California



WATER/ABJ/TAC:jrb

PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

WATER DIVISION RESOLUTION W-4244

Water Advisory Branch January 18, 2001

RESOLUTION

(RES. W-4244), GRAEAGLE WATER COMPANY, INC. (GWC). ORDER AUTHORIZING A GENERAL RATE INCREASE PRODUCING ADDITIONAL ANNUAL REVENUE OF $30,224 OR 9.59% IN 2000.

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Summary

By draft advice letter received June 22, 2000, this resolution grants a general rate increase in gross annual revenues of $30,224 or 9.59% for Test Year 2000. This increase will provide a 12.75% rate of return on a ratebase of $733,892 in the test year.

Background

GWC requested authority under Section VI of General Order 96-A and Section 454 of the Public Utilities Code to increase rates for water service to produce additional revenues of $59,960 or 19.02% in 2000. GWC’s request shows 2000 gross revenue of $315,240 at present rates increasing to $375,200 in 2000 at proposed rates to produce a rate of return on rate base of 12.6%. GWC estimates that it will serve approximately 704 flat rate customers and 103 metered customers in test year 2000. In addition GWC maintains 5 private and 86 public fire Protections in its service area.

GWC serves the unincorporated community of Graeagle, approximately fifty miles north of Truckee on State Route 89, Plumas County. The present rates were established on September 8, 1997 by Resolution (R.) W-4062, which authorized a rate base offset of $11,290 or 3.93%. The last general rate increase became effective December 18, 1995, pursuant to Resolution W-3956, which authorized an increase in rates of $27,448 or 10.92%, and a rate of return of 13.25%.

Discussion

The Water Division’s Water Advisory Branch (Branch) made an independent analysis of GWC's summary of earnings and issued its report in December, 2000. Appendix A shows GWC's and the Branch’s estimates of the summary of earnings at present, requested, and recommended rates. Appendix A also shows differences between GWC's and the Branch's estimates in operating expenses and rate base.

GWC was informed of the Branch’s differing views of expenses and ratebase and agrees with the Branch’s findings.

GWC’s draft advice letter requested rates, which it estimated, would produce a rate of return of 12.6%. The summary of earnings in Appendix A shows a rate of return of 12.75% at the Branch’s recommended rates. This is the midpoint of the range of rate of return recommended by the Commission’s Audit and Compliance Branch for Class C water utilities. Although this rate of return exceeds GWC’s requested rates, it does not result in GWC receiving more money than it has requested.

GWC submitted an accounting of plant in service in order to update plant accounts since the last GRC. Branch accepted those estimates but differs with the proposed improvements for the test year. Branch has more recent information on work done in 2000, showing that a proposed well is not yet complete. It is likely the project will be finished next year, so the Branch believes it to be reasonable to allow a ratebase offset for plant investment when that project is completed.

GWC files Annual Reports regularly and there are no other outstanding Commission orders.

The utility's current rate structure is made up of six schedules: Schedule No. 1, General Metered Service; Schedule No. 2, General Flat Rate Service; Schedule No. 2S, Seasonal Flat Rate Service, Schedule No.4, Private Fire Protection Service; Schedule No. 5, Public Fire Protection Service; and Schedule No. 6, Seasonal Flat Rate Irrigation Service.

The Branch modified the rate schedules to reduce the discount for seasonal customers and to implement standard service size ratios. As a result, some customers will see their rates increased by up to twice the system average increase. Because of this limitation, seasonal rates were only partially phased out. Branch recommends that GWC propose to eliminate seasonal rates in its next GRC.

The rates proposed by the Branch are included herein in Appendix B.

At the Branch's recommended rates shown in Appendix B, the bill for a typical annual flat rate residential customer would increase from $327.61 to $352.90 per year. The bill for a seasonal flat rate customer would increase from $286.66 to $335.00 per year. The typical bill for a 5/8 x 3/4-inch metered customer at average water use would increase from $23.26 to $25.54 per month. A comparison of customer bills at present and recommended rates is shown in Appendix C. The adopted quantities and tax calculations are shown in Appendix D.

NOTICE AND PUBLIC MEETING

A notice of the proposed rate increase was mailed to each customer on August 20, 2000. Two letters were received by the Branch, complaining of the magnitude of the increase. The Commission’s Consumer Affairs Branch reports that GWC has received 2 informal service complaints in the four years since the last rate increase was granted.

A public meeting was held On September 12, 2000, at the Community Hall in Graeagle. The Branch's representative explained Commission rate setting procedures and the utility’s representative explained the need for the rate increase. Thirty-eight customers attended the meeting. Although GWC met the legal noticing requirements, customers were generally unhappy that they did not receive enough information in the mail regarding the rate case and the agenda during the public meeting. Customers complained of the magnitude of the rate increase and suggested that GWC should increase their costs gradually through CPI increases. Apart from those complaints, customers generally agreed that the water company was well run.

Findings

1. The Branch’s recommended summary of earnings (Appendix A) is reasonable and should be adopted.

2. The rates proposed by the Branch (Appendix B) are reasonable and should be adopted.

3. The quantities (Appendix D) used in preparation of this report are reasonable and should be adopted.

4. The rate increase proposed by the Branch is justified and the resulting rates are just and reasonable.

5. GWC should be authorized to file an advice letter to recover the reasonable costs associated with the completion of the proposed well after the project has been completed.

Therefore it is ordered that:

1. Authority is granted under Public utilities Code Section 454 for Graeagle Water Company, Inc. to file an advice letter incorporating the summary of earnings and the revised schedules attached to this resolution as Appendices A and B respectively, and concurrently cancel its presently effective rate schedules: Schedule No. 1, General Metered Service; Schedule No. 2, General Flat Rate Service; Schedule No. 2S, Seasonal Flat Rate Service, Schedule No.4, Private Fire Protection Service; Schedule No. 5, Public Fire Protection Service; and Schedule No. 6, Seasonal Flat Rate Irrigation Service. Its filing shall comply with General Order 96-A. The effective date of the revised schedules shall be five days after the date of its filing.

2. Graeagle Water Company, Inc. is authorized to file an advice letter rate increase request to recover reasonable costs associated with the completion of a currently proposed well after the project has been completed and put into service.

3. This resolution is effective today.

I certify that the foregoing resolution was duly introduced, passed and adopted at a conference of the Public Utilities Commission of the State of California held on January 18, 2001; the following Commissioners voting favorably thereon:

_____________________

WESLEY M. FRANKLIN

Executive Director

LORETTA M. LYNCH

President

HENRY M. DUQUE

CARL W. WOOD

Commissioners

Commissioner Richard A. Bilas, being

necessarily absent, did not participate.

(D)

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