litigation costs for rehearing and appeal. Our approval of the Settlement Agreement shortens the time for complete resolution of all issues in the proceeding. And the Settlement Agreement ensures that customers have access to a safe and reliable water supply at a reasonable cost and that Cal Water and its shareholders will receive a reasonable rate of return on their investments.

Based on the foregoing, we find that the Settlement Agreement is reasonable considering the whole record, consistent with the law, and in the public interest. Accordingly, we grant the Joint Motion for Adoption of a Settlement Agreement.3. Significant Controverted Issues

The parties, principally Cal Water and Cal PA, contested various ratemaking and plant issues and made their own individual requests that were controversial. We have weighed the evidence presented on

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each contested issue and each special request, considered the relevant legal authorities brought to our attention and, where appropriate, we have considered the likely impacts of Covid-19. Two specific controversies require that we pay special attention to the health and economic impacts of Covid-19. We will address those matters first.

3.1. Should Cal Water Be Required to Replace Its “Full” Water Revenue Adjustment Mechanism (WRAM) with a “Monterey- Style” WRAM? If Not, Should Changes Be Made in How Cal Water Manages Its Current WRAM?

We do not order Cal Water to exchange its “full” WRAM for a“Monterey-Style” WRAM in this GRC proceeding. This is particularly so, given our recent ruling in D.20-08-047. There we prohibited applications filed after September 3, 2020 that seek to inaugurate or continue use of full WRAMs. In Ordering Paragraph 3 of D.20-08-047, we addressed Cal Water, as follows:

… California Water Service Company [and others] in their next general rate case applications, shall not propose continuing existing Water Revenue Adjustment Mechanisms/Modified Cost Balancing Accounts …. In D.20-08-047, we also stated unequivocally that “we are not

requiring water utilities to use a Monterey-Style WRAM and ICBA … in proposals for future GRCs.”14 Nonetheless, Cal PA’s position on the record in this GRC proceeding remains that we order Cal Water to immediately change from a full WRAM to a Monterey-Style WRAM for Test Year 2020 and the following two escalation years.15

14 Id. at 71-72.15 See CA Opening Brief, at 15 (in this GRC, Cal PA proposes that the Commission “eliminate the WRAM and replace it with a Monterey-Style WRAM”); ibid. (in this GRC, “[t]he Commission [s]hould [r]eplace the WRAM and SRM with an M-WRAM.”); and id. at 18 (in this proceeding, Cal PA “reasonably proposes that Cal Water be required to adopt an M-WRAM and an Incremental Cost Balancing Account.”).

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Particularly in view of D.20-08-047, we do not find any persuasive justification in the record of this proceeding to order an immediate change from a full WRAM to a Monterey-Style WRAM for Cal Water in this pending GRC proceeding.

We also are unpersuaded by Cal Water that it should be allowed to modify certain mechanisms associated with its WRAM to hasten amortization of the balances in its WRAM accounts. At the end of calendar year 2018, an aggregate WRAM amount across all of Cal Water’s rate areas of $56.1 million remained to be collected from ratepayers in the form of surcharges.16

As we did during the prior economic upheaval,17 we require Cal Water to limit annual total surcharges in all its districts and regions to no more than 10 percent of the company’s most recent revenue authorization. It is still true today that a limit on how much can be surcharged is necessary.18 During this uncertain pandemic era, the 10 percent cap will help temper what Cal Water can add to ratepayer bills in any one year.

16 See Exh. CW-103, at 219, lines 4-6 (“$56.1 million” in WRAM account and reported to SEC); but cf. Exh. PA-08, at 52, Chart 3-1 (“$59.826 million” remained to be collected from customers). The difference may be due to having made the respective assessments on different dates. 17 D.12-04-048 at 22. (We established the 10 percent cap in D.12-04-048, during the last economic upheaval, largely because we could not tolerate “surcharges increasing rates by 10 percent or more a year between GRC proceedings.”)18 Cal Water’s assertions in its Opening Brief at page 49, footnote 225, that the figure 10 percent was “arbitrarily chosen” and in its Reply Brief at 54 that the figure ten percent “was chosen for convenience” are simply and obviously not true. Considerable effort went into the decisional process leading up to the selection of the ten percent figure. See, e.g., D.12-04-048 at 3; 4 fn. 2; 17-25; 33-24; 38; 41-41; and Appendix A. Furthermore, temporary relief from it, in specific circumstances, and for a small number of individual water companies is not an admission that ten percent is either unworkable or arbitrary.

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The Sales Reconciliation Mechanism (SRM) is another mechanism strongly associated with Cal Water’s WRAM. Depending on whether actual sales quantities are lower or higher than a revised projection, the SRM increases or decreases customer bills in the escalation years of a rate cycle. The mechanism was first proposed by Cal Water and authorized in D.14-08-011. Its purpose is to refine Cal Water’s approved, Test Year sales projections and make them more accurate for use in escalation years, thereby reducing the potential amount of under-collections that would otherwise have entered the WRAM balancing accounts. Thus, it functions somewhat as a buffer for Cal Water’s WRAM mechanism, but only during escalation years.19

The SRM is triggered when there is difference (higher or lower) of five percent or more between Cal Water’s actual sales quantity in the immediately prior year and the approved sales forecast for the test year (which are one and the same year when making an SRM calculation for the first escalation year). When triggered by lower actual sales than a test year projection, which is what occurs most often, the SRM reduces what would otherwise be the flow of under-collections of revenue into Cal Water’s WRAM accounts. A portion of the revenue that would otherwise go into a WRAM balancing account during an escalation year for collection much later, is instead collected during the escalation year itself by reducing the test year sales projection.

19 We have said that the SRM works “as a means to mitigate against a high WRAM balance.” D.14-08-011 at 19. Accordingly, it should be permitted to function in all situations where a full WRAM functions. We have never envisioned the full WRAM as working only in periods of declared drought, as Cal PA argues should be the rule, nor have we confined the SRM to periods of drought. See D.16-12-06 at 27 (SRM “would limit the revenue disparity that is tracked by the WRAM”) (quoting D. 14-08-011 at 19-20).

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Because an approved test year revenue requirement does not change, rates in customer bills during the escalation years will increase whenever the SRM is triggered by unrealized sales. For example, if the actual sales for a year immediately prior to an escalation year are six percent lower than the approved sales projection for the associated test year, the five percent threshold has been met and three percent (half of the six percent difference) is incorporated into a new, lower sales forecast for the coming year and rates are recalculated based on the new, lower sales forecast to produce a set of revised rates for the coming escalation year.20

A build-up of surcharges in the WRAM accounts should be avoided whenever possible.21 The primary purpose of the SRM is to prevent, as much as possible, a build-up of surcharges in the WRAM balancing accounts of Cal Water, and avoid the resulting, so-called “pancaking” of surcharges upon surcharges that appear in bills when inflated WRAM balancing accounts are being amortized. A build-up of surcharges in Cal Water’s WRAM balancing accounts is harmful to both its customers and Cal Water, due to the length of time required to amortize the surcharges as well as the financial risk associated with the delay in collecting approved revenue.

However, in this proceeding, Cal Water asks that we allow it to enhance the effects of the SRM by allowing the entire difference between the prior year’s actual sales and that which we approve for

20 In practice, the 12-month period used for the SRM calculation differs from the calendar year. CW Reply Brief at 39. The remaining three percent of the six percent difference between forecast and recorded sales is eventually recovered through the WRAM/MCBA mechanism. See D.16-12-026 at 27.21See D.16-12-026 at 32 (“[A] GRC may also consider whether the SRM should be more broadly available to minimize resort to WRAMs or surcharges that may occur with floods, fire, climate change, changes in public policy, or other factors.”).

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the Test Year to enter the SRM calculation, rather than only half the difference, as is now the case.22 Cal PA opposes enhancing the SRM and argues that its use should be eliminated in all but declared drought periods.23

The arguments advanced by Cal Water in favor of its proposed changes are based on policy arguments and supposition rather than evidentiary facts.24 We have considered them in previous proceedings and found them deficient.25 Our opinion has not changed. The SRM should be calculated as it was during the past GRC cycle and surcharges shall be capped to the same extent as they have been.

3.2. Should Cal Water Be Authorized to Pursue Projects to Improve Water Quality in Its Dominguez District?

In this proceeding Cal PA and Cal Water disagree over whether we should adhere to federal or state water quality standards, and when it is appropriate to initiate construction work to diminish a potential risk to the health and safety of customers. Cal Water has taken the position that the more stringent state water standards should be enforced rather than the federal standards and that it should not have to wait until receiving a citation or violation to address foreseeable water treatment issues, as is promoted by Cal PA. In this

22 See CW Opening Brief at 34-39.23 Ibid. at 26-28. 24 See, e.g., Exh. CW-103, at 222: “The 10% limitation [on WRAM-related surcharges in customers’ bills] is arbitrary in nature and could inhibit … aggressive conservation in times of drought or during other periods of limited supply.” More speculation ensues: “Cal Water anticipates that the 10% cap will cause a significant delay in the recovery of WRAM balances ….” Ibid. And Cal Water adds: “… there will likely be continued usage reduction in many of Cal Water’s service areas.” Ibid. (Emphasis added to each quotation.)25 See, e.g., D.16-12-026 at 38-41 (“[W]e decline to adjust the 10 percent cap on the WRAM [amortization] at this time.”).

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decision, we choose to uphold the more demanding state standards and proactive approach.

Cal Water seeks authority to construct $10 million of plant improvements in its Dominguez District. All proposed construction projects in the Dominguez District (34,000 customer accounts) involve water treatment facilities. For each project, Cal Water proposes to follow California Division of Drinking Water (DDW) instructions and DDW permit conditions, regardless of whether the water quality of a well associated with the proposed construction does or does not exceed maximum acceptable contaminant levels set by the federal government. As justification for following DDW rather than federal standards, Cal Water points out that its rate proposal depends heavily on the use of groundwater to serve the residents of the Dominguez District.26 Cal Water presented evidence showing that should it fail to bring water quality up to the stricter DDW standards, DDW could order Cal Water to cease relying on groundwater from one or more wells in the Dominguez District. In turn, that would likely result in higher rates or a revenue shortfall because Cal Water would have to rely on importing water, which is an expensive proposition.27

With one exception (a $413,000 allowance for a feasibility study and basic pumping equipment at Well 219-02), Cal PA contends that the Commission should follow federal maximum contaminant

26 CW Opening Brief at 59-60 (“The cost of constructing and operating the [improved] treatment facilities [is] substantially less than purchasing water … . Indeed, Cal Water indicated that it would be seeking groundwater usage in the Dominguez District as part of [this] general rate case”).27 Ibid.

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standards, none of which have been violated frequently enough by Cal Water to require remedialmeasures, and deny Cal Water the revenue necessary to follow DDW’s instructions and permit requirements. Cal PA also points out that some of the wells at which Cal Water proposes remedial construction projects are currently listed as “active” wells by DDW, contrary to Cal Water’s insistence that the same wells are currently shut down.

We shall follow the guidance of our sister agency, DDW. Removing methane gas in well water, as well as fixing odor and color problems that may be indicators of more serious health threats for customers, is within the purview of DDW, and we will support such measures, not ignore them, in these Covid-19 circumstances, even though there is no sustained violation of federal maximum contaminant standards occurring. The physical and mental health of the public is especially important for us to protect during the current pandemic.

Furthermore, the overall purpose of the proposed construction projects is to maximize the amount of high-quality water taken from the ground rather than purchasing more expensive water elsewhere. By delivering high quality, lower-cost ground water to its Dominguez customers, rather than expensive bottled water, Cal Water will avoid adding further financial pressure to that already being experienced by its customers due to Covid-19, as well as avoid further mental and physical stress on its customers. 4. Ratemaking Issues Before the Commission

The following ratemaking issues are not as sensitive to the presence of the Covid-19 pandemic. They raise issues concerning our

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specific ratemaking methodologies, our accounting standards, and Cal Water’s approach to consolidation of its districts and regions.

4.1. Should Cal Water Be Ordered to Eliminate from Its Balancing Accounts the Pension and Health Care Costs Associated with 23 New Employment Positions Filled Between GRCs?

Cal PA opposes Cal Water’s request to recover the pension and health care costs (recorded in balancing accounts for such costs) associated with 23 newly hired or recently promoted employees,28 while simultaneously urging us to authorize the very positions for which the same employees were hired.29 The basis for Cal PA’s seemingly contradictory positions is a former Commission decision, D.92-03-094. As Cal PA puts it, D.92-03-094 is the applicable law, and it compels such a result, namely, failure to accurately forecast future hiring needs with full accuracy precludes recover from ratepayers of the associated pension and health care costs.30 We disagree.

D.92-03-094 is inapposite to this proceeding. That decision concerned the sale and leaseback of a water utility’s headquarters building in downtown Los Angeles and the construction of its new headquarters in San Dimas, several miles distant. Both the former and new headquarters were major capital assets of the utility. The sale/leaseback of the old and the construction of the new headquarters required our permission. That aspect of the decision alone distinguishes it from the present situation where our permission is not

28 Several of the employees were promoted and new employees were hired to fill their prior positions. See CW Opening Brief at 28-29 (“[M]any of the created positions were promotional causing vacancies at the prior positions … .”).29 Compare Exh. PA-11 at 6, lines 10-11(“Commission should adopt the new positions Cal Water actually hired”) with id. at 6, line 21- at 7, line 2 (“Commission should disallow recovery of pension costs and health care costs incurred for new hires … until TY 2020”).30 CA Reply Brief at 4-6.

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necessary for a utility to hire individual employees on an as-needed-basis.

There are additional, pertinent distinguishing aspects to D.92-03-094. In an earlier related decision, D.89-04-079, we authorized the same Los Angeles water utility to open memorandum accounts, one to track the ownership-costs collected in its rates and another to track the costs it incurred as a result of the sale/leaseback of its headquarters. Most importantly, we expressly provided that while over-collections for ownership costs were subject to refund, the utility would be at risk for under-collections. There was a significant under-collection during the sale/leaseback period, and we held in D.92-03-094 that the under-collection of revenue in rates could not be passed through in future rates.

Here, Cal PA has offered no evidence whatsoever to show us that our prior authorizations of Cal Water’s pension and health care balancing accounts contained express prohibitions against combining the pension or health care costs associated with necessary, but unpredicted employment positions between GRCs with those same costs for existing employees. Nor did Cal PA provide evidence of any express provision prohibiting recovering of such costs in rates. As Cal Water points out, we authorized creation of these balancing accounts to track pension and health care costs in the aggregate on a companywide basis, without distinguishing between existing employees and employees newly hired or promoted of necessity.31 Cal Water has done exactly what we expected it to do, unlike the water

31 CW Reply Brief at 28-29 (“[B]alancing account mechanisms at issue were never designed to track the costs of specific personnel, but instead … the pension and medical costs for the Company as a whole.”).

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utility in D.92-03-094 which ignored our express prohibition of its request and tried to do what we had prohibited.

For the same reason, we also are not persuaded by Cal PA’s reliance on and quotations from the remaining portion of D.92-03-094. The remainder of D.92-03-094 concerns costs associated with the new office headquarters of the water utility that were not recorded in any memorandum account because the utility failed to ask for authority to create one. For that reason, we prevented the utility from seeking to recover the unrecorded costs in rates.

The undisputed facts here are that we have already authorized balancing accounts for Cal Water to track its pension and health care costs for our review on a companywide basis, and Cal Water has done what it was supposed to do. In contrast, we denied recovery in D.92-03-094 precisely because the utility failed to do what it was supposed to do. Thus, because of these factual differences, we do not find D.92-03-094 instructive here.

Cal Water’s expenses for pension and health care benefits associated with filling new employment positions will be treated in the aggregate with all other employees when it is clear from the record that the employees are needed (which Cal PA concedes) for the utility to provide safe, reliable service to customers and no express prohibitions against doing so exist.

4.2. Should Cal Water’s Pension Cost and Health Care Cost Balancing Accounts Be Re-Authorized?

Cal Water has asked that we authorize it to maintain pension cost and health care cost balancing accounts for this rate-case cycle just as we have customarily done in past GRCs.32 Cal PA objects and contends 32 CW Opening Brief at 51-57.

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that: (1) past practice prevents the balances in the accounts from being reviewed in their entirety during a GRC proceeding; (2) customary procedures for amortizing these accounts allow no opportunity for the Commission to review the amount to be amortized; and (3) the existence of the balancing accounts has incentivized Cal Water purposefully to underestimate its pension and health care costs for its employees.33

We find there is no reason to agree with Cal PA’s opposition to following past practice and authorizing the same type of balancing accounts again.

As for Cal PA’s criticism that past practice prevents the balances in the account from being reviewed in their entirety in a GRC proceeding, care must be taken to distinguish between merely authorizing the use of balancing accounts to track pension and health care costs for Cal Water’s employees and actually amortizing some or all the balances in the accounts. In this proceeding, Cal Water asks merely that we approve of the use of balancing accounts for the coming rate case cycle. Cal Water has not asked us to rule on the proper amount to be amortized in the currently existing balancing accounts. The Commission will determine the amounts to be amortized from the currently existing balancing accounts when Cal Water files an Advice Letter with a request for a determination. The total amount recorded in each balancing account over the appropriate three-year rate cycle will be reviewed. Pursuant to past and present practice, should Cal PA want to object to the amount Cal Water asks to amortize from one or both balancing accounts, it will have an opportunity to do so and to seek the full Commission’s review of the 33 CA Opening Brief at 28-29; CA Reply Brief at 6-7.

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Water Division’s decision. We see nothing wrong with this existing process, and Cal PA has failed to offer any good reason for changing it.

Relying on a strained interpretation of a portion of Cal Water’s prepared testimony, Cal PA argues that the balancing accounts act as incentives for Cal Water to intentionally lower its forecasts of pension and health care costs, knowing that when it is time to amortize the accounts, they will likely be trued-up. Cal Water denied the allegation both from the witness stand and in prepared rebuttal testimony by its Vice President, CFO Thomas Smegal.34 Mr. Smegal’s prepared testimony provides a detailed historic account of Cal Water’s forecasts of pension and health care costs compared to what subsequently occurred.35 We find no indication in the record evidence of any intention to underestimate costs and then fall back on a true-up process, when amortizing the balancing accounts, to recover under-collections.

Cal PA closes its reply brief on this matter with the assertion that pension and health care costs are not difficult to forecast and therefore they do not qualify for balancing account treatment.36 No evidence is offered for such a sweeping statement. We reject the argument. And, we invite Cal PA to consider the enormous, unprecedented damage to the health and finances of the American workforce and employers rendered by a single virus strain, which no one predicted – precisely the kind of environment in which balancing accounts should be used.

34 EH Tr. (Smegal) at 997, line 4 – at 1000, line 3; Exh. CW-103 at 94, line 5 – at 96, line 8.35 Exh. CW-3 at 36 -- 42; see also Exh. CW-103 at 94, line 5 – at 96, line 8.36 CA Reply Brief at 7 (“pension and health care costs are foreseeable”).

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4.3. Should the Cost of Removing Main and Service Lines Be Added to the Cost of Installing New Lines or Continue to Be Included in Depreciation Calculations for the Vintage Lines?

The debate over this issue has no place in this proceeding. We agree with Cal Water that the position espoused by Cal PA “appears to be trying to establish new precedent on depreciation expense … wholly out of step with Commission history, past practice and with generally accepted accounting principles.”37 It is especially out of step with Standard Practice U-38-W. Furthermore, if a Class A water utility, a member of the public or Cal PA feels a different accounting treatment should be applied to the removal of main and service pipes, the Uniform System of Accounts for Class A Water Utilities provides a process for requesting such a change, and that process was not followed here by Cal PA.38 Briefly, the Commission’s Standard Practice U-1-W authorizes the Director of the Water Division to determine whether it is appropriate to change an existing practice and provides appropriate procedures to follow.

Cal PA recognizes that the long-standing practice for treating costs associated with the retirement of utility plant facilities is to book the costs with the vintage facility rather than the replacement facility for purposes of depreciation expense.39 37 CW Reply Brief at 6.38 “When the public, staff, a utility or [Public Advocates Office] sees the need to revise a standard practice, it will forward the suggested changes to the Director. The Division will consider the suggestions, coordinate with all affected parties, and modify the existing standard practice as appropriate. After the Director’ review, staff will send the modified standard practice out for comment. After staff receives comments, the Director will finalize and issue as a revised standard practice.” Standard Practice U-1-W, Section E-Revising Standard Practices, Uniform System of Accounts for Class A Water Utilities (January 2018) at 4, par. 9. 39 CA Opening Brief, at 53 (“Total depreciation accrual is the sum of the depreciation accrual for the recovery of a utility’s investments in plant (plant less net salvage value) plus the depreciation accrual for the future cost of removal.”)

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However, Cal PA purports to have discovered an exception to this general accounting practice that is applicable to water mains and service pipes. Cal PA bases its argument on the following language found in U-38-W: “[t]he cost of disposing of material excavated in connection with construction shall be considered as part of the cost of such work.”40 Cal PA contends that the quoted language was intended to apply to water mains and service lines and that it means that costs associated with removing vintage pipes from service must be associated with the costs of installing new pipes, for depreciation purposes.

We do not accept Cal PA interpretation of Standard Practice U-38-W. The language cited by Cal PA is taken out of context, as Cal Water points out.41 It is taken from a section of U-38-W that addresses structures and improvements to land, such as buildings, and does not address main and service pipelines. Standard Practice U-38-W is organized to distinguish “Structures and Improvements” to land from facilities that comprise “Transmission and Distribution Mains” or “Service[]” lines.42 There simply would not be any reason to provide these two separate sections were Cal PA’s proffered interpretation of U-38-W correct.

Neither would Utility Plant Instruction 12, entitled “Additions and Retirements of Utility Plant,” have been included in Standard Practice

40 Id., at 55 citing Standard Practice U-38-W, Uniform System of Accounts for Class A Water Utilities (January 2018) at A59 (emphasis in original Cal PA’s Opening Brief).41 CW Reply Brief at 4 – 7. 42 See Standard Practice U-38-W, Uniform System of Accounts for Class A Water Utilities (January 2018) at A64 (listing accounts for “Structures and Improvements” separately from accounts for “Transmission and Distribution” or “Services”); see also, id., at A63 (providing a separate Utility Plant Instruction 16 entitled “Classification of Mains” that addresses water mains specifically).

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U-38-W, if Cal PA’s interpretation was correct. Instruction 12 directly addresses the issue raised by Cal PA: “[When] property is of depreciable class, the book cost of the unit retired and credited to utility plant shall be charged to the depreciation reserve provided for such property.”43 Moreover, the portion of U-38-W entitled “Reserve for Depreciation of Utility Plant” (Account 250) provides specific instructions for how the depreciation reserve should be allocated:

B. At the time of retirement of depreciable utility plant in service, this account shall be charged with the book cost of the property retired and cost of removal, and shall be credited with the salvage value and any other amounts recovered, such as insurance.

C. The credits and debits to the reserve shall be so made as to show separately (1) the amount of accrual for depreciation, (2) the book cost of property retired, (3) cost of removal, (4) salvage, and (5) other items, including recoveries from insurance.44

U-38-W’s inclusion of broad, general directions such as these, without any written exception specifically applicable to water mains and service pipes, strongly implies that water mains and service pipes are to be accounted for under the general instructions, above. That being the case, Cal PA’s position on this issue is properly presented to the Director of the Water Division as a request to change U-38-W as currently written, understood and applied. We will not change it in this GRC.45

43 Id., at A60. 44 Id., at A42 (emphasis added).45 Cal PA also raised a corollary issue: Because Cal Water theoretically could avoid all “removal” costs by abandoning all vintage mains and service pipes in place, shouldn’t the removal costs for abandoned pipes always be zero? See CA Opening Brief at 52-55. However, Cal PA offered no proof to support the critical presumption

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4.4. Should Cal Water Be Required to Use Short Term Interest Rates for Funding Any Portion of Construction Work in Progress (CWIP)?

Cal PA requests that we deny Cal Water’s proposed financing of construction projects during 2020-2022 at Cal Water’s authorized rate of return.46 Cal Water’s authorized rate of return is a combination of equity and long-term debt.47 It currently is authorized at 7.48 percent.48 Assuming Cal PA’s estimate of the additional amount of financing necessary during each year of the current rate cycle ($6.75 million/year), Cal Water admits that the annual impact on its revenue requirement would be an additional $878,000 annually.49 Cal PA promotes using only financing costs at or near Cal Water’s short-term debt rate of 2.91 percent,50 which would produce a significantly smaller impact on revenue requirement. Cal PA offers four arguments why we should order Cal Water to devote all or as much of its available short-term interest financing to CWIP before using any more expensive financing for CWIP. We are not persuaded by any of Cal PA’s arguments for the following reasons.

First, Cal PA appears to object to the “doubling” or “compounding” effect of capitalized interest associated with CWIP.51

that there are no costs associated with abandoning a pipe in place. On the contrary, there is record evidence that there are always costs associated with abandoning a pipe in place. See CW Reply Brief at 2-3. Accordingly, we need not address this hypothetical issue.46 CA Opening Brief at 60-70. 47 Exh. CW-103 at 165.48 Exh. CW-02 at 82, lines 15-16.49 However, Cal Water expressly declines to agree with Cal PA’s assumption of an additional $6.75 million per year for CWIP. CW Reply Brief at 16, fn. 59.50 CA Opening Brief at 69.51 Exh. PA-01 at 92. A utility has a choice to record CWIP, including the financing costs, in either rate base on an annual basis, or record the costs in an account

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However, the same is true whether we order Cal Water to use its short-term interest rate (2.91 percent) or its rate of return (7.48 percent). Once capitalized, the interest rate on construction projects will be “doubled” (compounded) if it is equal to or lower than Cal Water’s rate of return, which it almost always is. Thus, this reality is not much help in distinguishing whether a rate at or near to Cal Water’s rate of return is an appropriate interest rate for CWIP. It is simply an illustration that a higher interest rate has a greater effect on rates than a lower one.

Cal PA next argues that Cal Water has provided “no evidence to support its claim that it uses equity to finance its capital projects.”52 On the contrary, Cal Water presented both testimonial evidence and explained in its briefing that little or none of its short-term borrowing capacity, totaling $212 million, is typically available to finance CWIP, hence long-term financing, including equity, is realistically the only type of financing available. More specifically, Cal Water presented both prepared and live testimony showing that for the years 2015-2018 it had an average of only $16.95 million in short-term borrowing capacity remaining after financing under-collections in its balancing accounts.53 The only financing sources available to Cal Water in amounts large enough to use on CWIP, including equity financing, were higher priced than short-term financing. labelled Allowance for Funds Used During Construction (AFUDC) and then capitalize all costs as soon as the plant goes into service. Cal Water chooses to follow the latter procedure and Cal PA does not oppose Cal Water’s use of the AFUDC vehicle for adding construction financing into rate base. 52 CA Opening Brief at 61.53 Exh. CW-103 at 170; EH Tr. 1019, lines 2-8 (Ferraro) (“… there’s approximately 17 million of short-term borrowing that was not used by the balancing account on the collections, you know, nowhere near the amount that would be needed to fund construction work in progress.”). Cal Water presented evidence that some short-term borrowings are also used for “general working capital due to seasonal cash requirements and for unexpected short-term cash requirements.” Ibid.

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Cal PA also invites our attention to several accounting standards and regulatory provisions that it claims compel use of “the cheapest sources of funding” available first. In reliance on those standards, Cal PA argues that only the lowest cost of funding is just and reasonable when it comes to financing CWIP.54 However, it is clear to us that Cal Water is putting its cheapest source of funding available to good use, given that it uses almost all its short-term financing capacity for purposes of funding shortfalls in revenue collection. The issue then is whether short-term financing should be allocated first to CWIP before it is used for anything else.

We are reluctant under the current pandemic circumstances to require that Cal Water use short-term financing to do construction work before using it for anything else. These are not normal circumstances we are in, and decisions concerning the deployment of financing should remain with Cal Water’s management who are aware on a day-by-day basis of the impacts on the utility of the pandemic. If necessary, management’s decisions can and will be examined later for reasonableness.

Furthermore, the accounting and regulatory provisions cited by Cal PA do not require that a utility’s short-term borrowing capacity always be allocated entirely to financing the construction of capital projects before being used to finance anything else. Indeed, the Uniform System of Accounts expressly provides for “a reasonable rate upon the utility’s own funds when used” to finance CWIP, terminology that is commonly understood to refer to a utility’s authorized rate of return, not its short-term borrowing rates. 54 CA Opening Brief at 64-65 (if short-term debt has been exhausted on other expenses, “then the rate of the marginal long-term borrowing funds should be applied.”).

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With respect to the accounting standards set by the Financial Accounting Standards Board (FASB), we conclude Accounting Standards Codification (ASC) 980-835-30, expressly displaces ASC 980-835-20,55 the standard that Cal PA relies on, by providing that in those circumstances when a regulatory agency requires a company to capitalize certain costs, as we do with AFUDC, “the amounts capitalized for rate-making purposes as part of the cost of acquiring the assets shall be capitalized for financial reporting purposes instead of the amount of interest that would be capitalized in accordance with Subtopic 835-20.”

It makes sense to us that the FASB would defer to regulatory ratemaking standards for asset acquisition costs to coordinate financial accounting and regulatory accounting practice with each other for investor-owned utilities. And while we have not promulgated a rule to the effect that long-term financing should be used for AFUDC, neither have we established a rule against using it. It therefore remains a question to be determined on a case-by-case basis.

In contrast to FASB’s interest in coordinating its accounting standards with ours, historically the Commission itself has never felt compelled to conform its accounting practices for ratemaking with the Internal Revenue Service’s accounting practices for federal income tax purposes and, accordingly, we refuse to adopt Cal PA’s invitation to do so here.

Finally, we do not accept Cal PA’s reading of the Federal Energy Regulatory Commission’s (FERC) rules. Our interpretation of FERC’s rules is set forth in D.09-03-025. There we did state that “[t]he FERC formula for calculating AFUDC provides that it is to be financed first by 55 See CW Opening Brief at 16-17.

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short-term debt.”56 However, we immediately pointed out in the following sentence that “[t]he remainder is to be covered by an average of prior year long-term debt, preferred stock, and common equity weighted by their respective balances”57 and, ultimately, we approved of the use of long-term financing (viz., an AFUDC rate of 7.7204 percent) for CWIP.58

In conclusion, we will not prioritize or mandate specific sources of funding for CWIP. Instead, we leave that to the discretion of Cal Water, subject to our review for reasonableness on a case-by-case basis during its GRCs. Here, Cal Water has demonstrated that it repeatedly uses all or almost all its short-term borrowing capacity to fund revenue needs, not CWIP, leaving little or no short-term debt to finance CWIP. It has never been our policy that utilities should finance all or a substantial portion of the CWIP with short-term debt when there is a significant need for them to cover under-collections of authorized revenue.59

We decline to order Cal Water to finance any amount of CWIP with short-term financing or to adopt the “lowest-cost methodology” favored by Cal PA for this rate case cycle. For this cycle, given the potential financial stress the Covid-19 crisis may impose on Cal Water and the length of time the pandemic will remain a threat, we are reluctant to order a major shift from using short-term borrowing to finance revenue shortfalls to using it to pay for labor and materials on 56 D.09-03-025 at 365, Finding of Fact 342.57 Ibid.; see also D.13-05-010 at 989 (“DRA’s own witness sponsoring the short term financing proposal acknowledged that the FERC formula does not direct the financing activities of the Applicants and there is nothing in that formula that requires CWIP to be financed 100% by short term debt.”).58 D.09-03-025 at 366, Finding of Fact 346.59 See D.13-05-010 at 948-985; D.14-08-032 at 615; and D.18-12-021 at 194-195.

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CWIP. Cal Water’s financing program has worked well for a long-time and, in our view, it would be particularly unwise for us to order a wholesale change during a worldwide health crisis whose ultimate economic consequences for Cal Water are still to be determined but are potentially severe.

Finally, we find no evidence in the record that Cal Water financed CWIP at its rate of return and then intentionally dragged out the time for constructing any of its capital projects, just to accrue more AFUDC than it would have if the projects were completed in a shorter time.

4.5. Should the Methodology Used by Cal Water to Calculate Its “Working Cash” Allowance Be Changed?

Cal PA seeks two changes to the way Cal Water calculates its “working cash” allowance.60 Cal PA contends that: (1) certain non-cash items, such as depreciation, deferred state and federal taxes and the amortization of regulatory assets should be excluded from the calculation of working cash; however (2) interest payments not yet made by the utility should be included. Cal Water does exactly the opposite – it includes the non-cash items referenced above and excludes from the calculation items like long-term debt interest payments not yet made. Cal Water opposes any change to the way it calculates working cash.

For ratemaking purposes, we allow the amount invested in working capital to be added to rate base. “Working capital” consists of materials and supplies as well as “working cash,” the calculation of which is at issue here. The “working cash” component of “working 60 CA Opening Brief at 56-60; CA Reply Brief at 17-20. “Working cash” according to Cal PA is “the amount of cash needed by a utility to meet its operating expenses for the period [during which] a utility has provided services to its customers but has not yet been paid for those services.” CA Opening Brief at 56.

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capital” is the result of calculating a weighted average deficiency after paying expenses and taxes in advance of collecting revenues and then adding in non-cash items, like accrued depreciation.61 Cal PA maintains that by including non-cash items like depreciation, Cal Water’s rate base increases by $8 million.62 Cal Water states that it has not verified such an amount, but assuming it is true, it would translate into $766,000 of systemwide, additional rate charges.63

Cal PA also suggests that long term bond interest payments should be factored into the working cash calculation as cash-on-hand before it is paid to bondholders, thereby reducing the amount of working cash Cal Water needs.64

Standard Practice U-16-W, Determination of Working Cash Allowance (March 2006), expressly authorizes Cal Water’s methodology for calculating its working cash.65 Cal AP does not dispute that Cal Water’s method of calculating working cash is consistent with the text and examples of U-16-W. Instead, Cal PA relies on the presence of the word “judgment” in the introductory passage of U-16-W. That portion of U-16-W describes challenges associated with determining what expenses should go into “working cash” depending on what kind of utility and what size of utility is being examined. Cal PA argues that the entirety of U-16-W is merely a suggestion and there is nothing “standard” about U-16-W at all.66

61 This deficiency is calculated utilizing a lead-lag (or weighted averaging) formula.62 CA Opening Brief at 57.63 CW Reply Brief at 24, n. 95.64 CA Opening Brief at 59-60.65 See Standard Practice U-16-W, Determination of Working Cash Allowance (March 2006), Chapter 3, at p. 1-22 to 1-23, Table 3-A, Sheets 2 and 3 of 5. 66 CA Opening Brief at 58.

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We disagree; we have standard practices precisely because they are standards to be followed. It may be necessary to exercise judgment how to apply the terms of U-16-W as between one utility industry and another or between a small utility and a large one, but that does not mean that U-16-W is entirely elective or something that can be redefined on a case-by-case basis.

Moreover, we cannot excuse Cal PA’s intentional avoidance of the holdings in D.14-08-006 and D.14-08-011. These are two decisions in which we expressly, clearly, and definitively rejected each of the two arguments Cal PA raises here. In D.14-08-011, a prior Cal Water GRC, the positions currently advanced by Cal PA were argued by The Utility Reform Network (TURN) and we said:

TURN, however, argues that the inclusion of “non-cash” transactions may have the effect of significantly overstating Cal Water’s working cash requirements. TURN does not believe that items such as depreciation, deferred taxes, and amortization expenses should be included …. TURN also asserts that Cal Water’s long-term debt interest payments are a significant source of cash working capital that Cal Water should include in its working cash calculation.We have reviewed the arguments and evidence and conclude that Cal Water may utilize the working cash methodology as it is consistent with Commission practice.67

D.14-08-006 addresses the same issues with respect to San Jose Water Company’s calculation of its working cash needs and reaches the same conclusion – the inclusion of the non-cash items at issue here is appropriate and so is the exclusion of interest payments on long-term debt.68

67 D.14-08-011 at 21 (footnotes omitted).68 D.14-08-006 at 96-97.

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Cal PA was clearly aware of D.14-08-011. Cal PA references the decision no less than five times in portions of its two post-hearing briefs here discussing a WRAM-related issue. Cal PA however completely avoids acknowledging that, on the issues related to working cash, D.14-08-011 expressly rejected Cal PA’s position on its merits.

Similarly, Cal PA avoided all mention of D.14-08-006. Commission ratesetting proceedings are not opportunities for parties to go fishing for a result different from what we have ordered previously on the same issue, just because Commission personnel have changed and might not reach the same result. If a party desires a different result than a prior ruling on a litigated issue, it should expressly acknowledge the existence of the decision contrary to its position and explain what has occurred that would make a change in that decision appropriate.

Here, there was a disturbing and glaring omission by Cal PA; and there was merely a repetition of a TURN position that we previously rejected.

4.6. Should Cal Water Be Required to Prepare A Consolidation Study for Its Next GRC? If so, What Should Be Its Scope and When Should It Be Submitted?

Cal PA has requested that we order Cal Water to prepare and submit an extensive, system-wide consolidation study in advance of its next GRC application.69 Cal PA also insists that Cal Water share the study with Cal PA at least 12 months before Cal Water’s next GRC application is filed and that Cal Water address a list of issues provided

69 CA Opening Brief at 8-14.

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by Cal PA in the study report.70 Cal PA asserts it is motivated by Cal Water’s response to D.14-10-047, which Cal PA describes as “suboptimal and inadequate.”71 In response, Cal Water asserts that it has lived fully up to the letter and spirit of D.14-010-047 and that is not worthwhile to perform an extensive consolidation study for its next GRC.72

In Cal Water’s last GRC, we approved three, individual consolidation proposals by Cal Water. In each consolidation, Cal Water sought to alleviate the burden of revenue requirements in an area burdened with affordability issues by sharing those costs with another area where affordability was not a concern.73

In the instant GRC proceeding, Cal Water initially sought approval of one more rate consolidation proposal, this time involving one of its districts (Dixon) that had apparent affordability problems arising from the cost to remove chromium-6 from its water supply, and another much larger district (Stockton) that had no chromium-6 or other serious water quality issues.74 However, Cal Water has since withdrawn its request.75

It is this iterative, pairing approach to consolidation to which Cal PA objects. Cal PA characterizes this kind of approach as evidence of a lack of interest on the part of Cal Water to combine its districts

70 Ibid.71 Id. at 9 (“Although the Commission established a consolidation framework [in D.14-10-047], Cal Water’s ad hoc, piecemeal approach to consolidating one district with another is suboptimal and inadequate.”).72 CW Opening Brief at 29-31; CW Reply Brief at 29-34.73 CW Reply Brief at 31, fn. 126. 74 Exh. CW- 03 at 1-8.75 Cal Water withdrew its request for a rate consolidation between its Stockton and Dixon districts by agreement with Cal PA. See, e.g., CW Reply Brief at 30.

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and regions other than joining one area where rate affordability is an issue to another where a rate increase would not cause concern.76

We, on the other hand, applaud Cal Water’s efforts to fix affordability problems in areas of its statewide system where affordability poses a problem. We do not presume it is evidence of a refusal to study a broader approach.

However, we do agree with Cal PA that a study and report on the approaches to consolidation Cal PA suggested in its briefing is both desirable and timely, especially because the state and nation face another steep climb out of an economic recession due to the Covid-19 crisis.

In fact, we urge Cal Water to follow an even broader approach than Cal PA requests. We direct that the study should include consideration of operational or other types of consolidation with municipal water companies for cost-savings or affordability purposes should the governor or state legislature officially encourage such cooperation reasonably before Cal Water’s next GRC application must be submitted.

We do not agree with Cal PA that a study should be submitted to Cal PA before Cal Water submits its next GRC application. D.14-10-047 clearly identifies the filing of an application for a GRC as the time when consolidation requests and accompanying studies should be submitted.77 We will not change that timing for this study. Nor will we change the parameters set forth in D.14-10-047 for consolidation studies. They remain the same, although they are broad enough to encompass the list of issues Cal PA wants Cal Water to address. We

76 See CA Reply Brief at 28-30.77 D.14-10-047, Ordering Paragraph No. 2.

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expect Cal Water to address those issues in the study report. However, it may be that Cal Water’s iterative approach to consolidation is the best way to achieve the goals set forth in D.14-10-047. That is the issue that needs to be explored in the next GRC and the study we order herein will advance that effort.5. Plant Issues

We discussed and resolved the dispute over whether Cal Water should be authorized to invest $10 million in plant upgrades to improve water quality in its Dominguez District in Section 3.2, above, because water quality is closely related to Covid-19. Below, we address another plant issue, one that is not impacted by Covid-19.

5.1. Should Cal Water Be Authorized to Spend $2.92 Million for AMI Pilot Projects in Bear Gulch, Los Altos and Redwood Valley Districts?

Currently, Cal Water subsidizes 50 percent of the surcharge for leaks that its customers suffer whenever there is a leak on a customer’s side of the meter. To reduce this cost, as well as to reduce the workhours necessary to read water meters manually in portions of the above-referenced districts (due to hilly topography, narrow winding streets and extended distances to walk from curb to house meter) and to avoid injuries to meter readers (for example, in areas where violent gangs are known to be present), Cal Water proposes to distribute Advanced Metering Infrastructure (AMI) type meters or AMI add-ons (collectively, AMI equipment) to some or all residents of these districts, not to exceed more than 1 percent of its systemwide customer total. It asks for authority to spend up to $2.92 million over two years.78

78 Exh. CW-104, at 140, line 19.

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The Town of Portola Valley, a party to this proceeding, is part of the Bear Gulch District. It supports Cal Water’s request and asks that all 5,000 of its residents be included in the AMI program.79

Cal Water describes its proposal as an extension of an earlier pilot program launched in 2012 in its Dominguez District and continued through its 2017- 2019 rate case cycle, involving both Automated Meter Reading (AMR) and AMI equipment.80 It abandoned its test of the AMR-type equipment due to a manufacturing defect in the meters it purchased and a growing preference in the utility industry for AMI equipment.81 Cal Water argues that expansion of its earlier pilot program to one percent (1 percent) of its total customer count will not only demonstrate the cost-savings and achieve the safety goals described above, but also provide a more reliable database for analyzing the value of AMI equipment.82

Cal Water previously indicated that it would provide a report on its earlier pilot program before distributing more AMR or AMI equipment,83 however, it has not yet produced such a report. 79 The Town did not specify the number of Cal Water customers within the Town’s border nor provide an estimate of cost to install AMI for all its residents.80 Automated Meter Reading (AMR) technology involves reading meters using mobile radio equipment. D. 16-12-042, Attachment A, at 121. Current Advanced Metering Infrastructure (AMI) equipment uses cellular phone technology to transmit data, CW Opening Brief, at 78, hence there is no need for deploying employees outfitted with mobile radios to collect data. 81 For 2017-2019, Cal Water was authorized to expend approximately $1.5 million annually on both AMR and AMI installations in its Dominguez district only. D. 16-12-042, Attachment A, at 121-123. In the rate case proceeding for 2017-2019, Cal Water initially requested authority to spend nearly $12 million/year to install either AMR or AMI in several of its districts. Here, Cal Water requests authority to install only AMI equipment, in only the three districts listed above, and spend no more than $2.5 million per year.CW Opening Brief, at 73-79.82 CW Opening Brief, at 76.83 D. 16-12-042, Attachment A, at 124, line 11 to 125, line 7.

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Consequently, Cal PA argues that the Commission should deny Cal Water permission to install AMI equipment for any more of its customers systemwide until (1) Cal Water credits those customers who had the defective AMR-type meters installed with the cost of installation and removal of those meters and (2) provides a report to the Commission showing the equipment installed in the previous pilot program produced cost-savings.

We approve Cal Water’s request for authority to extend its pilot AMI program into the Bear Gulch, Los Altos and Redwood Valley districts on condition that Cal Water shall, if it has not already done so, credit all customers who received defective AMR equipment for the cost of installation and replacement of the defective AMR equipment before moving forward with the extension of its pilot program.

Furthermore, while we acknowledge that there is a growing preference in the utility industry for AMI equipment, Cal Water must track its improved safety statistics and the cost-savings produced by the automated equipment previously installed and to be installed.84 The total number of equipment installations, including those installed as part of the initial program and still functioning properly, shall not exceed one percent (1%) of Cal Water’s systemwide customer count.85

Since the initial pilot program was marred by the installation of defectiveAMR meters, we excuse Cal Water’s tardiness in providing a report on the improvement of safety for employees and realization of cost-

84 The effects of the automated equipment that Cal Water should track and report on are listed in D. 16-12-042, Attachment A, at 124, line 11 to 125, line 7 and will remain the same.85 The defective AMR meters installed by Cal Water shall not be counted toward the one percent cap.

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savings. However, we order Cal Water to provide a preliminary report on safety improvements and cost-savings 18 months after resumption of the pilot program and, regardless of when Cal Water resumes the program, Cal Water must provide a final report in its next GRC application, assuming it completes installation of AMI equipment for one percent of customers systemwide or for any other reason ends the pilot program short of that limitation.

We grant the Town of Portola Valley’s request that its residents be considered for inclusion in the AMI pilot program. However, we will refrain from ordering that all or any specific number of residents of Portola Valley be provided AMI equipment. It shall be Cal Water’s decision as to how many and which of the Town’s residents are provided AMI meters as part of the pilot program, so that Cal Water has freedom to decide which customers within the Town, if any, suit the design parameters of the pilot program.

We recognize that Cal Water may conclude that only a limited number of residences in the Town are suitable for installation of AMI equipment, however, it must give due consideration to including Portola Valley customers in its pilot AMI program. And, in the event some AMI equipment is installed in Portola Valley, Cal Water must provide the appropriate Town official both the preliminary and final reports referenced above. 6. Disposition of Post-Hearing Motions

Several motions, seeking both evidentiary and substantive rulings, were filed by parties to the proceeding, after the evidentiary hearings adjourned.

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6.1. Motions Regarding ConfidentialityOn September 9, 2019, Cal Water filed a motion for leave to file a

confidential version of its post-evidentiary hearing opening brief. Cal PA filed a similar motion with respect to its post-evidentiary hearing reply brief on September 23, 2019. Public versions of all post-hearing briefs were filed with the Commission and served on all parties. Only the assigned Administrative Law Judge received copies of the confidential versions of the post-hearing briefs.

On September 30, 2019 Cal Water filed a motion to seal portions of the evidentiary record, specifically confidential exhibits that had been offered into evidence during the proceeding by either Cal Water or Cal PA. This motion was amended after Cal Water and Cal PA reached their Joint Settlement Agreement discussed above in section 2 of this decision. The amended version of the motion to seal was filed on December 13, 2019. A complete list of all exhibits offered by either Cal Water or Cal PA can be found in Attachment 13 to the Joint Settlement Agreement. The exhibits for which Cal Water seeks protection are all exhibits listed on Attachment 13 to the Joint Settlement Agreement bearing the letter “C” after the exhibit number, whether offered by Cal Water itself or Cal PA.

The basic thrust of Cal Water’s amended motion for confidential treatment for certain exhibits and the two motions seeking confidential treatment for certain post-hearing briefs is that there are exhibits and briefs that contain information, commonly referred to as “critical infrastructure information” or “CII.” CII typically includes the locations of critical utility infrastructures; references to their physical vulnerabilities; system maps; descriptions of how systems work; flow diagrams; and photographs inside the perimeter boundaries of critical

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infrastructures. Such information merits protection from disclosure under California Government Code §6254(e). We agree that the briefs for which Cal Water and Cal PA seek protection contain CII and should be protected by sealing them. We grant both Cal Water’ motion to seal a confidential version of its post-hearing opening brief and Cal PA’s motion to seal a confidential version of its post-hearing reply brief.

The next question is whether all the exhibits for which Cal Water requests CII protection, contain CII. We agree with Cal Water that they do.

However, there are two exhibits for which confidential treatment is sought on grounds other than CII. One is Exhibit CW-16C; we deny protection for it.86 Cal Water also seeks confidential protection for one Cal PA exhibit on the ground that it contains personal information for which individuals have a reasonable expectation of privacy. Cal Water contends that Exhibit PA-11C contains compensation information for an identifiable group of Cal Water senior executives that should not be made public. Besides joining Cal Water in marking the compensation information in PA-11C confidential, Cal PA marked information about “unfilled” Cal Water employee positions as confidential. We find neither type of information worthy of protection, as such information is routinely publicized. Protection for Exhibit PA-11C is denied.

86 Exhibit CW-16C, is a 14-page excerpt from a contract between a software vendor and Cal Water. Cal Water itself does not consider any information in the 14 pages confidential, but states that it has been asked by the vendor to seek confidential protection for the 14-page excerpt. Part of the excerpt contains pricing information from the vendor. Section 3.2 of G.O. 66-D expressly discourages extending confidential treatment to protect the economic interest of an information provider. See G.O. 66-D, §3.2(b): “A private economic interest is an inadequate interest to claim in lieu of a public interest.”

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Cal Water also states that it is not necessary to protect the information that Cal PA marked as confidential in Exhibit PA-10C. Accordingly, we deny protection to Exhibit PA-10C.87

To summarize, the confidential versions of Cal Water’s post-hearing Opening Brief and Cal PA’s post-hearing Reply Brief will be sealed permanently. Further, all exhibits, whether offered by Cal Water or Cal PA listed on Attachment 13 to the Joint Settlement Agreement marked with the letter “C” after the exhibit number will be sealed permanently except for Exhibits CW-16C, PA-10C and PA-11C.

6.2. Joint Motion to Admit ExhibitsDuring the evidentiary hearing, a total of 47 exhibits were offered

into evidence by Cal Water, Cal PA and one other party. All were admitted. After the evidentiary hearing, on August 14, 2019, Cal Water and Cal PA filed a Joint Motion to Move Exhibits into Evidence (Joint Motion) applicable to more of their respective exhibits. The movants attached a joint exhibit list to their August 14, 2019 motion. However, that list was later corrected and resubmitted as Attachment 13 to the Settlement Agreement on October 8, 2019. The movants ask for admission of 159 exhibits on the list attached to their Settlement Agreement. The movants divide the 159 exhibits into two categories: (a) 153 exhibits that were neither marked for identification nor admitted; and (b) six (6) exhibits that were marked for identification but have not yet been admitted. Attachment 13 indicates which exhibits have and have not been marked for identification and which exhibits have and have not been admitted into evidence.

87 Though not mentioned by Cal Water in its motion, Cal PA marked Exhibit PA-102C as containing CII, which it clearly does. It will be protected as well.

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No party to the proceeding has filed an objection to the Joint Motion to Move Exhibits into Evidence. Accordingly, with two exceptions, Exhibits CW-01 and CW-07C,88 the Joint Motion is granted. Accordingly, all exhibits not yet marked for identification will be marked for identification as they are listed on Attachment 13 to the Settlement Agreement. Excluding Exhibits CW-01 and CW-07C, all exhibits listed on Attachment 13 to the Settlement Agreement and not yet admitted will be admitted.

6.3. Joint Motion to Delay an Increase for Palos Verdes Ratepayers On April 28, 2020, Cal Water and Cal PA jointly filed a motion

seeking a delay of the increase in rates that would otherwise fall on Palos Verdes ratepayers as a result of a portion of the Settlement Agreement that places the full financial burden of Cal Water’s main pipeline replacement project on Palos Verdes ratepayers and removes that burden entirely from Antelope Valley ratepayers.89 No objection to this joint motion was filed.

In their joint motion, the moving parties seek two things. First, they ask that Cal Water be allowed to track the rate impact of $96 million of the cost of the pipeline replacement project in the interim rate memorandum account. The Administrative Law Judge has already granted that request in a ruling issued on May 18, 2020, and we affirm that ruling here.

Next, the moving parties ask that we permit an amendment to their Settlement Agreement so that the rate impact of the $96 million90 88 Exhibit CW-01 is already a part of the record in this proceeding by virtue of its having been filed in the docket and Exhibit CW-07C was withdrawn by Cal Water.89 Cal Water simultaneously filed a motion to shorten the time for filing responses to the joint motion, which the ALJ granted.90 As part of the Settlement Agreement, the cost of the pipeline project for rate purposes was capped at $96 million. Settlement Agreement (Attachment 1 to this

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pipeline replacement not take effect until the later of either (a) 30 days after Cal Water files a Tier 2 Advice Letter seeking to move the $96 million into rates for its Palos Verdes customers; or, (b) the effective date of the final rates authorized in this decision.91 Cal Water and Cal PA cite the Covid-19 crisis as the motivation and reason for their motion to delay imposing this additional financial burden on Palos Verdes customers. Denying this part of their joint motion would mean that the rate impact of the pipeline replacement project would be felt sooner because the terms of the Settlement Agreement would dictate the timing of the bill increase customers would see. That language provides simply that the first alternative (alternative (a), above) will determine the date when customers in the Palos Verdes area will see the billing impact of the $96 million added to rate base.

We understand the parties’ shared concern about increasing bills by a significant amount (about 25 percent or $27.00 per month for the average customer in the area) during the Covid-19 crisis. Because the current bills for an average customers in the Palos Verdes area will also decrease by approximately $6.00 per month for the Test Year it is appropriate to apply the decrease as an offset to the billing increase from the $96 million replacement project. We prefer to see Cal Water implement the $6.00 decrease and the $27.00 increase for the average customer take effect at the same time. The joint motion to modify the Settlement to delay the rate increase from the pipeline replacement project is now moot because the 2020 rate changes

decision) at 150, lines 3-7.91 At the same time, it filed its joint motion with Cal PA, Cal Water independently and filed a motion requesting an omnibus rate freeze until January 1, 2021 for all its customers, which we discuss in the following section of this decision. See section 6.4, below.

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associated with both the GRC Test Year and the pipe replacement project will be reflected in the 2018 GRC Interim Rate Memorandum Account.

6.4. Cal Water’s Motion for a Systemwide Rate Freeze Due to Covid-19 Impacts

Cal Water filed a separate motion to delay implementation of the rates ordered in this decision until January 1, 2021, due to the devasting health and economic impacts of Covid-19 on its customers systemwide. We deny this motion as well, for similar, if not precisely the same reasons for our ruling on the request to delay the effective date of the rates we authorize for Palos Verdes customers.

Many of Cal Water’s customers will experience a decrease in their bills as soon as this decision is effective. We prefer that they experience that now rather than delay it until next year when rates will escalate. For those customers who will experience a rate increase as soon as this decision is effective, there is an existing program that requires Cal Water to provide rate assistance. In addition, the Commission has mandated that no utility customer’s service will be shut-off for failure to pay due to financial hardship caused by the Covid-19 crisis. Cal Water’s motion seeking a systemwide delay in implementing the rates authorized by this decision is denied. 7. Conclusion

Again, we commend the parties for settling many of the issues in the proceeding, for preparing the testimony and reports on the contested issues and their efforts on briefing. The result is fair to all Cal Water customers and shareholders.

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8. Comments on Proposed DecisionThe proposed decision of ALJ Ferguson in this matter was mailed

to the parties in accordance with Section 311 of the Public Utilities Code and comments were allowed under Rule 14.3 of the Commission’s Rules of Practice and Procedure. Comments were filed on November 3, 2020 by Cal Water and by Cal PA, and reply comments were filed on November 9, 2020 by Cal Water and by Cal PA.

Cal Water requested changes in timing for various billing adjustments, none of which were opposed, and we will grant those requests. Cal Water also asked for additional time to allow it to conduct the consolidation study we are ordering it to prepare for use in its next GRC and, although Cal PA objects to any extension of time, we will grant Cal Water’s request, since we expanded the scope of the study requested by Cal PA. Cal Water also pointed out various housekeeping matters that were not opposed and those changes were also made. We have added an Ordering Paragraph allowing Cal Water to amortize its Interim Rate Memorandum Account.

We reject Cal Water’s request to eliminate the one percent cap on installation of AMI equipment and its request to eliminate our order to reimburse those customers, if any, who have paid for either installation or removal costs of defective AMR equipment. We also reject Cal Water’s request that it be allowed to avoid step filings when rates are reduced in escalation years.

Cal PA reiterated its arguments against (1) allowing water quality improvements at several facilities in the Dominguez District; (2) allowing Cal Water to continue its AMI pilot project; (3) allowing Cal Water to use long-term financing for CWIP; (4) allowing Cal Water to calculate its “working cash” as Cal Water has historically done; and (5)

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allowing Cal Water to accumulate pension and health care costs in balancing accounts for employees hired or promoted between GRCs. We reject all these requests; they are repetitious of arguments made previously in this proceeding and ruled upon. We also reject all of Cal PA’s requests for editorial changes to the text of the Proposed Decision.

Cal Water provided an additional comment on November 9, 2020 in response to a November 2, 2020 ruling and order by the ALJ. The ALJ issued his ruling and order after he learned that a software program provided by Cal Water to the Commission’s Water Division to facilitate calculating the impact of the resolution of contested issues in this proceeding had an internal flaw. Along with its November 9 comment explaining the nature of the flaw, Cal Water supplied corrected data and a revised software program with the internal flaw corrected. In this second revision of the Proposed Decision all necessary numerical corrections have been made. Chiefly, the revenue requirement for the Test Year 2020 was corrected downward by $2,218,078 to $696,501,780. No reply comments were filed.

9. Assignment of ProceedingLiane Randolph is the assigned Commissioner and Charles

Ferguson is the assigned Administrative Law Judge in this proceeding.Findings of Fact

1. On July 2, 2018, Cal Water filed its application for an order: (1) authorizing it to increase rates for water service by $50,673,500 or 7.6% in Test Year 2020; (2) authorizing it to increase rates on January 1, 2021 by $31,461,900 or 4.4% and on January 1, 2022 by $33,000,700 or 4.4% in accordance with the Rate Case Plan; and (3)

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adopting other related rulings and relief necessary to implement the Commission’s ratemaking policies.

2. On October 8, 2019, Cal Water and Cal PA filed an unopposed joint motion for approval of a partial Settlement Agreement that resolves many of the issues in the proceeding.

3. This partial Settlement Agreement permits Cal Water to continue to provide a safe, reliable source of water at reasonable rates.

4. The record in this proceeding does not support ordering Cal Water to change to a Monterey-Style WRAM in any rate area of Cal Water in this proceeding.

5. In D.20-08-047, the Commission determined that Cal Water was not obligated to effect an immediate change from a full WRAM to a Monterey-Style WRAM and further noted that a Monterey-Style WRAM is an option, not a necessity, for Cal Water to propose in its General Rate Case applications filed after September 3, 2020.

6. The record does not support authorizing Cal Water to surcharge customers more than 10 percent of its last approved revenue requirement.

7. The record does not support authorizing Cal Water to modify its SRM by incorporating one hundred percent of the difference between its approved sales forecast for the Test Year and its actual sales quantities for the prior year.

8. It is a commonly known fact, of which we take notice, that the United States, including the State of California, has since earlier this year been coping with the Covid-19 pandemic.

9. Cal Water has requested authority to construct $10 million of plant improvements in its Dominguez District for the purpose of ameliorating water quality problems.

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10. DDW regulates the development and use of groundwater sources for drinking water in the State of California.11. The water quality standards of DDW meet or exceed the

maximum contaminant standards promulgated by the federal government.12. This Commission follows the water quality standards of DDW as

well as the maximum contaminant levels set by the federal government.13. DDW ‘s standards meet or exceed federal maximum contaminant

standards and are not preempted by the federal maximum contaminant standards. 14. Cal Water has received warnings from DDW regarding the failure

of water drawn from certain of its Dominguez wells to meet DDW standards.15. The record demonstrates that water drawn from certain wells in

Cal Water’s Dominguez District has actually failed, or come close to failing, for a sustained period, the standards set by DDW. 16. Cal PA and Cal Water agree that it is appropriate for Cal Water to

create 23 new employment positions and hire new personnel or promote existing employees into those positions for the purpose of ensuring that safe and reliable water service is provided to Cal Water’s customers.17. Cal Water has created the positions and hired new personnel or

promoted existing employees into those 23 positions between the time of its prior GRC and this current GRC.18. Cal Water has aggregated and recorded the pension and health

care costs associated with each of these 23 new positions along with

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the pension and health care costs for the rest of its employees in its balancing accounts for pension and health care costs.19. The record in this proceeding contains no evidence of express

prohibitions by the Commission that would prevent Cal Water from recording the pension and health care costs associated with the 23 new positions along with the pension and health care costs for all other Cal Water employees in the balancing accounts previously created and approved for recording such costs on an aggregate, companywide basis.20. Cal Water has requested our authorization for it to maintain

balancing accounts for pension and health care costs, respectively, for the current rate-case cycle.21. We take notice of the commonly known fact that the Covid-19

pandemic has caused and continues to cause widespread financial damage to the economy and health of the American workforce on an unprecedented scale.22. Health care and pension costs are difficult to predict. 23. Given the difficulty of predicting health care and pension costs in

normal times and the further difficulties with predicting such costs presented by the Covid-19 pandemic, it is necessary for Cal Water to revise its health care and pension costs within 90 days of the issuance of this decision by means of a Tier 2 Advice Letter filing with the Commission’s Water Division.24. The Commission’s procedures for authorizing amortization of

balances in pension cost and health care cost balancing accounts for water utilities allow for thorough review by the Commission and opportunities for Cal PA to request such a review.

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25. There is no evidence in the record that Cal Water intentionally underestimated any of its pension and health care costs.26. There are costs associated with removing main and service pipes

from service, whether the pipes are retired by removing them from the ground or filling them with concrete and leaving them in place. Cal Water associates those costs with vintage pipes rather than replacement pipes.27. Standard Practice U-38-W, Uniform System of Accounts for Class

A Water Utilities (January 2018), provides that the costs of removing vintage pipes from service, no matter how the removal is accomplished, must be associated with the vintage pipes. 28. Assuming, but not deciding, that it would require $6.75

million/year in each year of the current rate cycle for CWIP, Cal Water admits that the systemwide rate impact would be $878,000 per year if CWIP were financed at Cal Water’s approved rate of return (7.48 percent). 29. When calculating its “working cash” needs, Cal Water includes

non-cash items like depreciation, deferred state and federal taxes and amortization of regulatory assets.30. When calculating its “working cash” needs, Cal Water excludes

items like interest payments on long-term debt.31. Affordability problems exist in areas of Cal Water’s statewide

system due to revenue requirements that are different from area to area of the system.32. Historically, Cal Water has endeavored to ameliorate the

affordability problems referenced in Finding of Fact 31 by consolidating an area suffering with an affordability problem to a different area not experiencing an affordability problem to achieve a rate consolidation.

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33. Cal PA has requested that we order Cal Water to perform a study and prepare a report on the feasibility of larger consolidations than Cal Water has undertaken thus far.34. Cal PA has requested that we order Cal Water to study a list of

consolidation issues Cal PA has included in its briefing and reports filed in this proceeding. 35. D.14-10-047 sets forth the scope and parameters for preparing a

consolidation study which governs the consolidation study we order in this proceeding.36. The list of issues Cal PA has asked the Commission to order

Cal Water to address fall within the scope of a consolidation study as set forth in D.14-10-047.

37. The record in this proceeding does not support ordering Cal Water to submit a report on a consolidation study to Cal PA 12 months in advance of Cal Water’s application for its next GRC.38. Cal Water was previously authorized to conduct a pilot program

in its Dominguez District with AMR devices.39. A report on the results was never prepared due to a

manufacturing defect found in the devices. There is no record evidence that Cal Water contributed to the failure of the AMR equipment it purchased and installed in any prior stage of its pilot programs.40. In this proceeding, Cal Water seeks authority to continue its pilot

projects by deploying AMI in its Bear Gulch, Los Altos and Redwood Valley districts not to exceed one percent of its total number of customers system wide.

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41. The Town of Portola Valley has requested that its residents be included in a continued AMI pilot program, should we authorize a continued pilot program.42. The water and other utility industries have, in most locations,

preferred to install AMI equipment and not AMR equipment.43. The projected expense of $2.92 million to install and operate AMI

equipment at up to a possible one percent of Cal Water Service Company’s systemwide customer count is reasonable. 44. The confidential versions of Cal Water’s post-evidentiary hearing

Opening Brief and Cal PA’s post-evidentiary hearing Reply Brief and all exhibits marked with the letter “C” after the exhibit identification number offered by either Cal Water or Cal PA contain critical infrastructure information, except Exhibits PA-10C, PA-11C, and Excerpt #2 in Exhibit CW-10C.45. Excepting those facilities for which we are authorizing proactive

water quality improvements, we affirm that during the period studied for purposes of this GRC, California Water Service Company’s water systems in all its districts were in compliance with all applicable state and federal drinking water standards. Conclusions of Law46. Rule 12.1(d) provides that the Commission will not approve

settlements, whether contested or uncontested, unless the settlement is reasonable considering the whole record, consistent with the law and in the public interest.47. The Settlement Agreement is reasonable considering the whole

record, consistent with the law and in the public interest and should be adopted.

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48. A revenue requirement for Cal Water of $696,501,780 for Test Year 2020 is reasonable and should be authorized. 49. The rates (labelled “Proposed”) for each rate district and rate

area for the Test Year 2020 illustrated in Appendices A - X attached hereto, reflecting all terms of the Settlement Agreement and this decision, are just and reasonable and should be adopted. 50. The post-test year ratemaking mechanisms and the resulting

estimated rates for each rate district and rate area as illustrated in Appendices A - X attached hereto, reflecting all terms of the Settlement Agreement and this decision, for escalation years 2021 and 2022 are just and reasonable and should be adopted. 51. Cal Water should be authorized to continue use of its current full

WRAM program through the end of escalation year 2022.52. Cal Water should not be allowed to avoid the Commission’s policy

limiting surcharges and billing increases during the years between general rate cases to no more than 10 percent of the most recent approved revenue requirement. 53. Cal Water should not be allowed to change how it currently

calculates its SRM.54. It is reasonable and appropriate for Cal Water to (1) continue its

Low-Income Ratepayer Assistance; (2) recalculate the surcharge based on the final adopted rates in this proceeding; (3) implement the recalculated surcharge by filing a Tier 1 advice letter within 45 days of the effective date of this decision; and (4) increase public awareness of the program. 55. It is reasonable and appropriate for Cal Water to continue its Rate

Support Fund as described in the Settlement Agreement approved in this decision.

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56. It is reasonable and appropriate to use ratepayer funds to meet DDW standards.57. D.92-03-094 should not be applied to this proceeding. 58. Maintaining balancing accounts for pension costs and health care

costs in the present rate-case cycle is both necessary and appropriate.59. Cal Water should be ordered to revise its health care and pension

costs within 90 days of the issuance of this decision by means of a Tier 2 Advice Letter filing with the Commission’s Water Division.60. It is not appropriate for the Commission to modify Standard

Practice U-38-W, Uniform System of Accounts for Class A Water Utilities (January 2018) in this General Rate Case proceeding.61. Specific decisions on how best to deploy financing options should be left for management of a utility to decide, particularly in times of crisis. Those decisions, including how and when various financing options are used, should be subject to review under a just and reasonable standard. 62. The Uniform System of Accounts, as interpreted and applied by the Commission, does not mandate that Cal Water use short-term financing options first before utilizing any longer-term or higher-priced financing for construction work in progress.63. ASC 980-835-20 of the Financial Accounting Standards Board does not require Cal Water to devote its short-term financing capacity to CWIP before using any longer-term or higher-priced financing for CWIP.64. The Commission is not obligated to conform its accounting

treatment of financing for CWIP to accounting standards employed by the Internal Revenue Service.

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65. D.09-03-025 does not require Cal Water to devote its short-term financing capacity to CWIP before using any longer term or higher priced financing for CWIP.66. The Commission’s Standard Practice U-16-W determines the

proper methodology for calculating the working cash allowance for a water utility.67. Cal Water’s inclusion of non-cash items like depreciation,

deferred state and federal taxes and amortization of regulatory assets in its calculation of working cash needs is consistent with Standard Practice U-16-W.68. Cal Water’s exclusion of items like interest payments on long-

term debt from its calculation of working cash needs is consistent with Standard Practice U-16-W.69. It is appropriate and useful for Cal Water to prepare a

consolidation study of its entire system as well as potential consolidation with municipally-owned systems and serve it on the Executive Director of the Commission and the Director of Cal PA within 12 months of the effective date of this decision.70. It is appropriate to limit Cal Water to deploying AMI to no more

than one percent of its total customers systemwide and at a cost of $2.92 million or less.71. It is appropriate to spread the cost of an AMI pilot program to all

customers in a district, whether all customers in a district participate in the pilot program and receive an AMI meter at this time or not. It is appropriate and reasonable for Cal Water to refund installation and/or removal costs to all customers who bore such cost and have not yet been reimbursed.

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72. All pending motions not expressly ruled on in this decision or in the course of the proceeding should be denied.73. The confidential versions of Cal Water’s post-evidentiary hearing

Opening Brief and Cal PA’s post-evidentiary hearing Reply Brief and all exhibits marked with the letter “C” after the exhibit identification number offered by either Cal Water or Cal PA should be permanently sealed, except Exhibits PA-10C, PA-11C, and Excerpt #2 in Exhibit CW-10C.74. This proceeding should be closed.

O R D E RIT IS ORDERED that:

75. The joint motion to adopt the Settlement Agreement of California Water Service Company and Public Advocates Office (attached hereto as Attachment 1) is granted. The Settlement Agreement is approved and adopted. 76. We authorize California Water Service Company’s revenue

requirement of $696,501,780 for Test Year 2020.77. We adopt the rates (labelled “Proposed”) for each rate district

and rate area of California Water Service Company for the Test Year 2020 as illustrated in Appendices A through X attached hereto, reflecting all terms of the Settlement Agreement and this decision. 78. We adopt the post-test year ratemaking mechanisms and

estimated rates for each rate district and rate area for California Water Service Company, as illustrated in Appendices A through X attached hereto, reflecting all terms of the Settlement Agreement and this decision.

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79. For Test Year 2020, within 60 days of the effective date of this decision, California Water Service Company shall file Tier 1 advice letters with revised tariff schedules in compliance with this decision for each of its districts and rate areas considered in this proceeding, consistent with the adopted rates for each rate area as illustrated in the attached Appendices A through X. This filing shall be subject to approval by the Commission’s Water Division.80. For escalation years 2021 and 2022, California Water Service

Company shall file Tier 1 advice letters, in conformance with General Order 96-B and the Revised Water Rate Case Plan (Decision 07-05-062), proposing new revenue requirements and corresponding revised tariff schedules in each rate district and rate area in this proceeding, consistent with the adopted estimated rates for each rate area as illustrated in the attached Appendices A through X. This filing shall be subject to approval by the Commission’s Water Division.81. The advice letters shall follow the escalation procedures set forth

in the Revised Rate Case Plan for Class A Water Utilities adopted in Decision 07-05-062 and shall include supporting workpapers. California Water Service Company shall file for rate reduction due to negative rate base growth, inflation factors, or customer growth. The revised tariff schedules shall take effect on January 1, 2021 and January 1, 2022, respectively, and apply to services rendered on and after their effective dates. The proposed revised revenue requirements and rates shall be reviewed by the Commission’s Water Division. The Water Division shall inform the Commission if it finds that the revised rates do not conform to the Revised Rate case Plan, this decision, or other Commission decisions, and if so, reject the filing.

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82. California Water Service Company shall (1) continue its current Low-Income Ratepayer Assistance program;(2) recalculate the surcharge based on the adopted rates in this proceeding; (3) implement the recalculated surcharge by filing a Tier 1 advice letter within 45 days of the effective date of this decision; and (4) increase public awareness of the program. 83. California Water Service Company shall continue its Rate Support

Fund (RSF) as described in the Settlement Agreement approved in this decision. All customers will be assessed an RSF surcharge, except for Low-Income Ratepayer Assistance customers who reside in an RSF area and fire protection service customers.84. To the extent that other matters before the Commission impact

the rates or tariffs adopted in this decision, California Water Service Company is authorized to incorporate those outcomes into the tariffs implemented for this General Rate Case, consistent with the terms and conditions of the Settlement Agreement approved in this decision.85. The Public Advocates Office’s request that we order California

Water Service Company to transition from a full Water Revenue Adjustment Mechanism (WRAM) to a Monterey-Style WRAM is denied.86. California Water Service Company’s request for authority to

surcharge customers more than an aggregate sum of ten percent of its most recently approved revenue requirement when amortizing its Water Revenue Adjustment Mechanism balancing accounts is denied.87. California Water Service Company’s request for authority to

modify its Sales Reconciliation Mechanism to incorporate one hundred percent of the difference between its prior year’s sales quantity and its approved projection of sales for the Test Year 2020 is denied.

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88. California Water Service Company is authorized to construct $10 million of plant improvements in its Dominguez District for the purpose of meeting both federal and California water quality standards and proactively protecting the health and safety of its customers.89. California Water Service Company is authorized to include the

pension and health care costs associated with 23 new employment positions it created and filled between the preceding and instant General Rate Cases, in its previously approved balancing accounts for such costs.90. California Water Service Company is authorized to maintain

balancing accounts for pension cost and health care costs in the present rate-case cycle.91. California Water Service Company shall revise its previously filed

forecasts of pension and health care costs by means of a Tier 2 Advice Letter filing with the Water Division within 90 days of the date of issuance of a final decision in this proceeding to account for Covid-19 impacts on its costs of health care and financial investments.92. California Water Service Company shall continue to associate the

removal costs of its main and service pipes with the vintage, rather than replacement, pipes.93. The Public Advocates Office’s request to order California Water

Service Company to use short term financing for calculating the cost of construction work in progress is denied. 94. California Water Service Company is authorized to include non-

cash items, including depreciation, deferred state and federal taxes and amortization of regulatory assets, to calculate its working cash needs.

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95. California Water Service Company is authorized to exclude interest payments on long-term debt to calculate its working cash needs. 96. California Water Service Company (Cal Water) shall prepare for

consideration in its next General Rate Case a consolidation study. The scope of the study shall include, but not necessarily be confined to the scope of the consolidation study requested in this proceeding by the Public Advocates Office (Cal PA) and shall be prepared consistent with the parameters set forth in Decision 14-10-047. The study must be served on the Executive Director of the Commission and the Director of Cal PA within 12 months of the effective date of this decision.97. Should the Governor or State Legislature order or otherwise

encourage consolidation efforts between municipal and investor-owned water utilities in this state reasonably before California Water Service Company’s application in its next General Rate Case is filed, California Water Service Company shall include such consolidations in the study ordered in the preceding Ordering Paragraph 22.98. California Water Service Company is authorized to continue with

the installation of advanced metering infrastructure at customer locations in Bear Gulch, Los Altos and Redwood Valley districts, so long as the total number of installations systemwide does not exceed one percent of its customer count systemwide and does not exceed $2.92 million in cost. 99. California Water Service Company may install advanced meter

infrastructure equipment at its customers’ locations in Portola Valley, so long as the total number of installations systemwide does not

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exceed one percent of its customer count systemwide and does not exceed $2.92 million in cost.100. California Water Service Company shall refund installation and/or removal costs for defective AMR meters to all its customers who previously bore such costs and have not been reimbursed within twelve months of the effective date of this decision.101. The respective motions of California Water Service Company and Public Advocates Office for confidential treatment of certain materials submitted are partially granted and partially denied, as follows:

a. The confidential versions of California Water Service Company’s post-hearing Opening Brief and the post-hearing Reply Brief of Public Advocates Office will be sealed permanently; and

b. All exhibits, whether offered by California Water Service or the Public Advocates Office, listed on Attachment 13 to the Joint Settlement Agreement and marked with the letter “C” after the exhibit number will be sealed permanently, except for Exhibits PA-10C, PA-11C and Excerpt #2 in Exhibit CW-10C.

102. The Joint Motion of California Water Service Company and Public Advocates Office to Move Exhibits into Evidence is partially granted and partially denied, as follows:

a. All exhibits not yet marked for identification will be marked for identification as they are listed on Attachment 13 to the Settlement Agreement;

b. Excluding Exhibits CW-01 and CW-07C, all exhibits listed on Attachment 13 to the Settlement Agreement and not yet admitted will be admitted; and

c. California Water Service Company and the Public Advocates Office shall prepare an updated Attachment 13 for their Settlement Agreement reflecting the rulings in this Ordering Paragraph and Ordering Paragraph 27 within seven calendar days of the effective date of this decision.

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103. The portion of the Joint Motion of California Water Service Company and Public Advocates Office to Defer Rate Increases for Palos Verdes Project and Reopen Record Due to Covid-19 Pandemic seeking a rate deferral is moot. The remainder of this Motion was previously ruled on by the Administrative Law Judge and is hereby affirmed. 104. The Motion of California Water Service for Timely Resolution of Proceeding and Deferral of Rate Changes Due to Covid-19 Pandemic is denied in all respects.105. All motions not ruled on during the course of the proceeding or in this decision are denied.106. Within 60 days of the adoption of this decision, California Water Service Company is authorized to file a Tier 1 advice letter to amortize the 2018 GRC Interim Rate Memorandum Account to true up interim rates to the final rates adopted in this decision, adjusted as described in Ordering Paragraph 33. The November 17, 2019 Administrative Law Judge’s Ruling Granting California Water Service Company’s Motion for Interim Rate Relief is affirmed.107. California Water Service Company is authorized to incorporate into the calculation of new rates any revenue requirement changes approved by the Commission after the July 2, 2018 filing of its application, and to notify customers of such changes via a bill insert utilizing language like that specified in the Settlement Agreement approved herein.

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108. Application 18-07-001 is closed.This order is effective today.Dated December 3, 2020, at San Francisco, California.

MARYBEL BATJERPresident

LIANE RANDOLPHCLIFFORD RECHTSCHAFFENGENEVIEVE SHIROMA

Commissioners

I dissent.

/s/ MARTHA GUZMAN ACEVES Commissioner

Attachment 1: A1807001 Attachment and Appendices (Final).pdf

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http://docs.cpuc.ca.gov/PublishedDocs/Published/G000/M354/K602/354602354.pdf

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