Appendix VOL 1 of 3 (X149366)

Case No.
S
IN THE SUPREME COURT OF THE
STATE OF CALIFORNIA
Monterey Peninsula Water Management District,

Petitioner,
v.
California Public Utilities Commission,
Respondent,
California-American Water Company,
Real Party in Interest
The California Public Utilities Commission, Decisions No. 11-03-035 and No.13-01-040 in
Proceeding No. Application 10-01-012
The Honorable Maribeth A. Bushey, Administrative Law Judge Presiding
Commissioner Michael R. Peevey, Assigned Commissioner
PETITIONER'S APPENDIX OF EXHIBITS IN SUPPORT

OF PETITION FOR REVIEW
VOLUME10F3
[PAGES 1 - 251]
Thomas J. MacBride, Jr., Bar No. 066662
tmacbride@goodinmacbride.com
David C. Laredo, Bar No. 66532
dave@laredolaw.net
Suzy Hong, Bar No. 239489
Megan Somogyi, Bar No. 278659
GOODIN, MACBRIDE, SQUERI,
DAY & LAMPREY, LLP
505 Sansome Street, Suite 900
San Francisco, California 94111
Telephone: (415) 392-7900
Facsimile: (415) 398-4321
Attorneys for Petitioner Monterey Peninsula
Water Management District
INDEX OF EXHIBITS
EXHIBIT
DOCUMENT
DOCUMENT
DATE
PAGE
RANGE
In the Matter of the Application of CaliforniaAmerican Water Company (U 210 W) for an

Order Authorizing the Collection and
Remittance of the Monterey Peninsula Water
Management District User Fee, Application
No.10-01-012
0110112010
1-25
VOLUME I
1.
2.
Resolution ALJ 176-3247. Preliminary

determinations of category and need for
hearing.
01/21/2010
26-32
3.
Response of Monterey Peninsula Water

Management District to the Application of
California-American Water Company
02/18/2010
33-39
4.
Protest of the Division of Ratepayer

Advocates
02/18/2010
40-46
5.
Motion to Approve Settlement Agreement

Between the Division of Ratepayer
Advocates, the Monterey Peninsula Water
Management District and California
American Water Company
05118/2010
47-71
6.
Proposed Decision Denying Approval of

Settlement Agreement and Dismissing
Application
12/21/2010
72-94
7.
Comments of California-American Water

Company on the Proposed Decision
01110/2011
95 - 119
8.
Comments of the Monterey Peninsula Water

Management District to the Proposed
Decision
01110/2011
120- 142
9.
Comments ofthe Division of Ratepayer

Advocates on the Proposed Decision
01/10/2011
143- 148
INDEX OF EXHIBITS
EXHIBIT
DOCUMENT
DOCUMENT
DATE
PAGE
RANGE
10.
D.ll-03-035: Decision Denying Approval

of Settlement Agreement and Authorizing
Amendment to Application
03/25/2011
149- 150
11.
Application of the Monterey Peninsula

04/25/2011
Water Management District for Rehearing of
Decision 11-03-035
151 - 213
12.
Amended Application of CaliforniaAmerican Water Company
08/26/2011
214-243
13.
Protest of the Monterey Peninsula Water

Management District to the Amended
Application
09/29/2011
244-248
14.
Protest of the Division of Ratepayer

Advocates
09/29/2011
249- 251
15.
Petition of the Monterey Peninsula Water

Management District for Modification of
Decision 11-03-03 5
10/14/2011
252-443
16.
Response of the Division of Ratepayer

Advocates to the Monterey Peninsula Water
Management District's Petition to Modify
Decision 11-03-035
11114/2011
444-446
17.
Administrative Law Judge's Ruling Setting

Prehearing Conference
01/26/2012
447-449
18.
California American Water Company

Response to ALJ's Directive to Provide
Additional Information
02/24/2012
450-487
19.
Proposed Interim Decision Authorizing

Aquifer Storage and Recovery Project Phase
2 and Carmel River Mitigation Agreement
04/06/2012
488-500
20.
Scoping Memo and Ruling of Assigned

Commissioner
04/16/2012
501 - 507
VOLUME2
INDEX OF EXHIBITS
EXHIBIT
DOCUMENT
DOCUMENT
DATE
PAGE
RANGE
21.
Opening Comments of the Division of

Ratepayer Advocates on the Proposed
Decision
04/26/2012
508- 515
22.
Comments of California-American Water

Company on the Proposed Decision
04/26/2012
516-518
23.

Management District on the Proposed
Interim Decision
04/26/2012
519-551
24.

Management District to the Scoping Memo
and Ruling of the Assigned Commissioner
04/30/2012
552- 557
25.
Opening Comments of the Division of

Ratepayer Advocates on the Scoping Memo
and Ruling of the Assigned Commissioner
04/30/2012
558- 559
26.
Reply Comments of the Division of

Ratepayer Advocates on the Proposed
Decision
04/30/2012
560- 561
27.
Administrative Law Judge's Ruling Setting

05/23/2012
562
VOLUME3
28.
Response of California-American Water

06/11/2012
Company to the Assigned Administrative
Law Judge's Direction to Provide Additional
Information
563-570
29.
Interim Decision Authorizing Aquifer

Storage and Recovery Project Phase 2 and
Carmel River Mitigation Agreement
06/26/2012
571 - 583
30.

Compliance Filing
12/31/2012
584- 593
31.
D.13-0l-040: Order Modifying D.ll-03-035

and Denying Rehearing, as Modified
01125/2013
594- 595
FILED
BEFORE THE PUBLIC UTILITIES COMMISSION
01-05-10
04:59PM
OF THE STATE OF CALIFORNIA
A1001012
In the Matter of the Application of

(U 210 W) for an Order Authorizing the
Collection and Remittance ofthe Monterey
Peninsula Water Management District User
Fee
Application I 0-01-
IN THE MATTER OF THE APPLICATION OF CALIFORNIA-AMERICAN

WATER COMPANY (U 210 W) FOR AN ORDER AUTHORIZING THE
COLLECTION AND REMITTANCE OF THE MONTEREY PENINSULA
WATER MANAGEMENT DISTRICT USER FEE
Stephen A. S. Morrison, Esq.

Suite 202
333 Hayes St.
San Francisco, CA 94102
Telephone: (415) 863-2960
Email: stephen.morrison@amwater.com
Timothy Miller Esq.
Suite 200
1045 B Street
Coronado, CA 92116
Telephone: (619) 435-7411
Email: tim.miller@amwater.com
Attorneys for Applicant
CALIFORNIA-AMERICAN WATER COMPANY
Dated: January 5, 2010
TABLE OF CONTENTS
INTRODUCTION ............................................................................... ,............................. 2
PROCEDURAL BACKGROUND AND IDSTORY ..................................................... 3
Application 08-01-027 and Commission Orders in D.09-07-021 ............................... 3
Activities Since Application 08-01-027 and CPUC Order 09-07-021 ....................... 4
REQUESTED RELIEF .................................................................................................... 5
The Commission Should Authorize California American Water to Reinstate
Collection and Remittance of the MPWMD User Fee ............................................... 5
The MPWMD's ASR Program is a Necessary and Cost Effective Water Supply
Activity and Not Duplicative of California American Water's Activities ................ 7
The MPWMD Mitigation Program is Required by Law, Prudently Implemented,
and Not Duplicative of California American Water's Mitigation Activities ............ 8
California Law Regarding Local Agency Fees and Taxes Provide Additional
Assurances Regarding the Prudence ofMPWMD Activities .................................. 12
Commission Review of California American Water's Memorandum Accounts and
Other Expenditures Provide Additional Assurance To the Commission that
Mitigation and ASR Expenditures are Prudent and Not Duplicative .................... 13
Authorize Recovery of Costs Recorded in the User Fee Memorandum Account. 14
SB 960 SCOPING MEMORANDUM ........................................................................... 14
OTHER FORMAL MATTERS AND PROCEDURAL REQUIREMENTS .. ,......... 16
CORRESPONDENCE CONCERNING APPLICATION .......................................... 18
SERVICE ......................................................................................................................... 18
EXHIBITS ....................................................................................................................... 18
CONCLUSION ................................................................................................................ 19
VERIFICATION ............................................................................................................. 20


Collection and Remittance ofthe Monterey
Peninsula Water Management District User
Fee
Application 10-01-
IN THE MATTER OF THE APPLICATION OF CALIFORNIA-AMERICAN

WATER COMPANY (U 210 W) FOR AN ORDER AUTHORIZING THE
COLLECTION AND REMITTANCE OF THE MONTEREY PENINSULA
WATER MANAGEMENT DISTRICT USER FEE
1. INTRODUCTION
California-American Water Company ("California American Water" or
"Company") files this Application pursuant to Decision ("D.") 09-07-021, Ordering
Paragraphs No. 24 and 25, which require California American Water to meet and confer
with the Monterey Peninsula Water Management District ("MPWMD" or "District"), and
submit for approval a program to fund projects currently performed by the District that
are properly the Company's responsibility. This application is filed within the 180-day
period allowed for such an application. 1
1 Ordering paragraph 24 states: "California American Water Company shall meet and confer with the
Monterey Peninsula Water Management District regarding costs properly the responsibility of California
American Water Company and its ratepayers." and Ordering paragraph 25 states: "No later than 180 days
after the effective date ofthis order, California American Water Company shall develop and submit for
In this Application and supporting testimony, California American Water

proposes a program to collect the funds required by MPWMD to carry out projects on
behalf of the Company and which the Company would otherwise have to carry out. This
program will, in.effect, reinstate the prior practice of collecting the MPWMD "User Fee".
The User Fee will be collected at rates set by the District's Board of Directors. The User
Fee funds will be applied to (i) the District's Mitigation Program required by the
California Environmental Quality Act to mitigate the effects of the Company's water
withdrawals from the Carmel River; and (ii) the Aquifer Storage and Recovery (or
"ASR") Program that is a joint project to legalize some of California American Water's
unpermitted diversions from the Carmel River. As described in testimony, neither of
these programs are duplicative of activities undertaken by California American Water.
California American Water also seeks authority herein to collect the balance of its
MPWMD User Fee memorandum account- currently at $1,254,568- via a customer bill
surcharge that would collect the accumulated balance by January 1, 2011.
2. PROCEDURAL BACKGROUND AND HISTORY

2.1. Application 08-01-027 and Commission Orders in 09-07-021
On January 30, 2008, California American Water filed Application ("A.") 08-01027 ("2008 Monterey GRC") requesting an increase in rates for its Monterey District.
Included in the Assigned Commissioner's and Administrative Law Judge's Ruling and
Scoping Memo dated June 27, 2008 was a requirement to address issues related to the
Commission approval a program to fund the projects currently peiformed by the Monterey Peninsula
Water Management District that are properly California American Water Company's responsibility, and is
authorized to file an advice letter to create a memorandum account for interim costs." D.09-07-021.
MPWMD funding from California American Water customers for activities other than
conservation and rationing, with an emphasis on the User Fee?
In deliberations leading to D.09-07-021, the Commission examined all of the
Company's "costs in the context of ... the significant financial burdens imposed on
residential and business customers.''3 The Commission noted the lack of an evidentiary
record to assess the necessity or the cost-effectiveness of the District's expenditures on
the Company's behalf and was therefore concerned that Company customers might be
paying fees to the District for projects that may not be necessary or cost effectively
performed. The Commission has an obligation to "ensure that the projects undertaken ..
. on [the Company's] behalf are necessary and are being provided in the most cost
effective manner."4 Thus the Commission ordered California American Water to meet
with the MPWMD regarding these programs, and required the Company to file an
application setting forth the method of collecting funds to support program costs. 5 The
Commission also authorized the Company to file an advice letter establishing a
memorandum account to record any interim costs.
2.2. Activities Since Issuance ofD.09-07-021

Following the issuance ofD.09-07-021, California American Water acted in
accordance with the expectations set forth in that Decision. Specifically, the Company
filed advice letter AL-785-A on July 20, 2009 to establish the authorized memorandum
account. The Division of Water and Audits approved AL-785-A on August 20, 2009
with an effective date of July 20, 2009. In addition, the Company initiated detailed
2
In A.07-12-010, this Commission examined and approved the collection and expenditure of a surcharge
for the MPWMD's conservation and rationing activities. This collection was termed the "User Fee".
3
D.09-07-021 at 116.
4
Id.
5
D.09-07-021, Ordering Paragraphs 24 and 25.
discussions with MPWMD on the programs and on funding steps, within the context of
D.09-07-021 and Ordering Paragraphs 24 & 25 in particular.
On September 24, 2009, California American Water entered into the Mitigation
and ASR Activity Reimbursement Agreement ("Reimbursement Agreement") with the
District to provide the MPWMD continued funding, on the preexisting "percentage of
revenue" basis, in order for the District to carry out the required Mitigation Program and
the ASR Program at the same level of service existing on July 1, 2009. 6 Payments made
pursuant to the Reimbursement Agreement are being recorded in the memorandum
account established by Advice Letter AL-785-A. On October 16, 2009, the Company
and the MPWMD entered into the Interim Carmel River Mitigation Program and Aquifer
Storage and Recovery Program agreement that specified the activities to be performed
with the funding provided under the Reimbursement Agreement.
3. REQUESTED RELIEF
3.1. The Commission Should Authorize California American Water to Reinstate
Collection and Remittance of the MPWMD User Fee
In this Application, California American Water- with the support of the
MPWMD- describes the User Fee as the appropriate means to fund projects (i.e. the
Aquifer Storage and Recovery Program and Mitigation Program) currently performed by
the District but properly or ultimately the responsibility of the Company. Therefore,
respectfully, the Commission should reinstate the prior Commission-approved practice of
collecting the MPWMD User Fee, at the rate set by the MPWMD Board of Directors,
from the Company's Monterey District customers. Further, that the User Fee should be
6
Because it is not California American Water that is required to implement the District's Mitigation
Program and as the MPWMD Board adopted a resolution to continue implementing its Mitigation Program,
an agreement with the MPWMD to implement the program is necessary for California American Water to
comply with Company requirements regarding documentary evidence for payments made by the Company.
remitted to the MPWMD to fund the ASR and Mitigation Programs. Finally, the
Company should be authorized to collect, from its Monterey District customers, the
balance in the Company's MPWMD User Fee Memorandum Account.
As described in the testimony ofF. Mark Schubert, the Aquifer Storage and
Recovery Program is a necessary, prudent, and non-duplicative program that is a current
Company obligation. The ASR Program is required to obtain legal water rights for the
Company's Monterey Division operations. As described in the testimony of Joe Oliver
and F. Mark Schubert, this joint program is cost effective precisely because the MPWMD
has water rights permits issued by the State Water Resources Control Board authorizing
Carmel River water diversions that it applies to the ASR. Company ratepayers would
encounter significant expenses were the Company to seek to obtain its own water rights.
This joint program further reduces costs by dividing the implementation tasks between
the MPWMD's expertise in permitting and hydrogeology, and the Company's expertise
in constructing and operating production, transmission and delivery infrastructure.
Therefore, respectfully, the Commission should authorize California American Water to
collect the ASR portion of the User Fee at the rate set by the MPWMD Board of
Directors as a prudent and appropriate cost.
As also described in the testimonies of Darby Fuerst and Rick Dickhaut, the
Commission has further assurances that the "percent of revenue" basis for User Fee will
not be a significant financial burden for California American Water's customers.
Specifically, the District is required to review and adopt its budget in a transparent public
process. Moreover, the ordinance approving the ASR fee requires annual reviews to
ensure that the revenue does not exceed the District's expenditure, and Article XIII D of
the California Constitution prohibits the MPWMD from collecting more in User Fee
revenue than the District incurs in expenditures without voter approval.
The attached testimonies of both Darby Fuerst and Rick Dickhaut also describe
the nature of the Mitigation Program and clarify the nature of the obligation.
Specifically, the testimony establishes that the Mitigation Program is not a current
obligation of California American Water. It is currently an obligation of the MPWMD
pursuant to the California Environmental Quality Act that has been made a contingent
obligation of the Company by State Water Resources Control Board Order 95-10. The
Mitigation Program is therefore necessary because it is required by law. The legal
obligation was previously met by the Commission-approved practice of collecting the
User Fee and remitting the funds to the District for the Mitigation Program. Therefore,
respectfully, the Commission should authorize California American Water to reinstate the
past practice. Specifically the Commission should authorize collecting the Mitigation
Program portion of User Fee at the rate set by the MPWMD Board ofDirectors,
consistent with the Commission's prior MPWMD User Fee approval. 7 This approach is
also supported by other Commission decisions regarding local agency fees and taxes. 8
3.1.1. The MPWMD's ASR Program is a Necessary and Cost Effective

Water Supply Activity and Not Duplicative of California American
Water's Activities
One of the two programs funded by the MPWMD User Fee is the ASR Program.
The ASR Program is a joint MPWMD/California American Water effort to implement a
phased water supply project that uses water rights granted to the MPWMD by the State
See Baird v. California American Water Company, D.94-03-0 15

See In re: Guidelines for the Equitable Treatment ofRevenue Producing Mechanisms Imposed By Local
Government Entities on Public Utilities, D.89-05-063, 32 CPUC 2d 60; and Packard v. Pacific Telephone
and Telegraph 1970 PUC LEXIS 158.
8
Water Resources Control Board, and existing and future infrastructUre owned by the
Company, to appropriate water from the Carmel River when there are excess winter
flows, and then store that water in the Seaside Groundwater Basin for delivery to
customers during the dry summer months.
As described in the testimonies of Joseph Oliver and F. Mark Schubert, ASR
Program activities are divided up based on the expertise of the parties. MPWMD as a
government agency that owns water rights and has hydrogeologists on staff provides key
staff, the necessary water rights and other entitlements for the program and performs the
appropriate preliminary studies. California American's expertise in constructing and
operating water systems is used to produce, treat, and deliver water to the Seaside
Groundwater basin in the winter and to customers in the summer.
The ASR Program is a responsibility of California American Water. In Order 9510, the State Water Resources Control Board ordered the Company to act diligently to
implement water supply projects to terminate its unpermitted diversions from the Carmel
River through one of three methods. 9 One of those methods is to obtain legal water rights
for the water it diverts from the Carmel River. The State Water Resources Control
Board, in its recently issued Cease and Desist Order issued against the Company, took the
position that the joint ASR program is one of California American Water's successes in
complying with Order 95-10 since the order was issued. 10
3.1.2. The MPWMD Mitigation Program is Required by Law, Prudently

Implemented, and Not Duplicative of California American Water's
Mitigation Activities
9
SWRCB Order 95-10, Condition No. 2. Order 95-10 may be viewed at

http://www. waterboards.ca.gov/waterrights/board_decisions/adopted_orders/orders/1995/wro95-1 O.pdf
10
Order No. WR-2009-0060. Order No. WR-2009-0060 may be viewed at
http://www. waterboards.ca.gov/waterrights/board_decisions/adopted_orders/orders/2009/wro2009_ 0060.p
df
In 1981 the MPWMD established procedures for annually setting a limit on the
total amount of water available to California American Water and a limit on how much
water each local municipality could use in each subsequent year. Under these
procedures, the District adopted a water supply capacity limit for the Company's system
and a formula for distributing water within the Company's service area. This program
became known as the Water Allocation Program, and that program continues to this day.
As required by the California Environmental Quality Act ("CEQA"), 11 the
MPWMD prepared an Environmental Impact Report ("EIR") to consider the
environmental effects of the Water Allocation ProgramY This EIR evaluated the
environmental effects assuming five different production volumes from the various
sources of supply on the Monterey peninsula. The EIR concluded that the Water
Allocation Program could have significant or potentially significant environmental
effects unless mitigated. Therefore, in implementing the Water Allocation Program, the
MPWMD was required under CEQA to mitigate to the extent feasible the significant
impacts of the Water Allocation Program, and the District's Board adopted what was then
a five year program for that purpose- i.e. the Mitigation Program.
The Mitigation Program focuses on impacts to fisheries, riparian vegetation and
wildlife, and the Carmel River Lagoon, including special status species and aesthetics,
from implementing the Water Allocation Program. Activities required to avoid or
substantially reduce negative impacts to the environment include: irrigation and erosion
control programs; fishery enhancement programs; establishing flow releases from
11
The California Environmental Quality Act is codified at Public Resources Code section 21000, et seq.
The regulations implementing CEQA, known as the CEQA Guidelines, are codified at 22 C.C.R. 14000, et
seq.
12
The Environmental Impact Report can be viewed at http://www.mpwmd.dst.ca.us/eir/aprl990/toc.htm.
10
existing dams to protect the fish and riparian habitat; monitoring water quality; reducing
municipal water demand; and regulating activities within the riparian corridor.
In Order 95-10, the State Water Resources Control Board noted that the
mitigation measures being undertaken by the :MPWMD, as part ofthe Water Allocation
Program EIR, were alleviating the effects of the Company's Carmel River diversions.
The mitigation measures being implemented by the District and receiving accolades from
the State Water Resources Control Board include the Fisheries Mitigation Program; the
Riparian Vegetation and Associated Wildlife Mitigation Program; and the Lagoon
Vegetation and Wildlife Mitigation Program, are all part of the Mitigation Program. As
noted previously, at the time the SWRCB was considering Order 95-10, the :MPWMD's
Mitigation Program was initially intended to last until June, 1996Y To ensure that those
mitigation measures continued to be implemented pending a long-term water supply
solution, the State Water Resources Control Board ordered California American Water to
implement those mitigation programs if the MPWMD ceased those activities after June
30, 1996, thereby making the Mitigation Program a contingent obligation of the
Company .14 The :MPWMD has, however, continued to implement the Mitigation Program, funded in part by the User Fee.
Regarding the prudence of:MPWMD's implementation of the Mitigation
Program, while California American does not have quantitative data comparing the costeffectiveness of the :MPWMD's Mitigation Program activities to the alternative of
sourcing and hiring consultants/vendors, as described in the testimony herein, the
13
The Five-Year Mitigation Program formally began in July 1991 with the new fiscal year (FY) and was
slated to run until June 30, 1996. In October 1996, the District adopted an Implementation Plan for FY
1997 through FY 2001.
14
Order 95-10, Ordering Paragraph No. 11.
10
11
MPWMD has, as a dedicated agency, been implementing the Program for almost 20
years. As described in the testimony of Darby Fuerst, adjustments to the Mitigation
Program have been made based on experience, and the District has developed extensive
institutional knowledge on the Carmel River's environs, not likely to be possessed or
easily matched by others. If California American Water were required to implement the
Mitigation Program in the absence of funding to the District for the Program, there would
be substantial efficiency losses. These would be in contracting, administration, and new
implementation processes and this would likely increase the costs of such activities
compared to historical MPWMD costs. As described in the testimony of Darby Fuerst,
an interruption of User Fee funding could also potentially result in damage to the Carmel
River habitat, due to the disruption of mitigation activities. Moreover, running a
comprehensive mitigation program similar to the MPWMD's Carmel River Management
Plan is outside the expertise of the Company, whose core competency is running a water
utility, particularly when compared to the Di~trict's 20 year history with these activities.
The District's implementation of the Mitigation Program ensures consistent protection of
the fragile Carmel River habitat, which is a resource valued by California American
Water's Monterey Division customers.
The District's Mitigation Program activities are quite distinct from various
mitigation activities undertaken by the Company. The focus of the Company's water
withdrawal mitigation activities center on meeting the terms of agreements with the
National Oceanic and Atmospheric Administration (''NOAA") regarding impacts to the
South Central California Coast ("SCCC") Steelhead, and agreements with the United
States Fish and Wildlife Service ("USFWS") regarding impacts to the California Red-
11
12
Legged Frog. None of the Company's current mitigation activities overlap with the
activities of the District in implementing the Mitigation Program. In addition, the
Company is currently negotiating a further agreement with NOAA to address impacts on
the SCCC Steelhead and to implement certain commitments the Company is discussing
with NOAA.
3.1.3. California Law Regarding Local Agency Fees and Taxes Provide
Additional Assurances Regarding the Prudence of MPWMD Activities
Prior Commission decisions show that when a local government entity imposes a
fee or tax, the Commission typically does not review the authority of local taxing entities
to impose taxes on utility customers, or to determine the validity of a tax enacted under
the general laws of California. 15 In line with that approach, the Commission previously
deferred interpretation of the MPWMD User Fee to the MPWMD. Moreover, in those
instances where the Commission has had the opportunity to review whether a local
ordinance conflicts with the comprehensive scheme of statewide regulation ofutilities but
there is concurrent jurisdiction in Superior Court, the Commission has previously held
that review is better in Superior Court because ofthe court's broadjurisdiction.
16
While it is typical Commission practice to abstain from reviewing local

government taxes and fees, because California American Water also undertakes some
mitigation and ASR activities, the Commission must ensure that utility customers are not
paying for duplicative work and that the joint activities of the Company and the
MPWMD do not run counter to the Commission's comprehensive scheme for regulating
utilities. The various testimonies attached establish the necessity and prudence of the
15
In re: Guidelines for the Equitable Treatment ofRevenue Producing Mechanisms Imposed By Local
Government Entities on Public Utilities,D.89-05-063, 32 CPUC 2d 60; Packard v. Pacific Telephone and
Telegraph 1970 PUC LEXIS 158.
16
Packard, supra.
12
13
ASR and Mitigation Programs. The testimonies also establish the cost benefits that inure
to California American Water's customers through the existing methods of
implementation.
In addition, there are quite separate protections under California law that may
reassure the Commission that California American Water's customers are protected from
waste. To impose the User Fee, the MPWMD must enact ordinances or pass resolutions.
As a public agency, the process of adopting ordinances and resolutions, including the
amount of the User Fee and the manner in which it is spent, is the subject of open, public
meetings by the elected MPWMD Board, thereby providing the protections afforded by
open government and democratic processes.
In addition, the California Constitution prevents abuse of the User Fee by the
MPWMD. Article XIII D ofthe California Constitution, also known as "Prop 218"
prohibits local government agencies from collecting more revenue from its citizens that it
actually spends for a specific activity or purpose. Under Prop 218, there is a distinction
between a "fee" and a "tax," and when revenue exceeds the actual costs of the program,
that revenue may transmute from a fee to a tax, requiring a two-thirds vote of the people
to remain valid.
3.1.4. Commission Review of California American Water's Memorandum

Accounts and Other Expenditures Provide Additional Assurance that
Mitigation and ASR Expenditures are Prudent and Not Duplicative
Regarding the potential for duplicative efforts, California American Water's only
similar mitigation effort would be the Company's Endangered Species Act compliance
activities. These expenditures are recorded in a Memorandum Account that is subject to
prudency review by the Commission. Included in those expenditures are payments to t~e
California Department ofFish and Game's Fisheries Restoration Grant Program as
13
14
administrator of a conservation agreement between California American Water and

NOAA for the benefit of the SCCC Steelhead. The Commission has the ability to
conduct comprehensive review of these mitigation activities by California American
Water. These measures are recorded separately from the ASR and Mitigation Program
measures. Accordingly the Commission can assure itself there is no duplication of effort
with that ofthe District.
Accordingly, California American Water respectfully requests the Commission
approve the User Fee program for funding and implementing the Mitigation Program and
Aquifer Storage and Recovery Program as outlined in the testimony and other evidence
submitted in support of this Application.
3.2. Authorize Recovery of Costs Recorded in the User Fee Memorandum
Account
As authorized by D.09-07-021 and Advice Letter AL-785-A, California American
Water has incurred and recorded expenses for the interim implementation ofthe
Mitigation and ASR Programs in a memorandum account, totaling $1,254,563 as ofthe
date of this Application. Based on historical payments, California American Water
expects the balance in the account to grow by over $5,000,000 if this Application is
pending for the maximum 18-month period allowed by law. Therefore, respectfully, the
Commission should authorize the Company to recover these costs from its Monterey
Division customers over a one year period commencing January 1, 2011. Finally, given
this delayed recovery California American Water proposes that the interest during
construction (IDC) rate of return apply to these funds.
4. SB 960 SCOPING MEMORANDUM

4.1. Category: Ratesetting
14
15
4.2. Are Evidentiary Hearings Necessary? No. However, there may be factual
disputes on material issues, which may necessitate hearings. In the event of
hearings California American Water intends to introduce the following items in
support of the Application:
4.2.1. This Application, copies ofwhich have been or will be delivered to the
Commission.
4.2.2. Prepared witness qualifications and direct testimony of employees of
California American Water and the Monterey Peninsula Water Management
District to support the reasonableness and prudence of the Application.
4.2.3. Prepared and oral rebuttal testimony and related exhibits to support
California American Water's specific requests.
4.3. Are Public Witness Hearings Necessary? No.
4.4. Issues. There are two issues in this proceeding. First, is whether California
American Water should be allowed to collect from its customers the Monterey
Peninsula Water Management District's User Fee at the rate set by the Monterey
Peninsula Water Management District Board of Directors and remit that fee to
the Water Management District. Second, is whether California American Water
should be allowed to collect from customers the balance of the Monterey
Peninsula Water Management District User Fee Memorandum Account
established by A.L. 785-A.
4.5. Schedule. Pursuant to Rule 2.l(c) ofthe Commissions Rules ofPractice and
Procedure, California American Water submits the procedural schedule below
for the Commission's consideration of the relief requested. Because this is a
15
16
compliance filing, California American Water proposes two schedules, one in the
event no protests are filed, with additional dates in the event protests are filed.
Day
Event
Date
Application Filed
January 5, 2010
3-5
Docketing and formal
January 8, 2010
Public Notice
35
Comments/Protests on
February 9, 2010
Application
65
Proposed Commission
March 11, 2010
Decision
(if no protests received)
92
Commission Decision
April 8, 20 10
(if no protests received)

February 22, 2010-
(if protests received)
April21, 2010
243
DRAReport
September 7, 2010
258
Intervenor Testimony
September 20, 2010
260-317
Formal Settlement
September 22, 2010-
Negotiations
November 18, 2010
290
Rebuttal Testimony
October 22, 2010
319-320
Evidentiary Hearings
November 22, 2010
350
Opening Brief
December 21, 201 0
364
Reply Brief
January 4, 2011
409
ALJ' s Proposed
February 18, 2011
46-106
Decision Mailed
406+
Commission's Agenda
February 17, 2011
5. OTHER FORMAL MATTERS AND PROCEDURAL REQUIREMENTS
16
17
5.1. Applicant's legal name is California American Water Company. California

American Water's corporate office and post office address is: 1033 B Avenue,
Suite 20, Coronado, California 92118.
5.2. Applicant California American Water, a California corporation, organized under
the laws of the State of California on December 7, 1965, is a Class A regulated
water utility organized and operating under the laws ofthe State of California.
California American Water provides water service in various areas in the
following California counties: San Diego, Los Angeles, Ventura, Monterey,
Sonoma, Sacramento, and Placer.
5.3. A certified copy of California American Water's articles of incorporation was
filed with the Commission on January 6, 1966 in connection with Application
48170. A certified copy of an amendment to California American Water's
articles of incorporation was filed with the Commission on November 30, 1989
in connection with Application 89-11-036. A certified copy of an Amendment to
California American Water's Articles oflncorporation dated October 3, 2001 and
filed with the office of the California Secretary of State on October 4, 2001, was
filed with the Commission on February 28, 2002, in connection with Application
02-02-030. The Articles oflncorporation have not been subsequently amended.
5.4. None of the. persons described in Section 2 of General Order No. 104-A has a
material financial interest in any transaction involving the purchase of materials
or equipment or the contracting, arranging, or paying for construction,
maintenance work, or service of any kind to which Applicant has been a party
during the period subsequent to the filing of California American Water's last
17
18
Annual Report with this Commission or to which California American Water

proposed to become a party at the conclusion of the year covered by said Annual
Report.
6. CORRESPONDENCE CONCERNING APPLICATION

Correspondence and communications concerning this Application should be
addressed to the following person:
Stephen A. S. Morrison
Director of Regulatory Policy & Counsel
California American Water
Suite 202
333 Hayes Street
Telephone: (415) 863-2960
E-Mail: stephen.morrison@amwater.com
Copies of such correspondence and communications should be sent to:
David P. Stephenson
Director of Rate Regulation
4701 Beloit Drive
Sacramento, CA 95838
Telephone: (916) 568-4222
Facsimile: (916) 568-4260
E-Mail: dave.stephenson@amwater.com
7. SERVICE
A copy of this Application has been served upon the service list attached hereto.
Unless otherwise noted on the service list, recipients will receive a copy of the
Application only, exclusive of the supporting testimony due to its size (over 75 pages),
cost of reproduction, and cost to mail. Attached to the copy of the Application being
served is a Notice of Availability .
.8. EXHIBITS
8.1. Testimony ofDarby Fuerst
18
19
8.2. Testimony ofF. Mark Schubert

8.3. Testimony ofDavid P. Stephenson
8.4. Testimony of Joe Oliver
8.5. Testimony of Rick Dickhaut
9. CONCLUSION
As demonstrated by this Application and supporting testimony, California
American Water respectfully requests that the Commission order that:
(A) California American Water is authorized to collect from the Company's
Monterey District customers and remit to the Monterey Peninsula Water Management
District the Monterey Peninsula Water Management District User Fee at the rate set by
the Monterey Peninsula Water Management District's Board ofDirectors.
(B) California American Water is authorized to collect from the Company's
Monterey District customers the balance in the Monterey Peninsula Water Management
District User Fee memorandum account via a customer bill surcharge that would collect
the accumulated balance by January 1, 2011.
(C) For such other and further relief as the Commission deems appropriate.
Dated:
January 5, 2010
By: Is! Stephen A. S. Morrison
Director ofRegulatory Policy & Counsel
Suite 202
333 Hayes Street
San Francisco, CA, 94102
Telephone: (415) 863-2960
E-Mail: stephen.morrison@amwater.com
Attorney for Applicant
19
20
VERIFICATION
I am an officer of the applicant corporation herein, and am authorized to make
this verification on its behalf. The statements in the foregoing document are true of my
own knowledge, except as to matters which are therein stated on information or belief,
and as to those matters I believe them to be true.
I declare under penalty of perjury that the foregoing is true and correct.
Executed on January 5, 2010 at San Francisco, California.
Is/ Stephen A. S. Morrison

Director of Regulatory Policy & Counsel
20
21
NOTICE OF AVAILABILITY
The appendices in support of the Application listed below exceed 75 pages

in length. Therefore, pursuant to Rule 1.9(c)(l), California American Water hereby
provides this Notice of Availability of the appendices in support of the Application.
Upon written request, California American Water will provide a copy of the appendices
in support of the Application update on parties on whom this Notice of Availability is
served. Parties that wish to obtain a copy of the exhibits in support of the Application
should contact:
Monica Trejo
Paralegal
333 Hayes Street, Suite 202
Tel: 415-863-2470
Email: monica.trejo@amwater.com
Exhibits:
-Testimony ofDarby Fuerst

-Testimony ofF. Mark Schubert
-Testimony ofDavid P. Stephenson
-Testimony of Joe Oliver
-Testimony of Rick Dickhaut
21
22
CERTIFICATE OF SERVICE
I, Monica Trejo, declare as follows:
I am employed in the City and County of San Francisco, California. lam over the
age of eighteen years and not a party to this action. My business address is California
American Water Company, 333 Hayes St., Suite 202, San Francisco, California 94102. On
January 5, 2010, I served the within:
IN THE MATTER OF THE APPLICATION OF CALIFORNIA
AMERICAN WATER COMPANY (U 210 W) FOR AN ORDER
AUTHORIZING THE COLLECTION AND REMITTANCE OF THE
MONTEREY PENINSULA WATER MANAGEMENT DISTRICT USER FEE
On the interested parties in this action addressed as follows:
See attached Service List.

~
(BY PUC E-MAIL SERVICE) By transmitting such document

electronically from California American Water Company, San Francisco,
California, to the electronic mail addresses listed above. I am readily
familiar with the practice of California American Water Company for
transmitting documents by electronic mail, said practice being that in the
ordinary course ofbusiness, such electronic mail is transmitted
immediately after such document has been tendered for filing. Said
practice also complies with Rule 1.10(b) of the Public Utilities
Commission of the State of California and all protocols described therein.
(BY U.S. MAIL) By placing such document(s) in a sealed envelope, with

postage thereon fully prepaid for first class mail, for collection and
mailing at California American Water Company, San Francisco,
California following the ordinary business practice. I am readily familiar
with the practice of California American Water Company for collection
and processing of correspondence for mailing with the United States
Postal Service, said practice being that in the ordinary course of business,
correspondence is deposited in the United States Postal Service the same
day as it is placed for collection.
I declare under the penalty of perjury under the laws of the State of California
that the foregoing is true and correct and that this declaration was executed on January 5,
2010, at San Francisco, California.
Is/ Monica Trejo

Monica Trejo
22
23
CPUC E-Mail Service List

A0801023, Updated 12/24/09
A0801024, Updated 10/20/09
A0801027, Updated 10/20/09
terrance.spann@hqda.army.mil
carlwwood@verizon.net
kdursa@salinas.net
sheri@lomgil.com
mickey3643@aol.com
Glen.Stransky@LosLaurelesHOA.com
dave@laredolaw.net
mpo@cpuc.ca.gov
ldolqueist@manatt.com
edwardoneill@dwt.com
jimmosher@sbcglobal. net
cs1 001 @co.santa-cruz.ca.us
dstephen@amwater.com
mccay4213@comcast. net
samweinstein@uwua.net
turnerkb@amwater.com
uwua@redhabanero.com
llowrey@nheh.com
ffarina@cox.net
stuart@brandon-tibbs.com
memoman2@gmail.com
aengusj@horanlegal.com
bobmac@.qwest.net
stephen. morrison@amwater.com
joshdavidson@dwt.com
lweiss@manatt.com
sleeper@manatt.com
salleyoo@dwt.com
jmueller@sMvd.com
clara@cwo.com
cmw@cpuc.ca.gov
flc@cpuc.ca.gov
jcm@cpuc.ca.gov
jws@cpuc.ca.gov
lwa@cpuc.ca.gov
mab@cpuc.ca.gov
mlm@cpuc.ca.gov
23
24
CPUC Mail Service List

A0801023, Updated 12/24/09
A0801024, Updated 10/20/09
A0801027, Updated 10/20/09
Maribeth A. Bushey
California Public Utilities Commission
Division of Administrative Law Judges
Room 5018
505 Van Ness Avenue
24
25
ALJ/jd2
01-21-10
01:56PM
PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA
Resolution ALJ 176-3247

Administrative Law Judge Division
January 21, 2010
.,._
______ __
,...
RESOLUTION
RESOLUTION ALJ 176-3247. Preliminary determinations of category and

need for hearing for proceedings initiated by application pursuant to
Rule 7.1 of the Commission's Rules of Practice and Procedure.
Senate Bill (SB) 960 (Leonard, ch. 96-08~6) requires, among other things, that the
Commission categorize proceedings and determine the need for hearing for purposes of
determining the applicable. restrictions on ex parte communications and other
applicable rules. The rules implementing these requirements are found, for the most
part, in Articles 7 and 8 of the Commission's Rules of Practice and Procedure.
Rule 7.1 requires the Commission to preliminarily determine, for a proceeding initiated
by application, the proceeding's category and whether the proceeding requires a
hearing. The Commission has reviewed the initial pleading of the utility applicants and
makes the preliminary determinations of category and need for hearing as shown in the
attached Preliminary Determination Schedule, consistent with the requirements of
Rule 7.1.
No public review or comment is. required for this resolution pursuant to Rule 14.7.
IT IS ORDERED that:
1. The category and need for hearing for each proceeding initiated by application listed
in the attached Schedule of Preliminary Determinations are preliminarily determined,
as noted.
...
-1-
412634
:1
26
ALJ/jd2
2. 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 21,2010, the following Commissioners voting favorably thereon:
/sf PAULCLANON
PAULCLANON
Executive Director
MICHAEL R. PEEVEY
President
DIAN M. GRUENEICH
JOHN A. BOHN
TIMOTHY ALAN SIMON
Commissioners
-2-
27
ALJ/jd2
PRELIMINARY DETERMINATION
SCHEDULE
Resolution ALJ 176-3247 (1121110)
::~~~~~:,~~}?
:.:.
/ ..
. . ;.-.- :..;..'.:.;:. ...-.;~ '.
.~:
'~
~- ~<
-"::'-.'-~r;:-.:.~--'r:',.. . . . ;;{l)af~sg~~~ ~-.~~~~~~ .~~~AltiN(; .
A09-12-019
BAUER'S LIMO{JSINE SERVICE, INC. (PSC-8361),
Application of Bauer's Limousine Service, Inc. (PSC-8361)
for authority to expand its current Passenger Stage
Corporation authority to operate in additional counties and
between fixed points within and between such counties,
over specified routes in San Diego, Orange, Los Angeles,
San Bernardino, Riverside, San Joaquin, Marin, Alameda,
Contra Costa, Yolo, Sacramento, Placer, Nevada, Tehama,
Shasta and Siskiyou Counties in the State of California, and
to Establish a Zone of Rate Freedom for its services.
Ratesetting
Ratesetting
NO
A09-12-020
Pacific Gas and Electric Company, Application of Pacific
Gas and Electric Company for Authority, Among Other
Things, to Increase Rates and Charges for Electric and Gas
Service Effective on January 1, 2011 (U39 M).
Ratesetting
Ratesetting
YES
A09-12-024
Southern California Edison Company, In the Matter of the
Application of Southern California Edison Company
(U338E) for Authority to Make Various Electric Rate
Design Changes.
Ratesetting
Ratesetting
YES
A09-12-025
Sou~hwest Gas Corporation, In The Matter of the
Application of Southwest Gas Corporation for the Issuance
of a Limited Exemption From The Affiliate Transaction
Rules (U905G).
Ratesetting
Ratesetting
NO
A09-12-026
San Jose Water Company, In the Matter of the Application
of San Jose Water Company (U168W) for an Order
Determining that Authorization of its sale ofProperty #181,
Site of the Doyle Road Station, was not and is not required.
Ratesetting
Ratesetting
YES
A09-12-027
BLUE & GOLD FLEET, L.P., In the Matter of the
Application of Blue & Gold Fleet, L.P., a Delaware
Limited Partnership (VCC-77), for authorization for
Passenger Fare Increases on its Vessel Common Carrier
Service on San Francisco Bay between the City of Sausalito
on the one hand and authorized points in San Francisco on
the other hand.
Ratesetting
Ratesetting
NO
-1-
28
ALJ/jd2
SCHEDULE
Resolution ALJ 176-3247 (1/21110)
, PROPQSEfi>. .. PRELIM:
cA:iiEaoiiv cATEGORY
A09-12-028
BLUE & GOLD FLEET, L.P., ADELA WARE LIMITED
PARTNERSHIP (VCC-77}, In the Matter ofthe
Service on San Francisco Bay between Angel Island State
Park on the one hand and authorized points in San
Francisco on the other hand.
Ratesetting
Ratesetting
NO
A09-12-029
BLUE & GOLD FLEET, L.P., In the Matter of the
Service on San Francisco Bay between Tiburon on the one
hand and authorized points in San Francisco on the other
hand.
Ratesetting
Ratesetting
NO
A09-12-030
BAY AIRPORTER EXPRESS, INC., In the Matter of the
Application of Bay Airporter Express, Inc. for authority to
operate as a passenger stage corporation between points in
San Francisco, Alameda, Contra Costa, Solano and San
Mateo Counties and the San Francisco, Oakland and San
Jose International Airports and to establish a Zone of Rate
Freedom.
Ratesetting
Ratesetting
NO
A09-12-031
MEDALLION TELECOM, INC., Application of
Medallion Telecom, Inc. for a Certificate of Public
Convenience and Necessity to Provide Resold Local
Exchange Services in the State of California.
Ratesetting
Ratesetting
NO
A09-12-032
FIRST CLASS TRANSPORTATION, L.L.C., In the
Matter of the Application of FIRST CLASS
TRANSPORTATION, L.L.C., a California Limited
Liability Company, PSC-16462, for authority to add more
service points in its current service area and provide new
transportation between such service area on the one hand
and San Diego International Airport and John Wayne
Airport (SNA} and Los Angeles International Airport
(LAX), and extendi'!g the existing ZORF thereon.
Ratesetting
Ratesetting
NO
-2-
29
ALJ/jd2
SCHEDULE
Resolution ALJ 176-3247 (1121110)
~:::: ,;-~-PR.OPflSED.:.~:~. -:~~::<f..JWLI~~::: . :
. -.-:,:
. -~:_::, ._,.
CATEGORY ;CATEGORY .; HEARING
A09-12-034
DIGITAL WEST NETWORKS, INC., Application of
Digital West Networks, Inc. for Registration as an
Interexchange Carrier Telephone Corporation pursuant to
the provisions of Public Utilities Code Section 1013.
NDIEC
Registration
Application
Ratesetting
NO
A09-12-037
COMITY COMMl,JNICATIONS, LLC, Application of
Comity Communications, LLC for Authority to Provide
Limited Facilities-Based and Resold Local exchange .
Telecommunications Services in the State of California.
Ratesetting
Ratesetting
NO
A10-01-003
NORTH COUNTY COMMUNICATIONS
CORPORATION OF CALIFORNIA (U5631C),
Application ofNorth County Communications Corporation
of California (U5631C) for Approval ofDefault Rate for
Termination of Intrastate, IntraMT A Traffic Originated by
CMRS Carriers.
Ratesetting
Ratesetting
YES
A10-01-004
TALTON COMMUNICATIONS, INC., In the Matter of
the Application ofTalton Communications, Inc. for
Registration as an Interexchange Carrier Telephone
Corporation pursuant to the provisions of Public Utilities
Code Section 1013.
NDIEC
Registration
Application
Ratesetting
NO
A10-01-006
Valencia Water Company, In the. Matter ofthe Application
of Valencia Water Company (U342W), a Corporation, for
an Order Authorizing it to Increase Rates Charged for
Water Service in Order to Realize Increased Annual
Revenues of$4,751,000 or 18.78% in a Test Year
Beginning January 2011, $1,957,000 or 6.40% in a Test
Year Beginning January 2012, $701,000 or 2.16% in an
Escalation Year Beginning January I, 2013, and to Make
Further Changes and Additions to its Tariff for Water
Service.
Ratesetting
Ratesetting
YES
A10-01-007
A VENUE TRANSPORTATION LIMO SERVICE LLC, In
the Matter of the Application of Avenue Transportation
Limo Service LLC, for authority to operate as a passenger
stage corporation between points in San Francisco,
Alameda, and Contra Costa Counties and the San
Francisco, Oakland and San Jose International Airports and
to Establish a Zone of Rate Freedom.
Ratesetting
Ratesetting
NO
-3-
30
ALJ/jd2
SCHEDULE
Resolution ALJ 176-3247 (1121110)
A10-01-008
NETWORK SERVICES SOLUTIONS, LLC, dba
NETWORK SERVICES, Application ofNetwork Services
Solutions, LLC d/b/a Network Services for Registration as
an Interexchange Carrier Telephone Corporation Pursuant
to the Provisions of Public Utilities Code Section 1013 .
NDIEC
Registration
Application
Ratesetting
NO
A10-01-009
Golden State Water Company, In the matter of the
Application of the GOLDEN STATE WATER
COMPANY (U133W) for an order authorizing it to
increase rates for water service by $2,911,400 or 29.9% in
201land by $321,200 or 2.5% in 2012 in its Arden
Cordova Service Area; to increase rates for water service
by $1,782,400 or33.2% in 2011 and by -$66,200 or -0.9%
in 2012 in itsBay Point Service Area; to increase rates for
water service by $409,100 or 22.6% in 2011 and by
$23,300 or 1.0% in 2012 in its Clearlake Service Area,
et al.
Ratesetting
Ratesetting
YES
A10-01-0ll
Southern California Edison Company, Application of
Southern California Edison Company (U338E) to issue,
sell, and deliver one or more series of Debt Securities and
guarantee the obligations of others in respect of the
issuance of Debt Securities, the total aggregate principal
amount of such indebtedness and guarantees not to exceed
$3.5 billion; to execute and deliver one or more indentures;
to sell, lease, assign, mortgage, or otherwise dispose of or
encumber utility property, et al.
Ratesetting
Ratesetting
NO
A10-01-012
California-American Water Company, In the Matter ofthe
Application of California-American Water Company
(U21 OW) for an Order Authorizing the Collection and
Remittance ofthe Monterey Peninsula Water Management
District User Fee.
Ratesetting
Ratesetting
YES
A10-01-013
California Water Service Company, Application of
CALIFORNIA WATER SERVICE COMPANY, (U60W),
a California corporation, for an order to issue and sell
additional debt and equity securities not exceeding the
aggregate amount of$350,000,000 and other related
requests.
Ratesetting
Ratesetting
NO
'
-4-
31
ALJ/jd2
SCHEDULE
ResolutionALJ 176-3247 (1121/10)
PROPOS.Eit
. NUMBER'
'iifl.i:rt'. ..
..... CATEGORY
A10-0l-Ol4
Ratesetting
PREUM; . .
CATEGORY
Ratesetting
NO
Pacific Gas and Electric Company, Application of Pacific

Gas and Electric Company for Approval of Ratepayer
Funding to Perform Additional Seismic Studies
Recommended by the California Energy Commission.
(U39E).
-5-
32


(U 21 0 W) for an Order Authorizing
Collection and Remittance of the
Monterey Peninsula Water Management
District User Fee
)
)
)
)
)
)
02-18-10
04:59PM
Application No. 10-01-012
RESPONSE OF
MONTEREY PENINSULA WATER MANAGEMENT DISTRICT
TO THE APPLICATION OF CALIFORNIA-AMERICAN WATER COMPANY
(U 210 W) FOR AN ORDER AUTHORIZING THE
COLLECTION AND REMITTANCE OF THE MONTEREY
PENINSULA WATER MANAGEMENT DISTRICT USER FEE
David C. Laredo, CSBN 66532

Heidi A. Quinn, CSBN 180880
DeLAY & LAREDO
606 Forest Avenue
Pacific Grove, CA 93950-4221
Telephone: (831) 646-1502
Facsimile: (831) 646-0377
Email: dave@laredolaw.net
Frances M. Farina, CSBN 185035
De LAY & LAREDO
389 Princeton Avenue
Santa Barbara, CA 93111
Telephone: (805) 681-8822
Facsimile: (805) 681-8823
. Email: ffarina@cox.net
Attomeys for MONTEREY PENINSULA
WATER MANAGEMENT DISTRICT
Febtuary 18,2010
33
BEFORE THE PUBLIC l,JTILITIES COMMISSION

Monterey Peninsula Water Management
District User Fee
)
)
)
)
)
)
RESPONSE OF
TO THE APPLICATION OF CALIFORNIA-AMERICAN WATER COMPANY
(U 210 W) FOR AN ORDER AUTHORIZING THE
COLLECTION AND REMITTANCE OF THE MONTEREY
PENINSULA WATER MANAGEMENT DISTRICT USER FEE
Pursuant to Rule 2.6(a) of the California Public Utilities Commission's ("CPUC"

or "Commission") Rules of Practice and Procedure, the Monterey Peninsula Water
Management District ("MPWMP, or "Water Management District") hereby files its
Response to the Application ("A.") 10-01-012 filed by California-American Water
Company ("CAW") on January 5, 2010.
In its Application, CAW seeks authorization for a program to collect funds
required by the Water Management District to carry out projects on behalf of CAW, and
which CAW is mandated to carry out. 1 The program would reinstate CAW's prior
practice of collecting the Water Management District's User Fee. 2 The User Fee will be
collected at rates set by the Water Management District's Board of Directors and will be
1
2
Application at p. 3.
/d.
Page2
34
applied to fund (1) the District's Mitigation Program required by the Califomia
Environmental Quality Act ("CEQA") to mitigate the effects of CAW's water
withdrawals from the Carmel River; and (2) the Aquifer Storage and Recovery ("ASR")
Program that is a joint project of CAW and the District to legalize some of CAW's
unpetmitted diversions from the Carmel River. 3
Pursuant to Rule 2.6(a), the Water Management District's Response is timely
filed within thirty (3 0) days of the date the notice of the filing of CAW's Application first
appeared in the Daily Calendar.
INTERESTS OF THE WATER MANAGEMENT DISTRICT

The Water Management District's Response is not a Protest. The District concurs
in the Application filed by CAW. In fact, the District's Response is filed in consultation
with CAW and the CPUC's Depattment of Ratepayer Advocates ("ORA").
Pursuant to Rule 1.4(a), the District respectfully requests the opportunity to be a
full hearing participant in the event any other party files a Protest to CAW's Application.
Rule 1.4(a)(2) provides that a person may become a party to a proceeding by filing a
protest or response to an application or petition. The person must fully disclose the
persons or entities on whose behalf the filing, appearance or motion is made, and the
interest of such persons or entities in the proceeding; and demonstrate that the
contentions will be "reasonably pertinent to the issues already presented!'4
In accord with Ride 1.4(b), the District is an interested party in CAW's
Application. Prior to the Commission's issuance of Decision ("D.") 09-07-021, CAW
3
4
Application atp. 3.
Rule I.4(b).
Page3
35
had been collecting the Oistrict's User Fee with prior approval of the CPUC. 5 The User
Fee is based on actual water use, and is based upon a percentage of water and meter
charges. CAW's Application and supp01ting testimony demonstrate that the District's
programs are not duplicative of activities taken by CAW.
The User Fee supports the Water Management District's comprehensive
Mitigation Program, as adopted for the Water Allocation Program Environmental Impact
Report in November 1990. 6
The Mitigation Program is designed to lessen the
environmental impacts that community water use and CAW's operations have on the
Carmel River and the Seaside Groundwater Basin ("Seaside Basin"), including impacts to
the steelhead and the red-legged frog, which are listed as threatened species under the
federal Endangered Species Act. 7
A pOition of the User Fee also defrays the District's ASR project, thus enabling
winter flows from the Carmel River to be diverted and stored in the Seaside Basin for use
during the summer months pursuant to guidelines set by federal and state fisheries
agencies. 8
In accord with Rules 1.4(b) and 2.6(c), the District has information that would be
useful and pertinent to the Commission in acting on CAW's Application.
5
Application
6
at p. 4, FN 2.
The Water Management District is required to implement this program. On September 24, 2009, CAW
entered into an agreement with the District to provide continued funding in order for the District to carry
out the required Mitigation Program and ASR program. See Application, p. 5.
7
Application at pp. 8 - 12.
.
8
/d. at pp. 7- 8.
Page4
36
CONCLUSION
For the reasons stated herein, the Water Management District respectfully
requests the Commission allow the District to participate in these proceedings as a full
participant.
Dated: February jS:2010
D v
. Laredo
DeLAY & LAREDO
Attorneys for Monterey Peninsula
U:\General (NEW)\MPWMD- Main\CPUC Application (Mitigation & ASR)\WMD Response to Application (rev).doc
Page5
37
PROOF OF SERVICE
'
3
4
5
6
7
8
9
I, Lisa Andrew, declare as follows:

I am employed in the City of Pacific Grove, County of Monterey, Califomia. I am
over the age of eighteen years, and not a patty to the within entitled cause. I am an employee of
De LAY & LAREDO and my business address is 606 Forest Avenue, Pacific Grove, California
93950. On February 18,2010, I served the within:
RESPONSE OF MONTEREY PENINSULA WATER MANAGEMENT DISTRICT TO
THE APPLICATION OF CALIFORNIA-AMERICAN WATER COMPANY (U 210 W)
FOR AN ORDER AUTHORIZING THE COLLECTION AND REMITTANCE OF THE
MONTEREY PENINSULA WATER MANAGEMENT DISTRICT USER FEE
on the interested parties il'l this action addressed as follows:
Please see attached Service List
10
II
12
13
14
15
16
17
18
[8l
(BY MAIL) By placing such envelope, with postage thereon fully prepaid for first
class mail, for collection and mailing at De Lay & Laredo, Pacific Grove, Califomia
following ordinary business practice. I am readily familiar with the practice being that in
the ordinary course of business, conespondence is deposited in the United States Postal
Service the same day as it is placed for collection.
1Zl
(BY E-MAIL SERVICE) By transmitting such document electronically from De

Lay & ~redo, Pacific Grove, California, to the electronic mail addresses listed above. I
am read,ily familiar with the practice of De Lay & Laredo for transmitting documents by
electron!c mail, saidpractice being that in the ordinary course of business, such electronic
mail is tninsmitted immediately after such document has been tendered for filing.
I declare that I am employed in the office of a member of the bar of this court at
whose direction tht( service was made.
19
Executed on February 18, 2010, at Pacific Grove, California.

20
21
........
22
23
24
25
26
27
1.
28
:.
38.
SERVICE LIST
Maribeth A. Bushey
505 Van Ness Avenue, Room 5018
mab@cpuc.ca.gov
Director Regulatory Policy & Counsel
333 Hayes Street, Suite 202
stephe,n.monison@fi.mwater.com
Timothy Miller
1045 B Street, Suite 200
Coronado, CA 92 116
tim.miller@amwater.cqm
David P. Stephenson
4701 Beloit Drive
dave.stephenson@amwater.com
.
.
.
..
'
'
Glen Stransky
Hidden Hills Subunit Ratepayers Association
92 Saddle Road
Cannel Valley, CA 93924
glen.
. . stransky@loslaureleshoa.com
.
.
(
39
02-18-10
04:59PM
Application of California-American
Water Company (U 210 W) For An
Order Authorizing The Collection And
Remittance Of The Monterey Peninsula
Water Management District User Fee
A.10-01-012
(Filed January 5, 2010)
PROTEST OF THE DIVISION OF RATEPAYER ADVOCATES
JAZON ZELLER
JOYCE STEINGASS
Attorney for the Division of Ratepayer

Advocates
Senior Utilities Engineer

Division of Ratepayer Advocates

505 Van Ness Ave.
Phone: (415) 703-4673
Fax: (415) 703-2262
jjz@cpuc.ca.gov

505 Van Ness Ave.
Phone: (415) 355-5532
jws@cpuc.ca.gov
415508
40
BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA
Application of California-American
Water Company (U 210 W) For An
Order Authorizing The Collection And
Remittance Of The Monterey Peninsula
Water Management District User Fee
A.I0-01-012

I.
INTRODUCTION
Pursuant to Rule 2.6 of the California Public Utilities Commission's
("Commission") Rules of Practice and Procedure, the Division of Ratepayer Advocates

("ORA") files this Protest to Application ("A.") 10-01-012 of California American Water
Company ("Cal Am") for an order authorizing the collection and remittance of the
Monterey Peninsula Water Management District ("MPWMD") User Fee.
II.
ISSUES
A.
DRA Does Not Oppose Cal Am's Primary Requests
In A.10-01-012, Cal Am makes the following requests:

1)
to collect from its customers the Monterey Peninsula Water Management

District's User Fee ~t the rate set by the Monterey Peninsula Water
Management District Board of Directors and remit that fee to the Water
Management District;
2)
to collect from its customers, the balance of the Monterey Peninsula

Water Management District User Fee Memorandum Account
Established by Advice Letter ("AL") 785-A.
These requests are reasonable and DRA supports these requests. The Commission
should follow its usual guidelines for the amortization of the balance in the memorandum
account, including reasonableness review. However, Cal Am also requested:
41
3)
to apply the Interest During Construction ("IDC") rate of return to the

baJance in the MPWMD user fee memorandum account.1
Cal Am provided no explanation of what the IDC rate of return is, or why it is
appropriate in this instance. Without this information, the Commission does not have the
basis to find that the IDC rate of return is reasonable. This issue is described further
below.
B.
Cal Am's Request To Earn Interest During Construction

Rate of Return On The $1.2 Million Balance In The
MPWMD User Fee Memorandum Account Is
Unsupported
In A.10-0l-012, Cal Am requests recovery ofthe expenses it has incurred for

interim implementation of the mitigation and Aquifer Storage and Recovery programs in
the MPWMD User Fee memorandum account. As of the date of filing A.10-01-012, the
amount in the memorandum account was $1,254,563; Cal Am expects this balance to
grow by more than $5 million if this Application is pending for a full 18 months. Cal Am
proposes to apply the interest dudng constructiop. rate of return on the balance in the
MPWMD User Fee memorandum account.
Cal Am proyides no explanation of what the IDC rate of return is or why it is
appropriate in this instance.~ The only information Cal Am provides regarding this
request is the following:
California American Water would also specifically request
that the total amounts accumulated in the current MPWMD
User Fee memorandum account be authorized for recovery as
part of this proceeding and that the recovery be completed by
January 1, 2011 and that in the meantime, given the sums and
delay involved, California American Water ought to be able
1 Application 10-0l-012: p. 14, filed 1/5/lO
~ ORA asked Cal Am what the IDC rate of return was, and Cal Am provided several explanations, but at
this time DRA does not have an understanding of what the exact IDC rate of return requested is or how it
is calculated.
42
to recover more than the basic rate, in fact the roc rate of
return ought to apply. 1
ORA's understanding is that the IDC rate of return applies to construction work that leads
to the creation of an asset owned by the utility. However, the balance in MPWMD User
Fee memorandum account is not an asset owned by the utility. Therefore, the IDC rate of
return is not the appropriate rate to apply. Furthermore, Cal Am has not provided any
reason the IDC rate of return should apply.
DRA protests Cal Am's application on the limited basis that Cal Am has not
supported its request to earn the IDC rate of return on the MPWMD User Fee
memorandum account. DRA recommends that the Administrative Law Judge ("ALJ")
order Cal Am to provide adequate justification for its request.
III.
CATEGORIZATION AND NEED FOR HEARING

DRA agrees with Cal Am's proposed categorization of this proceeding as
ratesetting. Until Cal Am has provided justification for its request, DRA cannot
determine whether hearings will be necessary.
IV.
SCHEDULE
DRA does not protest Cal Am's request to reinstate the MPWMD User Fee and
recommends that the Commission move forward under Cal Am's proposed schedule on
this issue and issue a final decision by April2010.
However, as stated above, ORA objects to Cal Am's unsupported request to apply
the Interest During Construction rate of return to the balance of the Monterey Peninsula
Water Management District User Fee memorandum account. Until Cal Am provides
more information about its requested interest rate, DRA does not know the extent of its
issue with the interest rate and cannot propose a specific schedule. DRA will work with
Cal Am to determine a fair rate to apply to the balance in the MPWMD User Fee
memorandum account.
J. Testimony of David P. Stephenson, p. 7.
43
V.
CONCLUSION
For the reasons stated above, DRA recommends that the Commission move
forward to reinstate the MPWMD User Fee. DRA protests the single issue of an
appropriate interest rate to apply to the balance in the MPWMD User Fee memorandum
account. DRA recommends that the Administrative Law Judge ("ALJ") order Cal Am to
provide adequate justification for its request to apply the IDC rate of return to the
MPWMD User Fee memorandum account.
Respectfully submitted,
Is/
JASON ZELLER
Jason Zeller
Assistant General Counsel

Advocates
505 Van Ness Ave.
jjz@cpuc.c~.gov
January 18, 2010
Phone: (415) 703-4673

Facsimile: (415) 703-2262
44
I hereby certify that I have this day served a copy of the "PROTEST OF THE
DIVISION OF RATEPAYER ADVOCATES" in A.10-01-012 by using the following
service:
[ X ] E-Mail Service: sending the entire document as an attachment to all known
parties of record who provided electronic mail addresses.
] U.S. Mail Service: mailing by first-class mail with postage prepaid to all
known parties of record who did not provide electronic mail addresses, if any.
Is/ ALBERT HILL

Albert Hill
NOTICE
Parties should notify the Process Office, Public Utilities
Commission, 505 Van Ness Avenue, Room 2000, San Francisco,
CA 94102, of any change of address and/or e-mail address to
insure that they continue to receive documents. You must indicate
the proceeding number on the service list on which your name
appears.
********************************** ***
45
SERVICE LIST
A.10-01-012
Glen.Stransky@LosLaurelesHOA.com;
dave.stephenson@amwater.com;
mab@cpuc.ca.gov;
stephen.morrison@amwater.com;
46


California- American Water Company
(U21 OW) for an Order Authorizing the
Monterey Peninsula Water
Mana ement District User Fee.
05-18-10
04:59PM
Application 10-01-012
(Filed January 5, 201 0)
MOTION TO APPROVE SETTLEMENT AGREEMENT BETWEEN THE

DIVISION OF RATEPAYER ADVOCATES, THE MONTEREY PENINSULA
WATER MANAGEMENT DISTRICT AND CALIFORNIA AMERICAN WATER
COMPANY
Allison Brown
505 Van Ness Avenue
San Francisco, CA 941 02
Phone (415) 703-5462
Fax: (415) 703-2057
aly@cpuc.ca.gov
David C. Laredo
Heidi A. Quinn
DeLAY & LAREDO
606 Forest Avenue
Pacific Grove, CA 93950
Telephone: (831) 646-1502
Facsimile: (831) 646-0377
Tim Miller
Corporate Counsel
1033 B Avenue, Suite 200
Coronado, CA 92118
Telephone: (619) 435-7411
47


California- American Water Company
(U21 OW) for an Order Authorizing the
MOTION TO APPROVE SETTLEMENT AGREEMENT BETWEEN THE DIVISION OF

RATEPAYER ADVOCATES, THE MONTEREY PENINSULA WATER MANAGEMENT
DISTRICT AND CALIFORNIA AMERICAN WATER COMPANY
I.
INTRODUCTION
Pursuant to Rule 12.1 of the Rules of Practice and Procedure of the California
Public Utilities Commission ("Commission"), the Division of Ratepayer Advocates
("ORA"), the Monterey Peninsula Water Management District ("MPWMD") and

California-American Water Company ("California American Water'' or "the Company")
(collectively "the Parties") submit this motion to approve the Settlement Agreement
Between the Division of Ratepayer Advocates, the Monterey Peninsula Water
Management District and California-American Water Company Regarding the Collection
and Remittance of the Monter_ey Peninsula Water Management District User Fee
("Settlement Agreement"), attached as Appendix A. The Settlement addresses the
propriety of California American Water collecting and remitting the MPWMD User Fee,
and the appropriate interest rate for California American Water to collect on the
MPWMD User Fee Memorandum Account.
- 1-
48
The proposed Settlement fulfills the criteria that the Commission requires for
approval of such settlements because it is consistent with the applicable law, in the
public interest, and reasonable in light of the record. Accordingly, the Parties request
the Commission grant this Motion, and adopt the Settlement Agreement. The Parties
request that the Commission introduce into evidence all testimony that has been served
in this matter, with the following proposed exhibit numbers:
Direct Testimony of Darby Fuerst, for California American Water as Exhibit
Direct Testimony of F. Mark Schubert, for California American Water, as
1
'
Exhibit 2;
Direct Testimony of David P. Stephenson, for California American Water,
as Exhibit 3;
Direct Testimony of Joseph Oliver, for California American Water, as
Exhibit 4;
Direct Testimony of Rick Dickhaut, for California American Water, as
Exhibit 5;
II.
PROCEDURAL BACKGROUND
A.
On January 30, 2008, California American Water filed Application ("A.")
08-01-027 ("2008 Monterey GRC") requesting an increase in rates for its Monterey
district." Included in the Assigned Commissioners and Administrative Law Judge's
-2-
49
Ruling and Scoping Memo dated June 27, 2008 was a requirement to address issues
related to the MPWMD funding from California American Water customers for activities
other than conservation and rationing, with an emphasis on the "User Fee." 1
B.
In D.09-07-021, the Commission closely examined all of the Company's
"costs in the context of ... the significant financial burdens imposed on residential and
business customers by thes~ substantial rate increases."2 The Commission noted the
lack of an evidentiary record to assess the necessity or the cost-effectiveness of the
District's expenditures on the Company's behalf and was concerned that the Company's
customers may be paying user fees to the District for projects that may not be
necessary or cost effective? The Commission ordered California American Water to
meet and confer with the MPWMD regarding these programs, and authorized the
Company to file an application setting forth the method of collecting funds to support
program costs. 4 This Commission also authorized the Company to file an advice letter
establishing a memorandum account to record any interim costs.
C.
On July 20, 2009, California American Water, as authorized in D.09-07-
021, filed advice letter AL-785-A to establish the MPWMD User Fee memorandum
account. The Division of Water and Audits approved AL-785-A on August 20, 2009 with
an effective date of July 20, 2009.
D.
On January 5, 2010, California American Water, as authorized in D.09-07-
021 filed the instant application seeking authorization to collect and remit the Monterey
1
for the MPWMO's conservation and rationing activities.
2
0.09-07-021 at 96.
3/d.
4
0.09-07-021, ordering paragraphs 24 and 25.
-3-
50
Peninsula Water Management District's User Fee at the rate set by the Monterey
Peninsula Water Management District's Board of Directors as the program for carrying
out the mitigation measures in the Monterey Peninsula Water Management District's
Water Allocation Program Mitigation Monitoring and Reporting Program and the Aquifer
Storage and Recovery Program. California American Water also request authorization
to collect the balance in the User Fee Memorandum Account via a surcharge and to
earn on that balance at the Interest During Construction, or IDC rate.
E.
On January 18, 2010, ORA protested that application contesting California
American Water's request to earn Interest During Construction on the memorandum

account balance contending that California American Water did not adequately support
that request. In all other respects, ORA supported California American Water's
application.
F.
On February 18, 2010, the Monterey Peninsula Water Management
District filed a Response to California American Water's application, supporting the

requested therein.
G.
On February 19, 2010, the Hidden Hills Subunit Ratepayers' Association
(Hidden Hills) filed a Motion for Party Status seeking to protest California American
Water's application. On March 4, 2010, representatives from the Monterey Peninsula
Water Management District, California American Water, and the Hidden Hills Subunit
Ratepayers' Association met and conferred regarding the Hidden Hills Subunit
Ratepayers' Association's protest. On March 5, 2010, the Monterey Peninsula Water
Management District sent a letter clarifying that the User Fee is not assessed to
-4-
51
customers within the Hidden Hills area. That letter is attached hereto as Exhibit 1. On
March 18, 2010, Hidden Hills filed a motion to withdraw its protest in reliance on the
Water Management District's letter. 5
Ill.
ARGUMENT
A.
THIS SETTLEMENT AGREEMENT IS CONSISTENT WITH

APPLICABLE LAW AND IS IN THE PUBLIC INTEREST.
The Settlement Agreement is consistent with applicable law and in the public
interest.
1.
The Settlement Agreement Is Consistent with Commission Precedent

Regarding Review of Local Government Fees
As stated in California American Water's application, the Commission typically

does not examine the authority of a local government agency to collect a fee or tax.
See In re: Guidelines for the Equitable Treatment of Revenue Producing Mechanisms
Imposed By Local Government Entities on Public Utilities, 0.89-05-063, 32 CPUC 2d
60; and Packard v. Pacific Telephone and Telegraph 1970 PUC LEXIS 158. In Packard
v. P. T & T. and P.G.& E, the Commission held that it had no jurisdiction to determine
whether the City of Vallejo was authorized to enact a utility users tax under the general
laws of the State of California, or whether the City of Vallejo followed the City Charter in
enacting an ordinance to impose a utility user's tax.
Following that precedent, the Commission need not examine whether MPWMD,
as a local government agency, may impose the User Fee on California American
On March 30, 2010, the docket office rejected Hidden Hills' motion to withdraw because Hidden Hills'
motion for party status had not been ruled upoi'J. The docket office nevertheless gave effect to the motion
to withdraw by deeming the motion for party status as moot.
-5-
52
.Water's Monterey area customers. Accordingly, the Settlement Agreement allowing

California American Water to collect and remit the User Fee at the rate set by the
MPWMD Board of Directors is consistent with Commission precedent regarding local
government fees and taxes.
2.
The Mitigation Program Funded By The User Fee Is Consistent with

Applicable Law And In the Public Interest Because It Is Required By
The California Environmental Quality Act
As stated in California American Water's application and supported by the

testimony of Darby Fuerst, the MPWMD's Mitigation Program, which is funded in part by
the User Fee, is required by the California Environmental Quality Act. As such, it is
consistent with the strong State policy to mitigate the adverse environmental impacts of
a project to the extent feasible.
3.
The Mitigation Program Funded By The User Fee Is In the Public

Interest Because It Mitigates the Effects of California American
Water's Pumping On the Environment
The Mitigation Program funded in part by the User Fee is in the public interest
because, as stated in the testimony of Darby Fuerst, the Mitigation Program mitigates
the effects of California American Water's pumping from the Carmel River on the
Carmel River's environs. The State of California has established a strong policy
requiring adverse environmental effects to be mitigated to the extent feasible.
Accordingly, the Mitigation Program and the User Fee that funds it are in the public
interest.
3.
The ASR Program Funded By The User Fee Is Consistent with

Applicable Law Because It Partially Satisfies State Water Resources
Control Board Order 95-10.
-6-
53
The ASR Program that is funded through the User Fee is consistent with the
applicable law because obtaining additional legal water rights to Carmel River water is
required by the State Water Resources Control Board.
In 1995, the State Water Resources Control Board found that California
American Water did not have adequate water rights on the Carmel River to supply the
needs of the Monterey Peninsula. 6 In Order 95-10, the State Water Resources Control
Board ordered California American Water to find additional legal sources of supply,
including water rights to the Carmel River. As a program that provides California
American Water with those water rights, the ASR program is consistent with the
applicable law.
4.
Resolution of the Application By Settlement Is In the Public Interest

and Consistent with Commission Precedent
Moreover, the Parties agree that resolving this matter short of evidentiary
hearings is in the public interest. The only contested issue in this case is the rate of
interest California American Water should collect on the User Fee memorandum
account for a period of approximately 18 months. If the proceeding were to continue to
full evidentiary hearings on the merits, the Parties would need to invest additional time
and resources. The Parties believe the Settlement Agreement will serve the public
interest by avoiding the uncertainty inherent in litigation and resolving the issues in this
proceeding in a manner acceptable to the Parties. Moreover, this Settlement Agreement
further benefits ratepayers because the Parties will be able to save valuable time and
For an extensive discussion relating to the history of Order 95-10 and related Commission activity, see
0.09-12-017 certifying an environmental impact report for California American Water's Long Term Water
Supply"'Solution for the Monterey Service Area.
-7-
54
resources that would have been expended (and passed on to customers) to litigate the
application.
In addition, Commission approval of the Settlement will provide speedy resolution

of contested issues, will save unnecessary litigation expense, and will conserve
Commission resources. The Commission has acknowledged that "[t]here is a strong
public policy favoring the settlement of disputes to avoid costly and protracted litigation."
In re PG&E, D.88-12-083, 30 CPUC 2d 189,221.
B.
THIS SETTLEMENT AGREEMENT IS REASONABLE IN LIGHT OF THE

ENTIRE RECORD.
This Settlement Agreement is reasonable in light of the entire record. The terms
proposed in the Settlement Agreement are just and reasonable. The User Fee
collected and remitted by California American Wa.ter is set by the MPWMD Board. As
stated in the testimony of Rick Dickhaut and Darby Fuerst, the MPWMD Board has
followed the applicable law in adopting ordinances to impose the User Fee, and will
have to follow numerous legal requirements to implement any future changes in the
User Fee. In addition, the Commission has full authority to review California American
Water's mitigation and water rights acquisition activities in the future to ensure that there
is no duplication of effort or unreasonable or imprudent implementation those efforts.
Therefore, the Commission can be assured that the amount of the User Fee is
reasonable and not duplicative of programs implemented by California American Water.
As stated in the testimonies of F. Mark Schubert and Joseph Oliver, the activities
of California American Water and the MPWMD in implementing the ASR program have
been divided between their respective. areas of expertise and have not been duplicated.
-8-
55
Finally, as to the rate of interest California American Water will earn on the
balancing account pending collection of the accrued balance, the Settlement Agreement
acknowledges that the for the 12 month period that the surcharge will be in effect,
California American Water should earn an interest rate that reflects a blend of shortterm and long-term debt. The parties agree that a five percent rate appropriately
reflects that blend.
IV.
CONCLUSION
For the reasons discussed above, the Parties request that the Commission
approve the proposed Settlement, introduce into evidence as part of the record all
testimony that has been served in this matter, and waive the comment period on the
Settlement.
Dated: May 18, 2010
CALIFORNIA-AMERICAN WATER COMPANY

Dated: May 18, 2010
By: Is/ Allison Brown
Allison Brown
-9-
56
Appendix A
57


Mana ement District User Fee
SETTLEMENT AGREEMENT BETWEEN THE DIVISION OF RATEPAYER

ADVOCATES, THE MONTEREY PENINSULA WATER MANAGEMENT DISTRICT
AND CALIFORNIA AMERICAN WATER COMPANY REGARDING THE
COLLECTION AND REMITTANCE OF THE MONTEREY PENINSULA WATER
MANAGEMENT DISTRICT USER FEE
Dana S. Appling
505 Van Ness Avenue
Phone(415)703-2544
Fax: (415) 703-2057
dsa@cpuc.ca .gov
Darby W. Fuerst
General Manager
Monterey Peninsula
5 Harris Court, Building G
Monterey, CA 93942
darby@mpwmd.dst.ca.us
Robert G. Maclean
President
1033 B. Avenue, Suite 200
Coronado, CA 92118
Telephone: (619) 435-7403
Facsimile: (619) 435-7434
Email: robert.maclean@amwater.com
58
SETTLEMENT AGREEMENT BETWEEN THE DIVISION OF RATEPAYER

ADVOCATES, THE MONTEREY PENINSULA WATER MANAGEMENT DISTRICT
AND CALIFORNIA AMERICAN WATER COMPANY
I. RECITALS
A.
On January 30, 2008, California American Water filed Application ("A.")
08-01-027 ("2008 Monterey GRC") requesting an increase in rates for its Monterey
district. Included in the Assigned Commissioners and Administrative Law Judge's
Ruling and Seeping Memo dated June 27, 2008 was a requirement to address issues
related to the Monterey Peninsula Water Management District ("Water Management
District") funding from California American Water customers for activities other than
conservation and rationing, with an emphasis on the "User Fee." 1
B.
In D.09-07-021, the Commission closely examined all ofthe Company's
"costs in the context of ... the significant financial burdens imposed on residential and
business customers by these substantial rate increases."2 The Commission noted the
lack of an evidentiary record to assess the necessity or the cost-effectiveness of the
District's expenditures on the Company's behalf and was concerned that the Company's
customers may be paying user fees to the District for projects that may not be
necessary or cost effective. 3 The Commission ordered California American Water to
meet and confer with the Water Management District regarding these programs, and
authorized the Company to file an application setting forth the method of collecting
funds to support program costs. 4 This Commission also authorized the Company to file
an advice letter establishing a memorandum account to record any interim costs.
C.
On July 20, 2009, California American Water, as authorized in D.09-07021, filed advice letter AL-785-A to establish the authorized memorandum account. The
Division of Water and Audits approved AL-785-A on August 20, 2009 with an eff~ctive
date of July 20, 2009.
D.
On January 5, 2010, California American Water, as authorized in D.09-07021 filed application A.10-01-012 seeking authorization to collect and remit the Water
Management District's User Fee at the rate set by the Water Management District's
Board of Directors as the program for carrying out the mitigation measures in the Water
Management District's Water Allocation Program Mitigation Monitoring and Reporting
Program (Mitigation Program) and the Aquifer Storage and Recovery Program (ASR).
California American Water also requested authorization to collect the balance in the
User Fee Memorandum Account via a surcharge and to earn on that balance at the
Interest During Construction (IDC) rate.
1
for the MPWMO's conservation and rationing activities.
2
0.09-07-021 at 96.
.
3/d..
4
0.09-07-021, ordering paragraphs 24 and 25.
59
A.10-01-012
Settlement Agreement
E.
On January 18, 2010, DRA protested that application contesting California
American Water's request to earn the Interest During Construction rate on the
memorandum account balance contending that California American Water did not
adequately support that request. In all other respects, DRA supported California
American Water's application.
F.
On February 18, 2010, the Water Management District filed a Response to
.California American Water's application, supporting the requests therein.
G.
On February 19, 2010, the Hidden Hills Subunit Ratepayers' Association
(Hidden Hills) filed a Motion for Party Status seeking to protest California American
Water's application. On March 4, 2010, representatives from the Monterey Peninsula
Water Management District, California American Water, and the Hidden Hills Subunit
Ratepayers' Association met and conferred regarding the Hidden Hills Subunit
Ratepayers' Association's protest. On March 5, 2010, the Monterey Peninsula Water
Management District sent a letter clarifying that the User Fee is not assessed to
customers within the Hidden Hills area. That letter is attached hereto as Attachment 1.
On March 18, 2010, Hidden Hills filed a motion to withdraw its protest in reliance on the
Water Management District's letter. 5
H.
On April 14, 2010, California American Water noticed a settlement
conference in this proceeding for April21, 2010. On April21, 2010, all parties attended
the noticed settlement conference. As a result of this settlement conference, the Parties
agreed to certain modifications to the draft Settlement Agreement and motion. Those
modifications are reflected herein.
II.
GENERAL
A.
Pursuant to Article 12 of the Rules of Practice and Procedure of the
California Public Utilities Commission ("Commission"), the Division of Ratepayer
Advocates ("DRA"), and California-American Water Company ("California American
Water'') (collectively, "the Parties"), desiring to avoid the expense, inconvenience and
the uncertainty attendant to litigation of the matters in dispute between them, have
agreed on the terms of this Settlement Agreement ("Settlement Agreement") which they
now submit for approval.
B.
Because this Settlement Agreement represents a compromise by them,
the Parties have entered into each stipulation contained in the Settlement Agreement on
the basis that its approval by the Commission not be construed as an admission or
concession by any Party regarding any fact or matter of law in dispute in this
proceeding. Furthermore, the Parties intend that the approval of this Settlement
Agreement by the Commission not be construed as a precedent or statement of policy
On March 30,2010, the docket office rejected Hidden Hills' motion to withdraw because Hidden Hills'
motion for party status had not been ruled upon. The docket office nevertheless gave effect to the motion
to withdraw by deeming the motion for party status as moot.
-2-
60
A.1 0-01-012Settlement Agreement
of any kind for or against any Party in any current or future proceeding. (Rule 12.5,
Commission's Rules on Practice and Procedure.)
C.
The Parties agree that no signatory to the Settlement Agreement assumes
any personal liability as a result of their agreement. All rights and remedies of the
Parties are limited to those available before the Commission.
D.
The Parties agree that the Settlement Agreement is an integrated
agreement such that if the Commission rejects or modifies any portion of this Settlement
Agreement, each party must consent to the Settlement Agreement as modified, or either
party may withdraw from the Settlement Agreement.
E.
The Parties agree to use their best efforts to obtain Commission approval
of the Settlement Agreement. The Parties shall request that the Commission approve
the Settlement Agreement without change and find the Settlement Agreement to be
reasonable, consistent with the law, and in the public interest.
F.
This Settlement Agreement may be executed in counterparts, each of
which shall be deemed an original, and the counterparts together shall constitute one
and the same instrument.
Ill.
COLLECTION AND REMITTANCE OF THE MONTEREY PENINSULA WATER

MANAGEMENT DISTRICT'S USER FEE
A.
The Parties agree that the program for mitigating the impacts of California
American Water's water pumping on the Carmel River, which is undertaken by the
Water Management District as described in California American Water's application for
this proceeding, is reasonable and prudent and is not duplicative of activities
undertaken by California American Water.
B.
The Parties agree that the Aquifer Storage and Recovery program
undertaken jointly by California American Water and the Water Management District to
obtain and utilize fully permitted water rights to the Carmel River, as described in
California American Water's application for this proceeding, is reasonable and prudent
and is not duplicative of activities undertaken by California American Water.
C.
The Parties agree that the Commission should authorize California
American Water to collect and remit to the Water Management District's User Fee at a
prudently set rate determined by the Water Management District Board from time to
time.
IV.
COLLECTION OF SURCHARGE FOR BALANCE OF THE USER FEE

MEMORANDUM ACCOUNT AND INTEREST THEREON
A.
The Parties agree that, because the Mitigation Program and ASR Program
are reasonable and prudent, as further described in paragraphs III.A and III.B, above,
-3-
61
A.1 0-01-012
the costs incurred by California American Water to fund these programs from July 2009
until the effective date of this decision are reasonable and prudent. Accordingly,
California American Water should be allowed to collect the balance in the Monterey
Peninsula Water Management District User Fee Memorandum Account.
B.
The Parties agree that, based on the recovery period that ends on
January 1, 2011, California American Water will likely fund that balance with a mix of
short-term and long-term debt. The Parties further agree that a five percent interest rate
on that balance is a fair and reasonable cost of funds based on the expected mix of
short-term and long-term debt. The parties acknowledge that this is a deviation from
the Standard Practice U-27 in the application of the 90-day Commercial Paper rate to
the memorandum account balance. The parties agree this does not create a
Commission precedent for future Commission decisions or ORA's position onfuture
settlements. DRA supports this deviation only because of the artificially low interest
rates due to the U.S. Federal Reserve Bank maintaining the Federal Funds rate
between zero and 0.25 percent.
C.
The Parties agree on the following procedure for implementing an decision
approving this settlement:
1.
Within five days of the effective date of decision approving this
settlement, California American Water will file an advice letter to modify the applicable
tariffs to collect and remit the User Fee, and to collect a surcharge in accordance with
Paragraph IV.C.2.
2.
On the effective date of a decision approving this settlement,
California American Water will transfer the balance in the MPWMD User Fee
Memorandum Account to a MPWMD User Fee Balancing Account, which will accrue
interest at the rate specified in Paragraph IV.B. California American Water will collect a
surcharge that will amortize the balance in the balancing account and the allowed
interest between January 1, 2011 and December 31, 2011.
2.
The Parties agree that the schedule attached hereto as Exhibit 2
represents a reasonable estimate of the surcharge based on the current balance in the
User Fee Memorandum Account, the. agreed interest rate, the potential date for a final
decision, and the period for collecting the surcharge. The Parties further agree that the
actual schedule submitted to the Commission with the advice letter required by
paragraph IV.C.1 may vary based on the actual date of a final decision.
THE DIVISION OF RATEPAYER ADVOCATES
-----='_,/;!.-..l;;-=--6- 201 0
-4-
62
A.10-01-012
/5
,2010
CALIFORNIA AMERICAN WATER COMPANY
_ _ _ _ _ ,2010
David P. Stephenson
-5-
63
A.10-01-012
/5
,2010
CALIFORNIA AME.RICAN WATER COMPANY
Robert G. Maclean
-5-
64
Attachment 1
65
MONTEREY PENINSULA
WATER MANAGEIVlENT DISTRICT
5 HARRIS COURT, BLDO. G
POST OfFICE !lOX 85

MONTI:REY, CA 93912-0085 (8J t} 658-560;)
FAX (831) 644-9.S60 http://www.mpwmd dst.ca.us
March 5, 2010
Timothy Miller Esq.
Suite 200
1045 B Street
Coronado, CA 92ll6
; .
Glen Stransky
Hidden Hills Subunit Ratepayers Association
92 Saddle Road
Carmel Valley, CA 93924
Sub jed:
Withdrawal of Hidden Hills Subunit Ratepayers Association's Motion to

[ntervene in California-American Water Company's Application before the
Cali'fornia Ptlblic Utilities Commission (A.10-0l-OU)
Gentlemen:
This letter shall confirm the discussions and understanding reached during our telephone meeting
held on March 4, 2010, by and among Tim Miller, Glen Stransky, David Laredo, and Darby Fuerst
relative to the Hidden Hills Subunit Ratepayers Association's (BHSRA) motion to intervene in
California-American Water Company's (Cal-Am) application to the California Public Utility
Commission (CPUC) for an order authorizing the collection and remittance of the Monterey
Peninsula Water Management District (MPWMD) user fee (A.lO-Ol-012).
The participants agreed that Cal-Am's application does not modify the contract by which Cal-Am
purchased the Hidden Hills Subunit from the carmel Valley Mutual Water Company. The
participants are in full agreement that the MPWMD user fee that is the subject of Cal-Am's
application does not have any force of effect upon the HHSRA ratepayers.
The participants also agree that the MPWMD Board can only modify the user fee by first complying
with the legal. requirements set by Proposition 218. This process shall require the development of
nexus data to support the assessment of a fee, notice to proposed fee payers, and a public hearing.
In reliance on these principles, HHSRA has agreed to withdraw its motion to intervene as a party to
A.I0-01-012. HHSRA shall not protest that application
66
Tim Miller and Glen Stransky

March 5, 2010
Page2
Sincerely,
~&P
Gene~~a~er
Cc: David Laredo, MPWMD General Counsel
67
Attachment 2
68
CALIFORNIA AMERICAN WATER COMPANY

MONTEREY DISTRICT - MPWMD USER FEE MEMO ACCT RECOVERY
PROPOSED AMORTIZATION SCHEDULE
Proposed Interest Rate effective upon date decision is rendered
5.00%1
2,333,397
Proposed Annual Recovery

Current Authorized Annual Revenue <1l
Proposed %.Surcharge
$42,731,888
5.46%
chk
2011 Expected Recovery
[a]
Month
$2,333,397
[b]
[c)
[d]
Monthly
MPWMD User
Fee Entry
($)
Surcharge
Collection
($)
Cumulative
Surcharge
Collection
($)
[b] +[c)
194,450
194,450
194,450
194,450
194,450
194,450
194,450
194,450
194,450
194,450
194,450
194,447
194,450
388,900
583,350
777,800
972,250
1,166,700
1,361,150
1,555,600
1,750,050
1,944,500
2,138,950
2,333,397
2,333,397
2,333,397
[e]
Interest
Rate
[f]
[g)
This
Month's
Interest
($)
([c+b]/2 + [g]) x [e]/12
Cumulative
Over/(Under)
Collection
($)
[b] + [c) + [f] + [g]
W&'fir9~1Th~~~
February
March
April
May
June
July
August
September
October
November
December
~~t~
February
March
April
May
June
July
August
September
October
November
December
TOTAL
5.00%
5.00%
5.00%
5.00%
5.00%
5.00%
5.00%
5.00%
5.00%
5.00%
5.00%
5.00%
(9,079)
(8,306)
(7,531)
(6,752)
(5,970)
(5,185)
(4,396)
(3,604)
(2,809)
(2,010)
(1,209)
(403)
(2,276,143) (2)
(2,090,772)
(1,904,629)
(1,717,709)
(1,530,011)
(1,341,531)
(1,152,266)
(962,212)
(771,366)
(579,725)
(387,285)
(194,044)
(0)
(57,254)
(1) To be updated with the most current authorized annual revenue at the time the surcharge is implemented.
(2) To be updated to reflect final actual balance at the time the surcharge is implemented.
69
PROOF OF SERVICE
I, Monica Trejo, declare as follows:
I am employed in the City and County of San Francisco, California. I am over the
age of eighteen years and not a party to this action. My business address is California
American Water Company, 333 Hayes St., Suite 202, San Francisco, California 94102.
On May 18,2010, I served the within:
MOTION TO APPROVE SETTLEMENT AGREEMENT BETWEEN THE

DIVISION OF RATEPAYER ADVOCATES, THE MONTEREY PENINSULA
WATER MANAGEMENT DISTRICT AND CALIFORNIA AMERICAN WATER
COMPANY
On the interested parties in this action addressed as follows:
See attached Service Lists.
[g)
(BY PUC E-MAIL SERVICE) By transmitting such document

electronically from California American Water Company, San Francisco,
California, to the electronic mail addresses listed above. I am readily
familiar with the practice of California American Water Company for
transmitting documents by electronic mail, said practice being that in the
ordinary course of business, such electronic mail is transmitted
immediately after such document has been tendered for filing. Said
practice also complies with Rule 1.10(b) of the Public Utilities
Commission of the State of California and all protocols described therein.
1:8]
(BY U.S. MAIL) By placing such document(s) in a sealed envelope, with

postage thereon fully prepaid for first class mail, for collection and
mailing at California American Water Company, San Francisco,
California following the ordinary business practice. I am readily familiar
with the practice of California American Water Company for collection
and processing of correspondence for mailing with the United States
Postal Service, said practice being that in the ordinary course of business,
correspondence is deposited in the United States Postal Service the same
day as it is placed for collection.
I declare under the penalty of peijury under the laws of the State of California
that the foregoing is true and correct and that this declaration was executed on
May 18, 2010, at San Francisco, California.
IS/ Monica Trejo

Monica Trejo
70
CPUC E-Mail Service List

A1001012 Updated April28, 2010
robertmaclean@amwater.com
dave@laredolaw.net
jjz@cpuc.ca.gov
carrie.gleeson@amwater.com
ffarina@cox.net
Glen.Stransky@LoslaurelesHOA.com
jws@cpuc.ca.gov
mab@cpuc.ca.gov
CPUC Mail Service List

A1001012 Updated April28, 2010
Maribeth A. Bushey
Room 5018
505 Van Ness Avenue
71
STATE OF CALIFORNIA
ARNOLD SCHWARZENEGGER, Governor
PUBLIC UTILITIES COMMISSION

505 VAN NESS AVENUE
SAN FRANCISCO, CA 94102-3298
FILED
12-21-10
03:04PM
December 21, 2010
Agenda ID #10058
Ratesetting
TO PARTIES OF RECORD IN APPLICATION 10-01-012

This is the proposed decision of Administrative Law Judge (ALJ) Maribeth Bushey. It
will not appear on the Commission's agenda sooner than 30 days from the date it is
mailed. The Commission may act then, or it may postpone action until later.
When the Commission acts on the proposed decision, it may adopt all or part of it as
written, amend or modify it, or set it aside and prepare its own decision. Only when
the Commission acts does the decision become binding on the parties.
Parties to the proceeding may file comments on the proposed decision as provided in
Article 14 of the Commission's Rules of Practice and Procedure (Rules), accessible on
the Commission's website at www.cpuc.ca.gov. Pursuant to Rule 14.3, opening
comments shall not exceed 15 pages.
Comments must be filed pursuant to Rule 1.13 either electronically or in hard copy.
Comments should be served on parties to this proceeding in accordance with Rules 1.9
and 1.10. Electronic and hard copies of comments should be sent to ALJ Bushey at
mab@puc.ca.gov and the assigned Commissioner. The current service list for this
proceeding is available on the Commission's website at www.cpuc.ca.gov.
Is/ KAREN V. CLOPTON

Karen V. Clopton, Chief
Administrative Law Judge
KVC:jyc
Attachment
72
ALJ/MAB/jyc
DRAFT
Agenda ID #10058
Ratesetting
Decision PROPOSED DECISION OF ALI BUSHEY (Mailed 12/21/2010)

In the Matter of the Application of CaliforniaAmerican Water Company (U210W) for an

Management District User Fee.
DECISION DENYING APPROVAL OF SETTLEMENT AGREEMENT AND

DISMISSING APPLICATION
Summary
This decision denies the application of California-American Water

Company for Commission authorization to collect and remit a "user fee" for the
Monterey Peninsula Water Management District and finds that the settlement
agreement supporting the application fails to meet the Commission's standards
for approving settlement agreements. It also dissolves the memorandum
account for interim user fee payments.
Background
In Decision (D.) 09-07-021, the Commission authorized CaliforniaAmerican Water Company (Cal-Am) to increase water rates in its Monterey
district by over 40% for the three-year rate case cycle. In that Decision, the
Commission also acted on a request from the Monterey Peninsula Water
Management District (Management District) to authorize Cal-Am to collect and
426412
-1-
73
DRAFT
A.10-01-012 ALJ/MAB/jyc
remit to the Management District a "user fee" set at 8.325% of all meter and
water charges billed by Cal-Am in the Monterey district.l
The Commission began its analysis of the Management District's request
by noting that the substantial rate increase in Cal-Am's Monterey District
imposed "significant financial burdens ... on residential and business
customers" and required that all "proposed expenditures be demonstrably
necessary for reliable service and provide value to customers." With this context
of closely scrutinizing increased customer charges, the Commission expressed
concern that "Cal-Am's customers may be paying user fees to the Management
District for projects that may not be necessary or cost effectively performed by
the Management District." The Commission noted that the "Management
District has a variety of funding mechanisms at its disposal over which this
Commission has no jurisdiction," specifically:
The Management District is authorized to issue bonds, assess
charges for groundwater enhancement facilities, levy assessments on
real property and improvements, and fix, revise, and collect rates
and charges for the services, facilities, or water furnished by it. For
general administrative costs and expenses, as well programs of
general benefit, the Management District is authorized to levy a
second property tax of up to $0.10 per $100 in assessed value.z
Turning its attention to the Management District's user fee proposal, the
Commission observed that the "Management District's choice of a percentage
assessment, rather than a fixed amount, has the effect of substantially increasing
The Commission's discussion of the Management District's fee proposal is found at

116 through 123 of mimeo version of D.09-07-021. All quotations in this section are to
those pages.
2
D.09-07-021, mimeo at 117, quotations and citations omitted.
-2-
74
DRAFT
the total amount collected by the Management District for the identified projects
as Cal-Am's rates increase." The Commission noted that the user fee generated
$1,860,000 in revenue during fiscal year 2006. With approximately $42 million in
operating revenues adopted in D.09-07-021 for test year 2009, at the requested
level of 8.325%, the proposed fee would generate about $3,500,000 for the
Management District, an 88% increase from 2006.
The Commission next expressed concern with the incomplete explanation
offered by the Management District for all components of the proposed user fee.
The Commission stated that of the current 8.325% fee, 7.125% is attributed to
Carmel River mitigation measures, which was explained, but the Management
District offer no explanation for the remaining 1.2% which is for the Aquifer
Storage and Recovery project costs.
In light of these concerns with Management District's user fee proposal,
the Commission pointed to an alternative approach that Cal-Am and the

Management District have previously used to ensure cost-effective coordination
on a joint project for water conservation programs. This joint project approach,
which included recovery of the Management District's costs from Cal-Am's
customers by a surcharge placed on the customers' bills, was approved by the
Commission in D.06-11-050.
The Commission concluded its discussion of the Management District's
user fee by emphasizing that to the extent Cal-Am and its ratepayers are legally
responsible for Carmel River Mitigation or Aquifer Storage Projects, the
Commission expected Cal-Am to meet that "responsibility in an efficient and
effective manner either by its own actions or as a joint project with the
Management District." To achieve this objective, the Commission directed
Cal-Am to (1) meet and confer with the Management District regarding "cost
-3-
75
DRAFT
f.-.10-01-012 ALJ/MAB/jyc
effective and efficient methods for Cal-Am to fully meet any responsibility it may
have for the Mitigation Program and the Aquifer Storage and Recovery project"
and to particularly discuss the possibility of implementing them as joint projects,
and to then (2) file an application setting forth any new method of collecting
funds to support Management District program costs properly assignable to
Cal-Am, whether performed by Cal-Am or the Management District.
The Commission also authorized Cal-Am to file an Advice Letter for
Memorandum Account to record costs that are Cal-Am's responsibility on an

interim basis.
Cal-Am filed Advice Letter No. 785-A that established the Monterey
Peninsula Water Management District User Fee Memorandum Account.
The Memorandum Account tracks costs for projects which Cal-Am has proper
responsibility for and has funded, and that are performed by the Management
District. The Memorandum Account was made effective July 20, 2009.
Description of the Application
On January 5, 2010, Cal-Am filed this application seeking Commission

authorization to "collect from the Company's Monterey District customers and
remit to the Monterey Peninsula Water Management District the Monterey
Peninsula Water Management District User Fee at the rate set by the Monterey
Peninsula Water Management District's Board of Directors."3 The application
also sought Commission authorization to collect from its Monterey District
customers all amounts recorded in its Monterey Peninsula Water Management
District Memorandum Account, which it estimates will total over $5 million if
Application at 19.
-4-
76
DRAFT
the application is pending for 18 months. In support of its application, Cal-Am

provided testimony from its Director of Rates and Regulation and its Vice
President of Engineering.
In the application, Cal-Am contended that the proposed "percent of
revenue" basis for calculating the user fee will not impose "a significant financial
burden" on its customers because the Management District adopts it budget in a
"transparent public process" and that the California Constitution prohibits the
Management District from collecting more than it spends on a project.4 Cal-Am
also argued that the Commission should abstain from reviewing the
Management District's user fee as it does with other local government fees and
taxes, or should only review it to ensure "that utility customers are not paying
for duplicative work" or activities that" run counter to the Commission's
comprehensive scheme for regulating utilities."s
In its application, Cal-Am stated that the State Water Resources Control
Board has imposed a "contingent obligation" on Cal-Am to implement the

Management District's Carmel River Mitigation Program, should the
Management District ever cease doing so.6 Cal-Am stated that in its 1995
decision, the Board expressed "accolades" for the Management District's
Fisheries Mitigation Program, and the Riparian Vegetation and Associated
Wildlife Mitigation Program.
The Management District also supplied supporting testimony for
Cal-Am's application. The testimony of the Management District's General
4
Application at 6.
s Application at 12.
6
Application at 10.
-5-
77
DRAFT
Manager explained the legislative creation of the Management District and its
various powers.
The General Manager's testimony also described the 1990 process that
produced the Carmel River Mitigation Program. The testimony included the
2007-2008 Annual Report for the Mitigation Program, dated September 2009.
This report included the only cost data presented for the Mitigation Program. In
the Executive Summary section, the report states that:
"a trend analysis shows that the overall costs remained fairly
constant (about $1.3-$1.7 million) for many years, except for
FY 2000, when an additional $981,786 was added to the capital
expense program to fund one half of the acquisition cost of the
District's new office building, bringing the expenditure total
over $2~6 million for that year. More recently, expenditures
continue to trend upward: FY 2005-06 expenditures were
$3.17 million; and FY 2006-07 were $3.29 million. . .. The
Mitigation Program Fund Balance as of June 30,2008, was
$999,898."7
Section XIII of the annual report is entitled "Summary of Costs for the
Mitigation Program- July 2007 through June 2008" and consists of one page of
text followed by one table showing the "cost breakdown." The table states that:
"This report does not include the Rebate Program, salaries for the Conservation
Office Staff or the project expenditures for 'Ordinance Enforcement' even though
they were booked as part of the Mitigation Program."
The table shows seven cost components, broken down into "personnel
costs," "operating expenses," "project expenses" and "fixed asset acquisitions."
The total expenditure amount shown is $3,671,996, with personnel comprising
Darby testimony at Exhibit 3, at I -14.
-678
DRAFT
the largest amount, $1,660,034. The second largest amount shown is just under
$1 million for unspecified /project expenses" for "water supply." Setting aside
that $1 million expenditure, the most expensive cost component is
"administrative" at $689,235. Chapter VI discusses the specific program
elements for "water supply" and adopts two specific goals: (1) determine and
participate in long-term water supply solutions, which focuses on participation
in the various forums for the Coastal Water Project and Community Outreach;
and (2) the Aquifer Storage and Reclamation Project, specifically to complete
Phase I and continue work on the next Phase.
The testimony of the Management District's Chief Financial Officer
explains the history and derivation of the user fee. The Chief Financial Officer
stated that the Management District and Cal-Am agreed that the "device of a
water user fee was the most equitable" means to fund the District's Mitigation
Program, and Cal-Am required that any such revenue collection means "would
not put the utility at risk."S The testimony states that the Management District
Board set the current user fee amount of 7.125% for the Mitigation Program in a
1992 Ordinance, and that the Board set the Aquifer Storage Project user fee at an
additional1.2% in 2005 based on the Board's determination that the Aquifer
Storage Project would be "funded on a pay-as-you go basis rather than via debt
financing."
Although not included in the testimony, the Management District's
Ordinance No. 67, adopted December 8,1992, with a purpose to "increase user
fee revenue available for the Five Year. Mitigation Program" retains the total
s Dickhaut Testimony at 3.
-7-
79
DRAFT
7.125% fee but includes the reallocated 1.11% from conservation programs.
The ordinance states that the total7.125% user fee "shall not be exclusively
dedicated to a single activity or program, but instead may be allocated at the
discretion of the Board provided that all such expenses shall confer benefit
and/ or service to existing water users."9
Similarly, the Management District's Ordinance No. 123, adopted
September 13,2005, sets an additional user fee component of 1.2% to fund
Aquifer Storage and Recovery Project and related water supply expenses. That
ordinance, like the Mitigation Program ordinance, retains the Board's discretion
to "allocate" the proceeds from this user fee to any endeavor that "confers benefit
and/ or service" to Cal-Am customers.Io
Cal-Am provided testimony from its engineer and the Management
District's engineer showing that the Aquifer Storage and Recovery Project is a
joint project between the two entities to store excess winter Carmel River water
in the Santa Margarita aquifer for use during the summer. Generally, Cal-Am is
providing improvements to its water main distribution system to enable the
conveyance of water through its system to wells owned by the Management
District for injection into the aquifer and then for the extraction and conveyance
of the water back in Cal-Am's system.11
The Management District submitted testimony showing that it owns
certain water rights that are essential to the Aquifer Storage and Recovery Project
. and that it has constructed two wells and related facilities that comprise Phase I
9
Management District Ordinance 67, Section 3.C. (December 8, 1992.)
IO
Management District Ordinance 123, Section 2.
11
Testimony of Schubert at 4- 8.
-8-
80
DRAFT
of the Aquifer Storage and Recovery ProjectP The testimony also explained that
the entire project is operated and managed pursuant to an agreement between
Cal-Am and the Management District dated March 28,2006. The testimony
included cost data showing that Phase I testing and construction costs were
$4,176,931, exclusive of staff time and permitting costs, with $1,620,300 in costs
remaining, and that the projected costs for Phase II are $5,042,400.13 The
projected firm yield of Phase I is 920 acre-feet/ year, with Phase II estimated to
yield an additional1,000 acre-feetjyear.14
With approximately $42 million in operating revenues adopted in
D.09-07-021 for test year 2009, at the requested level of 1.2%, the Aquifer Storage
and Recovery Project component of the user fee would generate about
$504,000 per year for the Management District.
Description of the Settlement Agreement
On May 18,2010, Cal-Am, the Management District and the Division of

Ratepayer Advocates filed their joint motion to approve settlement agreement.
The settlement agreement stated that the parties agreed that:
1. The Management District's Carmel River Mitigation Program is
non-duplicative, and reasonable and prudent.
2. The Management District's Aquifer Storage and Recovery
Program is non-duplicative, and reasonable and prudent.
3. The Commission shoUld authorize Cal-Am to collect and remit
the user fee to the Management District at the rate set by the
Management District.
12
Testimony of Oliver at4 -11.
13
Id. at Oliver Exhibits 6, 7, and 11.
14
Id. at 7 and 13.
-981
DRAFT
The settlement agreement also stated that the interest rate to be assessed
on the Memorandum Account balance should be 5%. The parties also agreed
that the Commission should receive into evidence all testimony that has been
served in this matter.
Discussion
Standard of Review- Settlement Agreement
In this application, Cal-Am bears the burden of proof to show its requests
are just and reasonable and the related ratemaking mechanisms are fair. In order
for the Commission to approve any proposed settlement, the Commission must
be convinced that the parties have a sound and thorough understanding of the
application, the underlying assumptions, and the data included in the record.
This level of understanding of the application and development of an adequate
record is necessary to meet our requirements for considering any settlement.ls
These requirements are set forth in Rule 12.1 of the Commission's Rules of
Practice and Procedure, which states, in pertinent part:
The Commission will not approve settlements, whether contested or
uncontested, unless the settlement is reasonable in light of the whole
record, consistent with law, and in the public interest.
For the reasons stated below, we are unable to find that the provisions of
the settlement agreement are consistent with Rule 12.1.
Reasonable in Light of the Record as a Whole
The record consists of Cal-Am's application with supporting testimony.
15 In the Matter of the Application of Park Water Company for Authority to Increase
Rates Charged for Water Service by $1,479,580 or5.99% in 2010,$503,371 or 1.91% in
2011, and $643,923 or 2.40% in 2012, D.09-12-001, mimeo at 19-20.
-10-
82
DRAFT
In its application, Cal-Am seeks Commission authorization for" the device

of a user fee" that will be "collected at rates set by the District's Board of
Directors" for the Management District to fund any endeavor that the
Management District determines will confer "benefit and/ or service" to
Cal-Am's customers. Cal-Am justifies this request as" an appropriate means to
fund projects, (i.e., the Aquifer Storage and Recovery Program and Mitigation
Program) currently performed by the District but properly or ultimately the
responsibility of the Company."16
As described above, however, Cal-Am's user fee proposal is not based on
the costs of these two programs and includes no ratemaking or programmatic
limitations. Consequently, the record in this proceeding is not sufficient for
settling parties to meet their burden of justifying the Commission's approval of
the settlement agreement.
Specifically, the record shows that the Management District's presentation
on the Aquifer Storage and Recovery Project includes this Project in both the
Mitigation Program for which it seeks an assessment of 7.125%, and as a separate
component for another 1.2%. The Management District's Chief Financial Officer
stated that the Management District Board has decided to fund this project on a
"pay-as-you-go" basis rather than incurring debt. While the Management
District's decision has the advantage of avoiding debt costs, such a decision
results in current customers paying the full costs of a project that is expected to
provide service for many years. This is not consistent with the Commission's
ratemaking standards.
16 Application at 5.
-11-
83
DRAFT
Turning to the Carmel River Mitigation Program, Cal-Am's presentation

does little to respond to the issues identified by the Commission in D.09-07-021.
Cal-Am continues to seek a percentage assessment but offers no cost-justification
for the proposed 88% increase in annual collections since 2006. The Management
District's own report shows that annual costs were stable at $1.3 to $1.7 million
for "many years" but in recent years have more than doubled that, without
explanation. The exception to the stable cost levels was in 2000 when the
Management District used nearly a million dollars of Mitigation Program
revenues to fund half its new office building.
Cal-Am's application raises several issues, most notably several instances
where duplication in effort and accounting may occur. In addition to the
apparent double-counting of the Aquifer Storage and Recovery Project as both a
part of the user fee Mitigation Program costs and also to substantiate a standalone additional component of the user fee, "water supply augmentation" is a
major cost component of the Management District's Mitigation Program which
largely focuses on the Coastal Water Project. Cal-Am, however, is actively
involved in the Coastal Water Project, such that the Management District need
not act on Cal-Am's behalf. The Management [)istrict's Mitigation Program
report also indicates that it does not include the "rebate program, salaries for the
Conservation Office Staff or project expenditures for.' ordinance enforcement"'
even though such costs are "booked as part of the Mitigation Program." The
Commission, however, has approved and separately funded a joint conservation
program with the Management District which would appear to include at least
some of the conservation costs. Finally, Cal-Am asserts that National Oceanic
-12-
84
DRAFT
and Atmospheric Administration (NOAA) steelhead mitigation activities17 focus

on impacts to steelhead, and that these activities have no "overlap" with the
Management District's activities which also focus on the steelhead fishery but the
record shows no analytical explanation for how endangered species costs for
steelhead are divided between the two agencies or any evidence that Cal-Am is
in any way managing these costs for ratepayers. With the total costs for the two
programs approaching $5 million a year, Cal-Am must demonstrate necessity
and cost-effectiveness of both components because Cal-Am has no incentive to
ensure cost control by these two agencies if the Commission blindly allows these
charges to be passed along to ratepayers.
To find a settlement agreement reasonable in light of the record, the
Commission must conclude that the parties used their collective experience to
produce appropriate, well-founded recommendations. As set forth above, the
record contains insufficient cost justification, several instances of apparent
double-counting, and ratemaking treatment at odds with our standards.
Accordingly, we are unable to conclude that the settlement agreement is
reasonable in light of the record.
Consistent With Law and Prior Commission Decisions
The parties assert that the Mitigation Program component of the User Fee
is consistent with applicable law because "the Mitigation Program ... is required
In Advice Letter No. 825-A, Cal-Am recently sought Commission authorization to

recover from customers $3.5 million paid to the NOAA for "Endangered Species Act
mitigation activities on the Carmel River."
17
-13-
85
DRAFT
by the California Environmental Quality Act."1s The parties offered no

justification for the other components of the proposed user fee.
The Commission is charged with the responsibility of ensuring settlement
agreements are consistent with other applicable law and prior Commission
decisions. The Public Utilities Code requires that all rates received by a public
utility be just and reasonable: "no public utility shall change any rate ... except
upon a showing before the Commission, and a finding by the Commission that
the new rate is justified."19
In D.09-07-021, the Commission indicated its willingness to include in the
Monterey District revenue requirement all costs of the Carmel River Mitigation
Program and Aquifer Storage and Recovery Project that are properly Cal-Am's
responsibility. The Commission required, however, that such costs must be
shown to be necessary and cost-effectively performed by the Management
District. As presented in the application and carried forward in the settlement
agreement, Cal-Am's justification for assessing these costs to its ratepayers does
not demonstrate that the Management District's user fee meets the Commission's
standards.
As set forth above, the Commission explained its concerns regarding the
Management District's proposed "percent of revenue" basis for its user fee.
Nevertheless, Cal-Am has presented an application which persists with such a
proposal and offers no compelling justification. Cal-Am's contention that the
18
Joint Motion to Approve Settlement Agreement at 6.
19 Pub. Util. Code 451 and 454.
-14-
86
DRAFT
Management District's "transparent" budgetary process somehow obviates the

Commission's concerns with a non-cost-based user fee is not persuasive.
Therefore, we conclude that the settling parties have failed to demonstrate
that the settlement agreement is consistent with D.09-07-021.
The Public Interest
For the reasons set forth above, we find that the user fee proposal as
described in the application and settlement agreement is not in the public
interest. The settling parties' motion for approval of the settlement agreement
should, therefore, be denied.
Disposition of Cal-Am's Application
The findings and conclusions in today' s decision dispose of the substantive

issues to be addressed in Cal-Am's application. As described above, the
application does not address the issues with the Management District's proposed
user fee set forth by the Commission in D.09-07-021.
No party has identified a disputed issue of material fact so no evidentiary
hearings are necessary. Thus, we find that the record on this application can be
closed and the matter determined at this time.
We conclude that the application does not address the issues raised in
D.09-07-021. Therefore, we do not authorize Cal-Am to collect and remit the
Management District's proposed user fee and this application should be
dismissed.2o Accordingly, the associated Monterey Peninsula Water
2o Cal-Am, in conjunction with the Management District, has presented coherent and
credible testimony demonstrating that the Aquifer Storage and Recovery Project is a
well-run joint project, complete with a joint management and operating agreement in
effect since 2006. In D.09-07-021, the Commission strongly signaled its support for joint
project arrangements as a means for the Commission to authorize ratemaking recovery
Footnote continued on next page
-1587
DRAFT
Management District User Fee Memorandum Account should also be dissolved

and no rate recovery authorized.
This proceeding should be closed.
Cal-Am's Responsibilities Under Order No. WR 95
The State Water Resources Control Board imposed the responsibility on

Cal-Am to implement all measures in the "Mitigation Program for the District's
Water Allocation Program Environmental Impact Report" not implemented by
the Management District.21 The 1990 Environmental Impact Report (EIR)
document referenced in the Board's decision is attached to the Management
District's General Manager's testimony in this proceeding, and was adopted by
the Management District's Board in November 1990. The adopted mitigation
measures are summarized at Exhibit 1 to that EIR and the following page,
Exhibit 2 Table, contains cost estimates for each measure. The Mitigation
Program summary in Exhibit 1 is substantially similar to the list set forth in
Decision 95-10 in Section 6.2 "Water Allocation Mitigation Program," so we
conclude that this is the Mitigation Program which the State Water Resources
Control Board has made a contingent obligation of Cal-Am.
for the costs of projects conducted by Cal-Am with the Management District, and
pointed to the water conservation program authorized in D.06-ll-050 as an example.
Given the extant joint management and operating agreement and the existing Cal-Am
memorandum account for its share of project costs, combining the Management
District's costs for this project with Cal-Am's in a joint project agreement similar to that
used by these same parties for joint water conservation programs would seem a
convenient and certain means to fund the Aquifer Storage and Recovery Project.
Cal-Am has not articulated a rationale for rejecting the joint project approach.
21
State Water Resources Control Board Decision 95-10 at Ordering Paragraph 11.
-16-
88
DRAFT
A.10-01-012 ALJ/MAB/jyc.
The three headings for the mitigation measures are: fisheries, riparian
vegetation and wildlife, and lagoon vegetation and wildlife. Exhibit 2 Table
contains cost estimates for each measure, broken down into capital, $442,700, and
annual expenses, $323,100.22
The EIR Exhibit 2 Table provides an ideal beginning point to prepare a
budget for the Mitigation Program that is Cal-Am's responsibility, and is
attached to today's decision for ease of reference. One way for Cal-Am to justify
.the amount of funding required to perform these three mitigation program
elements is for Cal-Am to obtain up-to-date cost and budget data from the
Management District specific to these three mitigation measures which are
Cal-Am's contingent responsibility. Those data can then be .used to update the
Exhibit 2 Table as the basis for justifying a forward-looking rate mechanism to
fund the three mitigation measures, should the Management District cease to
implement these mitigation measures.
In D.09-07-021, the Commission emphasized that to the extent Cal-Am and
its ratepayers are legally responsible for Carmel River Mitigation, the
Commission expected Cal-Am to meet that "responsibility in an efficient and
effective manner either by its own actions or as a joint project with the
Management District." If the Management District ceases to perform these
mitigation measures, then Cal-Am must prepare and implement a plan to meet
this responsibility.
The table also includes $6,000 for" aesthetics" which is not referenced in Order 95-10
as a Cal-Am obligation.
22
-17-
89
DRAFT
Comments on Proposed Decision
The proposed decision of the Administrative Law Judge (ALJ) 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 _ _ _ _ ___, and
reply comments were filed on _______ by _ _ _ _ __
Assignment of Proceeding
John A. Bohn is the assigned Commissioner and Maribeth A. Bushey is the

assigned ALJ in this proceeding.
Findings of Fact
1. No party has identified a disputed issue of material fact.

2. Cal-Am must implement all measures in the "Mitigation Program for the
District's Water Allocation Program Environmental Impact Report" not
implemented by the Management District.
3. The Mitigation Program for the District's Water Allocation Program
Environmental Impact Report is comprised of mitigation measures for fisheries,
riparian vegetation and wildlife, and lagoon vegetation and wildlife.
4. The Management District's 2007-2008 Annual Report for the Mitigation
. Program shows that the Management District allocated nearly $1 million of costs
of its new office building to the Mitigation Program.
Program shows the Aquifer Storage and Recovery Project as a component of the
user fee Mitigation Program costs and also as a stand-alone additional user fee.
6. Cal-Am is actively pursuing water supply augmentation through its
Coastal Water Project and the Management District need not act on Cal-Am's
behalf.
-18-
90
DRAFT
7. The rebate program, salaries for the Conservation Office Staff and project
expenditures for ordinance enforcement are booked as part of the Mitigation
Program, even though such costs are not included in the Management District's
2007-2008 Annual Report for the Mitigation Program. The Management District
did not explain whether these booked costs are included in the user fee even
though the Commission has approved and separately funded a joint
conservation program with the Management District which may include some of
the same costs.
8. The testimony supporting the application shows accounting treatment
inconsistent with Commission ratemaking standards.
Conclusions of Law
1. No evidentiary hearings are necessary. The testimony supporting the

application should be received into evidence and the record on this application
closed so that the matter can be determined at this time.
2. The settlement agreement is not reasonable in light of the record,
consistent with the law, or in the public interest.
3. The settlement agreement should not be approved.
4. Cal-Am has not met its burden of justifying the proposed user fee for the
Management District.
5. Application 10-01-012 does not meet the Conupission' s standards set out in
D.09-07-021 and Cal-Am's application should be dismissed.
6. The Monterey Peninsula Water Management District User Fee
Memorandum Account should be dissolved and the balance recorded in the
account should not be included in revenue requirement or recovered from
ratepayers in any way.
-19-
91
DRAFT
7. Cal-Am should file a Tier 1 advice letter to remove the memorandum

account from the preliminary statement in Cal-Am's tariff.
ORDER
IT IS ORDERED that:
1. The motion to approve the settlement agreement among CaliforniaAmerican Water Company, the Monterey Peninsula Water Management District
and the Division of Ratepayer Advocates is denied.
2. Application 10-01-012 is denied.
3. The testimony submitted in support of the application is received into
evidence.
4. California-American Water Company must dissolve the Monterey
Peninsula Water Management District User Fee Memorandum Account and not
recover any amount recorded therein from ratepayers.
5. California-American Water Company must file a Tier 1 advice letter to
remove the Monterey Peninsula Water Management District user fee

memorandum account from the preliminary statement in California-American
Water's tariff.
6. Application 10-01-012 is closed.
This order is effective today.

Dated _ _ _ _ _ _ _ _ _ _ _____/ at San Francisco, California.
-20-
92
INFORMATION REGARDING SERVICE
I have provided notification of filing to the electronic mail addresses on the

attached service list.
Upon confirmation of this document's acceptance for filing, I will cause a
Notice of Availability of the filed document to be served upon the service list to
this proceeding by U.S. mail. The service list I will use to serve the Notice of
Availability of the filed document is current as of today' s date.
Dated December 21, 2010, at San Francisco, California.
/sf JEANNIE CHANG

Jeannie Chang
NOTICE
Parties should notify the Process Office, Public Utilities Commission,
505 Van Ness Avenue, Room 2000, San Francisco, CA 94102, of any
change of address to ensure that they continue to receive documents.
You must indicate the proceeding number on the service list on which
your name appears.
**********************************************
The Commission's policy is to schedule hearings (meetings, workshops,

etc.) in locations that are accessible to people with disabilities. To verify
that a particular location is accessible, call: Calendar Clerk
(415) 703-1203.
If specialized accommodations for the disabled are needed, e.g., sign
language interpreters, those making the arrangements must call the
Public Advisor at (415) 703-2074 or TDD# (415) 703-2032 five working
days in advance of the event.
93
A.1 0-01-012 ALJ/MAB/jyc

ATTACHMENT
Exhibit 2
12-21710
COST ESTIMATES FOR FXNAL HXTXGATION PROGRAM FOR ~~ V
November 1990
(Values shown are fully funded by MPWMD for five years.)
MXTXGATXON PROG;RAM
NOOJAL
CAPITAL COST
Exisfieg
Fisheries
IUpariaa Vegdation
and W'ddlifc
Tot@
New
Total
'
$ 9.000
407.700
416,700
s 12,800
2()(),100
(1)
212,900
10,000
10,000
$295.000
121.000
416,000
s 26;000
25,000
51,000
3,200
LaJiloon Vegdatioa
and Wildlife
New
COST
___o
Acl1hetics
s 35,000
$442.700
S4TI,700
1,200
2,000
6.000
__
o
$315,000 $323,100
$638,100
$323,100
ESTIMATW TOTA.L COSl'

OF BOARD A.PPROVED NEW
PROGRAMS
N/A
ANNUAL FUNDS NEEDED
$315,000
TO CONTINUE EXISTING
ENVIRONMENTAL PROGRAMs
$638,100
TOTAL MITIGATION
. PROOR.AM COST
NOTE 1: A.nnuaJ cott Cll.i,matca for: tl~ niloutcCa uo avcragea; the aiiiiU&l cO.u could be u hiP as $382,000 in individlllll critiC:ally dey
yean aild u lCIW $7&,700 in wet yean.
5
(I;~D
OF ATTACHMENT)
. 94
I
Application of California-American Water
Company (U210W) for an Order Authorizing
the Collection and Remittance of the Monterey
Peninsula Water Management District User Fee.
FILED
II
01-10-11
04:59PM
,.
A.l0-01-012
i
i
I
!
COMMENTS OF CALIFORNIA-AMERICAN WATER COMPANY (U210W) ON THE

PROPOSED DECISION OF ADMINISTRATIVE LAW JUDGE BUSHEY
Timothy J. Miller
Corporate Counsel
1033 B A venue, Suite 200
Coronado, CA 92118
Telephone: (619) 435-7411
!:
Attorney for California-American Water

Company
300198821.2
95
TABLE OF CONTENTS
Page
I.
IN1RODUCTION ....................... ,...................................................................................... 1
II.
BACKGROUND ................................................................................................................ 2
-ill.
IV.
A.
Procedural IIistory.................................................................................................. 2
B.
The IIistory of MPWMD and the Water Allocation Program ........................ :..... .4
1.
The Water Allocation Program ....... ;.......................................................... 5
2.
MPWMD Surcharges ................................................................................. 6
C.
State Water Resources Control Board Order 95-10 and the Mitigation
Program .................................................................................................................. 7
D.
MPWMD Aquifer Storage and Recovery Program ............................................... 8
r
j-
I'
I
!'
I
I
ERRORS IN THE PROPOSED DECISION .................................................................... 9

A.
CAW Complied With D.09-07-021 ............ ,.......................................................... 9
B.
The Settlement Agreement Is Consistent with the Commission's

Guidelines on the Equitable Treatment of Local Government Revenue
Producing Mechanisms ........................................................................................ 11
C.
The PD Improperly Denies CAW the Opportunity to Recover the Balance

in the MPWMD User Fee Memorandum Account .............................................. 13
CONCLUSION ................................................................................................................ 15
300198821.2
-1-
96
TABLE OF AUTHORITIES
Page
STATE STATUTES
Pub. Util. Code 451 and 454 .................................................................................................... 15
Wat. Code App. 118-363 ............................................................................................................... 5
CALIFORNIA PUBLIC UTILITIES COMMISSION DECISIONS
D.OS-10-018, In the Matter of the Application of San Jose Water Company (U 168 W)for
an Order Approving the Sale of the Main Office under Section 851 and Authorizing
the Investment of the Sale Proceeds under Section 790 ...................................................... 4, 14
I:
D.09-04-066, In the Matter of the Application of The Nevada Hydro Company for a
Certificate of Public Convenience and Necessity for the Talega-Escondido/ValleySerrano 500-kV Interconnect, 2009 Cal. PUC LEXIS 195 ................................................. 4, 14
D.09-07-021, Application of California-American Water Company (U210W) for
Authorization to Increase its Revenues for Water Service in its Monterey District by $
24,718,200or80.30% in the year 2009; $6,503,900 or 11.72% in the year 2010; and
$ 7,598,300 or 12.25% in the year 2011 Under the Current Rate Design and to
Increase its Revenues for Water Service in the Taro Service Area of its Monterey .
District by$ 354,324 or 114.97% in the year 2009; $25,000 or 3.77% in the year
2010; and$ 46,500 or 6.76% in the year 2011 Under the Current Rate Design, and
Related Matters, 2009 Cal. PUC LEXIS 346 .................................................................. 2, 3, 11
D.10-12-016, In the Matter of the Application of California-American Water Company
(U21 OW) for a Certificate of Public Convenience and Necessity to Construct and
Operate its Coastal Water Project to Resolve the Long-Term Water Supply Deficit in
its Monterey District and to Recover All Present and Future Costs in Connection
Therewith in Rates ................................................................................................................... 13
D.89-05-063, Investigation on the Commission's Own Motion to Establish Guidelines for
the Equitable Treatment of Revenue-Producing Mechanisms Imposed by Local
Government Entities on Public Utilities, 1989 Cal. PUC LEXIS 890 ............................ 2, 3, 11
OTHER AUTHORITIES
MPWMD Ordinances 10, 36, 37, 51, 55, 58, 61, 67 and 123, available at
http://www.mpwmd.dst.ca.us/ordinances/ordinances.htm .............................................. 6, 7, 13
SWRCB Order95-10, available at
http://www .waterboards.ca.gov/waterrights/board_decisions/adopted_orders/orders/w
ro1995.shtml ....................................................................................................................... 3, 7, 8
- ii300198821.2
97
I"
I.
INTRODUCTION
Pursuant to Rule 14.3 of the California Public Utilities Commission ("Commission")
Rules of Practice and Procedure, California-American Water Company ("CAW" or

,.~
"Company'')) hereby submits its comments on the proposed decision of Administrative Law
Judge Bushey, mailed December 21, 2010 ("PD"). 1 The PD rejects the all-party settlement
between CAW, the Monterey Peninsula Water Management District ("MPWMD") and the
Division of Ratepayer Advocates (''DRA'') and dismisses the Application. The PD, however,
contains a number of misconceptions regarding MPWMD's "User Fee" and the relationship
between CAW and MPWMD's Mitigation Program and Aquifer Storage and Recovery ("ASR")
Program. These misconceptions have resulted in a number of fac~al and legal errors in the PD.
CAW respectfully requests that the Commission modify the PD to correct these errors and aclopt
the all-party settlement. As required by Rule 14.3(b), CAW has attached as Appendix A the
proposed findings of fact and conclusions of law that support the requested revisions.
Contrary to PD's description, the Mitigation Program and the ASRProgram are not
CAW obligations or capital projects that CAW has "contracted out" to MPWMD. MPWMD' s
Mitigation Program and ASR Program are local government programs funded by a utility user's
tax imposed by the MPWMD in accordance with California law.
When the Mitigation and ASR Programs are correctly viewed as local government
programs funded through a utility user's tax, the all-party settlement agreement offered to
resolve this proceeding meets the Commission's criteria for adopting settlement agreements: (a)
it is consistent with the law, particularly the Commission's Guidelines for the Equitable
CAW joins in the comments submitted by the MPWMD, and in particular, the list of factual and legal errors listed
in sections ill and IV of those comments.
300198821.2
98
Treatment of Revenue Producing Mechanisms Imposed by Local Government Entities on Public

Utilities; 2 (b) it is reasonable in light of the record; and, (c) it is in the public interest.
Accordingly, the Commission should approve the all-party settlement agreement, which would
authorize CAW to resume its prior practice of collecting and remitting to MPW.MD its User Fee
by way of a surcharge on customer bills. The settlement would also authorize CAW to impose a
surcharge on customer bills to collect the balance in the MPWMD User Fee Balancing Account,
I!
as this balance represents utility user's taxes the Company has paid fo~ its customers since July
i.
!"
2009.
II.
I-
BACKGROUND
A.
Procedural History
In the Commission's decision regarding CAW's 2008 general rate case for the Monterey
District, D.09-07-021, the Commission raise~ concerns about the MPWMD User Fee. 3 The
Commission ordered the Company to meet with ~WMD regarding costs "properly the
responsibility of California-American Water Company and its ratepayers." 4 The Commission
further ordered CAW to develop and submit for Commission approval within 180 days "a
program to fund the projects currently performed by the Monterey Peninsula Water Management
D.89-05-063,Investigation on the Commission's Own Motion to Establish Guidelines for the Equitable Treatment
of Revenue-Producing Mechanisms Imposed by Local Government Entities on Public Utilities, 1989 Cal. PUC
LEXIS 890 ("D.89-05-063, 1989 Cal. PUC LEXIS 890", or "Commission's Guidelines").
3
D.09-07-021, Application of California-American Water Company (U210W)for Authorization to Increase its
Revenues for Water Service in its Monterey District by $ 24,718,200 or 80.30% in the year 2009; $ 6,503,900 or
11.72% in the year 2010; and$ 7,598,300 or 12.25% in the year 2011 Under the Current Rate Design and to
Increase its Revenues for Water Service in the Toro Service Area of its Monterey District by$ 354,324 or I14.97%
in the year 2009; $ 25,000 or 3.77% in the year 201 0; and$ 46,500 or 6.76% in the year 2011 Under the Current
Rate Design, and Related Matters, 2009 Cal. PUC LEXIS 346 ("D.09-07-021, 2009 Cal. PUC LEXIS 346"), **180-
190.
D.09-07-021, 2009 Cal. PUC LEXIS 346, *236, Ordering CJ[24.
! ...
i
i
!.
l'
-2300198821.2
99
I:
District that are properly California-American Water Company's responsibility."5 Finally, the
Commission authorized CAW to track interim costs in an advice letter.6
The misconceptions regarding MPWMD's Mitigation and ASR Programs are apparent in
the language ~f 0.09-07-021, which refers to "Management District expenditures on [CaliforniaAmerican Water's] behalf." After meeting and conferring with :MPWMD, CAW attempted to
clarify this issue in its Application, explaining that the Mitigation Program was MPWMD's
I.
responsibility, and that CAW would only be responsible if for some reason MPWMD
discontinued the program? Similarly, the purpose of MPWMD' s ASR program is to use
MPWMD's water rights in order to augment the existing constrained water supply in Monterey. 8
The MPWMD program inures to the benefit of CAW because the Company has an obligation
under Order 95-10 to obtain legal water rights; however, CAW does not have a legal obligation
to do so via the ASR Program. The key is that the Mitigation and ASR Programs are local
government programs funded by a utility user's tax, as the Commission's Guidelines describe a
utility users' tax. 9
To assure the Commission that CAW was not incurring costs for tasks performed by
:MPWMD and paid by the User Fee, the Company provided testimony that further described the
cooperative- but not duplicative- efforts of CAW and MPWMD. 10
DRA filed the only protest to the application, which raised the issue of the interest rate
earned on the balancing account that would track the utility user's taxes the Company has paid
D.09~07-021, 2009 Cal. PUC LEXIS 346, **236-237, Ordering '][25.

Id.
A.10-01-012, In the Matter ofthe Application of California-American Water Company (U 210 W) for an Order
Authorizing the Collection and Remittance of The Monterey Peninsula Water Management District User Fee, filed
January 5, 2010 ("Application"), p. 7.
8
Direct Testimony of Joseph W. Oliver ("Oliver Testimony"), p. 4
9
D.89-05-063, 1989 Cal. PUC LEXIS 890, **5-9.
10
Direct Testimony of F. Mark Schubert ("Schubert Testimony"), passim.
5
6
7
-3300198821.2
100
for its customers since the Commission issued D.09-07-021. 11 Those payments were necessary
so the Mitigation and ASR Programs could continue uninterrupted to the benefit of the Carmel
River and CAW's customers. CAW reached agreement with DRA on the interest rate for the
balancing account, facilitating the all-party settlement that is the subject of the PD. CAW,
MPWMD and DRA filed a joint motion for approval of the all-party settlement agreement on
May 18, 2010.
.,!
In the seven months that elapsed between the filing of the settlement motion and the
issuance of the PD, the parties received no indication that there were concerns regarding the
sufficiency of the record or the terms of the settlement. Although not required, it is common
Commission practice for an AU to bring such concerns to the parties so that the parties may
modify the settlement to clarify the issues and address the AU's concerns. 12
B.
The History ofMPWMD and the Water Allocation Program
The Monterey Peninsula has a long history of water supply deficits. That history is welldescribed in Commission decisions D.09-12-017 and D.l0-12-016.
The MPWMD was born out of the water supply deficits that arose from the 1976-1977
drought, which resulted in water rationing on the Monterey Peninsula. MPWMD is a local
special district created by the Monterey-Peninsula Water Management District Law enacted by
the California Legislature in 1977. 13 Among the various powers of MPWMD is its authority to
11
Protest oftlJ.e Division ofRatepayer Advocates, filed February 18, 2010, p. 3.

See D.09-04-066, In the Matter of the Application of The Nevada Hydro Company for a Certificate of Public
Convenience and Necessity for the Talega-Escondido/Villley-Serrano 500-kV Interconnect, 2009 Cal. PUC LEXIS
195 ("D.09-04-066, 2009 Cal. PUC LEXIS 195"), **9-i1 (Providing the utility multiple opportunities to file .
adequate documents, including an amended application); see also D.OS-10-018, In the Matter of the Application of
San Jose Water Company (U I68 W)foran Order Approving the Sale of the Main Office under Section 85I and
Authorizing the Investment ofthe Sale Proceeds under Section 790 ("D.08-10-018") (Providing multiple
opportunities for utility to make required filings).
13
The Monterey Peninsula Water Management District Law is codified in Chapter 118 of the Water Code
Appendix. Wat. Code App. 118-1 to 118-901.
12
-4300198821.2
101
I.
f"
regulate "water distribution systems" within its jurisdiction and to adopt rules and regulations to
implement that authority.
,.
14
1.
The Water Allocation Program
In 1981, MPWMD adopted Ordinance 7, which created the Monterey Peninsula's first
standby rationing plan. That rationing plan included Rule 30, which required MPWMD to adopt
an annual resolution establishing a "municipal unit allotment," which in tum is "the maximum
quantity of water that can be delivered by a particular water distribution system within a
municipal unit in one water year." 15 This is the genesis of the "Water Allocation Program." As
part of this program, MPWMD limited CAW's appropriations from the Carmel River to 20,000
acre-feet per year ("afy") based on average rainfall. 16
In 1990, MPWMD revised significantly its Water Allocation Program to reflect dry-year
rather than average-year conditions and to account for environmental flow n:eeds. 17 In
compliance with the California Environmental Quality Act ("CEQA"), MWPMD prepared an
'
Environmental Impact Report ("EIR") to analyze the environmental effects of a modified Water
I.
Allocation Program. 18 MPWMD described the purposes of the environmental impact report as:
This EIR analyzes the cumulative impacts of the extraction of water from the
[Monterey Peninsula Water Resource System] and the delivery of this water to
users in the Monterey Peninsula area. More specifically, however, this EIR
focuses on the California-American Water Company (Cal-Am), which supplies
approximately 92 percent of the water delivered by water distribution systems to
users in the Monterey Peninsula area, and the role of the Monterey Peninsula
Water Management District, in regulating the Cal-Am system. Cal-Am, an
investor-owned private utility, currently supplies water to public and private
customers within part or all of the following jurisdictions: Carmel-by-the-Sea, Del
Rey Oaks, City of Monterey, Pacific Grove, Sand City, Seaside, and Monterey
14
Wat. Code App. 118-363.

A "municipal unit" was defmed by Ordinance 7 as the Cities of Carmel, Del Rey Oaks, Monterey, Pacific Grove,
Sand City, Seaside, and the portion of the County of Monterey and the City of Marina within the District's
.
boundaries.
16
Direct Testimony of Darby Fuerst ("Fuerst Testimony"), p. 6.
17/d.
15
18/d.
-5300198821.2
102
County. Cal-Am is the only supplier within the district that serves more than one
jurisdiction. 19
On November 5, 1990, the MPWMD Board certified the Final EIR for the Water
Allocation Program and adopted findings that included a set of mitigation measures for the
j.
selected production limits. These mitigation measures are the MPWMD's Five-Year Mitigation
Program.
20
Darby Fuerst, MPWMD's General Manager, explained the Mitigation Program in his
testimony as follows:
I.
I.
The Mitigation Program was necessary because the production level that was
analyzed and selected for CAW's main system, i.e., Water Supply Option V or
16,744 afy, resulted in significant, adverse environmental impacts that must be
mitigated. The California Environmental Quality Act (CEQA) requires that, for
each significant impact identified in an EIR, the EIR must discuss feasible
measures to avoid or substantially reduce the program's significant environmental
effect
I;
The Five-Year Mitigation Program formally began in July 1991 and ran through
June 1996. Following public hearings in May 1996, the District Board authorized
continuation of the Five-Year Mitigation Program through 2001. Since 2001, the
District Board has voted to continue the Comprehensive Mitigation Program as
part of the District's annual budget approval process. Continuation of the
Mitigation Program is necessary for implementation of the District's Water
Allocation Program. Implementation of the WaterAllocation Program is
necessary. in turn. to ensure that sufficient water is available to reliably serve
CAW's customers.Z 1 .
2.
I,.
!
MPWMD Surcharges
Since 1983, MPWMD has adopted nine ordinances that either imposed or modified some
form of a utility user's tax.Z2 Each ordinance ordered the water purveyor to place the tax on the
customer's bill as a surcharge, and then collect and remit the surcharge to MPWMD. 23 In most
cases, the ordinances increased the amount of the surcharge, but two ordinances reduced the total
1.
19
Exhibit MPWMD-DF-01.
ld.
Fuerst Testimony, pp. 6-7 (emphasis added).
22
MPWMD Ordinances 10, 36, 37, 51, 55, 58, 61, 67 and 123, available at
http://www.mpwmd.dst.ca.us/ordinances/ordinances.htm (last checked January 10, 2011).
23/d.
20
21
-6300198821.2
103
tax imposed on utility customers. 24 In all but three instances, the surcharge applied to all water
distribution systems with more than 50 connections, whether a regulated utility, a mutual water
company, or municipal water system. 25 In one instance, the ordinance applied to all water
purveyors regardless of size. 26 Two ordinances imposed the surcharge only on CAW
customers. 27 Most of these surcharges funded :MPWMD activities either to improve the Carmel
River, or to implement its regulatory powers in light of water supply emergencies. 28 Two
surcharges funded :MPWMD capital projects. 29
C.
State Water Resources Control Board Order 95-10 and the Mitigation
Program
During the late 1980's until1995, the Carmel River was the subject of great scrutiny at
the State Water Resources Control_ Board ("SWRCB"). On July 5, 1995, SWRCB issued two
decisions, Decision 1632 and Order 95-10. Decision 1632 granted :MPWMD the right to divert
up to 29,000 acre-feet of water from the Carmel River. 30 In Order 95-10, the SWRCB found that
CAW did not have the rights to over 10,000 acre-feet of the water it was diverting from the
Carmel River.
31
The SWRCB allowed CAW to continue diverting water above its established
rights, but imposed additional requirements on CAW. 32 Specifically, the SWRCB included in
,,
Order 95-10 a condition that, if :MPWMD ceased implementing the mitigation measures in the
Five Year Mitigation Program, then CAW was to assume those duties and ensure that the
24
!.
MPWMD Ordinances 55 and 61,

MPWMD Ordinances 10, 36, 55, 58,61, and 67.
26
MPWMD Ordinance 37.
27
MPWMD Ordinances 51 and 123.
28
MPWMD Ordinances 10, 37, 51, 55, 58, 61, and 67.
29
MPWMD Ordinances 36 and 123.
30
Via the proposed New Los Padres Dam and Reservoir.
31
SWRCB Order 95-10, p. 25, available at
http://www. waterboards.ca.gov/waterrightslboard_decisions/adopted_orders/orders/wro 1995.shtml (last checked
January 10, 2011).
32
SWRCB Order 95-10, pp. 40-44.
25
-7300198821.2
104
,.I.
,.
Mitigation Program continued.33 As of the end of 2010, MPWMD has continued to implement
I.
,.
the Mitigation Program, funded in part by the User Fee?4
D.
l
j..
I
MPWMD Aquifer Storage and Recovery Program
I-
Decision 1632 authorized MPWMD to divert 29,000 afy to the New Los Padres Dam and
,.I'
I
Reservoir; however, the MPWMD's electorate voted down the bond measure to fund the New.
Los Padres Dam and Reservoir. 35 In response, MPWMD looked for alternatives projects to
maintain or use the various permits that MPWMD obtained for the New Los Padres Dam project,
including the SWRCB permits. 36

The MPWMD developed the ASR program as the means for maintaining the SWRCB
permits.37 The ASR program takes excess winter Carmel River flow and stores that water in the
i
Seaside Groundwater Basin.
38
CAW then pumps that water from the Seaside Groundwater Basin
I
I
during the summer and fall when water levels are low on the Carmel River. 39
As described in testimonies of Joseph Oliver, MPWMD's Water Resources Manager, and

F. Mark Schubert, CAW's Director of Engineering, the Company and MPWMD have divi~ed
the responsibilities for this program. MPWMD constructs the ASR wells overlying the Seaside
Basin. 4 CAW constructs the necessary distribution system improvements to bring Carmel River
water to the ASR wells, and uses its existing Carmel Valley well network to divert the excess
Carmel River water and deliver the water to the ASR wells. 41 MPWMD and the Company have
33
SWRCB Order 95-10, p. 43, Ordering Paragraph 11.

Fuerst Testimony, p. 7.
35
Oliver Testimony, p. 4.
36
Oliver Testimony, passim.
37/d.
.
38/d.
39/d.
40
ld.
41
Schubert Testimony, p. 4.
34
!-
-8300198821.2
105
1..
I
been jointly working on modifying the SWRCB water rights as necessary to reflect ASR
operations, not dam and reservoir storage. 42
As stated in F. Mark Schubert's testimony, there is no duplication of effort in the ASR
program. :MPWMD expenditures funded by the User Fee are for :MPWMD's construction
expenditures, and related engineering and permitting activities. 43
III.
ERRORS IN THE PROPOSED DECISION

The Proposed Decision contains numerous factual and legal errors.
A.
CAW Complied With D.09-07-021
First, CAW is concerned about the PD's assertion that the Company did not address all of
the issues required by D.09-07-021. 44
0.09-07-021 contains the following orders relating to the :MPWMD User Fee:
24.
California-American Water Company shall meet and confer with the
Monterey Peninsula Water Management District regarding costs properly the
responsibility of California-American Water Company and its ratepayers.
25.
No later than 180 days after the effective date of this order,
California-American Water Company shall develop and submit for Commission
approval a program to fund the projects currently performed by the Monterey
Peninsula Water Management District that are properly California-American
Water Company's responsibility, and is authorized to file an advice letter to create
a memorandum account for interim costs.
The discussion in the decision regarding the User Fee provides additional insight into the
required content of this subsequent application, which states:
The Management District has a variety of funding mechanisms at its disposal over
which this Commission has no jurisdiction. !{the expenditures are properly CalAm's responsibility, we must ensure that the projects undertaken by the
Management District on Cal-Am's behalf are necessary and are being provided
in the most cost-effective manner.
r-.
42
43
44
ld.,p. 9
Schubert Testimony, p. 4.
PD, p.l2
-9300198821.2
Il'
!
106
[.
I
I
We are also concerned that the Management District's explanation of the user fee
was incomplete. The Management District stated that of the current 8.325% fee,
it uses 7.125% for mitigation measures, which it did discuss, and 1.2% for the
Aquifer Storage and Recovery project costs. The Management District offered no
discussion of its Aquifer Storage and Recovery costs. This is troubling because in
Cal-Am's Partial Settlement Agreement with DRA, discussed below, the parties
agree that Cal-Am will continue to record Aquifer Storage and Recovery costs in
a memorandum account for reasonableness review by the Commission in CalAm's next general rate case and that costs are expected to be about $14 million.
We are concerned that having Cal-Am and the Management District expend funds
for the same purpose may not be the most cost-effective means of undertaking the
required measures.
Therefore, we direct Cal-Am to meet and confer with the Management District to
discuss funding for, and implementation of, both the Mitigation Program and, the
Aquifer Storage and Recovery Project, including particularly the possibility of
implementing them as joint projects like that described above. The parties may
also consider other cost effective and efficient methods (or Cal-Am to fully meet
any responsibility it may have for the Mitigation Program and the Aquifer
Storage and Recovery project.
These excerpts show that the purpose of the meet and confer process, in part, was to
determine which of the MPWMD programs are CAW's responsibility, and, if the programs are
CAW's responsibility, then to ensure that any collaboration with the MPWMD is cost-effective.
The result of the "meet and confer" process was agreement between the Company and
MPWMD (and ultimately DRA) that neither the Mitigation Program nor the MPWMD's ASR
activities are CAW's responsibility. Both are local government programs. Accordingly, CAW's
II.
application sought to reinstate the prior practice because Commission precedent - specifically
the Commission's Guidelines for the Equitable Treatment of Revenue Producing Mechanisms
Imposed by Local Government Entities on Public Utilities - is clear that the prior practice was
r..
wholly proper as discussed below.
I
,
i"
The discussion in D.09-07-021 appears to imply that the Mitigation Program and ASR
Program are the Company's responsibilities, despite the conclusion that the record in that
proceeding did "not provide sufficient legal or factual support to determine the appropriate level
- 10300198821.2.
107
of Cal-Am funding for the Mitigation and Aquifer Storage and Recovery projects."45 While the
Application attempted to dispel any notion that these programs are the Company's responsibility,
the PD necessarily accepts as true what was unproven in D.09-07-021- that the MPWMD
Mitigation and ASR Programs are CAW obligations - with no evidence to support that
conclusion. This is a factual error. This factual error results in numerous legal errors in the PD's
treatment of the Settlement Agreement, the Memorandum Account, and the Application.
B.
I
I.
The Settlement Agreement Is Consistent with the Commission's Guidelines

on the Equitable Treatment of Local Government Revenue Producing
Mechanisms.
The MPWMD Mitigation and ASR Programs are local government programs funded by a
utility users' tax, and the Commission has previously addressed the appropriate treatment of
utility user's taxes. The Commission's Guidelines for the Equitable Treatment of Revenue
Producing Mechanisms Imposed by Local Government Entities on Public Utilities describes a
utility user's tax as "pass-along taxes to the consumer, usually based on consumption, but
collected by the utility for the taxing entity."46 The Commission's Guidelines then set forth the
following Findings of Fact, Conclusions of Law and Ordering Paragraphs:
The Commission has no jurisdiction to determine the authority of local taxing entities
to impose taxes on utility customers, or utilities, or users' taxes on commodities used
by a utility to produce its product. (Finding of Fact #9)
Public utilities should be authorized in their discretion to set forth as a separate line
item in a utility bill the utility users' tax imposed by the local government entity on
utility customers within the jurisdiction of that local governmental entity.
(Conclusion of Law #3)
I
I..
A public utility is authorized, in its discretion, to set forth as a separate line item in a
utility bill the utility users' tax imposed on the local government entity on utility
customers within the jurisdiction of that local governmental entity. (Ordering
Paragraph #4)
I
:..
j
45
46
D.09-07-021, 2009 Cal. PUC LEXIS 346, *189.

D.89-05-063, 1989 Cal. PUC LEXIS 890, *15.
I.
i
-11300198821.2
108
r1-.
The PD omits any reference to the Commission's Guidelines despite that decision being a
basis for the application, and instead treats the User Fee as a rate charged by the utility. 47
Treating the MPWMD User Fee as a rate charged by a utility is a legal and factual error because
,.
the MPWMD User Fee is not a rate charged by the utility, but is a utility user's tax. As a result,
I:
the PD then applies the wrong legal standard in: (a) determining whether the settlement is
consistent with the law; and, (b) in its disposition of the Application. This fundamental flaw also
undermines each one of the critiques levied by the PD against the Settlement Agreement and the
Application.
As discussed above, the detailed history regarding the Water Allocation Program and the
MPWMD User Fee shows a number of points that the PD misses or obfuscates. First is that the
I
I
Mitigation Program is a MPWMD activity that MPWMD first implemented on its own accord to
protect the Carmel River, but since 1990 has been and continues to be a program required by
CEQA mitigate the significant environmental effects that result from the MPWMD's allocation
of the limited water on the Monterey Peninsula. The Mitigation Program as a whole is not
something that is required of CAW. Some of the specific mitigation measure that comprise the
Mitigation Program require CAW to take some action or affects the Company's operations in
some way; however, those actions or operational effects are not funded by MPWMD's User Fee.
Second, because CEQA requires the mitigation program, which addresses the adverse
environmental effects on the Carmel River caused by the Monterey Peninsula's demand for
I
['
potable water, the Mitigation Program is in the public interest, and any decision that interrupts
these mitigation measures is. not in the public interest.

Third, the testimonies of Joseph Oliver and F. Mark Schubert make clear that the
f
,.i
MPWMD and CAW are not engaging in duplicative efforts in implementing the ASR Program.
47
Compare Application, p. 10 to PD, p. 12.
-12300198821.2
109
I
I
In fact, the uncontradicted testimony of F. Mark Schubert shows that it would cost CAW
millions of dollars to pursue its own water rights for the ASR program such as the one currently
being implemented with the MPWMD. 48
To the extent that the Commission is concerned about ratepayer protection from
unreasonable costs, CAW and.MPWMD have explained the protections that exist in California
law regarding government agency finance. 49 The Commission favorably cited to such
protections as a means to ensure government agencies implement projects reasonably and
prudently.50 The record shows that the MPWMD is implementing such legal protections with
regard to the MPWMD User Fee: each change in the User Fee has been done by an ordinance
that requires two readings at open, public meetings. 51
It is also important to note the similarity of the ASR Program to CAW's southern
California purchase water programs - where a government agency owns and operates
infrastructure from which the utility acquires water - but for one material difference. That
difference is that the Company does not pay the MPWMD for the ASR water because the
customers have already paid for it through the User Fee. The Commission has routinely allowed
CAW to recover the costs associated with its sou~hern California purchase water programs. The
record here does not support a different result.
C.
The PD Improperly DenieS CAW the Opportunity to Recover the Balance in

the MPWMD User Fee Memorandum Account
The PD's factual errors regarding compliance with 0.09-07-021 and the fundamental
legal flaw of omitting the Commission's Guidelines as relevant Commission precedent has
48
Schubert Testimony, p. 13
Application, p. 13.
50
D.l0-12-016, In the Matter ofthe Application of California-American Water Company (U210W)for a Certificate
of Public Convenience and Necessity to Construct and Operate its Coastal Water Project to Resolve the Long-Term
Water Supply Deficit in its Monterey District and to Recover All Present and Future Costs in Connection Therewith
in Rates, pp. 83-84.
51
See MPWMD Ordinanc~ 10, 36, 37, 51, 55, 58, 61, 67 and 123.
49
-13300198821.2
110
resulted in legal errors in the treatment of the MPWMD User Fee memorandum account.
Specifically, the PD states that CAW should dissolve the MPWMD User Fee memorandum
account and prohibits any recovery of the costs tracked in that account in rates.5 2 It appears that
this is because the PD concludes that the Application does not address the issues raised in D.09!.
07-021.53 As CAW has previously pointed out, this is factually incorrect. In addition, the PD
cites no authority for the proposition that the appropriate disposition of a memorandum account
is to dissolve its existence, without prudencyreview, as a "punitive measure" for deficiencies in
the Application. To the contrary, Commission practice is to provide a utility an opportunity to

correct perceived deficiencies in filings. 54 The Commission has not provided CAW that .
opportunity here. Thus, the PD is legally flawed, as the treatment of the memorandum account is
tantamount to a taking.
The PD' s treatment of the memorandum account and future mitigation program costs is
also flawed because it is internally inconsistent. The PD makes factual findings that certain
documents in the record constitute the mitigation measures that SWRCB would require CAW to
implement ifMPWMD does not. 55 The PD then offers suggestions on what the Commission
may accept as a "beginning point to prepare a budget for the mitigation program that is Cal-Am's
responsibility."
56
If some of the costs are reasonable, as the PD suggests based on its "starting
point for a budget,': then some of the costs recorded in the memorandum account are
indisputably reasonable and prudent, yet the PD does not provide CAW the opportunity to
recover the costs incurred to date. The PD also does not provide the Company a memorandum
52
PD, pp. 15-16.

PD, p.15.
54
See 0.09-04-066, 2009 Cal. PUC LEXIS 195 (Providing J:he utility multiple opportunities to file adequate
do~uments, including an amended application); and 0.08-10-018 (Providing multiple opportunities for utility to
make required filings).
55
As noted by MPWMD, this conclusion reached by the PD is a factual error.
56
This is applying ratemaking standards to a local government program, which is inconsistent with the Guidelines.
53
-14300198821.2
111
I,.
account to record future costs that would the subject of these future budgets. These are legal
errors.
IV.
CONCLUSION
The PD is legally and factually flawed. The most egregious error is that the PD ignores
I!
the core legal basis cited in the Application for granting the requested relief, and therefore
applies the incorrect legal standard to both the Settlement Agreement and the Application.
Accordingly, CAW respectfully requests that the Commission revise the Proposed
Decision to:
Authorize CAW to reinstate its prior practice because CAW is proposing to

collect a utility user's tax.
Correct any treatment of the :MPWMD User Fee as a rate charged by a utility
subject to Public Utilities Code sections 451 and 454 and properly characterize it
as a utility user's tax;
Revise the analysis of the settlement agreement in light of D.89-05-063, D.10-12016, and :MPWMD's comments on the Proposed Decision to conclude that the
settlement meets the Commission's standard for approval;
1."
Authorize CAW to collect the balance in the :MPWMD User Fee memorandum
account because CAW has been paying its customer's utility user's taxes, and
CAW should be authorized to collect those advances from its customers, with the
appropriate interest.
II"
[
-15300198821.2
112
By: Is/ Timothy J. Miller

Timothy J. Miller
Attorney for California-American Water
Company
I
-16300198821.2
113
I
!
I.
APPENDIX A
114
A.10-01-012
Appendix A to California American Water's Opening Comments
I:
Findings of Fact
1. No party has identified a disputed issue of material fact. The Monterey Peninsula
Water Management District ~sa local special district created by California law
with jurisdiction over potable water resources within a portion of Monterey
County.
2. The MPWMD adopted a Water Allocation Program under its statutory authority
to regulate water distribution systems.
3. The MPWMD prepared an Environmental Impact Report for the Water
Allocation Program that identified significant. adverse environmental impacts that
must be mitigated.
4. The MPWMD adopted a Five Year Mitigation Program to mitigate the
significant adverse environmental impacts of the Water Allocation Program.
~~.
Cal Am must implement all measures in the "Mitigation Program for

the District's Vlater Allocation Program Environmental Impact Report"
not implemented by the Management District. The Mitigation Program for the
District's Water Allocation Program Environmental Impact Report is comprised of
mitigation measures .for fisheries. riparian vegetation and wildlife. and lagoon
vegetation and wildlife.
6. The MPWMD has implemented the Mitigation Program every year since 1991.
JZ. Cal-Am must implement all measures in the "Mitigation Program for
the District's Water Allocation Program Environmental Impact Report"
not implemented by the Management District. The Mitigation Program for the
District's Water Allocation Program Environmental Impact Report is comprised of
mitigation measures for fisheries, riparian vegetation and v1ildlife, and lagoon
vegetation and wildlife.
4l The Management District's 2007 2008 l ..nnual Report for the

Mitigation Program shows that the Management District allocated nearly $1
million of costs of its nev1 office building to the Mitigation Programis funded by a
combination of the User Fee and other propertv taxes.
~2.
The Management District's 2007 2008 l\nnual Report for the

Mitigation Program shmvs the Aquifer Storage and Recovery Project Program as-a
component of the user fee Mitigation Program costs and also as a stand alone
additional user feeis a cooperative. non-duplicative proiect implemented by Cal-.
Am and MPWMD to augment water supplies within Cal-Am's. Monterey District.
Page 1 of3
115
,.
I
A.10-01-012
61 0. Cal Am is ootively pursuing water supply augmentatioE: through its Coastal.

\Vater Project ood the Mooagement District need BOt act OB Cal Am's behalf
MPWMD's ASR activities are funded in part by the MPWMD User Fee~
I.
+II. The rebate program, salaries for the ConservatioE: Office Staff and
project expenditures for ordinance enforcemoot are booked as part of the
Mitigation Program, eveB though such costs are not included in the Management
District's 2007 2008 Anrrual Report for the Mitigation Program. The Management
District did not explain whether these booked costs are included in the user fee
even though the Commission has approved and separately funded a
joint conservation program with the ManagemeE:t District which may include
some of the same costsThe MPWMD User Fee is a utility user's tax.
&12. The testimony supporting the application shows accounting
treatment inconsistent \vith Commission ratemaking standardsdoes not have
jurisdiction to determine the authority of local taxing entities to impose taxes on
utilitv customers. or utilities.
13. Cal-Am has been paying MPWMD's User Fee for its customers since the
adoption of D .09-07-021.
Conclusions of Law
1. No evidentiary hearings are necessary. The testimony supporting the application

should be received into evidence and the record on this application closed so that
the matter can be determined at this time.
2. The settlement agreement is net-reasonable in light of the record, consistent

with the law, or in the public interest.
3. The settlement agreement should Bet-be approved.

4. As a utility user's tax. Cal-Am has not met its buroon ofdoes not have to
justifying the proposed user fee for the Management District.
;
I
I,.
5. Application 10 01 012 does not meet the Commission's standards set out
in D.09 07 021 and Cal Am's application should be dismissedThe Commission
has previously granted utilities the discretion to set forth as a separate line item in
a utilitv billthe utilitv user's tax imposed by the local governmental entitv on
utility customers within the jurisdiction of that local government entitv.
6. -TOO-California American Water is authorized to transfer the balance in the

Monterey Peninsula Water Management District User Fee Memorandum Account
to a balancing accountshould be dissolved and the balance recorded in the account
should not be included in re'lenue requirement or recovered from ratepayerS in any
r.
Page 2 of3
116
A.10-01-012
wayand to recover that balance as a surcharge on customer bills in accordance

with settlement agreement.
r
r
Page 3 of3
117
PROOF OF SERVICE
I, Cinthia A. Velez, declare as follows:
I am employed in San Francisco County, San Francisco, California. I am over the
age of eighteen years and not a party to this action. My business address is MANATI, PHELPS
& PHILLIPS, LLP, One Embarcadero Center, 30th Floor, San Francisco, California 94111. On
January 11, 2011, I served the within:
Comments of California-American Water Company (U210W) on the

Proposed Decision ofAdministrative Law Judge Bushey
on the interested parties irt this action addressed as follows:
See Attached Service List
(BY CPUC E-MAIL SERVICE) By transmitting such document electronically

from Manatt, Phelps & Phillips, LLP, San Francisco, California, to the electronic
mail addresses listed above. I am readily familiar with the practice ofManatt,
Phelps & Phillips, LLP for transmitting documents by electronic mail, said practice
being that in the ordinary course of business, such electronic mail is transmitted
i:tnmediately after such document has been tendered for filing. Said practice also
complies with Rule 1.10 of the Public Utilities Commission of the State of
California and all protocols described therein.
(BY MAIL) By placing such document(s) in a sealed envelope, with postage thereon
fully prepaid for first class mail, for collection and mailing at Manatt, Phelps & Phillips,
LLP, San Francisco, California following ordinary business practice. I am readily
familiar with the practice at Manatt, Phelps & Phillips, LLP for collection and
processing of correspondence for mailing with the United States Postal Service, said
practice being that in the ordinary course of business, correspondence is deposited in the
United States Postal Service-the same day as it is placed for collection.
I declare under penalty of peljury under the laws of the State of California that the
foregoing is true and correct and that this declaration was executed on ianuary 11,2011, at San
Francisco, California.
300193866.1
118
I
PUC E-Mail Service List
A.l0-01-012
[Updated December 20, 2010]
I
j
robert.maclean@amwater.com
dave@laredolaw.net
jjz@cpuc.ca.gov
tim.miller@amwater.com
ffarina@cox.net
aly@cpuc.ca.gov
jws@cpuc.ca.gov
mab@cpuc.ca.gov
jb2@cpuc.ca.gov
U.S. Mail Service List

A.10-01-012
[Updated December 20, 2010]
l.
Maribeth A. Bushey
San Francisco, CA 94102-3214
Commissioner John Bohn
505 Van Ness Avenue
...,
300193866.1
119

FILED
01-10-11
04:59PM

Management District l,Jser Fee
Application No. I0-01-012
)
)
)
)
)
)
~--------~--~~~~--~)
COMMENTS OF THE
MONTEREY PENINSULA WATER MANAGEMENT DISTRlCT
TO THE PROPOSED DECISION

DeLAY & LAREDO
606 Forest Avenue
Telephone: (831) 646- I 502
Facsimile: (831) 646-03 77
Frances M. Farina, CSBN I85035
DeLAY & LAREDO
Santa Barbara, CA 931 I I
Telephone: (805) 681-8822
Facsimile: (805) 681-8823
E~ail: ffarina@cox.net
.:
Attorneys for MONTEREY PENINSULA

MPWMD Comments on Proposed Decision

A.I0-01-012
120
TABLE OF CONTENTS
TABLE OF CONTENTS .................................................. .

ii
TABLE OF AUTHORITIES ............................................. ..

I.
INTRODUCTION ........................................................ ..
II.
COMMENTS
A. Sumrnary of ErTors.......................................................
The Proposed Decision fails to comply with Commission precedent.

The Proposed Decision ignores Commission Guidelines.
The Proposed Decision improperly interferes with the authority of a
governmental entity to impose a lawful tax or fee.
The Proposed Decision contains factual erTors.
The Proposed Decision refers to alleged facts that can be refuted.
The Proposed Decision contains legal errors.
The Proposed Decision Results in a prejudicial denial of due process
by denying the Parties an opportunity to present evidence to refute
erroneous allegations.
The Proposed Decision Results in an unfair proceeding.
B. Background................................................................
C. The Proposed DeCision Fails to Comply with Commission
Precedent, Ignores Commission Guidelines, and Improperly

Interferes with the Authority of a Governmental Entity.............
D. The Commission Should Accept the All-Party, All-Issue

Settlement, or Allow a Hearing and Reasonable Time for
Parties to Request Alternate Relief............................ . ..........
E. An Attempted Settlement Cannot Be Used as a Basis to

Deny the Parties' Rights to Present Evidence as to Contested
Facts...........................................................................
III.
FACTUAL ERRORS........................................................
IV.
LEGAL ERRORS............................................................
12
V.
CONCLUSION ....................................... ;.......................
15
APPENDIX A
PROPOSED CHANGES TO FINDINGS OF FACT.............................
iv
APPENDIXB
PROPOSED CHANGES TO CONCLUSIONS OF LAW.......................

A.I0-01-012
Page i
121
PAGE(S)
CONSITUTIONS
California Constitution, Article XIIIC
10
California Constitution, Article XIIID
10
PROPOSITIONS
10
Proposition 218
CASES
Bighorn-Desert View Water Agency v. Verjil

39 Ca1.4th 205
10
Packard v. Pacific Telephone and Telegraph

1970 PUC LEXIS 158
STATUTES
California Environmental Quality Act (CEQA), Public Resources Code

21000-21178
Monterey Peninsula Water Management District Law,

Statutes of 1977, Chapter 527
Public Utilities Code 451
14
14
COMMISION DECISIONS
0.89-05-063
5, 6, 12, 14
0.90-08-055
6, 12, 14
0.94-03-015
6, 12, 14
0.09-07-021
3, 6, 8, 13,14
A.I0-01-012
Page ii
?.-:
122
CQMMISSION RULES
I
Rule 1.4..... .............. ... ................ .... . ...... .. .. .... . . .. .......
Rule 14.3 ................................................................. .
12.1...................................................................
Rule 12.4.. ........... .............................. .... .............. .. ...
Guidelines for the Equitable Treatment ofRevenue

Producing Mechanisms Imposed By Local Government
Entities on Public Utilities, 32 CPUC 2d 60..................... ......
Rule

A.Jo.o 1012
Page iii
123
BEFORE THE PU6LIC UTILITIES COMMISSION


(U 21 Q W) for an Order Authorizing
Management District User Fee
)
)
)
)
)
)
COMMENTS OF THE
TO THE PROPOSED DECISION
I. INTRODUCTION
The Monterey Peninsula Water Management District (Water Management District
or MPWMD) submits these Comments to the Proposed Decision (PD or Decision) of
Administrative Law Judge Maribeth A. Bushey pursuant to the December 21, 2010
Ruling and Rule 14.3 of the Califomia Public Utilities Commission's (CPUC or
Commission) Rules of Pract~ce and Procedure.
The Water Management District opposes adoption of the Decision because it
contains both factual and legal errors. The PD should be withdrawn. It is not consistent
with Commission precedent or sound policy. MPWMO joins all other Patties in this
proceeding and asks the Commission to approve the Settlement Agreement.
It is manifestly unfair for the Commission to reject the uncontested all-Party, all-
Issue settlement. Rule 12.1 provides that a settlement may be rejected if the resolution is
not reasonable in light of the whole record, but such action must not disallow the Parties
an opportunity to present evidence in the record to address the its deficiencies. The PO,
at page 15, states "No party has identified a disputed issue of material fact so no
A.I0-01-012
Page I
124
evidentiaty hearings are necessaty." This is factually and legally flawed.

As presented, the PO closes Application
10~01~012
without a hearing.
This
denies the Parties' rights to due process and deprives them of a fair hearing.
II. COMMENTS
A.
SUMMARY OF ERRORS
.The Proposed Decision fails to comply with Commission precedent.
The Proposed Decision ignores Commission Guidelines.
The Proposed Decision improperly interferes with the authority of a governmental

entity to impose a lawful tax or fee.
The Proposed Decision contains factual etTers.
The Proposed Decision refers to alleged facts that can be refuted.
The Proposed Decision contains legal errors.
The Proposed Decision Results in a prejudicial denial of due process by denying

the Parties an opportunity to present evidence to refute erroneous allegations.
B.
The Proposed Decision Results in an unfair proceeding.
BACKGROUNJ)
By its ruling of May 9, 2008 on the combined California American Water (CAW
or Cal-Am) Applications for water

conservation
(A.07~12~010),
(A.08~0l~027),
general office
(A.08~01~024),
and
the Commission stated, "We would also like to better
understand the growing role of the Monterey Peninsula Water Management District in
allocating costs to
Cal~Am's
customers, and have provided some initial questions in

A. I0~0 l-0 12
Page2
125
Attachment 2." 1 Footnote 5 on Attachment 2 stated the "Commission record has

notrevealed any authorization for Cal-Am to collect this amount from its customers and
remit it to the Water Management District." Decision (0.) 09-07-021, issued July 9,
2009 on Application 08-01-027, disallowed the long-standing existing practice of CAW
to collect and remit a lawful user fee2 to the Water Management District. D. 09-07-021
notes at page 119 that "numerous proposals" were rejected "for failing to make the
required demonstration on the record." 0. 09-07-021, at page 156, provides:
24. California-American Water Company shall meet and confer with the
Monterey Peninsula Water Management District regarding costs properly
the responsibility of California-American Watet' Company and its
ratepayers.
25. No later than 180 days after the effective date of this order,
Califomia-American Water Company shall develop and submit for
Commission approval a program to fund the projects currently performed
by the Monterey Peninsula Water Management District that are properly
California-American Water Company's responsibility, and is authorized to
file an advice letter to create a memorandum account for interim costs.
Prior to issuance of D. 09-07-021, the Commission had approved CAW collection
of the User Fee. 3 The Commission directed CAW to file the instant application to
address collection of funds to support District programs "for costs properly assignable to
Cal-Am, whether performed by Cal-Am or the Management District."4 However, the
Commission lacks authority to review enactment of the District User Fee. 5
As directed by 0.09-07-021, CAW submitted Application I 0-01-012 on Januaty
Joint Assigned Commissioner and ALJ Ruling Setting Special Procedures to Develop Record on
Conservation and Rationing Programs in A.08-0l 027, A.O&-Ol-024, and A.07-12-010, at p. 4
2
The testimony of R. Dickhaut and D. Fuerst provide uncontroveited evidence the MPWMD Board followed
applicable law to enact the User Fee.
3
Decision 09-07-021, at p. 4, FN 2.
4
Proposed Decision (PD), page 4.
5
The Commission, as with other local govemment fees and taxes, lacks authority to review the District user
fee. At most it may review CAW's collection to ensure utility customers do not incur duplicate costs.

A.! 0-01-012
Page3
126
5, 2010 seeking an order authorizing it to collect and remit to the Monterey Peninsula
Water Management District the District's User Fee. The User Fee in question provides
funds needed to pay for a Mitigation Program, which is a legal requirement relating to the
environmental consequences of CAW's production of water. 6 The Mitigation Program is
required under the California Environmental Quality Act (CEQA) 7 in response to
identified impacts caused by CAW on the Cannel River and the Seaside Groundwater
Basin. 8 The State Water Resources Control Board imposed an obligation on CAW to
continue this program if the District should stop its efforts.9
On January 18, 2010, the Division of Ratepayer Advocates (ORA) protested
CAW's application, contesting the Interest During Construction on the memorandum
account balance. DRA supported CAW's application in all other respects. On February
18, 2010, the District timely filed its Response to CAW's Application No. 10-01-012.
On February 19,2010, Hidden Hills filed a Motion for Party Status, expressing its
intent to protest the application. In March 2010, after meeting with the Parties, Hidden
Hills determined its protest was not necessary and asked to withdraw as a Party. The
CPUC Docket Office responded to Hidden Hills, stating "by tendering the Motion to
Withdraw, you manifested an intent that HHSRA not become a party at all, so even
though we are rejecting the Motion to Withdraw, we are giving it credence by treating the
The Mitigation Program is required by law. In September, 2009, CAW entered into an agreement with the
District to continue funding of this Program. See Application (A.) I0-01-012, p. 5.
7
Public Resources Code 21 000 - 21178.
8
A.I0-01-012, pp. 8- 12 ..
9
ld., p.IO. Also, the PO states, at page 16, the "State Water Resources Control Board imposed the
responsibility on Cal-Am to implement all measures in the 'Mitigation Program for the District's Water
Allocation Program Environmental Impact Report' not implemented by the Management District." See
also, Exhipit 1, Testimony of D. Fuerst, at Answer (A)9.
A.I0-01-012
Page4
127
previous MFPS as moot and no longer viable." 10

The Commission directed "Cal-Am to meet and confer with the Management
District to discuss funding for, and implementation of, both the Mitigation Program and
the Aquifer Storage and Recovery Project.. .. " 11 Based upon these meetings, CAW, the
District, and ORA, on May 18, 2010, filed a joint motion to approve an all-Patty, allIssue settlement agreement in this matter by which the Patties agreed:
1. The Mitigation Program is non-duplicative, reasonable, and prudent.
2. The ASR Program is non-duplicative, reasonable, and prudent. For this
reason the Patties agreed the Commission should authorize CAW to collect
and remit the user fee to the District.
C.
The Proposed Decision Fails to Comply with Commission Precedent,

Ignores Commission Guidelines, and Improperly Interferes with the
Authority of a Governmental Entity.
The Commission has limited authority to question a local government agency's

collection of a fee or tax. See In re: Guidelines for the Equitable Treatment of Revenue
Producing Mechanisms Imposed By Local Government Entities on Public Utilities
(Guidelines), 32 CPUC 2d 60; D.89-05-063, and Packard v. Pacific Telephone and

Telegraph 1970 PUC LEXIS 158. In Packard the Commission held it had no jurisdiction
to detennine whether the City of Vallejo was authorized to enact a utility users tax under
the general laws of the State of California, or whether the City of Vallejo followed the
City Charter iJ?. enacting an ordinance to impose a utility users tax .
..
The Proposed Decision fails to comply with Commission precedent, 0.89-05-063,

which provided the Guidelines, stating:
- l
This Con1tnission does not dispute or seek to dispute the authority or right
of any local governmental entity to impose or levy any form of tax or fee
.
..
10
Email from Nakahara, Martin M. [martin.nakahara@cpuc.ca.gov] to Hidden Hills, 3/19/2010 - Efile

Control #30466. 1
'
11
0.09-07-021, p. 122.
A.I0-01-012
Page5
128;
upon utility customers or the utility itself, which that local entity, as a
matter of general law or judicial decision, has jurisdiction to impose,
levy, or increase. Any issue relating to such local authority is a matter for
the Superior Court, not this Commission.
MPWMD is a gov~rnment agency. 12 The California Legislature endowed it with
the right and power to impose taxes, fees and other assessments 13 The Commission
lacks the authority to contest the District's lawful exercise of its authority 14 The
Commission may protect ratepayers and ensure that the imposition is properly placed on
the bills of customers, but it does not have the discretion to question or reject the fee, tax
or other imposition. If the Commission concludes the MPWMD User Fee is not legally
warranted, and action is needed to protect the ratepayer, the proper forum for such review
is before the Superior Court.
Additionally, the Proposed Decision fails to follow Commission precedent as set
by D.90-08-055 and 0.94-03-015. In each of those matters, the Commission recognized
MPWMD's authority to assess and collect fees from Cal-Am customers. 15 D.09-07-021
recognized at page 120 "The Management District has a variety of funding mechanisms
at its disposal over which the Commission has no jurisdiction." Importantly, the PD cites
no authority upon which the Commission can disallow the User Fee in question.
12
MPWMD was created by state legislation in 1977 (Monterey Peninsula Water Management District Law,
Statutes of I 977, Chapter 527). This law invests the District with the sole authority to provide for
integrated management of the ground and surface water resources within the Monterey Peninsula area. The
l,)istrict regulates and manages all water distribution systems within its tenitory including CAW's main
~rstem. This statute confers upon the Oistrict the power to impose fees and taxes.
!d.
14
D.89-05-063; CPUC Guidelines for the Equitable Treatment of Revenue-Producing Mechanisms
Imposed by Local Government Entities on Public l/tilities, 32 CPUC 2d 60.
IS See also Exhibit 3, Direct Testimony of David P. Stephenson, at A8, A9, and Al3, regarding prior
Commission treatment of government imposed fees and other "pass-through" costs, stating on p. 4,
"Generally, taxes and fees are added on to customer bills without question. This includes franchise taxes,
ad valorem taxes, city taxes, payroll taxes, county taxes, municipal fees, and even payments to
govemmental entities for the purchase of products or services.
A.J0-01-012
Page6
129
D.
The Commission Should Accept the All-Party, All-issue Settlement, or

Allow a Hearing and Time for Parties to Request Alternate Relief.
By its Application, CAW seeks authorization to collect funds required by the
Water Management District to carry out projects on behalf of CAW, and which CAW is
mandated to carry out. 16 The funds are needed to meet the expenses of (I) the Mitigation
Program required by CEQA to mitigate the effects of CAW's water withdrawals from the
Cannel River; and (2) the ASR Program that is required to offset impacts caused by
CAW's unpermitted diversions from the Carmel River. 17
The Parties to this matter have reached an all-Pmty, all-Issue Settlement.
Although Commission Rule 12.4 provides authority for the Commission to "reject a
proposed settlement whenever it determines that the settlement is not in the public
interest" the Commission must nonetheless
~'[p ]ropose
alternative tern1s to the parties to
the settlement which are acceptable to the Commission and allow the parties reasonable
time within which to elect to accept such terms or to request other relief." Rule 12.4(c);
Public Utilities Code 1701. The PO neither proposes alternate terms acceptable to the
Parties, nor does it allow the Parties a reasonable time to request other relief.
E.
An Attempted Settlement Cannot Be Used as a Basis to Deny the Parties'

Rights to Present Evidence as to Contested Facts.
The Proposed Decision unlawfully denies the Water Management District of its
right to present evidence in this matter. 18 The Pa1ties attempt to resolve this matter
without evidentiary hearings, resulting from Commission directed meet and confer
sessions,
19
cannot be construed to constitute a waiver of the Parties' rights to present
evidence and cross-examine witnesses.
The Parties' Motion to Approve Settlement
Agreement was offered to provide a speedy resolution of uncontested issues; an

16
A.I0-01-012, at p. 3.
!d.
18
MPWMD's Response to the Application requested an evidentiary hearing pursuant to Rule J:4(a).
19
D.09-07-02l, p. 122.
A.!0-01-012
Page7
17
130
attempted settlement cannot now be used as a basis to deny the Parties' rights to present
evidence as to contested facts.
III.
FACTUAL ERRORS
MPWMD notes several factual enws in the PD, including several flawed
statements capable of COITection or refutation in an evidentiary hearing, and requests the
opportunity to introduce evidence to support changes to conect these elTors, as noted:
Page 2: The PD cites
D.09~07~021
for the proposition that
"Cal~Am's
customers
may be paying user fees to the Management District for projects that may not be
necessary or cost effectively performed by the Management District." There is no
evidence in the record of this proceeding to supp01t this allegation.
CAW's
Application and supporting testimony demonstrate District programs are necessary

and do not duplicate CAW activities.
Page 3: The PD cites D.09-07-021 for the proposition an "incomplete explanation

[was] offered by the Management District for all components of the proposed user
fee." Evidence in the record of this proceeding provides ample explanation as to all
components. 20 If further questions exist, the Parties must be afforded an oppOitunity
to amplify their explanations. This is the proper role for cross-examination and ALJ
inquiry that would ordinarily occur during the scope of an evidentia1y hearing. 21
Page 8: The PD states the "user fee proposal is not based on the costs of these two
20
Exhibit 1, Testimony of D. Fuerst, at A6, provides an overview of the District Water Allocation Program
and the Comprehensive Mitigation Program. This describes funding sources for the Mitigation Program,
including the User Fee. Exhibit 4, Testimony of J. Oliver provides detail as to the District's Aquifer
Storage and Recove1y (ASR) Project. Exhibit 5, Testimony of R. Dickhaut provides c;letail regarding the
District's budget process.
21
The need to subject witnesses to cross examination was referenced as a reason to hold the instant
proceeding. 0.09-07021, p. 120. This was because, "We are also concerned that the Management
District's explanation of the user fee was incomplete." 0.09-07-021, p. 121.
A.J0-01-012
Page8
131
programs and includes no ratemaking or programmatic limitations." This reference

is in error.2 2 R. Dickhaut testified23 that MPWMD is legally required to review the
user fee each year to ensure the purposes for which the fee was imposed have been
met, to ensure the fee is still required, and to assess whether the amount of the fee
remains appropriate. Mr. Dic!<haut stated the fee is required to sunset if the purpose
for the fee expires. He also explained, "If the purpose for the fee is determined to
continue, but the amounts needed to fund that purpose are decreased, the fee shall be
reduced to that lesser amount. "24
Page 12: The PD states "Cal-Am's application raises several issues, most notably
several instances where duplication in eff011 and accounting may occur." There is no
evidence in the record of this proceeding to support this allegation. To the contrary,
Exhibit 2, Testimony of F. Mark Schubert at A12, states "I have not observed a
duplication of effort between MPWMD and California American Water in achieving
the stated goals for Phase I ASR. MPWMD is responsible for the full development
of the ASR well site; Califomia American Water is responsible for the necessary
conveyance of potable water to and from the ASR well site." At Al3 he adds,
"California American Water and MPWMD have also discussed that a clear separation
of r~sponsibilities, similar to Phase 1 ASR, be assigned to each agency for future
ASR as not to duplicate efforts." The Parties must have an opportunity to address
enor and present evidence disproving the alleged duplication of effort or accounting.
'
22
Exhibit I, Testimony of D. Fuerst, at A8, provides an overview of the Mitigation Program budget
process, beginning in 1991, and that "Since 200 I; the District Board has voted to continue the
Comprehensive Mitigation Program as part of the District's annual budget approval process."
23
Exhibit 5,.Testimony ofR. Dickhaut, at A9.
~M
.
.
A.JO.Ol-012
Page9
132
Page 12: The PD comments that Cal-Am asserts National Oceanic and Atmospheric
Administration (NOAA) activities "have no 'overlap' with the Management
District's activities... but the record shows no analytical explanation for how
endangered species costs for steelhead are divided between the two agencies or any
evidence that Cal-Am is in any way managing these costs for ratepayers." The PO
acknowledges duplicated efforts are not occurring, but notes the lack of an analytical
explanation. The. Parties should be afforded an opportunity to present evidence of
such an analysis.
Page 13: The PD concludes that "the record contains insufficient cost justification,
several instances of apparent double-counting." There is no evidence in the record in
this proceeding to support this allegation. 25
The Parties seek an opportunity to
present sufficient cost justification and to clarify the perceived accounting ambiguity.
Page 16: The PD erroneously states ''The 1990 Environmental Impact Report (EIR)
document referenced in the Board's decision is attached to the Management District's
General Manager's testimony in this proceeding." This is in e11'or. The EIR is not
attached to testimony. Exhibit MPWMD-DF-01 is an Executive Summary of the
Final EIR. The Parties ask to present the full EIR in evidence.
Page 17:
The PO erroneously concludes "Exhibit 2 Table provides an ideal
beginning point to prepare a budget for the Mitigation Program that is Cal-Am's
2
s Exhibit 5, Testimony of R. Dickhaut, at A9, demonstrates how the User Fee lawfully complies with
Proposition 218 (California Constitution, Articles XIIIC and XIIID), and the legal mandate of the
California Supreme Court as determined in Bighorn-Desert View Wate1 Agency v. Ve1jil, 39 Cal.4th 205.
Mr. Dickhaut testifies to the notice and protest proceedings conducted by MPWMD.
In Exhibit 2, at A 17, F. Mark Schubert testifies that MPWMD ASR efforts are cost effective, and that
without reliance on these that CAW would necessarily incur legal expense to modify the SWRCB
Declaration of Fully Appropriated Stream, and acquire water rights and complete timely and expensive
environmental analyses. He concludes that CAW's efforts "could cost between $3,000,000 and up to
$6,000,000."
A.l0-01-012
Page 10
133
responsibility." The PO conf\lses the Program EIR with the "Five-Year Mitigation
Program."
Exhibit 1, Testimony of D. Fuerst, at A8, shows that the Five-Year
Mitigation Program was only an initial program that has since been reassessed and
revised by the District Board every year since 200 I, as part of the Mitigation Program
in the District's annual budget approval process.
Page 17: The PO enoneously summarizes "cost estimates for each measure, broken
down into capital, $442,700, and annual expenses, $323,100." This statement is
incorrect. The 1990 annual costs also include "annual funds needed to continue
existing environmental programs," as shown in the lower pmtion of the PO
attachment.
26
The costs to continue existing environmental programs in 1990 were
$315,000; therefore the total annual cost to operate the proposed mitigation program
in 1990 was $638,100. Further, Exhibit 5, Testimony of R. Dickhaut, at A 10, states
"for Calendar Year's 2010 and 2011, it is anticipated that the amounts budgeted for
the MPWMD comprehensive Mitigation Program will be $3,534,900 and $3,711,600,
respectively. The equivalent number ofstaffpositions is expected to remain at 14.3."
Page 17:
The PD states "If the Management District ceases to perform these
mitigation measures, then Cal-Am must prepare and implement a plan to meet this
responsibility." There is no evidence as to the time needed for CAW to assume this
role, the environmental consequences resulting from delay, and whether the delay
will pose legal jeopardy to CAW or result in fines to be borne by ratepayers.
Page 19: The PI) enoneously states in Findings of Fact #7 that the "District did not
explain whether these booked costs are included in the user fee even though the
26
The PD attaches a copy of"Exhibit 2, Cost Estimates for Final Mitigation Program for Option V,
November 1990."
A. I 0-01-012
Page 11
134
Commission has approved and separately funded a joint conservation program with
the Management District which may include some of the same costs." The District
should be afforded an opportunity to justify these costs, and prove that its joint CAWDistrict conservation program does not include the same costs.
IV.
LEGALERRORS
General: The Proposed Decision fails to comply with Commission precedent, 0.8905-063, and deviates from the Guidelines for the Equitable Treatment of RevenueProducing Mechanisms Imposed by Local Government Entities on Public Utilities.
The PD effectively disputes the authority of MPWMD as a local governmental entity

to impose or levy a tax or fee upon utility customers or the utility itself. This issue is
not proper for resolution by the Commission, but stated in 0.89-05-063, "Any issue
relating to such local authority is a matter for the Superior CoUJi, not this
Commission." MPWMD is authorized by the legislature to impose taxes, fees and
other assessments. The Commission lacks discretion to question or reject the tax or
fee. If the Commission concludes the MPWMD User Fee is not legally warranted,
and action is needed to protect the ratepayer, the proper forum for such review is
before the Superior Court.
General: The Proposed Decision fails to follow Commission precedent as set by

0.90-08-055 and 0.94-03-015. In each ofthose matters, the Commission recognized
MPWMD's authority to assess and collect fees from Cal-Am customers. 27
27
See also Exhibit 3, Direct Testimony of David P. Stephenson, at A8, A9, and A 13, regarding prior
Commission treatment of government imposed fees and other "pass-through" costs, stating on p. 4,
"Oenerally, taxes and fees are added on to customer bills without question. This includes franchise taxes,
ad valorem taxes, city taxes, payroll taxes, county taxes, municipal fees, and even payments to
governmental entities for the purchase of products or services."
A.I0-01-012
Page 12
135
General: At page 2 of the Motion to Approve Settlement Agreement, the Parties

requested introduction of evidence to support that settlement:
Direct Testimony of Darby Fuerst - Exhibit 1;
Direct Testimony ofF. Mark Schubert- Exhibit 2;
Direct Testimony ofl)avid P. Stephenson- Exhibit 3;
Direct Testimony of Joseph Oliver- Exhibit 4;
Oirect Testimony of Rick Dickhaut- Exhibit 5.
CAW presented testimony to support the all-Party, all-Issue settlement, but this does
not exhaust matters that are relevant and necessa1y to address issues raised by
rejection of the settlement. The Parties require an oppo11unity to augment the record.
Page 3: By reference to 0.09-07-021, the PD incorporates the Commission's earlier

conclusion, at pp. 122 and 123, "the current record does not provide sufficient legal
or factual support to determine the appropriate level of Cal-Am funding for the
Mitigation and Aquifer Storage and Recove1y projects." Such a record was not
adduced in this proceeding by reason of the all-Party, all-Issue settlement. The PD
impermissibly precludes the opportunity of the Parties to present such evidence.
Page 11: The PD comments on the District's decision to fund "on a 'pay-as-you-go'
basis rather than incurring debt" and concludes this "has the advantage of avoiding
debt costs, [but] such a decision... is not consistent with the Commission's
ratemaking standards." There is no basis to show Commission ratemaking standards
limit the discretion of the District. 28
0.09-07-021 recognized "The Management
District has a variety of funding mechanisms at its disposal over which this
28
Exhibit 5, Testimony of R. Dickhaut, at A9, demonstrates the User Fee complies with applicable
procedural and substantive legal requirements that apply to MPWMD.
A.I0-01-012
Page 13
136
Commission has no jurisdiction." and that it was "The Management District's choice
of a percentage assessment ...."29 The PO fails to justify Commission interference
with the lawful, independent exercise of govemmental discretion by MPWMD.
Page 13: The PD concludes the District's "ratemaking treatment [is] at odds with our
standards." It is legal error to apply Commission ratemaking standards to a lawful
user fee enacted by the Water Management District. 30 This conclusion is an improper
deviation from the holding in 0.89-05-063.
Page 15: The PD presumes the User Fee is a rate charged by CAW, subject to
Commission approval, citing Public Utilities Code 451 and 454, that "no public
utility shall charge any rate ... except upon a showing before the Commission, and a
finding by the Commission that the new rate is justified." In fact, the User Fee is a
fee lawfully enacted by a public entity, that CAW is required to pass through, similar
to a utility or franchise tax. The user fee is not a new fee. Public Utilities Code
451 and 454 have no applicability to this matter. In Decision 90-08-055 and Decision
94-03-015, the Commission previously recognized MPWMD's authority to assess
and collect fees from Cal-Am customers.
Page 15: The PD concludes "CAW's application does not address the issues raised
in D.09-07-021." If so, it is legal error to not allow the Parties an opportunity to
amend that application to address those issues.
Page 18: Findings of Fact #2 states "Cal-Am must implement all measures in the
"Mitigation Program for the Districfs Water Allocation Program Environmental
Impact Report" not implemented by the Management District. This finding is at odds
29
0.09-07-021, p. 120.
30 !d.

A.l0-01-012
Page 14
137
with the statement at page 17 that "If the Management District ceases to perform
these mitigation measures, then Cal-Am must prepare a11d implement a plan to meet
this responsibility." Preparation and submittal of a plan falls far short of required
implementation, and does not meet legal mandates imposed on CAW.
VI.
CONCLUSION
The Proposed Decision should be withdrawn on the grounds the PD is not

consistent with Commission precedent and sound policy, and contains factual and legal
error. As an alternative, MPWMD joins the other Pa1ties and requests the Commission
approve the all-Party, all-Issue Settlement Agreement.
As stated, the PD impermissibly precludes the opportunity of the Parties to
present relevant evidence, and to cross-examine witnesses. This is a fundamental denial
of due process. If the Settlement Agreement is rejected, evidentiary hearings are required
to enable clarification of the record.
Is! David C. Laredo

DAVID C. LAREDO
De LAY & LAREDO
Attorneys for
MONTEREY PENINSULA WATER

MANAGEMENT DISTRICT
U:\Gencral (NEW)\MPWMD Main\PUC A.I0-01-012\Commcnts on PD Al0-01-012 (Final).doc

A.I0-01-012
Page 15
138
APPEND.IX A
PROPOSED CHANGES TO fiNDINGS OF FACT
IF THE ALL-PARTY, ALL ISSUE SETTLEMENT IS NOT ACCEPTED
1. No party has identified a There are disputed issue:t,of material fact that COif! pel
a hearing on the Settleme11t
Agreeme11t.
c
4
'
'
'
2. Cal-Am must implement all measures in the "Mitigation Program for the
3. The Mitigation Program for the District's Water Allocation Program
Environmental Impact Report is comprised of mitigation measures for fisheries,
riparian vegetation and wildlife, and lagoon vegetation and wildlife.
Program shows that the Management District allocated nearly $1 million of costs
Program shows the Aquifer Storage and Recove1y Project~ as a component of the
These compo11ents are separate a11d distinct costs centers a11d do 11ot reflect a
dupllcati~n o(efforior fundlng.
'
'
'
\
I;
6. Cal-Am is actively pursuing water supply augmentation through its Coastal

Water Project and the Management District need not act on Cal-Am's behalf. 'l!:!!l.
District's activities1 however, do not result in a duplication o(effort.
t
iS
.,
7. The rebate program, salaries for the Conservation Office Staff and project
expenditures for ordinance enforcement that are booked as part of the Mitigation
Program, even though S"ttca oosts are not"inOiuded in the Management District's
2007-2008 Annual Report for the Mitigation Program. The Management Distriot
did not explain .vhether-~ese booked oests are !!QLincluded in the "ttser fee .ev:en
though the Commission has approved and separately funded a joint conservation
program with the Management District. These efforts do not which.may include
some of the same costs.
4
8. The testimony supporting the application shows accounting treatment

inconsistent
with Commission
ratemaking standards, hut; that
treatment
does
.
. e
;
"
conul{v with tf!e Commissio!t 's Guid,elines (or the ~9u~table '[tea~ment of RevenueProducing Mechanisms Imeosed bv Local Goveri1ment Entities! 011 Public
Utilities.
.
.
t
'
'

A.l0-01-012
Page iv
139
APPENDIXB
PROPOSED CHANGES TO CONCLUSIONS OF LAW
IF THE ALL~PARTY, ALL ISSUE SETTLEMENT IS NOT ACCEPTED
I. Ne Evidentiary hearings are necessary. Tl~e testimony s1::1pporting the

applieation &Aol:lld be received. into eYidenee and tAe record on this. application
closed so tfiat the. matter can ..be. determinea at this time.
2. Testimony should be presented to show whether or not the settlement
agre~~ent is oot r~asonable in light of the re~ord, co~sistent with the law, or in the
public interest.
.3. The settlement agreement should not be approved until following this hearing.
L
4. Cal-Am has llQ_not met. its burden of justifying the proposed user fee for the
Management District because the <;pmrn,i~sit;Jn fJ!picaqy does not ex,amb:ze t!te
authori!J?. of a local government agencr to collect a fee or tax.
I
.:
41
5. In accord with D.89-05-063 and the Guidelines (fJr the Equitable Treatment
o(Reven~~-Prdducing M~ch~1tisms imeo;ed bv ioc~/ Govern'ment Entiti~s on

Pu,blic f!tillfies, t{te Cq;,trtti~~io,n d~qs ,not dispute 'or se,ek" t~ di;p~t; t~e ~uthority
or right o(anJ!.local governmental entity to impose or levv any form o[tax or [ee
upon ufllf;ty "<;ust~mers qr t!ir: utilftV t~se{G w~{c~ tftat lf!qzt'e,ntfty,, as a m,att~r of
general law or judicial decision, has jurisdiction to impose, levy, or increase.
Any issue, ~e{qting ~o suci1 ioc~l a,utho~itY is ~ '!'~t{e~ (or t~~ S~ee1ior Colfrt, Ttot
this Commission.
5. Application 10.01 012 .does not meet tfie Commission!s standards set out in
D,Q.9 O'J. 02.1 and Cal Am's application should be. dismissed.
6. The Monterey Feninsula 1.Vater Management District 'User Ji:ee Memorandum
A"ocount should be dissolv.ed and the, balanee. Feoorded in the account should not
be included in revenue. reql:lirement or reooered from ratepayers in any way.
+. Cal Am should file a +ier 1 advice letter to remove the memorandum account
from the ,:preliminary statement in Cal Am's tariff.

A.I0-01-012
Pagev
140
r:
PROOF OF SERVICE
I, Barbara A. Creely, declare as follows:
2
3
4
I am employed in the City of Pacific Grove, County of Monterey, California. I am over

the age of eighteen years, and not a party to the within entitled cause. I am an employee of De
LAY & LAREDO and my business address is 606 Forest Avenue, Pacific Grove, California
93950. OnJanuary'LO, 2011, I served the within:
COMMENTS OF THE MONTEREY PENINSUAL WATER

MANAGEMENT DISTRICT TO THE PROPOSED DECISION
6
7
8
on the interested parties in this action addressed as follows:

Please see attached Service List
10
11
12
13
14
18]
(BY E-MAIL SERVICE) By transmitting such document electronically from De

Lay & Laredo, Pacific Grove, California, to the electronic mail addresses listed above. I
am readily familiar with the practice of De Lay & Laredo for transmitting documents by
electronic mail, said practice being that in the ordinary course of business, such electronic
mail is transmitted immediately after such document has been tendered for filing.
I declare that I am employed in the office of a member of the bar of this court at whose
direction the service was made.
15
Executed on January 10, 2011, at Pacific Grove, California.

16
17
,lsi Barbarp A. Creely
18
BARBARA A. CREELY
19
20
21
22
23
24
25
26
27
U:\Gcncral (NEW)\MPWMD Main\PUC A.IO..()I..()!2\AI0-01..()12 POS.doc
28
141
SERVICE LIST
A.l0-01-012
By Email Only:
Robert G. Maclean
California American Water
Coronado, CA 92118
For: California American Water
Joyce Steingass
Water Branch
Room4209
505 Van Ness Avenue
For: DRA
jws@cpuc.ca.gpv
Jason J. Zeller
Legal Division
Room 5030
505 Van Ness Avenue
For: DRA
jjz@cpuc.com
Allison Brown
Calif Public Utilities Commission
Legal Division Room 4107
505 Van Ness Avenue
For: DRA
aly@cpuc.ca.gov
David P. Stephenson
4701 Beloit Drive
Timothy J. Miller, Esq.

Corporate Counsel
California Ameri~an Water Company
Coronado, CA 92118
Glen Stransky
Hidden Hills Subunit Ratepayers
Association
92 Saddle Road
Carmel Valley, CA 93924
Email and Overnight Mail:
glen.stransky@loslaurel~shoa.com
Carrie Gleeson
Calif'omia American Water
1033 B Street, Suite 200
Coronado, CA 92118
Maribeth A. Bushey
505 Van Ness Avenue
Room 5018
mab@cpuc.ca.gov
Frances M. Farina
De Lay & Laredo
ffarina@cox.net
MPWMD
January 10, 2011
142
BEFORE THE PUBLIC {,JTILITIES COMMISSION


(U 210 W) for an Order Authorizing
01-10-11
04:59PM

Filed January 5, 2010
COMMENTS OF
THE DIVISION OF RATEPAYER ADVOCATES
ON THE PROPOSED DECISION
I.
INTRODUCTION
Pursuant to Rule 14.3 of the California Public Utilities Commission's Rules of
Practice and Procedure ("Rules"), the Division of Ratepayer Advocates ("DRA") hereby
files its Comments on the December 21, 201 0 Proposed Decision ("PD") of
Administrative Law Judge Bushey, rejecting an all party settlement authorizing collection
and remittance of the Monterey Peninsula Water Management District User Fee.
DRA notes that under Rule 14.3 of the Commission's Rule of Practice and
Procedure comments on proposed decisions "shall focus on factual, legal or technical
errors" in the proposed decision, making specific references to the record. The
Commission should reject the Proposed Decision because the settlement is a just and
reasonable outcome for ratepayers. DRA is unable to consistently make specific
references to the record because, in anticipation of an all party settlement, DRA did not
file testimony and the Parties were not given opportunity to fully develop the record.
441495
143
II.
DISCUSSION
A.
The PD Errs in Asserting Jurisdiction over the District's

User Fee
1.
The PD Commits Factual Error by Characterizing

MPWMD's programs as Cal Am's.
The PD commits factual error by finding that the programs funded by the
District's User Fee are California American Water's ("Cal Am") responsibility. The
Monterey Peninsula Water Management District's ("MPWMD" or "District") User Fee
funds programs that are the responsibility of the MPWMD, not that of California
American Water.
2.
The PD Commits Legal Error By Improperly

Interfering with the Authority of a Government
Agency.
The Commission has no jurisdiction of the District's User Fee. The PD errs in its
failure to comply with Commission precedent, 0.89-05-063. Further, the PD is
inconsistent with the Guidelines for the Equitable Treatment of Revenue-Producing
Mechanisms Imposed by Local Government Entities on Public Utilities. The PD
effectively disputes the authority ofMPWMD as a local governmental entity to impose or
levy a tax or fee upon utility customers or the utility itself. This issue is outside of the
Commission's jurisdiction. As the Commission stated in 0.89-05-063, "Any issue
relating to such local authority is a matter for the Superior Court, not this Commission."
The PD itself acknowledges that MPWMD is authorized by the legislature to impose
taxes, fees and other assessments, and that these funding mechanisms are outside of the
Commission's jurisdiction.! The Commission lacks jurusdiction to question or reject the
tax or fee.
1 PO at 2.
441495
144
B.
The Commission Should Accept the All-Party Settlement,

or Allow a Hearing and Reasonable Time for Parties to
Request Alternate Relief.
DRA fully supports the all party settlement reached in this proceeding, and
respectfully urges that the Commission adopt the settlement in its entirety. DRA will not
reargue the motion in support of settlement, but as the Parties argued in that motion, the
settlement is reasonable in light of the record, is consistent with the law, and is in the
public interest. The PD's finding to the contrary is unsupported. As such, DRA supports
the Comments to the PD filed by Monterey Peninsula Municipal Water District~.
Should the Commission reject the settlement, DRA respectfully requests that the
PD be modified to reopen the record and allow a hearing and reasonable time for Parties
to request alternate relief. Under Rule 12.4, if a settlement is rejected, the Commission
may:
(a) Hold hearings on the underlying issues, in which case the
'' parties to the settlement may either withdraw it or offer it
as jointtestimony,
I
(b) Allow the parties time to renegotiate the settlement,

(c) Propose alternative terms to the parties to the settlement
which are acceptable to the Commission and allow the
parties reasonable time within which to elect to accept
such terrris or to request other relief.
I
The PD does not allow for any of those alternatives. From the time of ORA's
'
February 18, 2010 Protest, the Parties anticipated settling this application. In fact, DRA's
I
protest was
limite~
to challenging the accounting mechanism proposed in the
application~. With. that understanding, DRA did not prepare or serve testimony, nor did
1
the other Parties submit supplemental or rebuttal testimony. Moreover, the Parties
'
attempt to resolve this matter without evidentiary hearings cannot be construed as a

waiver of their right to present evidence and cross examine witnesses.
:.
.\
1 ORA has not had the opportunity to review the Comments to the PD filed
by California American
Water.
1 ORA Protest, filed February 18, 2010, at 1-3 .
...
441495
145
The PD rejects the settlement as unreasonable in light of the whole record because
the "record contains insufficient cost justification, several instances of apparent doublecounting, and ratemaking treatment at odds with our standards."~ This is factually
incorrect as there is no evidence in the record to support this finding. If there is an
appearance of double counting, the Parties should be afforded the opportunity to address
such findings in a hearing. Further, as the only contested issue among the Parties was the
proper accounting mechanism, the Parties did not develop the record to include additional
evidence on uncontested issues. Again, ifthere is a question about the cost justification or
ratemaking treatment of the user fees, the applicants should have the opportunity to
address these questions in an evidentiary hearing. To close this proceeding now, without
affording the Parties an opportunity for hearings on the factual issues raised in the PD,
would be to improperly deny the Parties their due process.
III.
CONCLUSION
For the reasons stated above, DRA respectfully requests that the PD be modified
to accept the settlement, or in the alternative, that the PD be modified to reopen the
record and allow the Parties hearings on this application.
Respectfully Submitted,
Is/
ALLISON BROWN
ALLISON BROWN
January 10, 2011
Attorney for the

505 Van Ness Avenue
Phone: (415) 703-5462
Fax: (415) 703-2262
Email: aly@.cpuc.ca.gov
PO, at 13.
441495
146
I hereby certify that I have this day served a copy of"COMMENTS OF THE
DIVISION OF RATEPAYER ADVOCATES ON THE PROPOSED DECISION" to
the official service list in A.l0-01-012 by using the following service:
[X ] E-Mail Service: sending the entire document as an attachment to all known

parties of record who provided electronic mail addresses.
[ ] U.S. Mail Service: mailing by first-class mail with postage prepaid to all
known parties of record who did not provide electronic mail addresses.
IS/
MARTHA PEREZ
Martha Perez
147
SERVICE LIST
A.10-01-012
dave@laredolaw.net
jjz@cpuc.ca.gov
ffarina@cox.net
Glen.Stransky@LoslaurelesHOA.com
aly@cpuc.ca.gov
jws@cpuc.ca.gov
mab@cpuc.ca.gov
148
10
Date of Issuance 3/25/2011
ALJ/MAB/jyc
Decision 11-03-035 March 24,2011

In the Matter of the Application of CaliforniaAmerican Water Company (U210W) for an

Management District User Fee.
DECISION DENYING APPROVAL OF SETTLEMENT AGREEMENT AND

AUTHORIZING AMENDMENT TO APPLICATION
Summary
This decision finds that the settlement agreement fails to meet the
Commission's standards for approving settlement agreements and denies
approval of the settlement agreement. It also authorizes the applicant to amend
the application consistent with this decision.
Background
In Decision (D.) 09-07-021, the Commission authorized CaliforniaAmerican Water Company (Cal-Am) to increase water rates in its Monterey
district by over 40% for the three-year rate case cycle. In that Decision, the
Commission also considered the user fee that Cal-Am had been collecting on
behalf of the Monterey Peninsula Water Management District (Management
447487
-1-
149
Decision No.ll..;Q3-035 is included as Exhibit 1 to the Petition for Review.
150
11


)
)
)
)
)
)
04-25-11
04:59PM

APPLICATION OF THE
FOR REHEARING OF DECISION 11-03-035

De LAY & LAREDO
606 Forest A venue
Telephone: (831) 646-1502
Facsimile: (831) 646-03 77
De LAY & LAREDO
Telephone: (805) 681-8822
Facsimile: (805) 681-8823
Email: ffarina@cox.net
Date: April25, 2011

DAY & LAMPREY, LLP
Thomas J. MacBride, Jr.
SuzyHong
Telephone: (415) 392-7900
Facsimile:
(415) 398-4321
E-mail: tmacbride@goodinmacbride.com
151
TABLE OF CONTENTS
I.
II.
BACKGROUND ................................................................................................... 6
A.
Events Leading to the Filing of the Application ........................................ 6
B.
Decision No. 09-07-021 ............................................................................. 6
C.
The Monterey Peninsula Water Management District User Fee

Memorandum Account .............................................................................. 7
D.
The Necessity of Continuing the Projects Funded Through The

User Fee ..................................................................................................... 8
E.
The Application ......................................................................................... 9
F.
I)RA's Partial Protest. ................................................................................ 9
G.
The Determination that Hearing Was Required and The Absence

of A Prehearing Conference or Scoping Memo ......................................... 9
H.
The Negotiation and Submission of The All-Party Settlement ................. 9
I.
The Proposed Decision and Decision ...................................................... 10
SPECIFICATIONS OF ERROR ......................................................................... 12

A.
The Commission exceeded its subject matter jurisdiction by

interfering with and obstructing collection of a user fee by
MPWMD, which is lawfully imposed and collected by MPWMD
pursuant to authority conferred upon MPWMD by the Legislature ........ 12
B.
The Commission failed to proceed in the manner required by law

by never issuing a scoping memo after it determined that a hearing
was required but before it issued the Decision ........................................ 12
C.

by never conducting a pre-hearing conference after it determined
that a hearing was required but before it issued the Decision .................. 12
D.

by not following Rule 12.4 of its Rules of Practice and Procedure
which does not permit dismissal (even conditional dismissal) of a
matter in response to a motion for approval of a settlement.. .................. 12
E.

by not applying precedent (including its own) with regard to the
standard for a motion to dismiss ............................................................. 12
F.
Because the Commission determined that a hearing should be held

but never completed the hearing , the Commission did not comply
with Sections 311 and 1701.3 and thereby failed to proceed in the
manner required by law ........................................................................... 13
-1-
152
(continued)
III.
G.
The Findings of Fact are not suppqrted by substantial evidence in

light of the whole record .......................................................................... 13
H.
The Commission did not adequately weigh evidence in support of

the relief sought in the application -evidence contrary to factual
claims made in the Decision- and thereby violated Section 1705 as
construed by U.S. Steel Corp. v. PUC, 29 Cal.3d 603, 629 P.2d
1381 (1981) and Industrial Communications Systems, 22 Cal. 3d
572 (1978), 585 P.2d 863 ........................................................................ 13
DISCUSSION OF LEGAL ERRORS ................................................................. 13

A.
B.
The Decision Exceeds the Commission's Jurisdiction by

Impermissibly Interfering with Authority Conferred by the
Legislature on MPWMD to (1) Fix the Level of the User Fee and
(2) Provide for Its Collection through Cal-Am ........................................ 13
1.
MPWMD has the statutory right to impose a fee on CalAm's ratepayers and collect that fee through utility bills ............ 15
2.
MPWMD's Enabling Act post-dates the Public Utilities

Act; to the extent any conflict between the two arises, the
later enacted legislation should govern ........................................ 17
3.
The Commission has long recognized that it has no

jurisdiction over user fees by local and regional
government entities ...................................................................... 20

by never issuing a scoping memo after it determined that a hearing
was required ............................................................................................. 22
1.
The Commission Never Issued the Scoping Memo as

Required By Law ......................................................................... 22
2.
The Failure to Issue the Legally Required Scoping Memo

Prejudiced MPWMD ................................................................... 23
C.

by never conducting a pre-hearing conference after it determined a
hearing was required but before issued the Proposed Decision ............... 25
D.

by not following Rule 12.4 which does not permit dismissal (even
conditional dismissal) of a matter in response to a motion for
approval of a settlement ........................................................................... 27
E.

by not applying precedent (including its own) with regard to the
standard for a motion to dismiss .............................................................. 28
-11-
153
(continued)
F.
The Commission Failed to Proceed in the Manner Required by

Law by Failing to Comply with Section 1701.3 ..................................... 31
1.
The Requirements of Section 1701.3 ........................................... 31
2.
MPWMD was Prejudiced by the Commission's Failure to

Conduct a Hearing before Dismissing the Application as
Filed ............................................................................................. 33
3.
There Was Ample Time to Clarify the Record Evidence

with Regard to Issues of Concern to the ALJ .............................. 37
G.
The Commission Failed to proceed in the manner required by law

by failing to comply with Section 311 ..................................................... 37
H.
The Decision does not contain adequate Findings of Fact and

Conclusions of Law on all material issues. Sections 1705,
1757(a)(3) ................................................................................................ 38
I.
1.
The Conclusions of Law do not provide the Legal Basis

for Dismissal of The Application................................................. 39
2.
The Findings of Fact do Not Explain why Restricting

MPWMD from collecting the User Fee is Required to
Avoid a Double Collection of revenues from CAL-AM
Ratepayers .................................................................................... 41
None of The Findings of Fact are supported by substantial

evidence in light of the whole record (Section 1757(a)(4))
Because the "whole Record" remains to be received .............................. 45
1.
The Decision is not based on the record" as required by

Section 1701.2(a) ........................................................................ 46
2.
Much of the Text of the Decision Is Inaccurate ........................... 47

a.
The Decision Incorrectly Presumes the User Fee is

Charged by CAL-AM ...................................................... 47
b.
The Water Management District's Programs do not

Duplicate CAL-AM's Activities ..................................... 47
c.
Evidence in the Record Demonstrates there is no

Duplication in Effort and Accounting ............................. 48
d.
The User Fee is Based on the Costs of the Programs

it Supports ........................................................................ 48
e.
The Record Provided Clear Cost Justifications ............... 49
f.
Erroneous Cost Summary .............................................. 49
-111-
154
(continued)
J.
II.
g.
Error in Citing the 1990 Environmental Impact

Report ............................................................................. 50
h.
Confusion of the Program EIR with the Five-Year

Mitigation Program .......................................................... 50
The Commission did not adequately weigh evidence in support of

the relief sought in the application and thereby violated Section
1705 as construed by U.S. Steel Corp. v. PUC, 29 Cal.3d 603, 629
P.2d 1381 (1981) and Industrial Communications Systems, 22
Cal. 3d 572 (1978), 585 P.2d 863 ........................................................... 50
1.
The Effective Collaboration Between CAL-AM and

MPWMD ...................................................................................... 51
2.
The Fact That the User fee At Issue is That ofMPWMD

and Not CAL-AM ........................................................................ 51
3.
The Testimony of Mr. Schurbert, Mr. Dickhaut and Mr.

Fuerst. ........................................................................................... 52
CONCLUSION .................................................................................................... 52
-lV-
155
Statutes
CCP Section 201 ............................................................................................................... 19
CCP Section 309.5 ............................................................................................................ 52
CCP Sections 311 ............................................................................................. 4, 13, 38, 47
CCP Section 311 (d) .......................................................................................................... 3 8
CCP Section 437(c) ........................................................................................................... 30
CCP Section 451 ........................................................................................................ passim
CCP Section 454 ............................................................................................................... 48
CCP Section 863 ............................................................................................................... 21
CCP Section 1701.3 ................................................................................................ 4, 13,32
CCP Section 1701.3(a) ...................................................................................................... 33
CCP Section 1731 (b)(3) .................................................................................................... 11
CCP Section 1757(a)(3) .................................................................................................... 39
CCP Section 1085 ............................................................................................................... 3
CCP Section 1085 ....................................................................................................... 21, 22
CCP Section 1241 ............................................................................................................. 20
CCPSection 1701.1 ................................................................................................ 2, 12,23
CCP Section 1701.1 (b) ............................................................................................. passim
CCP Section 1701.2(a) ...................................................................................................... 47
CCP Section 1701.3(d) ..................................................................................................... 33
CCP Section 1701.5 .......................................................................................................... 10
CCP Section 1701.5(b) ...................................................................................................... 25
CCP Section 1705 ................................................................................. ,.................... passim
CCP Section 1757(a)(l) .......................................................................................... 2, 12, 13
CCP Section 1757(a)(2) ............................................................................................. passim
CCP.Section 1757(a)(4) ........................................................................................ 13, 46, 47
CCP Section 1758(a)........................................................................................................... 5
CCP Section 2890 ............................................................................................................. 20
CCP Section 2889 .9(b) ..................................................................................................... 20
Government Code Section 53750 ..................................................................................... 22
Government Code Section 66022 ..................................................................................... 21
Cases
Bighorn-Desert View Water Agency v. Verjil, 39 Cal.4th 205 ......................................... 50
Bixby v. Pierno (1971) 4 Cal.3d 130, 149 [93 Cal. Rptr. 234,481 P.2d 242] .................. 46
Cal. Mfrs. Ass'n v. Pub. Utils. Comm'n, 24 Cal. 3d 251,258-259,
155 Cal. Rptr. 664, 667-668, 595 P.3d 98, 101-102 (Cal. 1979) .................................. 39
Cal. Motor Transp. Co. v. Pub. Utils. Comm 'n, 59 Cal. 2d 270,
28 Cal. Rptr. 868, 871, 379 P.2d 324 (Cal. 1963); ....................................................... 39
Cf, Santa Clara Valley Transportation Authority v. Public Utilities Com.,
124 Cal. App. 4th 346, 2004 Cal. PUC LEXIS 1973 (November 22, 2004) ................. 11
City ofFresno, 254 Cal. App. 2d at 81; 1967 Cal. App. LEXIS 1369*6 .................. 20, 42
-v-
156
(continued)
City ofLos Angeles v. Pub. Utils. Comm 'n,

7 Cal. 3d 331, 102 Cal. Rptr. 313,318,497 P.2d 785,790 (Cal. 1972) ....................... 39
City of Marina v. Bd ofTrs. ofCal. State Univ.,
39 Cal. 4th 341, 355 (Cal. 2006) ............................................................................. 12, 29
City of Vernon v. Public Utilities Commission, 88 Cal. App. 4th 672, 678 (2001) .......... 46
County ofinyo v. Public Utilities Com., 26 Cal. 3d 154, 167 (1980) ............................... 14
County ofSan Diego v. Assessment Appeals Bd No. 2 (1983)
148 Cal. App. 3d 548 [195 Cal. Rptr. 895] ................................................................... 46
Greyhound Lines, Inc. v. Pub. Utils. Comm 'n,
65 Cal. 2d 811,56 Cal. Rptr. 484, (Cal. 1967); ............................................................ 39
Industrial Communications Systems, 22 Cal. 3d 572 (1978),
585 P.2d 863 ............................................................................................... 13, 51, 32, 53
Los Angeles Met. Transit Authority v. Public Utilities Com. (1959) 52 Ca1.2d 655,
[343 P.2d 913].) ............................................................................................................ 14
Lucas Valley Homeowners Ass 'n v. County ofMarin, eta!.,
233 Cal. App. 3d.130; Cal. Rptr. 427; 1991 Cal. App. LEXIS 932 ............................. 46
Orange County Air Pollution Control Dist. v. Public Uti!. Com. (1971)
4 Ca1.3d 945, [95 Cal. Rptr. 17, 484 P.2d 1361] .................................................... 14, 19
Packard v. Pacific Telephone and Telegraph, 1970 PUC LEXIS 158 ............................. 21
People ex ref. Pub. Uti!. Com. v. City ofFresno [(1967)]
254 Cal. App. 2d 76, 62 Cal. Rptr. 79] ........ ,.......................................................... 14, 19
PG&E Corporation v. Public Utilities Com.,
118 Cal. App. 4th 1174 (May 21, 2004); 13 Cal, Rptr. 3d 630; 2004 Cal App.
LEXIS 785 .................................................................................................................... 14
Santa Clara Valley Transportation Authority v. Public Utilities Com.,
124 Cal. App. 4th 346, 356 (Cal. App. 6th Dist. 2004) .............................. 14, 17, 19, 42
Sierra Club v. California Coastal Commission (1993) 12 Cal. App. 4th 602 ................... 46
Southern California Edison v. Public Utilities Com.,
140 Cal. App. 4th 1085; 2006 Cal PUC LEXIS 948 (June 26, 2006) ............... 5, 25, 26, 28
Sullivan v. Delta Airlines (1997) 15 Ca1.4th288, 307 fn.9 .................................... 7, 14,24
U.S. Steel Corp. v. PUC, 29 Ca1.3d 603, P.2d 1381 (1981) ....................................... 13, 53
Decisions of CPUC
D.89-05-063 ...................................................................................................................... 21
D.90-08-055 .................................................................................................................. 6, 21
D.91-10-040 .................................................. ;................................................................... 30
D.94-03-015 .................................................................................................................. 6, 21
D.09-07-021 ............................................................................................................... passim
D.09-11-008 ...................................................................................................................... 26
D.ll-04-035 ........................................................................................................................ 3
D.ll-01-029 ............................................................................................................. :........ 26
D.ll-03-035 ...................................................................................................................... 53
-VI-
157
(continued)
Rules & Regulations

.Article 12 .......................................................................................................................... 29
Rule 7.5 ..................................................................................................................... 4, 9, 26
Rule 7.2 ................................................................................................................... 4, 26, 27
Rule 7.3 ' 23, 24

Rule 7.3(a) ........................................................................................................................... 4
Rules 7.3(b) ......................................................................................................................... 4
Rule 12(a)............................................................................................................................ 5
Rule 12(b)........................................................................................................................... 5
Rule 12(c)............................................................................................................................ 5
Rule 12.4 .................................................. ,................................................................. passim
Rule 12.4(a)....................................................................................................................... 28
Rule 12.4(b) ...................................................................................................................... 28
Rule 12.4(c)....................................................................................................................... 28
Rule 12.5 ........................................................................................................................... 28
Rule 13.10 ................................................................................................................... 35,38
Rule 13.13 (b) ................................................................................................................... 26
Rule 13.14(a) ..................................................................................................................... 38
Rule 13.3(a)....................................................................................................................... 33
Rule 14.3 ........................................................................................................................... 25
Rule 14.3(b)........................................................................................................................ 5
Rule 14.3(c)................................................................ ,........................................................ 5
Rule 16.1(a) ......................................................................................................................... 1
Other Authorities
California Water Code, Chapter 118-2; Stats 1977, c.527 ......................................... 17, 41
Deerings UncodifiedActs, WATER, ACT 610 ................................................................ 17
Enabling Act, Section 326(b) ...................................................................................... 20,46
In re: Guidelines for the Equitable Treatment ofRevenue Producing Mechanisms
Imposed by Local Government Entities on Public Utilities (Guidelines) ..................... 21
Public Resources Code 21000- 21178 .......................................................................... 8
-vii-
158

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APPLICATION OF
THE MONTEREY PENINSULA WATER MANAGEMENT DISTRICT
Pursuant to Public Utilities Code Section 1731 1 and Rule 16.1 of the
California Public Utilities Commission's ("Commission") Rules of Practice and
Procedure, the Monterey Peninsula Water Management District ("MPWMD" or
"Water Management District") hereby files this Application for Rehearing of
Decision No. (D.) 11-03-035. The Decision was issued on March 25, 2011.
MPWMD has filed this timely application within 30 days of the mailing of the
Decision. 2
The Decision took the unusual step of denying a request for approval of an
All-Party Settlement ("Settlement Agreement"), an agreement entered into
between MPWMD, California American Water Company (Cal-Am) and the
Division of Ratepayer Advocates (DRA) (collectively "Parties"). Even more
unusual, and unlawful, was the fact that after refusing to approve the All Party
Settlement, the Decision dismissed the matter. It authorized the Executive Director
to summarily dismiss the application unless was amended in a fashion directed by
the Decision. Hearings would not even be held with respect to the application
Cal-Am filed even though the Commission had earlier determined that hearings
with respect to it were required.
1
All statutory references herein are to the California Public Utilities Code unless
otherwise indicated.
2
Commission Rule 16.1(a).
1
159
Rehearing of D. 11-03-035 is warranted for myriad reasons set forth below

and outlined in the Specifications of Error set forth in II infra. The Decision
embraces major errors of substantive and procedural law (the latter representing a
wholesale disregard of Section 1701.1 et seq. and the Commission Rules
implementing that portion of the Public Utilities Code).
First, the Decision exercises jurisdiction over MPWMD, a governmental
entity, by restricting MPWMD's ability to both (1) impose a User Fee 3 and (2)
collect that fee through Cal-Am's bill. The Legislature has expressly authorized
MPWMD to take both actions. 4 Restricting MPWMD from doing so is an act that
lies beyond the Commission's jurisdiction. 5
To be clear at the threshold, MPWMD does not object to the Commission
assuring that ratepayers of Cal-Am, having paid for certain costs ofMPWMD
through the MPWMD User Fee, do not again pay for the same costs through CalAm's general rates. But the Decision does not so limit its reach. It plainly
purports to ( 1) pass judgment on the level of MPWMD 's revenues, 6 (2) impose
Commission "ratemaking standards" on MPWMD's chosen means of cost
recovery 7 (3) question the prudency of the costs ofMPWMD itself! and,
ultimately, (4) deny MPWMD the ability to collect the fee in a manner provided
by law. 9
The Decision impliedly assumes that the Commission must undertake a
granular examination ofMPWMD's operations in order to protect Cal-Am's
3
The charge at issue herein has been referred to as a "user fee" in both the Decision and
the MPWMD ordinances adopting and modifying it. Accordingly it is referred to herein
as the "User Fee".
4
See discussion infra at III.3.A.
5
See, Section 1757(a)(l).
6
See, e.g. Decision, page 12 questioning increase in MPWMD surcharge revenues since
2006.Q
7
Id at pp.ll-12.
8
See for example, page 13 asserting that no "analytical explanation" exists regarding the
fashion in which two governmental entities, MPWMD and the National Oceanic and
Atmospheric Administration ("NOAA") allocate responsibilities for protecting steelhead
trout.
9
As we note at III.3.Aby enacting MPWMD's Enabling Act, the Legislature has
provided for MPWMD to collect fees through the bills of utilities such as Cal-Am.
2
160
ratepayers. This policy course marks a sharp deviation from past and even very
current Commission jurisprudence. Only a few weeks ago (in another matter
involving water supply on the Monterey Peninsula), the Commission recognized
that agencies such as MPWMD "have an independent legal duty to incur only
reasonable and prudent costs ... " 10 That observation, unlike the Decision,
embraces a recognition that government agencies such as MPWMD are obligated
by state law to limit fees to the level necessary to fund the costs for which the fee
was developed; failure to do so may result in the fee being characterized as a tax 11
Accordingly, conducting a quasi-general rate case with respect to MPWMD
is not only an extra-jurisdictional act, it represent poor policy for two obvious
reasons. First, MPWMD itself is already subject to lawful restraints on the level
of the User Fee. Second,. and, more to the point, if the Commission believes that
Ca-Am is recovering (in general rates) sums for costs already being borne by
MPWMD, the Commissions proper recourse is to examine Cal-Am's rates. 12 The
scrutiny of MPWMD undertaken by the Decision was both unnecessary and an act
that lies beyond the Commission's jurisdiction
Historically, the Commission has disclaimed (1) the jurisdiction to interfere
with collection of government fees and (2) the need to do so. Government entities
have been imposing surcharges on utility customers (recovered through the bills of
Commission-regulated utilities) for decades. The City of Los Angeles, for
example, has charged a surcharge higher than the 8.25% at issue here since the
10
D. 11-04-035 (April14, 2011).

As we note at III.F.2 and III.I.2d, infra, MPWMD submitted prepared testimony on
this point. The User Fee at issue herein is a fee, not a tax. As such, it must be justified at
the time MPWMD adopts each annual budget. MPWMD is required to justifY the amount
and purpose of use for the user fee in each annual budget, and Cal-Am or members of the
public have an opportunity to protest the amount of the fee. See Exhibit 5 of testimony of
R. Dickhaut, at A9], or the uses to whichit is put. The objections may be lodged
administratively before the MPWMD board, or thereafter as a judicial challenge
(pursuant to Section 1085 of the Code of Civil Procedure. CCP 1085) to the enactment of
the annual budget ordinance. MPWMD is very cognizant of the fact that fees cannot
exceed the cost of providing the service for which the fee is collected.]
12
See, Section 728.
11
161
1980s. 13 The Decision marks the first instance in which the government entity
setting the fee has been subjected to scrutiny not through the procedures
established in by its own enabling legislation or the Code of Civil Procedure but,
instead, in a Commission proceeding. The Decision marks the first instance in
which the government entity setting the fee has been denied the ability. to collect
the lawfully adopted fee in a means provided by law through the Commissionregulated utility. Beyond a reference to Section 451, which applies to charges of
CAL-AM but not MPWMD, the Decision is devoid of any explanation or
reference to a change in statutory or decisional law that permits the Commission to
now take this course.
The Decision was also reached in a matter utterly at odds with procedural
reforms enacted by the Legislature in 1996, embodied in Senate Bill No. 960. 14
The Commission determined that a hearing was required 15 and never modified that
determination in accordance with the Commission's Rules. 16 The Assigned
Commissioner, however, neither scheduled a pre-hearing conference nor issued a
scoping memo as required by both Section 1701.1 (b) and the Commission's Rules
of Practice and Procedure ("Rules") that implement that statute. 17 After denying
the motion to approve the All-Party Settlement, the Decision simply determined
that further proceedings on the application filed by CAL-AM would not take
place. The strange fashion in which the matter was concluded (one contrary to,
inter alia, Sections 311 and 1701.3) forced the parties to then respond to a "stealth
position," a set of arguments and factual claims never presented on the record,
advanced at a prehearing conference or raised through a scoping memo. (There
was no witness, for example, that any of the parties could cross-examine with
regard to these claims.) The settling parties were compelled to respond through
13
http://fmance.lacitv.org/comtaxFAQ.htm.
Stats 1996, c. 856.
15
Resolution ALJ-176-3247 (January 21.2010).
http://docs.cpuc.ca.gov/efile/RESC/112666.pdf.
16
See Rules 7.3(b) and 7.5.
17
See Rule 7.2 (requiring prehea.ring conference [PHC] after preliminary determination
of need for hearing and Rule 7.3(a) (requiring scoping memo determining "issues to be
addressed" whether or not PHC is held.)
14
162
the vehicle of comments on a Proposed Decision ("PD"), limited in both size 18 and
substance.
19
Because the Commission failed to adhere to the statutory
requirements, it failed to proceed "in the matter required by law."20

The Commission also failed to proceed "in the matter required by law" by
failing to adhere to its Rule 12.4 governing the disposition of a motion for
approval of a settlement. Instead of returning the application to the hearing
room, 21 permitting the parties to renegotiate and resubmit the Settlement22 or
describing the terms that would be acceptable to the Commission23 , the Decision
flipped Rule 12.4 on its head by advising the Parties not of what steps would be
required to gamer approval of their All-Party Settlement but, instead, what they
would be required to do to even get back to the hearing room and avoid outright
dismissal. 24 That course is not available under Rule 12.4 or any other portion of
the Commission's Rules. When the Commission prejudices a party by failing to
follow its own rules, the resulting failure to proceed "in the matter required by
law" invites an appellate court to "set aside" 25 the Decision. 26 Under applicable
precedent, a court would be required to do so here. 27
The Decision also fails to comply with Section 1705 in several respects. It
fails to apprise the Parties (or any other reader) of the basis for the outcome and
many of the findings are not supported by the record. Relying largely on an
annual report for the 2007-2008 fiscal year, it ignores (and fails to acknowledge or
18
Rule 14.3(b).
Rule 14.3(c).
20
Section 1757(a)(2).
21
Rule 12(a).
22
Rule 12(b).
23
Rule 12(c) permits the Commission to advise the settling parties of the terms that
would be acceptable to the Commission. Here, the Decision advised the parties of the
terms that would be required to avoid dismissal by the Executive Director.
24
Even the offer to permit the matter to continue long enough to receive an amended
application was a last minute development. The PD would have simply dismissed the
matter outright sua sponte.
25
Section 1758(a).
26
Southern California Edison v. Public Utilities Com., 140 Cal. App. 4th 1085; 2006 Cal
PUC LEXIS 948 (June 26, 2006).
27 Jd
19
163
weigh) contrary evidence. There is no explanation of why that contrary evidence

(submitted as prepared testimony for receipt under oath) should be disregarded.
Instead of holding a hearing to resolve the stark differences between that
testimony and the observations embraced in the Decision, the Decision foreclosed
any hearing at all on either the All-Party Settlement or CAL-AM's application.
Rehearing is required to correct these legal errors.
I.
BACKGROUND
A.
Events Leading to the Filing of the Application
By its ruling of May 9, 2008 on the combined California American Water (

CAL-AM) Applications for water (A.08-01-027), general office (A.08-01-024),
and conservation (A.07-12-010), the Commission stated, "We would also like to
better understand the growing role of the Monterey Peninsula Water Management
District in allocating costs to CAL-AM's customers .... "
B.
Decision No. 09-07-021
Prior to issuance of D. 09-07-021 issued July 9, 2009 on Application 08-01027, the Commission had acknowledged the propriety of CAL-AM's collection of
the User Fee. 28
D. 09-07-021, however, did not authorize Cal-Am, to collect the User Fee
and instead directed Cal-Am to file the instant application to address collection of
funds to support MPWMD programs "for costs properly assignable to CAL-AM,
whether performed by CAL-AM or the Management District [MPWMD]."
Specifically, Decision (D.) 09-07-021 ordered that:
24. California-American Water Company shall meet and confer
with the Monterey Peninsula Water Management District regarding
costs properly the responsibility of California-American Water
Company and its ratepayers.
28
See D. 90-08-055 (Commission recognized propriety of CAL-AM's assessment of fee

set at level fixed by MPMWD Board and deferred to MPWMD any question regarding
application of fee to vacant lots) and D. 94-03-015 (recognizing MPWMD's imposition of
fmes on CAL-AM customers for excessive water use.)
6
164
25. No later than 180 days after the effective date of this order,
California-American Water Company shall develop and submit for
Commission approval a program to fund the projects currently
performed by the Monterey Peninsula Water Management District
that are properly California-American Water Company's
responsibility, and is authorized to file an advice letter to create a
memorandum account for interim costs.
C.
The Monterey Peninsula Water Management District User Fee

Memorandum Account
Immediately after D. 09-07-021 was issued, in response to Ordering

Paragraph 25 of D. 09-07-021, Cal-Am filed Advice Letter No 785-A,
establishing the Monterey Peninsula Water Management District User Fee
Memorandum Account ("User Fee Memorandum Account"). Cal-Am continued
to make payments to MPWMD to fund MPWMD's Carmel River Mitigation
Program ("Mitigation Program") and its Aquifer Storage and Recovery project
("ASR") so that those projects could receive funding as they would have had the
User Fee continued. The payments to MPWMD were recorded in the User Fee
Memorandum Account29
Accordingly, since the issuance of D. 09-07-021 and through the course of
the instant matter, MPWMD has been receiving the funds necessary to continue
the Mitigation Program and.ASR. MPWMD, therefore, simply pursued the course
set by D. 09-07-021 to address the concerns expressed by the Commission in D.
09-07-021 while receiving funds through payments recorded by Cal-Am in the
User Fee Memorandum Account
As explained below, it is the Decision of which rehearing is sought (not D.
09-07-021 30 ) that has brought the funding for the Carmel River Mitigation
29
Decision, page 18.

Accordingly, MPWMD did not seek rehearing of D. 09-07-021, which set the course
for the instant docket. The absence ofim application for rehearing of D. 09-07-021 does
not foreclose consideration of any of the legal issues raised herein. The Commission
cannot acquire jurisdiction over the acts of MPWMD by consent, waiver or estoppel.
Sullivan v. Delta Airlines (1997) 15 Cal.4th 288, 307 fu.9. That issue remains ripe for
review here. The balance of the issues raised herein arise out of events occurring
between the filing of the Cal-Am application and the issuance of the Decision.
30
165
Program ("Mitigation Program")and the Aquifer Storage and Recovery project

("ASR") to an end.
D.
The Necessity of Continuing the Projects Funded Through The

User Fee
This Commission has more than a passing familiarity with the
challenges faced by policy makers and Cal-Am in addressing surface and ground
water shortages on the Monterey Peninsula. Late last year, in D. 10-12-016
(December 2, 2010, the Commission noted that:
Monterey Peninsula residents and businesses have been struggling
with water constraints since the 1940s ..... We have been addressing
these concerns at this Commission alone since 1997 -well over a
decade ...
Cal-Am supplies the Monterey District with surface water and
groundwater from the Carmel River System and the coastal subarea
of the Seaside Groundwater Basin (also known as the Seaside
Basin) ..... Water supply has long been constrained due to frequent
drought conditions on the semi-arid Monterey Peninsula, which
obtains its water supply solely from rainfall. In addition, as
described in the FEIR, seawater intrusion and excess diversion have
existed for decades, first identified in the late 1930s and documented
by the State of California in 1946 31
The User Fee at issue herein provides funds needed to pay for the Carmel
River Mitigation Program. The Mitigation Program is legally required to address
the environmental consequences of Cal-Am's production of water. 32 More
specifically, the Mitigation Program is required under the California
Environmental Quality Act (CEQA) 33 in response to identified impacts caused by
Cal-Am on the Carmel River and the Seaside Groundwater Basin. 34 The State
Water Resources Control Board imposed an obligation on Cal-Am to continue this
program if the MPWMD should discontinue doing so although ,as we note at
31
D. 10-12-016 (December 2, 2010 at pp. 9 & 18.

The Mitigation Program is required by law. In September, 2009, CAL-AM entered
into an agreement with the MPWMD to continue funding of this Program. See
Application (A.) 10-01-012, p. 5.
33
Public Resources Code 21000- 21178.
34
A.10-01-012, pp. 8- 12.
32
166
III.H.2 infra, 35 there was no evidence that MPWMD had either discontinued those
efforts or planned to do so.
E.
The Application
As directed by Ordering Paragraph 25 of D.09-07-021, CAL-AM filed

Application 10-01-011 on January 5, 2010 seeking an order authorizing it to
continue to collect MPWMD's User Fee and remit it to MPWMD.
F.
DRA's Partial Protest
On January 18,2010, DRA protested CAL-AM's application, contesting

the Interest During Construction on the memorandum account balance. DRA
supported CAL-AM's application in all otherrespects. 36 On February 18,2010,
the MPWMD timely filed its Response to CAL-AM's Application No. 10-01-012.
G.
The Determination that Hearing Was Required and The

Absence of A Prehearing Conference or Scoping Memo
Three days after DRA filed its protest, the Commission determined a
hearing was required. 37 The Commission never modified this determination nor
did the Assigned Commissioner seek a modification of that determination pursuant
to procedures set forth in the Commission's Rules. 38
Notwithstanding the fact that the Commission determined that a hearing
was required (1) no prehearing conference was ever held and (2) no scoping memo
was ever issued prior to the issuance of the Decision.
H.
The Negotiation and Submission of The All-Party Settlement
D.09-07-021 directed "Cal~Am to meet and confer with the Management

District [MPWMD] to discuss funding for, and implementation of, both the
35
36
See, e.g. Exhibit 1, Testimony of D. Fuerst, at Q&A8,

"These requests are reasonable and DRA supports these requests." DRA Protest, page,
1.
37
Resolution ALJ-176-3247 (January 21,2010).

http://docs.cpuc.ca.gov/efile/RESC/112666.pdf
38
Rule 7.5 (Changes to Preliminary Determinations) provides that: "If the assigned
Commissioner, pursuant to Ru1e 7 .3(a), changes the preliminary determination on need
for hearing, the assigned Commissioner's ruling shall be placed on the Commission's
Consent Agenda for approval of that change." The Assigned Commissioner neither
issued such a ruling nor placed it before the Commission.
9
167
Mitigation Program and the Aquifer Storage and Recovery ("ASR") Project.. .. "
39
Based upon discussions at these meetings, Cal-Am, MPWMD and DRA, reached
agreement on a comprehensive All-Party Settlement that embraced the following
points:
1. The Mitigation Program is non-duplicative, reasonable, and prudent.
2. The ASR Program is non-duplicative, reasonable, and prudent.
3. Cal-Am should be authorized to collect MPWMD's user fee (at a rate
set by MPWMD) and remit it to MPWMD. 40
On May 18, 2010, the Parties filed a motion seeking approval of the AllParty Settlement.
I.
The Proposed Decision and Decision
Seven months later41 , on December 21,2010, the ALJ issued the PD

denying the motion, denying the Application and closing the proceeding. The
parties were given 20 days 42 (spanning the heart of the holiday season) to submit
comments on the PD, which were limited to 15 pages, and did so on January 10,
2011.
On March 24,2011, the Commission's Consent Calendar included a
revised version of the PD which differed materially from the original PD in two
respects.
First, in an attempt to respond to the unanimous view of the Parties that
dismissal 43 without further proceedings was improper, Cal-Am was given 60 days
39
D.09-07-021, p. 122.
Decision, page 10.
41
The delay in ruling on the motion did not implicate the 18-month time limit set forth in
Section 1701.5 because the statutory clock does not begin until the scoping memo is
issued. Here, a scoping memo was never issued.
42
Rule 14.3(a).
43
As we note at III.B.2 infra, while ostensibly addressing the objections of the Parties
regarding premature dismissal, the remedy embraced in the Decision is illusory. First,
the Decision directs dismissal in the absence of very specific amendment by Cal-Am.
Yet the current application has never been addressed on the merits in the fashion required
by law (pre-hearing conference, scoping memo.) Second, if the application is amended,
the amended application will form the boundaries of the permissive authority sought; the
authority actually sought by Cal-Am (embraced in the original application and the AllParty Settlement) will have been foreclosed, again, without a pre-hearing conference,
scoping memo or a hearing. Put another way, the original application would have never
40
10
168
to amend its application to either (1) propose a joint program by which Cal-Am
would fund MPWMD performance of its Mitigation measures program and
MPWMD's portion of the ASR program, or (2) offer an implementation plan for
Cal-Am to assume direct responsibility should MPWMD discontinue its
Mitigation measures program. The Decision provided that if no such amendment
was filed, the existing application was to be dismissed without any further
proceedings.
Second, Cal-Am was permitted to recover the balance in its MPWMD User
Fee Memorandum Account (after closing the account) over a 12-month period. As
noted earlier, that account tracked payments by Cal-Am to MPWMD (in lieu of
billing its customers the User Fee for MPWMD) so that MPWMD could continue
the programs.
The net effect of the revised PD was to leave MPWMD without a practical
means of collecting its User Fee used to fund the Mitigation and ASR projects .
The revised PD not only rejected the provision of the settlement that permitted the
User Fee to again be billed arid collected by Cal-Am on behalf ofMPWMD (as
contemplated by MPWMD's Enabling Act44 ) but it terminated the Monterey
Peninsula Water Management District User Fee Memorandum Account employed
by Cal-Am to facilitate eventual recovery from its ratepayers of sums paid to
MPWMD for the projects undertaken by MPWMD.
The Commission adopted the revised PD as the Decision without
discussion on March 24, 20 11. The date of issuance of the Decision is March 25,
2011. 45 The Decision leaves Cal-Am, MPWMD, DRA and water user in exactly
been examined in a hearing room even though, after the Commission's determination that
a hearing was required, it was required to be examined pursuant to the requirements of
Section 1701.3 and the conforming Commission Rules of Practice and Procedure.
Finally, even were the Commission to act favorably on an amended application, the issue
of its jurisdiction to govern collection of the MPWMD user fee would remain unresolved
and should be resolved by the Commission or a court. Cf, Santa Clara Valley
Transportation Authority v. Public Utilities Com., 124 Cal. App. 4th 346, 355; 2004 Cal.
PUC LEXIS 1973 (November 22, 2004).
44
See discussion at Ill.A.1.infra.
45
Section 1731 (b )(3 ).
11
169
the situation the All-Party Settlement sought to avoid. Because the All Party
settlement has been rejected, the continued pursuit of measures required by sound
water supply management (as well as CEQA and the SWRCB) will now have to
be undertaken against a backdrop of uncertainty and potential litigation.
II.
SPECIFICATIONS OF ERROR
A.
The Commission exceeded its subject matter jurisdiction by

interfering with and obstructing collection of a user fee by
MPWMD, which is lawfully imposed and collected by MPWMD
pursuant to authority conferred upon MPWMD by the
Legislature. Section1757(a)(l). 46
B.
The Commission failed to proceed in the manner required by

law by never issuing a scoping memo after it determined that a
hearing was required but before it issued the Decision. Sections
1701.1 (b), 1757(a)(2)
C.

law by never conducting a pre-hearing conference after it
determined that a hearing was required but before it issued the
Decision. Sections 1701.1 (b), 1757(a)(2)
D.

law by not following Rule 12.4 of its Rules of Practice and
Procedure which does not permit dismissal (even conditional
dismissal) of a matter in response to a motion for approval of a
settlement. Section 1757(a)(2).
E.

law by not applying precedent (including its own) with regard to
the standard for a motion to dismiss . Section 1757(a)(2). 47
46
Legislation that became effective in 1999, "broadened the grounds on which review
could be sought" in appellate courts and added the substantial evidence test. See, the
report of the California State Auditor at page 1. California State Auditor Report 2004118 issued July 2005. The report can be found at the auditor's website at
www.bsa.ca.gov.
47
"[A]n agency's use of an erroneous legal standard constitutes a failure to proceed in a
manner required by law." City of Marina v. Bd ofTrs. of Cal. State Univ., 39 Cal. 4th
341, 355 (Cal. 2006) (internal citations omitted).
12
170
III.
F.
Because the Commission determined that a hearing should be

held but never completed the hearing , the Commission did not
comply with Sections 311 and 1701.3 and thereby failed to
proceed in the manner required by law.
G.
The Findings of Fact are not supported by substantial evidence

in light of the whole record. Section 1757(a)(4).
H.
The Commission did not adequately weigh evidence in support

of the relief sought in the application -evidertce contrary to
factual claims made in the Decision- and thereby .violated
Section 1705 as construed by U.S. Steel Corp. v. PUC, 29 Cal.3d
603, 629 P.2d 1381 (1981) and Industrial Communications
Systems, 22 Cal. 3d 572 (1978), 585 P.2d 863.
DISCUSSION OF LEGAL ERRORS

A.
The Decision Exceeds the Commission's Jurisdiction by

Impermissibly Interfering with Authority Conferred by the
Legislature on MPWMD to (1) Fix the Level of the User Fee and
(2) Provide for Its Collection through Cal-Am. Section
1757(a)(l).
MPWMD is a government agency. 48 It is endowed by the California

Legislature with the right and power to impose taxes, fees and other assessments
and to collect the same through the bills ofutilities such as Cal-Am. 49 Past
decisions of the Commission have recognized MPWMD' s authority to impose fees
on Cal-Am ratepayers. 50
48
See discussion at III.A (in particular III.A.1) infra. The Legislature created MPWMD
in 1977 (Monterey Peninsula Water Management District Law, Stats 1977, Chapter 527).
("Enabling Act"). The Enabling Act invests the Water Management District with the sole
authority to provide for integrated management of the ground and surface water resources
within the Monterey Peninsula area. The District regulates and manages all water
distribution systems within Its territory including CAL-AM's main system. The Enabling
Act confers upon the MPWMD the power to impose fees and taxes and to collect them,
through utility bills .
. 49 Id
50
See D. 90-08-055 (Commission recognized the propriety of CAL-AM's collection of a
fee set at a level fixed by MPMWD Board and deferred to MPWMD any question
regarding application of fee to vacant lots) and D. 94-03-015 (recognizing MPWMD's
imposition of fines on CAL-AM customers for excessive water use.)
13
171
The Legislature has never vested the Commission with jurisdiction over
MPWMD. Until it does so, the Commission may not regulate the assessment and
collection of fees lawfully adopted by MPWMD even where, as is not the case
here, "compelling policy arguments" are present to support such an action.
51
As our Supreme Court has recognized, "[e ]established doctrine

declares that, 'In the absence of legislation otherwise providing, the
[PUC's] jurisdiction to regulate public utilities extends only to the
regulation of privately owned utilities.' (Los Angeles Met. Transit
Authority v. Public Utilities Com. (1959) 52 Ca1.2d 655, 661 [343
P.2d 913].) The Court of Appeal noted the same principle in People
ex rei. Pub. Uti!. Com. v. City ofFresno [(1967)] 254 Cal. App. 2d
76, 81 [62 Cal. Rptr. 79]. We reiterated in Orange County Air
Pollution Control Dist. v. Public Uti!. Com. (1971) 4 Ca1.3d 945,
953 at footnote 7 [95 Cal. Rptr. 17, 484 P.2d 1361], that 'The [PUC]
has no jurisdiction over municipally owned utilities unless expressly
provided by statute.' Significantly, when the Legislature first granted
the PUC regulatory authority over the Los Angeles Metropolitan
Transit Authority, it enacted such a specific statute (Stats. 1951, ch.
i668, p. 3804), and observed that in so doing it 'has made
exceptions to a long established policy.... '(Stats. 1951, ch. 1668,
13.4.)" (County oflnyo v. Public Utilities Com. (1980) 26 Ca1.3d
154, 166 [161 Cal. Rptr. 172, 604 P.2d 566].)
Santa Clara Valley Transportation Authority v. Public Utilities
Com., 124 Cal. App. 4th 346, 356 (Cal. App. 6th Dist. 2004)
The Commission cannot acquire jurisdiction over the acts of MPWMD by

consent, waiver or estoppel. 52 Moreover, a reviewing court will afford the
Commission no deference on questions of its ownjurisdiction 53 (and may not
even defer on non-jurisdictional issues in the absence of a legislative delegation
of rule-making authority.) 54 Accordingly, howsoever one might parse the
Commission's past expressions of its direct or indirect authority over MPWMD,
no basis exists today by which the Commission can claim the authority to deny
51
County oflnyo v. Public Utilities Com., 26 Cal. 3d 154, 167 (1980).

Sullivan v. Delta Airlines (1997) 15 Cal.4th 288, 307 fn.9.
53
PG&E Corporation v. Public Utilities Com., 118 Cal. App. 4th 1174 (May 21, 2004);
52
13 Cal, Rptr. 3d 630; 2004 Cal App. LEXIS 785
54
Santa Clara Valley Transportation Authority v. Public Utilities Com., 124 Cal. App. 4th
346; 2004 Cal. PUC LEXIS 1973 (November 22, 2004);

14
172
MPWMD, "a body politic" 55 under state law, revenues from the User Fee
imposed (by MPWMD not Cal-Am) on Cal-Am ratepayers. (Certainly, this
docket, which was concluded in the absence of full briefing or a complete
evidentiary record by the parties, offered no basis.) 56
The Commission must recognize the following:
1.
MPWMD has the statutory right to impose a fee on CalAm's ratepayers and collect that fee through utility bills.
In 1977, the Legislature enacted the ("Enabling Act") which includes the
following:
The [Monterey Peninsula Water Management] district shall have the

power:
(a) To sell, lease or otherwise dispose of water or any rights to the use of
the works of the district subject to the provisions ofSection 329.
(b) To ftx, revise, and collect rates and charges for the services, facilities,
or water furnished by it.
(c) To establish rules and regulations, consistent with the provisions of law
and the rules and regulations of the state and county health officials, to
protect the public health in the operation of the works, to provide for the
sale, distribution, and US? of water, and the services and facilities of the
works, to provide that service, facilities, or water shall not be furnished to
persons against whom there are delinquent charges, and to provide for
charges for the restoration ofservice.
(d) To provide that chargf!s for any of its services or facilities may be
collected together with, and not separately from, the charges for other
services or facilities rendered by it, or it may contract that all such
charges be collected by any other private or public utility, and that such
charges be billed upon the same bill and collected as one item.
(e) To provide that if all or part of a bill is not paid, the agency may
discontinue any or all services or facilities for which the bill is rendered
(f) To providefor the collection of charges. Remedies for their collection

and enforcement are cumulative and may be pursued alternatively or
55
Enabling Act, Section 118-133.

As MPWMD notes at III.B.2 infra, the opportunity to file comments on a PD does not
replicate the opportunity afforded by full opening and reply briefs.
56
15
173
consecutively as determined by the board.

(g) To provide for a basic penalty of not more than 10 percent for
nonpayment of the charges within the time and in the manner prescribed by
it, and, in addition, to provide for a penalty ofnot exceeding one-half of 1
percent per month for nonpayment of the charges and basic penalty. The
district may provide for the collection ofsuch penalties.
(h) To provide for the collection of the charge and penalties by making the
same a lien upon the real property and collectible at the same time and in
the same manner as taxes and assessments are so collected upon such real
property. 57
These are not policy directives from the MPWMD Board to its staff. The
enumerated powers flow directly from the Legislature. These include the express
right to set a surcharge (Sec 326(b)) and to collect it through the Cal-Am bill (Sec.
326 (d)).
Lest there be any doubt about the breath of the authority expressly
conferred, the Legislature provided more. In addition to the powers set forth above
and elsewhere in the Enabling Act 58 , the Legislature also vested MPWMD with
"such powers as are reasonably implied from such express powers necessary and
proper to carry out the objects of and purposes of the district. " 59
The Legislature well understood 60 that collection of the User Fee would be
through bills remitted by water utilities regulated by the Commission. Indeed,
when it created MPWMD, the Legislature expressly found that "within the
Monterey Peninsula area that will be served by the public district [MPWMD], the
water service is principally supplied by a privately owned water supplier.." 61 Yet,
in enumerating the powers conferred on MPWMD, the Legislature makes no

reference at all to the Commission.
57
Deerings Uncodified Acts, WATER, ACT 610. Monterey Peninsula Water

Management District Law (1977 ch 527) 326. Powers of district. (emphasis added).
58
Monterey Peninsula Water Management District Law, Appendix to California Water
Code, Chapter 118-2; Stats 1977, c.527.
59
Jd at Section 118-301; Stats 1977, c 527, Sec 301.
60
See the reference to privately owned public utilities in Sec 326(d).
61
Code, Chapter 118-2; Stats 1977, c.527, Sec 2.
16
174
The absence of any such reference is significant. "(W)hen the Legislature

has intended to confer PUC jurisdiction over a publicly owned ... [entity] ... it has
specifically and expressly done so." 62 "(I)n the absence of an express provision,
we will not infer a legislative intent to confer PUC jurisdiction." 63
Remarkably, the Decision (page 2) acknowledges the Commission's
determination in D. 09-07-021 that MPWMD "has a variety of funding
mechanisms at its disposal over which this Commission has no jurisdiction ....
specifically:
The Management District is authorized to issue bonds, assess charges for
groundwater enhancement facilities, levy assessments on real property and
improvements, and fix, revise, and collect rates and charges for the
services, facilities, or water furnished by it ... " 64
The Decision does not explain why the Commission may now preclude
MPWMD from collecting the lawfully assessed fee. Nor, as we note later, does the
Decision assert (or even suggest) that MPWMD set the User Fee other than in
accordance with the Enabling Act and other provisions of law.
2.
MPWMD's Enabling Act post-dates the Public Utilities

Act; to the extent any conflict between the two arises, the
later enacted legislation should govern.
MPWMD does not believe any conflict exists between the MPWMD
Enabling Act and Section 451 65 Section 451 requires that the rates and charges of
Commission-regulated water utilities be reasonable. The Commission may ensure
that Cal-Am is not charging "unreasonable" rates by insuring that Cal-Am is not
recovering (through its general rates) costs borne not by Cal-Am but by MPWMD
(and funded through the User Fee.) The authority ofMPWMD under the Enabling
act would not be affected and no conflict would arise.
62
Santa Clara Valley Transportation Authority v. Public Utilities Com., 124 Cal. App.
4th 346, 364 (Cal. App. 6th Dist. 2004).
63 !d.
64
Decision, page 2.
65
Decision, Conclusion of Law ("COL") No 5.
17
175
But, cutting to the chase, a conflict does arise if the Commission purports to
pass on the wisdom ofMPWMD expenditures, 66 the fashion in which the cost of
certain facilities is recovered (i.e. "pay-as-you-go" versus multi-year
amortization) 67 or the level of the fee. The Commission lacks authority to restrict
MPWMD's ability to bill and collect the User Fee through Cal-Am.
While the Commission is a constitutionally-created agency, its jurisdiction
over water companies is grounded in statutory law, specifically the Public Utilities
Act (Section 201 et seq.) Originally enacted in 1911, the Act was recodified into
its current form in 1951. 68 Twenty-six years later, the Legislature created
MPWMD by passing the Enabling Act. If any conflict exists between the two, the
later enacted and more specific legislation (the Enabling act) should govern. As
the Santa Clara Court held:
We examine the statutes in their context and with other legislation on the
same subject. [Citation.] If they conflict on a central element, we strive to
harmonize them so as to give effect to each. If conflicting statutes cannot be
reconciled, later enactments supersede earlier ones [citation], and more
specific provisions take precedence over more general ones 69 [citation]. ....
It is well settled that a later statute may supersede, modify, or so affect the
operation of an earlier law as to repeal the conflicting earlier law by
implication. [Citations.] 'The courts assume that in enacting a statute the
Legislature was aware of existing, related laws and intended to maintain a
consistent body of statutes.' [Citation.]" (Orange County Air Pollution
. Control Dist. v. Public Uti/. Com. (1971) 4 Ca1.3d 945, 954, fn. 8 [95 Cal.
Rptr. 17, 484 P.2d 1361].) ...... " 70
Similarly, when the Legislature confers broadly worded authority on the
Commission it does not, absent express language, intend to abrogate or restrict
more specific powers vested in governmental entities.. In People ex. re. Public
66
See, FOF 3.
See, FOF 7 of the Decision summarizing text at pp. 11-12. ("P)ay-as-you-go" is
decried as "not consistent with the Commission's ratemaking standards." (No reference
to (or description of) any such "standard" is provided in the Decision.)
68
Stats 1951, c.764.
69
It would be difficult to find a more general statute than Section 451.
70
Santa Clara Valley Transportation Authority v. Public Utilities Com., 124 Cal. App.
4th 346, 360 (Cal. App. 6th Dist. 2004)
67
18
176
Utilities Commission v. City ofFresno ("City ofFresno'') (1967) 254 Cal. App.
2d 76; 62 Cal. Rptr. 79; 1967 Cal. App. LEXIS 1369, the Court held that Section
851, which requires Commission approval prior to the sale, encumbrance or other
disposition by a public utility of its property, cannot constrain the otherwise
unrestricted power of a city to condemn public utility property under Section 1241
et seq. of the Code of Civil Procedure. A utility is not required to obtain the
consent of the Commission before the superior court may enter a fmal judgment of
condemnation. The Court, noted that (1) the Commission had no jurisdiction to
regulate the activities of public districts 71 and (2) while application of Section 851
to bar the proposed condemnation could only be by inference, the grant of eminent
domain authority to the City of Fresno was express and specific. 72
City ofFresno is instructive (and controlling) here. Section 451 governs

the rates of Cal-Am but not those ofMPWMD. One advocating its relevance to
this matter would have to argue that Section 451 extends to charges billed by CalAm not for itself but on behalf of another party. MPWMD is aware of no
authority for that proposition. We note that when the Legislature has authorized
the Commission to examine third party charges on utility bills it has ( 1) done so
expressly 73 and (2) expressly affirmed that the limited grant of authority did not
confer any more extensive Commission jurisdiction over the third party. 74
Seemingly overlooked in the Decision is the fact that Cal-Am is not
promulgating the MPWMD User Fee on its bill. It is only billing the fee {or
MPWMD. There is no conflict between Section 451 and the Enabling Act if for
no other reason than Section 451 governs Cal-Am's rates and the Enabling act
governs those ofMPWMD. If a conflict could be fashioned, however, it should be
resolved in favor of the later enacted, express terms of the Enabling Act which (1)
71
City ofFresno, supra, 254 Cal. App. 2d at 81; 1967 Cal. App. LEXIS 1369*6
Id, 254 Cal. App. 2d at 84; 1967 Cal. App. LEXIS 1369*11-12
73
See e.g. Sections 2889-2890.
74
Section 2889.9(b). MPWMD is also compelled to note that the cited statutes were
addressed to questionable activities by vendors of products and service that billed
subscribers of local exchange carriers. One presumes the Commission sees a more
salutary purpose in MPWMD's efforts to preserve that groundwater supply on the
Monterey Peninsula.
72
19
177
authorize MPWMD to set a user fee 75 , (2) authorizes MPWMD to collect it

through Cal-Am 76 and (3) make no reference to the Coinmission.
3.
The Commission has long recognized that it has no

jurisdiction over user fees by local and regional
government entities.
By denying the approval of the All-Party Settlement Agreement, the

Decision fails to follow Commission precedent. On several occasions, the
Commission has acknowledged that it may not interfere with a local governmental
authority imposing a lawful fee.
In Packard v. Pacific Telephone and Telegraph, 1970 PUC LEXIS 158, the
Commission held it had no jurisdiction to determine whether the City of Vallejo

was authorized to enact a utility users tax under the general laws of the State of
California, or whether the City of Vallejo followed the City Charter in enacting an
ordinance to impose a utility users tax. 77
In Commission decisions D.90-08-055 and D.94-03-015, the Commission
recognized that MPWMD possessed the authority to assess and collect fees from
CAL-AM customers. Again, in D.09-07-021, at page 120, the Commission
recognized "The Management District has a variety of funding mechanisms at its
disposal over which the Commission has no jurisdiction."
Also, in In re: Guidelines for the Equitable Treatment of Revenue
Producing Mechanisms Imposed by Local Government Entities on Public Utilities
(Guidelines) 78 the Commission stated:
"This Commission does not dispute or seek to dispute the authority or
right of any local governmental entity to impose or levy any form of
tax or fee upon utility customers or the utility itself, which that local
entity, as a matter of general law or judicial decision, has jurisdiction
75
Enabling Act, Section 326(b).
76
Id., Section 326(d).
77
As noted earlier, the City of Los Angeles imposed a 10% telecommunications user fee
(collected for the City by Commission-regulated telecommunications providers) for
decades. The fee was reduced to 9% in 2008 but is still collected by Commissionregulated companies from their subscribers.
78
D.89-05-063; 1989 Cal. PUC Lexis 890.
20
178
to impose, levy, or increase. Any issue relating to such local authority

is a matter for the Superior Court79 , not this Commission."
The above-cited Commission precedent describes how the Commission
exceeded its jurisdiction here. The Decision's denial of the Settlement Agreement
effectively "dispute(s) the authority or right of any local governmental entity to
impose or levy any form of tax or fee upon utility customers or the utility itself,
which that local entity, as a matter of general law or judicial decision, has
jurisdiction to impose, levy, or increase."
Moreover, a major focus of the Decision is the Commission's disapproval
of how the Water Management District calculates its User Fee. Specifically, the
Commission disputes the right of the Water Management District to use the "payas-you-go" approach for the ASR Project 80 and the proposed "percent of revenue"
basis for calculating the User Fee. 81 Taken as whole, the Decision expresses its
view that the User Fee is simply too high. The determination of how the User Fee
is calculated and its ultimate level, however, are judgments reserved to MPWMD
under the Enabling Act (acting in compliance with the Proposition 218 Omnibus
Implementation Act (A.B. 1260 of2007) which, effective in 2008, amended
Government Code 53750 to clarify the type and manner for which notice is to be
given to water utility users.)
The Decision never questions MPWMD's compliance with the Enabling
Act or any other law and the Commission has no authority to review or restrict the
MPWMD User Fee or the purpose for which it is used. At most, the Commission
may ensure that a public utility, such as Cal-Am, is not collecting (through its
general rates) revenues to fund activity for which a fee already being collected by
a governmental entity such as MPWMD. The Commission may adjust the rates of
Cal-Am to prevent such double-recovery but it may not reduce the User Fee fixed
by MPWMD (not Cal-Am) pursuant to MPWMD's statutory authority, or prevent
79
Here, the obvious vehicle is a writ of mandate under section 1085 of the Code of Civil
Procedure. See also CCP Section 863 and Government Code section 66022.
80
Decision at pg. 12.
81 !d.
21
179
its collection. If the Commission concludes the fee is not legally warranted, any
challenge must be brought in the proper forum, the Superior Court. 82
B.

law by never issuing a scoping memo after it determined that a
hearing was required. Sections 1701.1 (b) 1757(a)(2).
1.
The Commission Never Issued the Scoping Memo as

Required By Law.
Section 1701.1 (b) requires that:

"The commission upon initiating a hearing shall assign
one or more commissioners to oversee the case and an
administrative law judge where appropriate. The
assigned commissioner shall schedule a prehearing
conference. The assigned commissioner shall prepare
and issue by order or ruling a scoping memo that
describes the issues to be considered and the
applicable timetable for resolution.''
Rule 7.3 of the Commission's Rules provide that:
(a) At or after the prehearing conference (if one is
held), the assigned Commissioner shall issue the
scoping memo for the proceeding, which shall
determine the schedule (with projected submission
date) and issues to be addressed .....
(b) The assigned Commissioner has the discretion not
to issue a scoping memo in any proceeding in which it
is preliminarily determined that a hearing is not needed
and (1) in a proceeding initiated by application,
complaint, or order instituting investigation, no timely
protest, answer, or response is filed, or (2) in any
proceeding initiated by Commission order, no timely
request for hearing is filed.
Here, no scoping memo was issued before the Decision was issued even
though the Commission had determined, on January 21, 2010, 83 t}J.at a hearing was
82
CCP 1085.
Resolution ALJ-176-3247 (January 21, 2010).
83
22
180
required. The failure to issue the scoping memo violated both Section 1701.1(b)
and Rule 7.3.
2.
The Failure to Issue the Legally Required Scoping Memo

Prejudiced MPWMD
The failure to comply with Section 1701.1 (b) and Rule 7.3 was prejudicial
to MPWMD, DRA and Cal-Am. The Parties 84 had every right to expect that prior
to the issuance of a PD they would have the opportunity to address (through the
introduction of evidence at a hearing if necessary) issues deemed of importance to
the Commission (which are to be set forth in the scoping memo.) Even if a
scoping memo is issued with respect to any amended application, critical issues
(Commissionjurisdiction 85 over collection of the user fee 86 , purported duplication
of activity; "pay-as-you-go" accounting, etc.) may be deemed beyond the scope of
the matter.
Given the requirements Rule 12.4, addressed in more detail at HID. infra,
the Parties also had every right to expect that if the Commission rejected the AllParty Settlement, some further proceeding on the original application would take
place before a PD or decision resolving it was issued. 87 The Commission's
violation of Section 1701.1 (b) and Rule 12.4 denied MPWMD the opportunities
afforded to it by statute and by Rule.
84
Throughout the course of this application for rehearing, MPWMD makes references to
the rights of the "Parties." MPWMD, however, files this pleading solely on its own
behalf and does not purport to speak for DRA or Cal-Am.
85
Of course certain jurisdictional issues could not be foreclosed. The Commission cannot
acquire jurisdiction over the acts of MPWMD by consent, waiver or estoppel Sullivan v.
Delta Airlines (1997) 15 Cal.4th 288, 307 fn.9.
86
While an application for rehearing offers the opportunity to brief jurisdictional points,
one presumes that that by enacting SB 960, the Legislature expected the Commission to
ask for briefing with regard to its jurisdiction to take an action before it took the action.
Similarly, while comments under rule 14.3 offer an opportunity, the legal briefmg must
share 15 pages with comments on other issues and, in this case, be prepared on a difficult
schedule straddling the year-end holidays
87
No one should harbor the illusion that the Decision is only interim. Barring an
amendment meeting the requirements of Ordering Paragraph 4, the matter is to be
terminated without any further action. If the amendment is filed, it perforce withdraws
from consideration authority sought in the original application, again, without a single
hearing day being held.
23
181
Because no Scoping Memo was issued and the matter (the original
application) was terminated without any further proceedings, MPWMD's only
recourse was to respond for the first time to points raised in the PD under the Rule
governing comments on PDs, 88 rather than through full opening and reply briefs.
In a 15-page pleading- forced to be prepared in 20 days over the holidays 89 - the
Parties were required to address the PD's factual assertions 90 offered in opposition
to approval of an All-Party Settlement.
Issues which were apparently deemed dispositive (albeit never set forth in a
scoping memo) would have normally been the subject of opening and reply briefs
with no page limits and a longer period of time for preparation. Had the Parties
been given the opportunity to fully brief those matters, they would have an
opportunity to respond to issues in the scoping memo in detail. Again, in this
matter, MPWMD was forced to respond to brief statements in a PD already issued,
on short notice, and in under 15 pages.
91
The failure to adhere to a timely issued scoping memo, formed the basis for
annulment of the Commission decision in Southern California Edison v Pubic
Utilities Commission, 140 Cal. App. 4th 1085, 2006 Cal. PUC LEXIS 948 (June
26, 2006). In that case, the Court of Appeal annulled that portion of a
Commission decision in a rulemaking proceeding directing that utilities pay
"prevailing wage" on construction projects. The Court concluded that (1) the
Commission decision under review departed so sharply from the original scoping
memo (see Section 1701.1 (b)) that the Commission had not "proceeded as
88
Rule 14.3.
Given the fact that (1) the 18-month time limit under Section 1701.5(b) does not
commence until a scoping memo is issued and (2) no scoping memo was ever issued,
there was no particular urgency compelling the release of the PD by any particular date.
Accordingly, MPWMD is at a loss to understand why the PD was released on December
21,2010.
90
The latter task was made more difficult by virtue of the fact that some of the bases for
denial are vaguely stated. For example, the Decision states that "pay-as-you-go" funding
of project costs is" inconsistent with Commission ratemaking standards," yet provides
nothing more. The "ratemaking standards" cited are not identified.
91
Further, had an evidentiary hearing been conducted, the Parties would have had the
opportunity to present facts and cross-examination to refute the erroneous assumptions .
that are embedded in the PD.
89
24
182
required by law" (SeCtion 1757(a)(2)) and (2) the departure from the
Commission's own rules was prejudicial.
Here, there was no scoping memo from which to depart (error in itself). But
the prejudice is exactly as described in Southern California Edison. Prior to the
issuance of the PD, the Parties had no notice that the accounting and other issues
that led to rejection of the Settlement (and ultimately of the original application)
were issues in the proceeding. 92 Following the PD, the Parties were provided
only a truncated opportunity to address those issues by their comments
The failure to issue a scoping memo 93 was error and it was prejudicial to
MPWMD.
C.

law by never conducting a pre-hearing conference after it
determined a hearing was required but before issued the
Proposed Decision. Sections 1701.1 (b) 1757(a)(2)
Section 1701.1 (b) requires that:

"The commission upon initiating a hearing shall assign one or
more commissioners to oversee the case and an administrative law
judge where appropriate. The assigned commissioner shall schedule
a prehearing conference. The assigned commissioner shall prepare
and issue by order or ruling a scoping memo that describes the issues
to be considered and the applicable timetable for resolution."
Rule 7.2 of the Commissions Rules provide that:
In any proceeding in which it is preliminarily

determined that a hearing is needecf4 , the assigned
commissioner shallset a prehearing conference as
92
In D.11-01-029, the Commission recently granted rehearing ofD.09-11-008 on

identical facts. The Commission determined a hearing was needed, failed to issue a
scoping memo and then rejected a settlement and dismissed the application in the same
order, D. 09-11-008. Rehearing is warranted here for the same reason.
93
The failure to issue a scoping memo also leaves MPWMD with no basis to seek oral
argument since the "time and ...manner" of seeking oral argument are set forth in the
scoping memo. Rule 13.13 (b).
94
Again, while Rule 7.5 fixes a procedure by which the Assigned Commissioner may
change "the preliminary determination on the need for hearing" the procedure was never
followed in this matter.
25
183
soon as practicable after the commission makes the

assignment. The ruling setting the prehearing
conference may also set a date for filing and serving
prehearing conference statements. Such statements
may address the schedule, the issues to be considered,
and any other matter specified in the ruling setting the
prehearing conference. [Emphasis Added]
The Commission did not comply with either Section 1701.1 (b) or Rule 7 .2.
The Application was filed on January 5, 2010 and assigned to the Assigned
Commissioner on January 12, 2010. The Cori:nnission made the determination
regarding the need for a hearing on January 21, 2020 and the ALJ was assigned
the next day. During the four months between the assignment date and the date the
motion for approval of the Settlement was filed, no prehearing conference was
held and no scoping memo was issued. In other words, the prehearing conference
was not only not set "as soon as practicable", it was never set.
The prejudice to the parties arising out of the Commission's failure to
adhere to the statutory requirement is similar to that arising out of its failure to
issue a scoping memo. Quite simply, the matter was resolved in summary fashion
without providing the Parties the opportunity to address issues identified as those
on which the matter would tum. Had a prehearing conference been held, the ALJ
could have apprised the Parties of her concerns regarding the issues she wished to
see addressed in either a settlement, if one was forthcoming, or in the evidentiary
showing to be made at the hearing.
Of course, one could argue that the settling parties (or indeed any parties
to Commission proceedings) should be able to ascertain those issues on their own.
But one of the policies underlying SB 960 was to facilitate Commissioner
involvement in the hearing process in part by streamlining that process. The
prehearing conference was viewed as a means to make the process more efficient.
The purpose of the prehearing conference is "to identify parties involved and the
26
184
major issues that need to be addressed." 95 The parties were not to be left guessing
as to what issues should be addressed.
D.

law by not following Rule 12.4 which does not permit dismissal
(even conditional dismissal) of a matter in response to a motion
for approval of a settlement. Section 1757(a)(2).
The Commission's Rules provide specific alternatives with regard to

motions to approve settlements. Obviously, the Commission can accept the
settlement in total (Rule 12.5.) Or, the Commission "may reject a proposed
settlement whenever it determines that the settlement is not in the public interest."
(Rule 12.4.) If it elects to reject the settlement, the Commission may hold
hearings on the merits (Rule 12.4(a)), offer the parties time to renegotiate the
settlement (Rule 12.4(b)) or "propose alternative terms to the parties to the
settlement which are acceptable to the Commission and allow the parties
reasonable time within which to elect to accept such terms or to request other
relief." (Rule 12.4(c)). None of these alternatives were followed by the
Commission in the Decision. No others are provided for in Rule 12.4 or any of the
other provisions of the Commission's Rules 96
By issuing a decision that fails to comport with the Rules of Practice and
Procedure, the Commission has failed to proceed in the manner required by law.
As noted earlier, in Southern California Edison Co. v. Public Utilities
Commission, 140 Cal. App. 4th 1085, 1106, 45 Cal. Rptr. 3d 485, 500 (Cal. Dist.
Ct. App. 2006), the Court of Appeal annulled the Commission decision at issue
95
Assembly Staff Analysis on SB 960. http://www.leginfo.ca.gov/pub/9596/billlsen/sb 0951-1000/sb 960 cfa 960614 143601 asm floor.html
96
While applications for rehearing are to address legal issues, rehearing may be granted
if "sufficient reason is made to appear." Section 1731 (b). Rehearing may be granted for
policy reasons as well and the Commission should consider one raised by this outcome.
The sharp departure from Rule 12.4 here provides a disincentive to pursue settlements. If
the underlying proceeding many be dismissed without hearing in response to a settlement
motion, applicant's in particular will be discouraged for pursuing that course. The more
prudent course would be to simply continue to hearing even if the parties do not really
disagree on major issues.
27
185
because the Commission had not proceeded in the manner required by law. The
Court's ruling was predicated on the Commission's failure to follow its own Rules
of Practice and Procedure related to scoping memos. Here, the Commission has
plainly disregarded the provisions of Article 12 of the Rules of Practice and
Procedure.
The violation of Article 12leaves MPWMD and the other parties with no
opportunity to pursue the application as filed on the merits. Had the Commission
complied with Rule 12.4, the Parties would have had an opportunity to address the
concerns expressed in the Decision (through additional evidence) before the
Decision was issued.
E.

law by not applying precedent (including its own) with regard to
the standard for a motion to dismiss. Section 1757(a)(2). 97
The Decision conditionally dismisses the application. With respect to the

application filed by Cal-Am, the order is not interim in any respect. Cal-Am must
amend the application as directed in the Decision or the application will be
dismissed by the Executive Director without any further action by the
Commission98
The Decision, however, does not explain the basis for the dismissal. While
it describes its concerns with the Settlement, it does not explain why those
concerns compel dismissal of the application. Since Rule 12.4 does not offer
dismissal of a proceeding an available response to a motion for approval of a
settlement, one is compelled to look for some other legal basis for the dismissal.
As we note at H.l. irifra., however, the Conclusions of Law do not advise the
reader of any legal basis authorizing or compelling dismissal of the application as
filed. One is simply left to speculate.
97
"[A]n agency's use of an erroneous legal standard constitutes a failure to proceed in a

manner required by law." City of Marina v. Bd ofTrs. of Cal. State Univ., 39 Cal. 4th
341, 355 (Cal. 2006) (internal citations omitted).
98
Decision, Ordering Paragraph No 2.
28
186
One possibility is that the Commission believes that no material facts are at
issue such that the application may be disposed of as a legal matter even though no
party sought dismissal. Under this theory, the Commission has, in effect,
dismissed the matter sua sponte?
When the Commission considers summary adjudication, however, it has
adhered to the standard set forth in CCP 437c (c), stating that:
The Commission has permitted deviation from the rules to accept the
filing of a special pretrial motion- the motion for summary
judgment. Where a contested matter turns on questions of law rather
than questions of fact, a motion for summary judgment can help to
expedite administrative proceedings by avoiding needless hearings.
To properly consider this motion, we will employ the procedure for
summary judgment provided at Section 437(c) of the California
Code of Civil Procedure and the relevant case law. n6. Inasmuch as
summary judgment denies the right of the adverse party to full
hearing of the case, it should be applied with caution. Summary
judgment will be granted only when it is clear from the affidavits or
declarations filed in connection with the motion that there are no
triable issues of fact. Any doubts as to the propriety of granting the
complainants' motion will be resolved in favor of the respondent.
n6 California Code of Civil Procedure Section 437c(c) states:
"(c) The motion for summary judgment shall be granted if all the
papers submitted show that there is no triable issue as to any
material fact and that the moving party is entitled to judgment as a
matter of law. In determining whether the papers show that there is
no triable issue as to any material fact, the court shall consider all of
the evidence set forth in the papers, except that to which objections
have been made and sustained by the court, and all inferences
reasonably deductible from the evidence, except summary judgment
shall not be granted by the court based on inferences reasonably
deductible from the evidence, if contradicted by other inferences or
evidence, which raise a triable issue as to any material fact." 99
When the Decision granted its own motiori to dismiss here, did it resolve all
factual doubts in favor of the settling parties? Hardly. Substantial factual questions
99
Omniphone v. Pacific Bell; Decision No. 91-10-040, 1991 Cal. PUC LEXIS 695
(October 23, 1991) (emphasis supplied).
29
187
remain. MPWMD does dispute, for example, either the text or implied import of
Findings of Nos. 1-7 below:
1.
Cal-Am must implement all measures in the "Mitigation Program for the

2.
The Mitigation Program for the District's Water Allocation Program
Environmental Impact Report is comprised of mitigation measures for siheries,

reparian vegetation and wildlife, and lagoon vegetation and wildlife.
3.
The Management District's 2007-2008 Annual Report for the Mitigation
Program shows that the Management District allocated nearly $1 million of costs
4.
The Management District's 2007-2008 Annual Report for the Mitigation
Program shows the Aquifer Storage and Recovery Project as a component of the
5.
Cal-Am is actively pursuing water supply augmentation through its Coastal
Water Project and the Management District need not act on Cal-Am's behalf
6.
The rebate program, salaries for the Conservation Office Staff and project
expenditures for ordinance enforcement are booked as part of the Mitigation

Program, even though such costs are not included in the Management District's
2007-2008 Annual Repo~tfor the Mitigation Program. The Management District
did not explain whether these booked costs are included in the user fee even
though the Commission has approved and separately funded a joint conservation
program with the Management District which may include some of the same costs.
7.
The testimony supporting the application shows accounting treatment
inconsistent with Commission ratemaking standards.

The Decision apparently treats these statements as undisputed and draws
from them some basis (not set forth in the Conclusions of Law) to dismiss the
application filed by Cal-Am. But, minimally, both their representation as an
accurate characterization of the record and their application to this matter is
vigorously disputed. The accuracy of any and the fashion in which they
30
188
compelled a particular outcome could have been addressed at a hearing.

(Moreover, if a hearing is held, the parties can address them.). But, they may not
now be treated as beyond dispute.
At H.2 and 1.2.irifra., MPWMD addresses the aspects at the FOP's that
remain in dispute to show why the fmdings are inadequate and cannot be deemed
supported by "substantial evidence in light of the whole record." The Commission
will surely note that many of the same factual issues are raised in F. below to show
why the Commission's failure to comply with Section 1701.3 prejudiced
MPWMD Yet again, in J. irifra, many of the same points of contention are raised
in connection with the Commission's failure to satisfy the requirement of Section
1705 that the Commission weigh the relevant evidence. Industrial
Communications Systems, 22 Cal. 3d 572-(1978), 585 P.2d 863. While perhaps
repetitive, the citations to (1) evidence not addressed inthe Decision and (2)
clarifications that could easily have been made at a hearing or in response to a
request from the ALJ serve to demonstrate how ( 1) the summary dismissal of the
original application fostered a host of procedural infirmities in the Decision and
(2) how those infirmities could have been easily avoided.
F.
The Commission Failed to Proceed in the Manner Required by

Law by Failing to Comply with Section 1701.3
1.
The Requirements of Section 1701.3
Section 1701.3 provides, in relevant part, that;

(a) Jfthe commission pursuant to Section 1701.1 has determined that
a ratesetting case requires a hearing. the procedures prescribed by
this section shall be applicable. The assigned
commissioner shall determine prior to the first hearing whether the
commissioner or the assigned administrative law judge shall be
designated as the principal hearing officer. The principal hearing
officer shall be present for more than one-half of the hearing days .... The
commission shall establish a procedure for any party to request the
presence of a commissioner at a hearing. The assigned commissioner shall
be present at the closing arguments of the case ....
The presentation to the full commission shall contain a record of
the number ofdays of the hearing, the number ofdays that each
31
189
commissioner was present, and whether the decision was completed on

time ..... .
(d) Any party has the right to present a final oral argument of
its case before the commission. Those requests shall be scheduled in
a timely manner. A quorum of the commission shall be present for the
final oral arguments.
Here, there were no "closing arguments"
100
or "final oral arguments." 101
The requirements governing the presence of Commissioner 102 at the hearing were
circumvented by simply never holding the hearing described in Section 1701.3(a).
Similarly, the Decision does not contain the summary required by the final
paragraph of Section 1701.3(a) because no hearing was held on the original
application. It was not returned to the hearing room for evidentiary hearings,
argument or any other purpose. It was simply scheduled for dismissal by the
Executive Director.
As the Commission is well aware, the Parties attempted to resolve this
matter in a non-adversarial manner. Cal-Am filed the application required by
D.09-07-021 and the parties conducted the meet and confer sessions mandated by
D. 09-07-021. 103 They reached an All-Party Settlement. As such, the Parties did
not create a "record" in the customary fashion by presenting additional evidence or
cross-examining witnesses at a hearing during the pendency of the settlement.
Rather than acknowledging that the settlement process is undertaken to
avoid the expense of detailed formal submissions on the formal record, the
employed the material submitted with the application as a basis for ending the
matter. The parties were not permitted to offer further evidence, oral argument or
briefs in response to the concerns raised in the PD. Had those concerns been
expressed by a witness, the witness would have been subject to cross-examination.
100
Section 1701.3(a).(emphasis supplied.)

Section 1701.3(d).
102
Rule 13.3(a) requires that "In any ratesetting proceeding, the assigned Commissioner
shall be present at the closing argument, if any, and, if designated as presiding officer,
shall be present for more than one-half of the hearing days" Here, the parties would have
offered closing argument the matter had not been prematurely terminated.
100
.
D. 09-07-021, p.l22.
101
32
190
But the views embraced in the decision were not made available for testing in the
customary fashion. The Parties were only permitted to respond t them through
comments, a procedure which bore the shortcomings described in B.2.supra.
2.
MPWMD was Prejudiced by the Commission's Failure to

Conduct a Hearing before Dismissing the Application as
Filed.
The prejudice to the parties is manifest and is particularly highlighted by

the Decision's treatment of certain factual issues both in the initial text of the
Decision and in the Decision's review of the Comments on the PD. Both the
statutory scheme enacted by SB 960 and the Commission's Rules required that the
Parties be given the opportunity to produce evidence and cross-examine witnesses
to clarify and amplify their positions before the Commission speculated on those
factual points in the Decision to support the Decision's (1) denial of the Settlement
Agreement and (2) its dismissal of the application as filed. Examples of issues
that could have been easily addressed at hearing follow:
Responsibility for Programs
In its review of the Parties' respective Comments on the PD, the Decision
states that Cal-Am and DRA "disavowed all responsibility for the District's
Carmel River mitigation and Aquifer Storage programs" while the MPWMD
"took the opposite position" that Cal-Am was mandated to carry out the Mitigation
and ASR programs. 104 Had the matter proceeded to hearing, a critical point of
clarification could have been provided for the ALJ and the Commission. Under
the Enabling Act, MPWMD has discretion as to what programs it will undertake
as it~ sole responsibility. 105 The SWRCB has stated that Cal-Am should undertake
the programs "ifMPWMD should for any reason discontinue them." 106 If this
point was not clear to the Commission, it should have sought clarification on the
104
Decision at pp. 18-19.

See, Section 118-325 of the Enabling Act by which the Legislature confers on
MPWMD "the power as limited in this law to do any and every lawful act necessary in
order that sufficient water may be available ... "
106
Application, page 10.
105
33
191
record. (A scoping memo could have also raised the critical issue of responsibility
for particular projects. No scoping memo, however, was issued.)
Characterization of the User Fee
The Decision also states the Parties differed in their characterization of the
User Fee, claiming that MPWMD and DRA were "circumspect" about the nature
of the User Fee. If the Commission believed that MPWMD and the DRA were
"circumspect" about such a crucial characterization, such that the All Party
Settlement could not be adopted, Rule 12.4 and Section 1701.3 require the matter
be returned to the hearing room to afford the Parties the opportunity to clarify their
positions by producing evidence and cross-examining witnesses. Clarification
could also, obviously, be provided through examination by the ALJ or the
submission offurther evidence as directed by the ALJ. 107
Components of the User Fee
Similarly, the Decision cites 0.09-07-021 for the proposition that an
"incomplete explanation [was] offered by the Management District for all
components of the proposed user fee." 108 Evidence in the record of this
proceeding, however, provides ample explanation as to all components. 109 Ifthere
was further question as to the Parties' explanation, the Parties must be afforded an
opportunity to augment their explanations. The Parties would be afforded this
opportunity during an evidentiary hearing and cross-examination of witnesses as
well as examination by the ALJ. 110 If further evidence was deemed appropriate or
required, it could have been submitted as directed by the ALJ. 111
107
Rule 13.10.
Decision at p. 3.
109
Exhibit 1, Testimony of D. Fuerst, Exhibit 4, Testimony of J. Oliver, Exhibit 5,
Testimony ofR. Dickhaut.
110
The need to subject witnesses to cross examination was referenced as a reason to hold
the instant proceeding. D.09-07-021, p. 120. This was because, "We are also concerned
that the Management District's explanation of the user fee was incomplete." D.09-07021, p. 121.
111
Rule 13.10.
108
34
192
Duplication of Activity
Notwithstanding uncontroverted testimony stating there has been no
observation of duplicative efforts, 112 the Decision states to the contrary that "CalAm's application raises several issues, most notably several instances where
duplication in effort and accounting may occur." 113 However, the Decision does
not explain where such duplication may or has occurred or will occur. Even more
unsettling is the fact that this conclusion is at odds with the evidence before the
Commission, prepared testimony of a witness ready, willing and able to present it
under oath. 114 Since no hearing was held, the parties had no opportunity to
respond to the specific concerns that led to the speculative error in the Decision.
Since the policy underlying the requirement for a scoping memo is to give
parties the opportunity to address the Commission's concerns, the Parties here
should have been permitted to present further evidence (after the Commission
finally identified that concern) that no duplicative efforts are being made.
NOAA
Moreover, a hearing would have permitted the Parties to address any doubts
the Commission harbored with regard to the division of costs between the National
Oceanic and Atmospheric Administration (NOAA) and MPWMD. The Decision
acknowledges Cal-Am's statement that efforts ofNOAA and those ofMPWMD
"have no 'overlap"' but expresses concern that the record does not provide for an
"analytical explanation for how endangered species costs for steelhead are divided
between the two agencies or any evidence that Cal-Am is in any way managing
these costs for ratepayers." 115 If the Commission desires an "analytical
112
Exhibit 2, Testimony ofF. Mark Schubert at A12, states "I have not observed a
duplication of effort between MPWMD and California American Water in achieving the
stated goals for Phase 1 ASR. MPWMD is responsible for the full development of the
ASR well site; California American Water is responsible for the necessary conveyance of
potable water to and from the ASR well site." At Al3 he adds, "California American
Water and MPWMD have also discussed that a clear separation of responsibilities,
similar to Phase 1 ASR, be assigned to each agency for future ASR as not to duplicate
efforts."
113
Decision at p. 12.
114
Exhibit 2, Testimony ofF. Mark Schubert.
115
Decision, p 13.
35
193
explanation", the last way to obtain one is to dismiss a proceeding in which

hearings are deemed required 116 but have never been held. At that hearing, the
Parties would have had an opportunity to explain the perceived "analytical" gap
between Cal-Am's assertion that efforts of the MPWMD and NOAA are not
duplicative, and the Decision's assumption that Cal-Am, in some unexplained
fashion, is not managing "these costs for ratepayers" 117 A hearing would have
provided the forum for an examination as to how efforts of the two government
agencies organizations are divided, and whether or not an overlap occurs. 118
Remarkably, this portion of the Decision does not cite a specific "overlap"
between Cal-Am and MPWMD activities, but appears limited to whether there is
an overlap between MPWMD and NOAA activities.
Purported "Apparent Double-Counting"
The Decision concludes that "the record contains insufficient cost
justification ... [and] ... several instances of apparent double-counting." 119
MPWMD presented testimony of its Chief Financial Officer, Rick Dickhaut, to
demonstrate that the User Fee complies with Proposition 218 and other legal
mandates. 120 Ifthe Commission requires more evidence to allay its concerns
regarding "double-counting", the Parties are more than willing to provide it and
must be allowed to do so before the matter is summarily decided.
All of the issues set forth above could, and should, have been embraced in a
scoping memo. Unfortunately, none was issued.
116
Resolution ALJ-176-3247 (January 21, 2010).

117 Jd
118
Ahy discussion of the Commission's need to conduct a hearing, of course, ignores the
issue as to the Commission's limited jurisdiction into this area of inquiry. The
Commission lacks authority to review, disapprove or restrict the MPWMD fee, or how
they are used. At most, the Commission may adjust the rates of CAL-AM to prevent
double-recovery.
119
Decision at p. 13.
120
Exhibit 5, Testimony ofR. Dickhaut at A 9.
36
194
3.
There Was Ample Time to Oarify the Record Evidence .

with Regard to Issues of Concern to the ALJ
The Parties filed the settlement motion in May of 201 0; the Proposed
Decision was issued in December of2010. Durin:g the intervening seven months,
there was no indication that there were concerns regarding the sufficiency of the
record or the terms of the settlement. The Decision does not explain why the ALJ
could not have simply brought her concerns to the parties, at a prehearing
conference or through a ruling issued pursuant to Rule 13.10 121 so that the parties
could modify the settlement 122 or clarify the issues.
G.
The Commission Failed to proceed in the manner required by

law by failing to comply with Section 311
Section 311 (d) calls for the issuance of a PD after a matter has been
"submitted for decision". When was this matter" submitted for decision?" The
answer is that it has never been. The parties unsuccessfully sought approval of an
All-Issue, All-Party Settlement. None sought dismissal. None were apprised that
the matter had been "submitted" nor could they have reasonably so assumed.
Rule 13.14(a) provides that "a proceeding shall stand submitted for
decision by the Commission after the taking of evidence, the filing of briefs, and
the presentation of oral argument as may have been prescribed." Here there was
no taking of evidence at hearing 123 , no briefs 124 and no oral argument.
121
Rule 13.10 provides that:

The Administrative Law Judge or presiding officer, as applicable, may require the
production of further evidence upon any issue. Upon agreement of the parties, the
presiding officer may authorize the receipt of specific documentary evidence as a
part of the record within a fixed time after the hearing is adjourned, reserving
exhibit numbers therefore.
122
A prehearing conference or ruling could have facilitated such an inquiry. Indeed, that
is the import of Rule 12.4.
123
Where the Commission has determined that a hearing is required, the Rules make no
provision for receipt of evidence other than at the hearing. Where the Commission has
determined that no hearing is required, prepared testimony may be admitted pursuant to a
motion. Rule 13.8(d).
-~
124
The Rules distinguish between briefs (Rule 13.11) and Comments on a PD (Rule
14.3).
37
195
H.
The Decision does not contain adequate Findings of Fact and

Conclusions of Law on all material issues. Sections 1705,
1757(a)(3).
Section 1705 requires that Commission decisions "shall contain separately

stated findings of fact and conclusions of law by the [C]ommission on all issues
material to the order or decision." The separately stated findings of fact and
conclusions of law must
afford a rational basis for judicial review and assist the reviewing
court to ascertain the principles relied upon by the [C]ommission
and to determine whether it acted arbitrarily, as well as assist parties
to know why the case was lost and to prepare for rehearing or
review, assist others planning activities involving similar questions,
and serve to help the [C]ommission avoid careless or arbitrary
action. 125
"Everv issue that must be resolved to reach that ultimate finding is 'material to the
order or decision' and findings are required on the basic facts upon which the
ultimate fmding is based." 126 Although the Commission may have discretion to
determine which factors are relevant to a particular decision, the Commission must
state those factors and make findings on the material issues that ensue from those
factors. 127 Applying Section 1705, the California Supreme Court has invalidated
Commission decisions which fail to make findings on every issue necessary to
reach the ultim~te finding. 128
Here, the Findings and Conclusions set forth in the Decision do not explain
the ultimate outcome- a determination that the application as filed is unlawful or
may not be granted for some other reason. The Decision does not contain findings
125
Greyhound Lines, Inc. v. Pub. Utils. Comm 'n, 65 Cal. 2d 811, 813, 56 Cal. Rptr. 484,
485, 423 P.2d 556, 557 (Cal. 1967); Cal. Motor Transp. Co. v. Pub. Utils. Comm 'n, 59
Cal. 2d 270, 274-275, 28 Cal. Rptr. 868, 871, 379 P.2d 324 (Cal. 1963); Cal. Mfrs. Ass 'n
v. Pub. Utils. Comm 'n, 24 Cal. 3d 251, 258-259, 155 Cal. Rptr. 664, 667-668, 595 P .3d
98, 101-102 (Cal. 1979).
126
Greyhound Lines, 65 Cal. 2d at 813; Cal. Motor Transport, 59 Cal. 2d at 274-75
(emphasis supplied); City ofLos Angeles v. Pub. Utils. Comm'n, 7 Cal. 3d 331,337, 102
Cal. Rptr. 313,318,497 P.2d 785,790 (Cal. 1972).
127
California Motor Transp., 59 Cal.2d at 275; City ofLos Angeles, 7 Ca1.3d at 337.
128
Greyhound Lines, 65 Cal.2d at 813 (ultimate fmding regarding "public interest"); Cal.
Motor Transp., 59 Cal.2d at 274-75 (ultimate finding regarding "public convenience and
necessity").
38
196
and conclusions that resolve "(e)very issue that must be resolved to reach that
ultimate fmding" as required by Greyhound Lines. As noted below, one is left to
guess at the rational (particularly the legal rational) for the Decision.
1.
The Conclusions of Law do not provide the Legal Basis

for Dismissal of The Application.
The Conclusions of Law ("COLs") 129 consist of receiving the testimony

(COL 1), determining that the Settlement should not be approved (COL 2-3),
outlining the sought amendment (COL 4) and a reference to Section 451 (COL 5.)
Nothing is offered to explain to anyone why barring MPWMD from collecting the
User Fee through Cal-Am is required (or permitted) by Section 451. No COL
concludes that the Commission may take that course notwithstanding the Enabling
Act. The COL's, individually or in concert, do not explain why rejection of the
All-Party Settlement legally compels (or even pelinits) dismissal of the
application. Indeed no variation of any of the foregoing is found in the COLs'.
129
The COLs are set forth below:

1. The testimony supporting the application should be received into evidence.
2. The settlement agreement is not reasonable in light ofthe record, consistent with
the law, or in the public interest.
3. The settlement agreement should not be approved.
4. California American Water Company should be authorized to amend this
application within 60 days of the effective date of today 's decision by filing and serving
one of the following;
A. Joint program proposal for the District to perform the Carmel River
Mitigation measures based on an updated version ofthe budget set
out in Attachment 1, and to fund the District's portion of the Aquifer
Storage and Recovery Project, or
B.
Implementation plan for Cal-Am to assume direct responsibility for

the Carmel River Mitigation measures, should the District cease to
fund the measures.
The Monterey Peninsula Water Management District User Fee Memorandum should
close 60 days after the effective date of this order. Cal-Am should be authorized to file a
Tier 2 advice letter to amortize the amounts recorded in that account over 12 months
with interest to be calculated based on the 90-day commercial paper rate.
5. Pub. Uti!. Code 451 requires all charges or rules pertaining to charges
demanded or received by a public utility to be just and reasonable.
39
197
Most significantly, the Decision does not contain a COL squarely

addressing, explaining and/or resolving the legal question of whether the
Commission may, under color of Section 451, restrict the ability of MPWMD to
exercise its lawful authority under the Enabling Act to set and collect its User Fee.
Moreover, no COL asserts (or even suggests) that MPWMD has not fully
complied with the applicable law in setting and collecting the User Fee.
Although Section 451 makes no reference to the Commission itself, the
Commission may believe that it bears some obligation under Section 451 that
overrides the Enabling Act. There is no authority to support that view found in the
Decision but at least it would frame a theory to be debated on review. No such
theory, however, is espoused in either the COLs or the text of the Decision.
Alternatively, the Commission may believe that the Enabling Act does not
authorize MPWMD to fix and collect the fee at issue through the Cal-Am bill.
Again, if that is the Commission's position, it should say so in a COL. Neither the
COLs or the body of the Decision, however, contain any such inference much less
proffer authority for it.
As a corollary, the Commission may also construe Section 326(d) of the
Enabling Act to permit CAL-AM to refuse to bill the user fee. Section 326(d)
provides MPWMD with the authority:
To provide that charges for any of its services or facilities may be
collected together with, and not separately from, the charges for
other services or facilities rendered by it, or it may contract that all
such charges be collected by any other private or public utility, and
that such charges be billed upon the same bill and collected as one
item.
Moreover, the Legislature has also conferred on MPWMD "such powers as are
reasonably implied from such express powers necessary and proper to carry out
the objects of and purposes of the district." 130
130

Code, Chapter 118-2; Stats 1977, c.527.
at Section 118-301; Stats 1977, c 527, Sec 301.
40
198
Has the Commission concluded that MPWMD may not collect the User Fee
through Cal-Am? If so, what is the source ofthat limitation? No answer is found
in the COLs or anywhere else in the Decision.
Or, has the Commission concluded that it may lawfully bar Cal-Am from
collecting a lawfully set User Fee? A Commission order effectively precluding
MPWMD from collecting a lawfully set User Fee implicates a host of legal issues
including the question addressed at III.A.2. supra regarding the effect to be given
the later enacted more specific legislation. 131 The Decision, however, does not
even claim such jurisdiction.
The COLs fail to meet the requirement of Section 1705. They do not reach
a "conclusion" on a single relevant legal issue.
2.
The Findings of Fact do Not Explain why Restricting

MPWMD from collecting the User Fee is Required to
Avoid a Double Collection of revenues from CAL-AM
Ratepayers.
The findings of fact (FOFs) are no more helpful than the COLs. They are
set forth below with comments and analysis:
1. Cal-Am must implement all measures in the "Mitigation Program for
the District's Water Allocation Program Environmental Impact Report" not

This FOF is apparently included to imply that MPWMD is not

implementing the Mitigation Measures such that CAL-AM will or would be
compelled to undertake, at the expense of its ratepayers, an activity for which
MPWMD is collecting a User Fee. There is no evidence, however, that MPWMD
is not implementing the Mitigation Measures. To the contrary, the evidentiary
See discussion of Santa Clara at III.3.A supra. Such a holding would also be flatly
contrary to City ofFresno. 254 Cal. App. 2d at 84; 1967 Cal. App. LEXIS 1369* 11-12.
MPWMD's authority to fix and collect the User Fee is express and clear. The
Commission's authority to preclude its collection under color of Section 451 is tenuous at
best. The user fee at issue is neither set by a public utility nor collected for the benefit of
a public utility.
l3l
41
199
record supports the fact that the Measures are continuing132 and that there is no
duplication of effort. 133
2.
The Mitigation Program for the District's Water Allocation
Program Environmental Impact Report is comprised of mitigation measures for

fisheries, riparian vegetation and wildlife, and lagoon vegetation and wildlife.
This FOF simply states certain objectives of the Mitigation Program.
3.
The Management District's 2007-2008 Annual Report for the
Mitigation Program shows that the Management District allocated nearly $1

million of costs of its new office building to the Mitigation Program.
This FOF, which is contested as stated, implies MPWMD should not
recover administrative costs through the User Fee. There is no support for this
proposition in the law. MPWMD is not required to justify the cost underlying its
User Fee in a Commission proceeding. That said, it was fully prepared to moot
the issue by doing so. Had this matter proceeded to hearing, the basis for the
present fee could have been explored at hearing rather than summarily resolved by
reference to a report for fiscal years that ended almost three years ago. At the
hearing, MPWMD could have presented evidence that it funded its office using a
cash management, properly-documented inter-fund transfer, incorporating a
m<i;ndatory obligation to repay the loan with interest at the rate those monies would
have otherwise earned had they been invested. The MPWMD Board found those
funds to be available for use as they were earmarked for long term capital
replacement, not for current operations.
4.
The Management District's 2007-2008 Annual Report for the
Mitigation Program shows the Aquifer Storage and Recovery Project as a

component of the user fee Mitigation Program costs and also as a stand-alone
additional user fee.
132
Exhibit 1, Testimony of D. Fuerst, at AS, provides an overview of the Mitigation

Program budget process, beginning in 1991, and that "Since 2001, the District Board has
voted to continue the Comprehensive Mitigation Program as part of the District's annual
budget approval process."
133
Decision, p. 13, acknowledges CAL-AM's statement that efforts ofNOAA and those
ofMPWMD "have no 'overlap."'
42
200
This FOF is also contested. It implies that the MPWMD user fee is too
high. Yet, the fee was set pursuant to statutory procedures and public comment
and does not exceed any restrictions on the level of the fee imposed by law on
MPWMD. The decision does not dispute MPWMD's compliance with any legal
requirement and there is no basis in the law for review of the fee level by the
Commission. Again, had this matter proceeded to hearing, the basis for the
present fee could have been explored at hearing rather than summarily resolved by
reference to an outdated report for fiscal years from almost three years ago:
5.
Cal-Am is actively pursuing water supply augmentation through its.
Coastal Water Project and the Management District need not act on Cal-Am's
behalf
This FOF goes to the level of CAL-AM's rates, not the user fee set by
MPWMD. Had this matter proceeded to hearing, MPWMD would have
demonstrated that its adopted Mission Statement is "To Manage, Augment and
Protect Water Resources for the Benefit of the Community and the Environment."
MPWMD's decision to continue pursuit of water augmentation projects is
consistent with its enabling statute and its adopted mission. It is inaccurate to
assert that any such efforts are simply done "on Cal-Am's behalf."
6.
The rebate program, salaries for the Conservation Office Staff and
project expenditures for ordinance eriforcement are booked as part of the

Mitigation Program, even though such costs are not included in the Management
District's 2007-2008 Annual Report for the Mitigation Program. The
Management District did not explain whether these booked costs are included in
the user fee even though the Commission has approved and separately funded a
joint conservation program with the Management District which may include
some of the same costs.
Had this matter proceeded to hearing, MPWMD would have demonstrated
that the need to include funding for MPWMD Demand Management activities is a
component of the Mitigation Program. "The Management District did not explain
43
201
whether these booked costs are included in the user fee" (or why) because no one
asked it to. MPWMD's Demand Management program (including water efficiency
and conservation eiements) is not funded by the Conservation Surcharge collected
by Cal-Am for Conservation Programs within the Monterey District. Had it been
given the opportunity, MPWMD would have presented evidence as to its Demand
Management Program budget and personnel expenses for the past 20 years (since
the adoption of the Water Allocation Program in 1990), specify those elements of
the program that are funded by the Mitigation Program budget, and impacts that
would result from not continuing MPWMD's Demand Management program
7.
The testimony supporting the application shows accounting
treatment inconsistent with Commission ratemaking standards.

The subtext ofthis FOF is that were MPWMD subject to regulation by the
Commission, the Commission would "disallow" certain portions of the revenue
MPWMD seeks to recover from the User Fee. The disallowance would be
premised on the fact that the fashion in which the revenue requirement supported
by the fee is calculated is not a manner consistent with "Commission ratemaking
standards"- standards not identified in the Decision. But, neither the "ratemaking
standards" nor, more importantly, the legal basis for the Commission to impose
them on MPWMD are found in the Decision either. At a hearing on this matter,
MPWMD would have demonstrated that its treatment of user fee revenue and its
expenditure was complaint with general accepted accounting principles and
standard governmental cost accounting.
8.
The user fee and Carmel River mitigation program have a unique
history, including particularly that the funds have been remitted to a government
agency, that render reasonable Cal-Am 's request to recover the amounts recorded
in the account.
This FOF (really a COL) should have been applied to the entirety of the
application. All of the proceeds from the User Fee have been remitted to a
government agency in accordance with statutory authority enabling those fees to
44
202
be fixed 134 and collected 135 by a public utility 136 . None of the proceeds are
retained by Cal-Am.
I.
None of The Findings of Fact are supported by substantial

evidence in light of the whole record (Section 1757(a)(4))
Because the "whole Record" remains to be received
Findings in Commission decisions must be supported by "substantial

evidence in light of the whole record." City of Vernon v. Public Utilities
Commission, 88 Cal. App. 4th 672, 678 (2001) (citing Section 1757(a)(4).) To
determine whether the requirements of Section 1757(a)(4) 137 are satisfied, a court
does not simply determine whether evidence in support of a challenged finding
exists in any measurable amount.
The "in light of the whole record" language means that
the court reviewing the agency's decision cannot just
isolate the evidence supporting the findings and call it
a day, thereby disregarding other relevant evidence in
the record. (Bixby v. Pi~rno (1971) 4 Cal. 3d 130, 149
[93 Cal. Rptr. 234, 481 P.2d 242].) Rather, the court
must consider all relevant evidence, including
evidence detracting from the decision, a task which
involves some weighing to fairly estimate the worth of
the evidence. (County ofSan Diego v. Assessment
Appeals Bd. No.2 (1983) 148 Cal. App. 3d 548 [195
Cal. Rptr. 895].) 138
Here, the "whole record" was never completely established. The
Commission determined that a hearing was required but never held it. It never
offered the parties the opportunity to develop a whole record by proffering
134
Enabling Act, section 326(b).

Id at Section 326(d).
136
We assume it is beyond dispute that Cal-Am qualifies as a ''private or public utility"
within the meaning of section 326(d) of the Enabling Act. To conclude otherwise would
be inconsistent with the Legislature's understanding of the status quo at the time it passed
the Enabling Act. See discussion ofthe legislative fmding at III.A.1 supra.
137
Section 1757(a)(4) provides that a Commission decision may be annulled if"The
findings in the decision of the commission are not supported by substantial evidence in
li&ht of the whole record."
13
Lucas Valley Homeowners Ass 'n v. County of Marin, eta!., 233 Cal. App. 3d 130; 284
Cal. Rptr. 427; 1991 Cal. App. LEXIS 932. See also Sierra Club v. California Coastal
Commission (1993) 12 Cal. App. 4th 602.
135
45
203
evidence and argument with regard to conjecture ("may occur" 139 , "would appear
to" 140 and "apparent" 141 ) in the Decision. Rather than comply with Rule 12.4, the
Commission simply brought the matter to a close. It did not complete the
proceeding in the manner required by Sections 311 and 1701.3(a).
1.
The Decision is not based on the record" as required by

Section 1701.2(a)
For largely the same reason that the Decision failed to meet the "substantial
evidence" requirements of Section 1757(a)(4), the Decision does not satisfy the
requirement of Section 170 1.2(a) 142 that is be "based on the record." Here, the
parties had no opportunity to address any objections or concerns with regard to the
prepared testimony-testimony the witnesses were willing to submit under oath.
The Decision relies in large part on an annual report almost three years old and the
parties were given no opportunity to clarify, update or explain anything in it.
Moreover, before the PD was issued, MPWMD did not have an opportunity to
brief or otherwise arg~e the question of how that data should be employed in a
decision in this matter. The hearings were not held and no briefs were filed
because the parties proposed a settlement prior to the hearings. The "record" was
not complete. The matter had not come to a "conclusion" (Section 1705).
Myriad provisions of the Pubic Utilities Code fix requirements for
"hearings" or set evidentiary standards. 143 Again, it cannot seriously be contended
that these requirements can be meet by (1) determining that a hearing should be
held, (2) rejecting an All-Party Settlement prior to the hearing and then (3)
declaring that any further consideration of the filed application wo1,1ld come to an
end.
139
Decision, page 12.

!d. at page 13.
141 !d.
142
.
Section 1701.2(a) provides iri part that:
The commission decision shall be based on the record developed by the
assigned commissioner or the administrative law judge. A decision different from that of
the assigned commissioner or the administrative law judge shall be accompanied by a
written explanation of each of the changes made to the decision.
143
See, e.g. Sections 728, 761, 768, 1708, 1757(a)(4).
140
46
204
2.
Much of the Text of the Decision Is Inaccurate.
One indicia of the extent to which the Decision is not based on the record is
the number of factual inaccuracies in it. Rehearing will permit the Commission to
correct them.
a.
The Decision Incorrectly Presumes the User Fee is

Charged by CAL-AM.
At page 14, the Decision cites Public Utilities Code 451 and 454 for the
proposition, not contested here, that "(n)o public utility shall charge any rate ...
except upon a showing before the Commission, and a finding of the Commission
that the new rate is justified." First, none of the cited text is found in Section 451,
the lone statute found in the COLs. Second, the citation seems premised on an
assumption that the User Fee is charged by Cal-Am, a privately owned public
utility, when, in fact, the User Fee, is charged (lawfully) by a governmental entity,
MPWMD. Finally, the User Fee is not a "new rate." 144
b.
The Water Management District's Programs do not

Duplicate CAL-AM's Activities
At page 2, the Decision citesD.09-07-021 for the proposition that "CalAm's customers may be paying user fees to the Management District for projects
that may not be necessary or cost effectively performed by the Management
District." This statement is about as useful as one stating that "Cal-Am's
customers may be paying user fees to the Management District for projects that
are necessary and cost effectively performed by the Management District." There
is no specific evidence in the record of this proceeding cited to support the
Decision's allegation that expenditures are for unnecessary or inefficient projects.
144
On June 20, 2005, the MPWMD Board of Directors approved the District's 2005-06
budget which included a 1.2% increase in the User Fee (to 8.325%). At its July 18,2005
meeting, MPWMD approved the first reading of Ordinance 123 and the Notice of
Exemption to be filed after the second reading. Ordinance 123 was approved at second
reading on August 15, 2005 and the Notice of Exemption was subsequently filed with the
Monterey County Clerk. The MPWMD User Fee increase went into effect on October
14,2005.
47
205
To the contrary, CAL-AM's application and supporting testimony demonstrate

MPWMD programs are necessary and do not duplicate CAL-AM activities. 145
c.
Evidence in the Record Demonstrates there is no

Duplication in Effort and Accounting
The Decision states that "Cal-Am's application raises several issues, most
notably several instances where duplication in effort and accounting may
occur." 146 There is no evidence in the record of this proceeding to support this
allegation. To the contrary, Exhibit 2, Testimony ofF. Mark Schubert at Q&A
12, states "I have not observed a duplication of effort between MPWMD and
California American Water in achieving the stated goals for Phase 1 ASR.
MPWMD is responsible for the full development of the ASR well site; California
American Water is responsible for the necessary conveyance of potable water to
and from the ASR well site." At Q&A 13 he adds, "California American Water
and MPWMD have also discussed that a clear separation of responsibilities,
similar to Phase 1 ASR, be assigned to each agency for future ASR as not to
duplicate efforts." Why is this testimony rejected? The rejection cannot be
premised on the demeanor of the witness. The hearing was never held.
d.
The User Fee is Based on the Costs of the Programs

it Supports
At page 11, the Decision states the "user fee proposal is not based on the
costs of these two programs and includes no ratemaking or programmatic
limitations." This statement is an error. R. Dickhaut testified 147 that MPWMD is
legally required to review the user fee each year to ensure the purposes for which
the fee was imposed have been met, to ensure the fee is still required, and to assess
whether the amount of the fee remains appropriate. Mr. Dickhaut stated the fee is
required to sunset ifthe purpose for the fee expires. He also explained, "If the
145
See III.I.2.c irifra.

.
Decision at p. 12 (emphasis added.)
147
Exhibit 5, Testimony ofR. Dickhaut, at A9.
146
48
206
purpose for the fee is determined to continue, but the amounts needed to fund that
purpose are decreased, the fee shall be reduced to that lesser amount."
e.
148
The Record Provided Clear Cost Justifications
The Decision concludes that "the record contains insufficient cost

justification, several instances of apparent double-counting."
149
There was no
evidence in the record in to support such an allegation. 150 Moreover, assuming,
arguendo, that this conclusion had any merit, the proper remedy available to the
Commission is to review and, if necessary, reduce the revenue to Cal-Am derived
from its general rates. The proper remedy is not to preclude collection of the
MPWMD User Fee.
f.
Erroneous Cost Summary
The Decision erroneously summarizes "cost estimates for each measure,

broken down into capital, $442,700, and annual expenses, $323,100." 151 The
1990 annual costs, however, also include "annual funds needed to continue
existing environmental programs," as was shown in the lower portion of the
Proposed Decision attachment. The costs to continue existing environmental
programs in 1990 were $315,000; therefore the total annual cost to operate the
proposed mitigation program in 1990 was $638,100.
152
Further, Exhibit 5,
Testimony of R. Dickhaut, at A1 0, states "for Calendar Years 2010 and 2011, it is

148
149
Id.
Decision at p. 13
E:xhibit 5, Testimony ofR. Dickhaut, at A9, demonstrates how the User Fee lawfully
complies with Proposition 218 as determined in Bighorn-Desert View Water Agency v.
Verjil, 39 Cal.4th 205. Mr. Dickhaut testifies to the notice and protest proceedings
conducted by MPWMD in 2008.
In Exhibit 2, at A 17, F. Mark Schubert testifies that MPWMD ASR efforts are cost
effective, and that without reliance on these that CAL-AM would necessarily incur legal
expense to modify the SWRCB Declaration of Fully Appropriated Stream, and acquire
water rights and complete timely and expensive environmental analyses. He concludes
that CAL-AM's efforts "could cost between $3,000,000 and up to $6,000,000."
151
Decision at p. 16.
152
Any reference to 1990 Mitigation Program cost estimates is flawed if it does not
increase the 1990 dollars to 2011 dollars. Escalating those costs to 2011 dollars would
bring an estimate of the total annual cost of the 1990 program to between $1.31 M and
$1.43 M.
150
49
207
anticipated that the amounts budgeted for the MPWMD comprehensive Mitigation
Program will be $3,534,900 and $3,711,600, respectively. The equivalent number
of staff positions is expected to remain at 14.3."
g.
Error in Citing the 1990 Environmental Impact

Report
The Decision erroneously states "The 1990 Environmental Impact Report

(EIR) document referenced in the Board's decision is attached to the Management
District's General Manager's testimony in this proceeding." This statement is in
error. The EIR is not attached to testimony. Exhibit MPWMD-DF-01 is an
Executive Summary of the Final EIR. MPWMD asks to present the full EIR in
evidence at a hearing.
h.
Confusion of the Program EIR with the Five-Year

Mitigation Program.
The Decision erroneously concludes "The EIR Exhibit 2 Table provides an

ideal beginning point to prepare a budget for the Mitigation Program that is CalAm's responsibility ... " 153 The Decision confuses the Program EIR with the
"Five-Year Mitigation Program." Exhibit 1, Testimony of D. Fuerst, at Q&A8,
shows that the Five-Year Mitigation Program was only an initial program that has
since been reassessed and revised by the District Board every year since 2001, as
part of the Mitigation Program in the District's annual budget approval process
J.
The Commission did not adequately weigh evidence in support

of the relief sought in the application and thereby violated
Section 1705 as construed by U.S. Steel Corp. v. PUC, 29 Cal.3d
603, 629 P.2d 1381 (1981) and Industrial Communications
Systems, 22 Cal. 3d 572 (1978), 585 P.2d 863.
In order to satisfy Section 1705, the Commission is obligated to actually
weigh the record evidence rather than simply admit it. 154 Here, there is no
evidence that the Commission did so. It largely relies on an old annual report,
153
Decision at p.16
154
Industrial Communications Systems v. Public Utilities Commission (1978) 22 Cal. 3d

572.
50
208
issued roughly three years before the Decision. (The Application was filed over
15 months ago.) MPWMD should be permitted to present more recent and
relevant Annual Reports, and supporting budgets, in evidence at a hearing.
Below, MPWMD identifies evidence in the record that was obviously not
"weighed" by the Commission (at least as reflected in the Decision.)
1.
The Effective Collaboration Between CAL-AM and

MPWMD
The record shows an effective collaboration between the MPWMD and

CAL-AM in implementing the Mitigation Program as well as the ASR Project.
DRA, representing the interests of ratepayers, 155 has been kept fully ~pprised on
the nature and extent of the collaboration.
Prepared testimony was submitted showing that MPWMD and Cal-Am
have a history of working collaboratively to implement the requirements of the
Mitigation Program and the ASR Project. Also, testimony was provided that
specifically demonstrates how MPWMD and Cal-Am have divided
responsibilities. 156 Also, the record shows that the collaboration is cost
effective. 157
2.
The Fact That the User fee At Issue is That of MPWMD

and Not CAL-AM.
While the Decision would leave anyone in doubt, MPWMD presumes that
the Commission is aware that the User Fee is set by MPWMD and only collected
by Cal-Am for MPWMD. That fact, and its consequences for the assertion of
Commission jurisdiction, are simply never addressed in the Decision.
155
Section 309.5.
See, for example, Testimony of CAL-AM Engineer F. Mark Schurbert, p.4 regarding
ASR project.
157
Exhibit 2 at A 17 F. Mark Schurbert testified that MPWMD ASR efforts were cost
effective.
156
51
209
3.
The Testimony of Mr. Schurbert, Mr. Dickhaut and Mr.

Fuerst
Mark Schubert, a CAL-AM engineer, submitted testimony with regard to

the cost effectiveness ofMPWMD's ASR programs and the absence of
duplication between CAL-AM and MPWMD programs.
158
Mr. Dickhaut
submitted testimony with regard to the fashion in which the User Fee is developed
and how the level is set in compliance with California Constitutional and statutory
law. 159 Mr. Fuerst, the General Manager ofMPWMD submitted testimony with
regard to MPWMD's continued pursuit of the Mitigation Program funded by the
User Fee. 160 All of this testimony contradicts (1) the Decision's conclusion that
duplication and waste may be occurring, (2) the Decisions not too thinly veiled
implication that the User Fee is too high and (3) the Decision's. expressed fear that
Cal-Am and its ratepayers will be left to fund programs intended to be funded by
the User Fee but abandoned by MPWMD. Yet, none of this testimony is
addressed in the Decision.
By failing to weigh the evidence and arguments of the parties to the AllParty Settlement, the Decision fails to satisfy Section 1705 and construed in US
Steel and Industrial Communications Systems.
II.
CONCLUSION
The Commission must order rehearing of D .11-03-03 5. Rehearing is
warranted and necessary because the Decision arrogates to the Commission

powers the Legislature has conferred on MPWMD-the authority to impose and
collect a lawfully set User Fee. The Decision also unlawfully departed from the
provisions of law governing how Commission decisions are to be reached and
what they must include. The Decision adopted factual determinations and
158
159
160
See, III. 1.2.c, supra.
see, III. 1.2.d, supra.
See, Exhibit 1, Testimony of D. Fuerst, at A8, provides an overview of the Mitigation

Program budget process, beginning in 1991, and that "Since 2001, the District Board has
voted to continue the Comprehensive Mitigation Program as part of the District's annual
budget approval process."
52
210
arguments asserted by a party that never appeared; the Parties that did appear were
not permitted to confront, challenge or rebut those views before they formed the
basis for a Proposed Decision and, ultimately, the Decision of which rehearing
sought.
Dated: April25, 2011
DAY & LAMPREY, LLP
SuzyHong
San Francisco, California 94111
Telephone:
(415) 392-7900
Facsimile:
(415) 398-4321
E-mail: tmacbride@goodinmacbride.com
By:
Is/ Thomas J. MacBride, Jr.


3465/001/X128270.vl
53
211
I, Linda Chaffee, certify that I have on this 29th day of April2011
caused a copy of the foregoing
APPLICATION OF THE
to be served on all known parties to A. 10-01-012listed on the most recently updated
service list available on the California Public Utilities Commission website, via email to
those listed with email and via U.S. mail to those without email service. I also caused
courtesy copies to be hand-delivered as follows:
Commissioner President Michael R. Peevey

Executive Division
505 Van Ness A venue, Room 5218
ALJ Maribeth A. Bushey

Executive Division
I declare under penalty of perjury that the foregoing is true and

correct. Executed this 29th day of April2011 at San Francisco, California.
Is/ Linda Chaffee
Linda Chaffee
3465/00l/Xl28398. v l
212
Service List A.1 0-01-012

Last Updated 4/4/11
ROBERT G. MACLEAN
DAVID C. LAREDO
dave@laredolaw.net
Jason J. Zeller
jjz@cpuc.ca.gov
TIMOTHY J. MILLER, ESQ.
FRANCES M. FARINA
ffarina@cox.net
GLEN STRANSKY
OLIVIA PARA
olivia.para@amwater.com
SARAH E. LEEPER
sarah.leeper@amwater.com
DAVID P. STEPHENSON
Allison Brown
aly@cpuc.ca.gov
Joyce Steingass
jws@cpuc.ca.gov
Maribeth A. Bushey
mab@cpuc.ca.gov
PUC/X128287.v1
213
12
FILED
08-26-11
04:59PM
In the Matter of the Application of CaliforniaAmerican Water Company (U21 OW) for an
Order Authorizing the Collection and Remittance
of the Monterey Peninsula Water Management
District User Fee
A.l0-0 1-012
AMENDED APPLICATION OF CALIFORNIA-AMERICAN WATER COMPANY

(U210W) FOR AN ORDER AUTHORIZING: THE COLLECTION OF A SURCHARGE
-'l'OFUND-THE--CARM-ELR:IVER-MJTiGAT-IONPR()GRAM-,-TH-E COhhEC-'fi()N-()F A SURCHARGE TO FUND THE CARMEL RIVER PHASE 1 AQUIFER STORAGE
AND RECOVERY FACILITIES; AND TO ESTABLISH A MEMORANDUM ACCOUNT
FOR PHASE 2 AQUIFER STORAGE AND RECOVERY FACILITIES
i
j_
I
Sarah E. Leeper
California-American Water_ Company
333 Hayes St., Suite 202
-Telephone: (415) 863-2960
Facsimile: (415) 863-0615
Email: sarah.leeper@amwater.com
Timothy J. Miller
Coronado, CA 92118
Telephone: (619) 435-7411
Facsimile: (619) 435-7434
Email: tjm.miller@amwater.com


1!
Dated: August 22, 2011
300685790.1
214
TABLE OF CONTENTS
I.
INTRODUCTION ................................................................................................................. 1
II
PROCEDURAL BACKGROUND AND HISTORY ........................................................... .3
A.
Application 08-01-027 and CPUC Order 09-07-021 .... ,................................................... 3
B.
Compliance With CPUC Order 09-07-021 ....................................................................... 5
c.
2010 Application, 2010 Settlement Agreement, and Decision Denying Settlement.. ...... 5
III.
I
IL
REQUESTED RELIEF .......................................................................................................... 7
A.
The Commission Should Authorize California American Water to Impose A Surcharge

On Customer Bills To Fund the Mitigation Program ....................................................... 7
1.
Summary of Proposed Program ........................................................................................7

a.
Fisheries Program ........................................................................................................ 7
b.
Riparian Program ......................................................................................................... 8
c.
Lagoon Program ........................................................................................................... 8
d.
Hydrologic Monitoring Program ................................................................................ 9
... 2. ... _.Th~ MP.WMP Miti.g1'!ti911 P.r.QgrJ!ll:lJ~ AS::o!!.~!P.:g~_gt Qbl!gciliol} of..~altfoJ:!lia Agle.ricall..
Water And Must Be Funded Under Principles of Concurrent Jurisdiction ...................... 9
B.
The Commission Should Authorize California American Water to Impose A Surcharge

on Customer Bills To Fund The Completion of the District's Aquifer Storage and
Recovery Facilities .......................................................................................................... 14
C.
The Commission Should Authorize California American Water To Establish a

Memorandum Account to Record The Costs To Construct the Remaining Phase 2 ASR
Facilities and File an Advice Letter to Transfer The Costs To Ratebase....................... 15
IV. SB 960 SCOPING MEMORANDUM .................................................................................. 16

V.
OTHER FORMAL MATTERS AND PROCEDURAL REQUIREMENtS ........................ IS
VI. CORRESPONDENCE CONCERNING APPLICATION ............................. , ...................... 19

VII. EXHIBITS ............................................................................................................................. 20
VIII. SERVICE .............................................................................................................................. 20
X.
CONCLUSION ..................................................................................................................... 20
-I300685790.1
215
lI
In the Mattei of the Application of CaliforniaAmerican Water Company (U210W) for an

Order Authorizing the Collection and Remittance
of the Monterey Peninsula Water Management
District User Fee
A.l 0-01-012
AMENDED APPLICATION OF CALIFORNIA-AMERICAN WATER COMPANY

(U210W) FOR AN ORDER AUTHORIZING: THE COLLECTION OF A SURCHARGE
TO FUND THE CARMEL RIVER MITIGATION PROGRAM, THE COLLECTION OF
A SURCHARGE TO FUND THE CARMEL RIVER PHASE 1 AQUIFER STORAGE
AND RECOVERY FACILITIES; AND TO ESTABLISH A MEMORANDUM ACCOUNT
FOR PHASE 2 AQUIFER STORAGE AND RECOVERY FACILITIES
I. INTRODUCTION
C~lifornia
American Water Company ("California American Water" or "Company") files
I'
this Amended Application pursuant to Decision ("D.") 11-03-035, Ordering Paragraph No. 2.A,
which authorizes California American Water to file an amended application the proposes a joint
program with the Monterey Peninsula Water Management District ("MPWMD" or "District") to
perform the Carmel River mitigation measures and the District's portion of the Aquifer Storage
and Recovery ("ASR") Project. This application is filed within the period allowed for such an
application, as extended by the Executive Director by letter dated May 24, 2011. 1
D.l I -03-035, In the Matter ofthe Application of California-American Water Company (U21 OWJ for an Order
Authorizing the Collection and Remittance ofthe Monterey Peninsula Water Management District User Fee
Ordering paragraph 2 states: California American Water Company is authorized to amend Application I 0-01-012
within 60 days of the effective date of this order by filing and serving one of the following:
- 1300685790.1
216
I
j'
I
In this Amended Application and in response to the Commission's concerns expressed in
D.ll-03-035, California American Water proposes the Mitigation Program would be funded via
a surcharge on California American Water's customer bills in a manner similar to the current
conservation program surcharge. In D.ll-03-035, the Commission was concerned that a
"percentage of revenue" basis for the User Fee charged to customers unnecessarily increased
each time California American Water's water rates increased. Unlike the User Fee, this
surcharge would be based on the total program cost, which in tum is based on original 1990
mitigation program budget and updated to reflect both: (a) changes in how the program is
implemented compared to 1990; and (b) increases in costs due to a variety of factors, including
changes in the program and inflation. For the period beginning June 1, 2011 through December
31,2014, this surcharge would generate $6,836,413 in revenue to fund these mitigation
--acti-vities, includingmanagement-supervision and-support staffcosts, capital asset-purchases and
indirect overhead.
Regarding the ASR Project, this Amended Application contains two requests. First,
California American Water and the District are proposing a separate surcharge that would
J-
complete planned facilities for Phase 1 of the District's Aquifer Storage and Recovery project, as
well as replenish the reserves the District expended to construct the existing facilities. For the
!'
A. Joint program proposal for the Monterey Peninsula Water Management District to perform the
Carmel River Mitigation measures based on an updated version of the budget set out in Attachment
1, and to fund the Monterey Peninsula Water Management District's portion of the Aquifer Storage
and Recovery Project, or
I.
Ir
B. Implementation plan for California-American Water Company to assume direct responsibility for
the Carmel River Mitigation measures, should the Monterey Peninsula Water Management District
cease to fund the measures.
Absent such an amendment, the Executive Director is authorized to dismiss this application without prejudice to
refiling.
-2-
300685790.1
217
1:.
i
period beginning June I, 2011through December 31,2014, this surcharge would generate an
additional $4,754,918 in revenue to fund these capital improvements, including project
management, management supervision and support staff costs, and indirect overhead. Second, to
complete Phase 2 of the aquifer storage and recovery program but to avoid the Commission's
concerns regarding the District's "pay-as-you-go" financing, California American Water requests
the Commission to authorize California American Water to est&blish a memorandum account,
earning Aid For Funds Used During Construction at California American Water's weighted
average cost of capital, to record the estimated $4,200,000 to construct the remaining Phase 2
ASR facilities. The Commission would further authorize California American Water to file a
Tier 2 advice letter to transfer those costs to ratebase and institute an interim surcharge for its
customers in the main Monterey, Ryan Ranch, Bishop and Hidden Hills systems to recover the
-revenue requirement- for those costs pending final ratemaking-treatment in Galifornia American
Water's next general rate case.
Between the Mitigation Program and the Phase 1 ASR Program, these proposed
surcharges would generate $11,591,331 in revenue for Distdct activities previously funded by
the District's User Fee, while California American Water would construct the remaining Phase 2
aquifer storage and recovery facilities, estimated at $4,200,000 and record those costs in a
memorandum account, the balance of which would be recovered in rates upon completion of
construction.
..
D. PROCEDURAL BACKGROUND AND HISTORY
,..
A. Application 08-01-027 and CPUC Order 09-07-021
On January 30, 2008, California American Water filed Application ("A.") 08-01-027
("2008 Monterey GRC") requesting an increase in rates for its Monterey District. Included in
-3300685790.1
218
the Assigned Commissioner's and Administrative Law Judge's Ruling and Scoping Memo dated
June 27, 2008 was a requirement to address issues related to the MPWMD funding from
California American Water customers for activities other than conservation and rationing, with
an emphasis on the User Fee. 2
I
In deliberations leading to 0.09-07-021, the Commission examined all of the Company's
"costs in the context of ... the significant financial burdens imposed on residential and business
customers by these substantial rate increases."3 The Commission noted the lack of an
evidentiary record to assess the necessity or the cost-effectiveness of the District's expenditures
j.
on the Company's behalf and was therefore concerned that Company customers might be paying
fees to the District for projects that may not be necessary or cost effectively performed. The
Commission has an obligation to "ensure that the projects undertaken ... on [the Company's]
behalf are necessary and are being provided in the most cost effective manner."4 Thus the
Commission ordered California American Water to meet with the MPWMD regarding these
programs, and required th<;: Company to file an application setting forth the method of collecting
funds to support program costs5 The Commission also authorized the Company to file an advice
letter establishing a memorandum account to record any interim costs.
In A.0?-12-0 I 0, this Commission examined and approved the collection and expenditure of a surcharge for the
MPWMD's conservation and rationing activities. For activities other than conservation and rationing, the collection
was termed the "User Fee".
3
D.09-07-021 Application ofCalifornia-American Water Company (U210W) for Authorization to Increase its
Revenues for Water Service in its Monterey District by $24,718,200 or 80.30% in the year 2009; $6,503,900 or
11.72% in the year 2010; and $7,598,300 or 12.25% in the year 2011 Under the Current Rate Design and to
Increase its Revenues for Water Service in the Toro Service Area ofits Monterey District by $354,324 or 114.97%
in the year 2009; $25,000 or 3. 77% in the year 2010; and $46,500 or 6. 76% in the yeqr 2011 Under the Current
Rate Design at 116.
4
Id.
5
D.09-07-021, Ordering Paragraphs 24 and 25.
-4.
300685790.1
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B. Compliance with CPUC Order 09-07-021

Following the issuance ofD.09-07-021, California American Water acted in accordance
with the expectations set forth in that Decision. Specifically, the Company filed advice letter
AL-785-A on July 20, 2009 to establish the authorized memorandum account. The Division of
Water and Audits approved AL-785-A on August 20, 2009 with an effective date of July 20,
2009. In addition, the Company initiated detailed discussions with MPWMD on the programs
and on funding steps, within the context ofD.09-07-021 and Ordering Paragraphs 24 and 25 in
particular.
On September 24, 2009, California American Water entered into the Mitigation and ASR
Activity Reimbursement Agreement ("Reimbursement Agreement") with the District to provide
the MPWMD continued funding, on the preexisting "percentage of revenue" basis, in order for
the District to carry out the required Mitigation Program and the ASR Program at the same level
of service existing on July 1, 2009. 6 Payments made pursuant to the Reimbursement Agreement
were recorded in the memorandum account established by Advice Letter AL-785-A. 7 On
October 16, 2009, the Company and the MPWMD entered into the Interim Carmel River
Mitigation Program and Aquifer Storage and Recovery Program agreement that specified the
activities to be performed with the funding provided under the Reimbursement Agreement.
!
C. 2010 Application, 2010 Settlement Agreement, and Decision Denying Settlement
On January 5, 2010, California American Water timely filed the application authorized
I.
by D.09-07-021, proposing a program that would reinstate the prior practice. This proposal was
6
Because it is not California-American Water that is required to implement the District's Mitigation Program and as
the MPWMD Board adopted a resolution to continue implementing its Mitigation Program, an agreement with the
MPWMD to implement the program was necessary for California-American Water to comply with Company
requirements regarding documentary evidence for payments made by the Company.
7
Ordering Paragraph 4 ofD.ll-03-035 ordered the memorandum account closed on May 24, 2011. California
American Water has closed that account in accordance with the decision.
1-
-5300685790.1
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,I"
..
rooted in Coinmission precedent regarding the scope of Commission jurisdiction over local
agency taxes. 8
I
I
The Division of Ratepayer Advocates ("DRA") protested the single issue of the interest
/:
rate applicable to California American Water's memorandum account. That issue was quickly
II
settled and the three parties to the proceeding, California Americ~ Water, the MPWMD, and
DRA, proposed the Commission approve a settlement agreement that would have reinstated the
'
long-standing practice of collecting and remitting the User Fee.
I
1..
In 0.11-03-:035, the Commission rejected this settlement agreement. The Commission

found that the settlement was not reasonable in light of the record, specifically citing the
following concerns:
The ASR Project is a component ofboth the 7.125 percent Mitigation Program and
the 1.2 percent ASR project fee, and results in current customers paying for capital
projects that benefit future customers;
I/
I
The Mitigation Program costs had doubled after years of stable costs, without
1.
I
explanation;
I.
There appears to be a duplication of effort between California American Water and

the District in water supply augmentation activities and Steelhead mitigation
activities.
I;
0.11-03-035 authorizes California American Water to file an amended application that

proposes either: (a) a joint program proposal based on the original 1990 Mitigation Program
budget; or, (b) an implementation plan for California American Water to assume direct
8
See Guidelines for the Equitable Treatment ofRevenue Producing Mechanisms Imposed by Local Government
Entities on Public Utilities, 0.89-05-063.
-6300685790.1
221
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!
responsibility for the Carmel River mitigation measures should the MPWMD cease to fund those
measures.
III.
REQUESTED RELIEF
A. The Commission Should Authorize California American Water to Impose A
Surcharge On Customer Bills To Fund the Mitigation Program
1. Summary o~ Proposed Program
In this Amended Application, California American Water proposes to collect a surcharge

to recover $6,836,413 for the Mitigation Program tasks to be performed from June 2011 through
2014. Table One, Summary of Mitigation Program Costs- June 2011 to December 2014, sets
out the costs for the various components of the mitigation program, which are briefly described
later, and set forth in detail in the supporting testimony.
T a ble 1: S umma11
Mitigation
Program
Com_ponent
Fisheries
Riparian Vegetation
Lagoon Mitigation
Hydrologic
Monitoring
Management/Support
Staff
Capital Assets
Indirect Overhead
Total for Period
11gat"ton
0 fM"f
Jun-Dec
2011
$346,983
$170,830
$28,833
$59,339
P rogram c OS t S- J une 2011 Th rougJhD ecemb er. 2014

2012
2013
2014
Total for
Cost
Component
$613,268
$632,279
$676,060
$2,268,589
$333,792
$457,644
$317,181
$1,279,447
$72,426
$60,896
$50,412
$212,568
$110,277
$139,129
$148,005
$456,750
$161,404
$285,269
$294,113
$303,230
$1,044,016
$5,960
$224,251
$30,004
$396,347
$44,739
$408,634
$43,806
$421,302
$124,509
$1,450,534
$997,600
$1,841,383
$2,037,434
$1,959,996
$6,836,413
i .
'.
a. Fisheries Program.
In summary and as further described in the testimony of Darby Fuerst and Kevan
Urquhart, the Fisheries Program, among other things: (i) records data on the steelhead population
in the Carmel River; (ii) rescues young steelhead from drying reaches of the Carmel River; (iii)
operates the Sleepy Hollow Steelhead Rearing Facility, including steelhead stocking, physical
-7300685790.1
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plant maintenance and capital improvements, and preparation of the facility's Rescue and
Rearing Management Plan in consultation with state and federal experts; (iv) conducts a
California Stream Bio-assessment Procedure (benthic invertebrate sampling at 6 stations); (v)
coordinates with California American Water regarding operations to maximize fish habitat,
including monitoring the Carmel River Lagoon water levels and water quality to improve the
lagoon as habitat for fish. Also included within this budget are activities to mitigate potentially
significant impacts associated with the operation of the Aquifer Storage and Recovery project.
b. Riparian Program
In summary and as further described in the testimony of Darby Fuerst, Larry Hampson
and Thomas Christensen, the Riparian Habitat Program, among other things: (i) replants riparian
vegetation at exposed banks with little or no vegetation, and engages in other vegetation
management activities, including obtaining required State and federal permits for these activities;
(ii) manages data collection regarding the channel profile and also cross section data from the
Carmel River for use in maintaining a long-term record and comparing to the past and future
data; (iii) monitors the physical and biological processes along the river to evaluate the District's
river management activities; (iv) inspects the Carmel River from the upstream end of the lagoon
to Camp Steffani; (v) maintains and updates records regarding erosion damage, conditions that
could cause erosion, and the overall condition of the riparian corridor; (vi) enforces the District
riparian ordinances; and, (vii) prepares Integrated Regional Water Management Plans.
c. Lagoon Program
In summary and as further described in the testimony of Darby Fuerst, Larry Hampson
and Thomas Christensen, the Lagoon Habitat Program performs the following activities: (i)
vegetation habitat monitoring; surveying and analyzing bathymetric transects; conducting
-8300685790.1
223
topographic, hydrology and wildlife surveys; and providing technical expertise regarding
management and improvement of the lagoon.
d. Hydrologic Monitoring Program.

In summary and as further described in the testimony of Darby Fuerst and Joseph Oliver,
among other things, the Hydrologic Monitoring Program: (i) regularly tracks precipitation,
streamflow, surface and groundwater levels and quality, and lagoon characteristics between Los
Padres Dam and the Carmel River Lagoon, using real-time and computer monitoring methods at
numerous data collection stations; (ii) maintains an extensive monitoring network, and
continuous streamflow recorders along the Carmel River; (iii) implements a multi-agency
Memorandum of Agreement and develops quarterly water supply strategies based on hydrologic
conditions; (iv) works cooperatively with resource agencies implementing the federal
Endangered Species Act; and, (v) implements ordinances that regulate wells and water
distribution systems.
2. The MPWMD Mitigation Program Is A Contingent Obligation of California

American Water And Must Be Funded Under Principles of Concurrent
Jurisdiction
In 1981, the District established procedures for annually setting a limit on the total
amount of water available to California American Water and a limit on how much water each
local municipality could use in each subsequent year. Under these procedures, the District
adopted a water supply capacity limit for the Company's system and a formula for distributing
water within the Company's service area. This program became known as the Water Allocation
Program, and that program continues to this day.
-9300685790.1
224
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!
In 1990, the District revised the Water Allocation Program to reflect dry rainfall year
conditions instead of average rainfall year conditions. As required by the California
Environmental Quality Act ("CEQA"), 9 the District prepared an Environmental Impact Report
("EIR") to consider the environmental effects of the Water Allocation Program. This EIR
evaluated the environmental effects assuming five different production volumes from the various
sources of supply on the Monterey peninsula. The EIR concluded that the Water Allocation
Program could have significant or potentially significant environmental effects unless mitigated.
Therefore, in implementing the Water Allocation Program, the District was required under
CEQA to mitigate, to the extent feasible, the significant impacts of the Water Allocation
Program. The District's Board adopted a Mitigation Program and authorized staff to carry out
that program for five years, until June 30, 1996, and to report the results of the Mitigation
Program to the Board.
The adopted Mitigation Program focused on the impacts of the Water Allocation Program
on fisheries, riparian vegetation and wildlife, and the Carmel River Lagoon, including special
,..
status species, and aesthetics. Activities required to avoid or substantially reduce adverse
I
environmental effects to the Carmel River include: irrigation and erosion control programs;
fishery enhancement programs; establishing flow releases from the existing dams to protect the
fish and riparian habitat; monitoring water quality; reducing municipal water demand; and
regulating activities within the riparian corridor. The District has modified the Mitigation
Program over time based on the results of the mitigation measures and to adapt to changing river
conditions.
The California Environmental Quality Act is codified at Public Resources Code section 21000, et seq. The
regulations implementing CEQA, known as the CEQA Guidelines, are codified at 22 C.C.R. 14000, et seq.
- 10300685790.1
225
In Order 95-10, the State Water Resources Control Board found that the Mitigation
Program was alleviating the effects of the Company's diversions on the Carmel River. As noted
previously, at the time the SWRCB was considering Order 95-10, the District's Mitigation
Program was initially intended to last until June, 1996. 10 To ensure that those mitigation
measures continued to be implemented pending a long-term water supply solution, the State
j.
Water Resources Control Board ordered California American Water to implement those
I
i
I
I
mitigation programs if the District ceased those activities after June 30, 1996, making the
Mitigation Program a contingent obligation of the Company. 11 The District continued to
implement the Mitigation Program, funded in part by the User Fee, until 2009 when the
/.
Commission ordered California American Water to cease collecting and remitting the User Fee.
Since 2009, California American Water and the District have worked cooperatively to ensure the
Mitigation Program has continued uninterrupted.
The Commission has concluded that the Mitigation Program is a contingent obligation of
California American Water. 12 To the extent that the Mitigation Program is required by State
Water Resources Control Board order, principles of concurrent jurisdiction require the
Commission provide California American Water the opportunity to satisfy that sister agency
obligation. 13 The Commission expects California American Water to meet that responsibility in
an efficient and effective manner. 14 Because the MPWMD has been implementing this program,
ostensibly to the satisfaction of the State Water Resources Control Board, and the personnel and
10
The Five-Year Mitigation Program formally began in July 1991 with the new fiscal year (FY) and was slated to
run until June 30, 1996. In October 1996, the District adopted an Implementation Plan for FY 1997 through FY
2001.
11
Order 95-10, Ordering Paragraph No. II.
12
D.ll-03-035, p. 15-16; Finding of Fact No. I
13
See Decision Directing TariffModifications To Recognize Moratorium Mandated By State Water Resources
Control Board D.II-03-048 (recognizing the concurrent jurisdiction of the State Water Resources Control Board
regarding Carmel River diversions.)
14
D.ll-03-035, p.l6 (citing 0.09-07-021).
- 11 300685790.1
226
l.
j
processes are in place, joint implementation by California American Water and the Monterey
Peninsula Water Management District is the most efficient and effective manner of meeting this
responsibility.
I
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California American Water is proposing in this Amended Application a program that will
fund the costs for the Mitigation Program based on a specific budg~t that includes staff hours,
employee compensation rates, and a description of the work to be performed rooted in the nearly
20-year history of actually implementing this Mitigation Program. The proposed budget
includes a share of the District's management and support staff time, certain capital asset
purchases, and indirect overhead. This proposal addresses the Commission's concerns expressed
in D .11-03-03 5. First, because the surcharge is based on the cost of the program and not a
"percentage of revenue," the revenue generated by the surcharge will not automatically increase
when California American Water's rates increase, as was assumed in 0.09-07-021 and D.11-03035. Second, the surcharge proposed here will be effective through December 31,2014- the
end of California American Water's pending rate cycle. California American Water and the
MPWMD will, similar to the joint California American Water/MPWMD conservation program,
submit a proposed budget for the Mitigation and ASR programs in its next general rate case
covering the period of2015 through 2017, which may be reviewed by the Division of Ratepayer
Advocates and the Commission prior to being adopted. Third, this program will use a one-way
balancing account to funnel surcharge revenue collected by California American Water to the
District. If the District does not expend these funds, then the excess funds could be carried over
to the next rate cycle and funding for that rate cycle reduced, or the funds could be returned via a
surcredit.
- 12300685790.1
227
The District's Mitigation Program activities are quite distinct from other mitigation
activities undertaken by the Company. The focus ofthe Company's water withdrawal mitigation
activities center on meeting the terms of agreements with the National Oceanic and Atmospheric
Administration ("NOAA") regarding impacts to the South Central California Coast ("SCCC")
Steelhead, and agreements with theUnited States Fish and Wildlife Service ("USFWS")
regarding impacts to the California Red-Legged Frog.
Regarding the SCCC Steelhead, as discussed in the testimony of Larry Hampson, the
funds paid to the California Department ofFish and Game are funding mitigation projects under
the Department's Fisheries Restoration Grant Program. The activities selected by the
Department to fund include Carmel River habitat improvements such as the removal of the
Sleepy Hollow Ford, the removal of the Old Carmel River Bridge, and studying the feasibility of
a Carmel River Lagoon Barrier. These activities do not fall within the scope of activities
undertaken by the District under the auspices of the Mitigation Program.
Regarding the California Red-Legged Frog, California American Water monitors,
rescues, and relocates California Red-Legged Frog tadpoles in the vicinity oflarge production
wells when necessary, as well as certain mitigation measures associated with drawdown of San
II
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Clemente Dam. As discussed in the testimony of Kevan Urquhart, the District does not perform
any rescue or relocation operations with respect to California Red-Legged Frog and only records
incidental sightings when out in the field.
- 13300685790.1
228
B. The Commission Should Authorize California American Water to Impose A

Surcharge on Customer Bills To Fund The Completion of the District's Aquifer
Storage and Recovery Facilities
The Aquifer Storage and Recovery Program is a part of the Mitigation Program; as
discussed in the testimony of Darby Fuerst, the District has long sought to implement water
supply projects to augment the Peninsula's water supply pending the construction of a long-term
solution. The aquifer storage and recovery program is slightly different than the other Mitigation
Program components because of its emphasis on constructing infrastructure that complements
California American Water's distribution system, as opposed to addressing impacts to the
I.
riverine habitat of the Carmel Valley. The District and California American Water have worked
cooperatively for almost ten years to construct and implement the Aquifer Storage and Recovery
Program. The Commission has previously authorized California American Water to construct
improvements to its distribution system to realize the full potential of this water supply project. 15
As discussed in the testimony of Darby Fuerst and Joseph Oliver, additional facilities
remain to be constructed to fully implement Phase 1 of the project, including water treatment and
electrical controls, final site grading, paving, fencing and landscaping. The cost to complete
those improvements is estimated to be of$1,860,485, exclusive of management and support staff
costs, capital asset purchases for management and support staff, and indirect overhead. In
r.
addition and as also explained in the testimony of Darby Fuerst and Suresh Prasad, the District
has in the past spent $1,522,792 of its reserves to fund Aquifer Storage and Recovery
construction costs that exceeded the annual revenue generated by the 1.2 percent ASR portion of
the User Fee. As summarized in Table 2, California American Water is requesting the
Commission to authorize the Company to collect a surcharge in a total amount of$4,875,488 to
fund the remaining improvements of the ASR project, to replenish $1,522,792 to the District's
15
See D.09-07-021, p.103
- 14300685790.1
229
reserves, and to fund management and support staff, capital assetpurchases, and indirect
overhead associated with the Aquifer Storage and Recovery project.
T a ble 2 : S ummary.ofASRP rogram c osts- J une 2011 Th rougJhD ecemb er 2014

Jun-Dec
2012
2013
2014
Total for
ASR
2011
Cost
Program
Component
Component
Staff
$204,764
$211,111
$115,854
$217,656
$749,385
Phase 1 Capital Costs
$527,005
$.863,617
$339,669
$250,745
$1,981,036
Replenishment of
$427,056
$427,056
$427,056
$1,522,792
$241,625
Reserves
Management/Support
$71,421
$75,918
$40,410
$73,636
$261,385
Staff
$2,943
$1,896
Capital Assets
$1,004
$3,178
$9,021
Indirect Overhead
$96,140
$99,120
$102,193
$351,849
$54,395
$980,293
$1,666,176
$1,153,535
$1,075,464
$4,875,468
Total for Period
C. The Commission Should Authorize California American Water To Establish a

Memorandum Account to Record The Costs To Construct the Remaining Phase 2
ASR Facilities and File an Advice Letter to Transfer The Costs To Ratebase.
In D.ll-03-035, the Commission expressed its dissatisfaction with the District's "pay of
you go" financing for aquifer storage and recovery facilities because current customers were
i.
paying the full costs of infrastructure that has a long life, inconsistent with Commission
ratemaking standards. In response to this, California American Water is proposing that it will
construct the Phase 2 aquifer storage and recovery facilities discussed in Joe Oliver's January
2010 testimony and as further described in the testimony of John T. Kilpatrick, beginning in
I,.
2012 and to be completed in 2013. To facilitate completion of these facilities, which will allow
California American Water to maximize the use of pending water rights from the State Water
Resources Control Board, California American Water requests the Commission to authorize
California American Water to establish a memorandum account to record the costs incurred to
rI
construct those facilities, and to file a Tier 2 advice letter upon completion of the project to
transfer the balance to ratebase. The memorandum account would earn, during the pendency of
I'
- 15300685790.1
230
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the project, Aid For Funds Used During Construction at the rate of California American Water's
I.
weighted average cost of capital. In addition to transferring the balance in the memorandum
account to ratebase, the advice letter would institute an interim surcharge on the bills of
I
I
California American Water's main Monterey, Ryan Ranch, Bishop and Hidden Hills customers
!
I
to recover the revenue requirement associated with that balance, pending final ratemaking
disposition as determined in California American Water's next general rate case. That advice
letter would have a cap of$4,200,000 for construction costs, but the requested balance would
include interest. California American Water would be able to request recovery of construction
costs that exceed $4,200,000 in its next general rate case. 16
IV. SB 960 SCOPING MEMORANDUM
A. Category: Ratesetting
B. Are Evidentiary Hearings Necessary? Yes. Potentially, there may be factual disputes
on material issues, which will necessitate hearings. California American Water intends to
introduce the following evidentiary items in support of the Application:
1. This Amended Application, copies of which have been or will be delivered to the
Commission.
I
I
t
16
In D.l0-12-016 In the Matter ofthe Application of California-American Water Company (U21DW) for a
Certificate ofPublic Convenie_nce and Necessity to Construct and Operate its Coastal Water Project to Resolve the
Long-Term Water Supply Deficit in its Monterey District and to Recover All Present and Future Costs in
Connection Therewith in Rates. , the Commission authorized California American Water to construction two
aquifer storage and recovery wells of its own. These facilities are currently planned to inject desalinated water
produced during periods of low demand for recovery during periods ofhigh demand. These Regional Desalination
Project ASR wells are not currently planned for use in conjunction with the District's Carmel River Aquifer Storage
and Recovery Project.
- 16300685790.1
231
2. Prepared witness qualifications and direct testimony of employees of California

American Water and the Monterey Peninsula Water Management District to support
the reasonableness and prudence of the Application,
3. A Request for Official Notice of various approved agency documents, including but
not limited to the Water Allocation Program Environmental Impact Report, State
Water Resources Control Board Order 95-10, and State Water Resources Control
Board Order WR 2009-0060.
4. Prepared and oral rebuttal testimony and related exhibits to support California
American Water's specific requests.
C. Are Public Witness Hearings Necessary? No.

D. Issues. There are three issues in this proceeding. First, is whether California American
Water should be allowed to collect a surcharge from its customers to fund Carmel River
Mitigation Program activities. Second is whether California American Water should be
allowed to collect a surcharge to fund completion of Phase 1 Aquifer Storage and
Recovery program activities implemented by the Monterey Peninsula Water Management
District. Third is whether California American Water should be authorized to establish a
memorandum account to record costs to construct the remaining Phase 2 aquifer storage
and recovery facilities and file an Tier 2 advice letter to add those costs to rate base and
impose an interim surcharge to recover the revenue requirement.
E. Schedule. Pursuant to Rule 2.l(c) of the Commissions Rules of Practice and Procedure,
California American Water submits the procedural schedule below for the Commission's
consideration of the relief requested.
- 17300685790.1
232
Day
Event
Date
Application Filed
August 22, 2011
Docketing and formal

Public Notice
Comments/Protests on
Application
August 29, 2011

September 29, 2011
152
DRA Report
December 16, 2011
167
Intervenor Testimony
December 31,2011
183
Formal Settlement
Negotiations
Rebuttal Testimony
0
3-5
35
46-106
198
199
250
344
375
Evidentiary Hearings,
If needed
Briefing Complete
ALJ's Proposed
Decision Mailed
Commission's Agenda
October 2011
January 16, 2012

January 31, 2012
February, 2012
March 23, 2012
June 25, 2012
July 26, 2012
V. OTHER FORMAL MATTERS AND PROCEDURAL REQUIREMENTS

A. Applicant's legal name is California-American Water Company. California American
Water's corporate office and post office address is: 1033 B Avenue, Suite 200, Coronado,
California 92118.
B. Applicant California American Water, a California corporation, organized under the laws
of the State of California on December 7, 1965, is a Class A regulated water utility
organized and operating under the laws ofthe State of California. California American
I,.
Water provides water service in various areas in the following California counties: San
Diego, Los Angeles, Ventura, Monterey, Sonoma, Sacramento, and Placer.
- 18300685790.1
233
C. A certified copy of California American Water's articles of incorporation was filed with
the Commission on January 6, 1966 in connection with Application 48170. A certified
copy of an amendment to California American Water's articles of incorporation was filed
with the Commission on November 30, 1989 in connection with Application 89-11-036.
A certified copy of an Amendment to California American Water's Articles of
Incorporation dated October 3, 2001 and filed with the office of the California Secretary
of State on October 4, 2001, was filed with the Commission on February 28,2002, in
connection with Application 02-02-030. The Articles of Incorporation have not been
subsequently amended.
D. None of the persons described in Section 2 of General Order No. 104-A has a material
financial interest in any transaction involving the purchase of materials or equipment or
the contracting, arranging, or paying for construction, maintenance work, or service of
any kind to which Applicant has been a party during the period subsequent to the filing of
California American Water's last Annual Report with this Commission or to which
California American Water proposed to become a party at the conclusion of the year
covered by said Annual Report.
VI. CORRESPONDENCE CONCERNING APPLICATION

Correspondence and communications concerning this Application should be addressed as
follows:
Timothy J. Miller
Coronado, CA 92118
Telephone: (619) 435-7411
- Facsimile: (619) 435-7434
Copies of such correspondence and communications should be sent to:
- 19300685790.1
234
Sarah E. Leeper
333 Hayes St., Suite 202
Telephone: (415) 863-2960
Facsimile: (415) 863-0615
Email: sarah.leeper@amwater.com
AND
David P. Stephenson
4701 Beloit Drive
Sacramento, CA, 95838
Telephone: (916) 568-4222
Facsimile: (916) 568-4260
E-Mail: dstephen@amwater.com
VII.
EXHIBITS
Appended hereto is the following exhibit, which is filed pursuant to Commission Rule
1.5 and in support of this Amended Application.

Exhibit A: Draft Customer Notice.
VIII. SERVICE
A copy of this Application has been served upon the service list attached hereto. Unless
otherwise noted on the service list, recipients will receive a copy of the Application only,
exclusive of the supporting testimony due to its size (over 75 pages), cost of reproduction, and
cost to mail. Attached to the copy of the Application being served is a Notice of Availability.
IX. CONCLUSION
As discussed in this Amended Application and supporting testimony, California
American Water respectfully requests that the Commission order that:
-20300685790.1
235
(A) California American Water is authorized to collect from the Company's Monterey
Main system, Ryan Ranch, Bishop and Hidden Hills system customers a surcharge to fund the
Carmel River Mitigation Program.
(B) California American Water is authorized to collect from the Company's Monterey
Main system, Ryan Ranch, Bishop and Hidden Hills system customers a surcharge to fund the
Monterey Peninsula Water Management District's Phase 1 Aquifer Storage and Recovery
facilities and replenish the District's reserves for expenses incurred to construct those facilities.
(C) California American Water is authorized to establish a memorandum account earning

AFUDC at California American Water's weighted average cost of capital to record the costs to
construct the remaining Phase 2 Aquifer Storage and Recovery facilities, to file a Tier 2 advice
letter upon project completion to transfer the memorandum account balance to ratebase and
institute an interim surcharge to recover the revenue requirement for those facilities from its
Monterey Main system, Ryan Ranch, Bishop and Hidden Hills customers pending a final
decision on recovery of the revenue requirement in California American Water's next general
rate case.
(D) For such other and further relief as the Commission deems appropriate.
Dated:
August 22, 2011

By: Is/ Tim Miller
Tim Miller
Corporate Counsel
-21300685790.1
236
VERIFICATION
I, the undersigned, say:

I am an officer ofCALJFORNIA-AMERICAN WATER COMPANY, a
corporation, and am authorized to make this verificatic;m for and on behalf of CALJFORNIAAMERICAN WATER COMPANY, and I make this verification for that reason. I have read the
foregoing amended application, am informed, and believe the matters therein are true, and, on
that ground, allege that the matters stated therein are true.
1.
I qeclare under penalty of perjury that the foregoing is true and correct.
I
Executed at Sacramento, California, August 22, 2011.
CALJFORNIA-AMERICAN
WATER COMPANY
.
.
I
L
300683444.1
237
l.
L
t
f.
NOTICE OF AVAILABILITY
Testimony in support of California American Water's Amended Application
exceeds 50 pages in length and 3.5 megabytes in size. Therefore, pursuant to Rules 1.9(c)(1)-(2),
\.
California American Water hereby provides this Notice of Availability of the testimony. Upon
written request, California American Water will provide a copy of testimony in support of the
Amended Application on parties on whom this Notice of Availability is served. Parties that wish
to obtain a copy of the testimony in support of the Amended Application should contact:
Demetrio A. Marquez
Paralegal
Manatt, Phelps & Phillips, LLP
!.Embarcadero Center, 30th Floor
Tel: 415-291-7557
Fax: 415-291-7659
Email: dmarquez@manatt.com
Testimony to the Amended Application

Direct Testimony of Darby Fuerst
Direct Testimony of Suresh Prasad
Direct Testimony of Kevin Urquhart
Direct Testimony of Thomas Christensen
Direct Testimony of Larry Hampson
Direct Testimony of Joseph W. Oliver
Direct Testimony of David P. Stephenson
Direct Testimony of John T. Kilpatrick
300682559.1
238
Testimony to Original Application, Dated January 5, 2010 1

Direct Testimony of Darby Fuerst
Direct Testimony of Joseph Oliver
Direct Testimony of F. Mark Schubert, P.E.
I
I
Dated:
August 22,2011
I
I
f
Out of an abundance of caution, following is a list of the direct testimony served with the
original Application, originally served on January 5, 2010. Parties who need any copies of these
testimonies should also contact the undersigned.
300682559.1
239
!
t
EXHIBIT A
240
CALIFORNIA
AMERICAN WATER
FOR A SPANISH VERSION OF THIS NOTIFICATION, VISIT
WWW.CALIFORNIAAMW
I
I
SUMMARY
The proposed s
in the chart below
requirements by
and without the
System
I
Revenue
Increase
From
'
Total
Proposed
Percentage
Increase
From Both
Surch~rge
#2
$429.2
$2,642.3
10.03%
PAR
$74.8
$14.5
$89.3
10.03%
Multi-Residential
$403.7
$78.3
$482.0
10.03%
Commercial
$9,059.5
$761.0
$147.6
$908.6
10.03%
Public Authority
$2,318.3
$194.7
$37.8
$232.5
10.03%
r1
The current revenue requirement by customer classification is as shown in the rate case
comparison exhibit in A.10-07-007 filed as part of the settlement agreement. The revenues
shown are the amounts contained in the ORA position.
241
Industrial
$154.6
$13.0
$2.5
$15.5
10.03%
Golf Course
$261.1
$21.9
$4.3
$26.2
10.03%
Visciano Tank
$6.6
$0.6
$0.1
$0.7
10.03%
I"
Construction
$143.2
$12.0
$2.3
10.03%
Sale for Resale
$97.1
$8.2
10.03%
II
Other
$19.2
$1.6
10.03%
Bishop
$770.6
Ryan
Ranch/Hidden
Hills
$1,041.4
Other Revenue
$557.9
TOTAL
$46,472.3
I
I
I
i
I
$104.4
$46.9
$56.0
10.03%
10.03%
$757.0
Peninsula Water
"'"''"'!:,'"' and Recovery
Peninsula Water Management

Water and remitted to the
July of 2009, at which time
pursuant to
order. The second surcharge
to offset capital improvement costs for
aquifer storage and recovery
Peninsula Water Management
nnnr.ITOr0\1
AB
In 2009,
American Water to cease collecting and remitting the
Monterey
District's User Fee, which the Monterey Peninsula Water
Management
1983 and last increased in 2005 to 8.325 percent of all
water and meter
Fee revenues were used by the Monterey Peninsula Water
Management District to
mitigation activities and aquifer storage and recovery
activities associated with
River. In lieu of collecting and remitting the User Fee, the
CPUC ordered California
Water to meet and confer with the Monterey Peninsula Water
Managem~nt District and then file an application to propose a mechanism for funding these
activities. On January 5, 2010, California American Water, in conjunction with the Monterey
Peninsula Water Management District, filed the required application. On May 18, 2010, California
American Water, the Monterey Peninsula Water Management District, and the Division of
Ratepayer Advocates within the CPUC filed a motion to approve a program that would have
resumed the practice of collecting and remitting the User Fee at the rate specified by the
Monterey Peninsula Water Management District's Board of Directors. On March 24, 2011, the
CPUC issued an order rejecting that settlement agreement and authorizing California American
Water to file an amended application proposing an alternate method for funding the Monterey
242
Peninsula Water Management Districfs activities. This application is the proposal to meet this
order from the CPUC. The CPUC will render a final decision and the amount of the surcharge
approved by the CPUC could vary from the original proposed request by California American
Water.
OBTAINlNG A COPY OF THE APPLICATION
A Copy of California American Water's Amended Application and related
inspected at California American Water's Pacific Grove office at 511 Fo
100, Pacific Grove, CA 93950. Copies of the proposed application ar
the CPUC's Central Files Office between the hours of 8:00 a.m. an
Francisco at 505 Van Ness Avenue, San Francisco, California 94
,.
j.
ibits maybe
e Road, Suite
'fable to review at
daily in San
EVIDENTIARY HEARINGS
The CPUC may schedule formal evidentiary hearings
provide testimony and are subject to cross
are open to the public, but only those who are formal
CPUC has their own court reporters who will take
participating in the evidentiary hearings. California
hearings. The Division of Ratepayer Advocates (ORA)
economists and attorneys who independently evaluate the
and present their analyses and recommendations for the CPUC
hearings are completed, the ALJ will
all of the evidence
for California
decision. The CPUC may approve the
the draft decision by the ALJ, or may
decision filed
Commissioner. The final decision may differ
American """'Y"?''"
request.
PROTESTING THE APPLICATION
If you are a formal party
the CPUC's Docket
ication must be filed with
this filing as a customer of California American

or e-mail. Written public comment by
ired by the CPUC and may be sent to the
part of the formal correspondence fife
Administrative Law Judge (ALJ), the
ThePAO
formal party
the CPUC or to
Suite 500, Los
here). Please referto
all correspondences.
members of the public who wish to protest or participate as a

For assistance in filing comments or protests with
n"''"'rt'ng, please contact the PAO, 320 West Fourth Street,
e-mail public.advisor@cpuc.ca.gov. (List phone numbers
application number when writing ore-mailing the PAO on
300685794.1
.243
13


Collection and Remittance ofthe
)
)
)
)
)
)
09-29-11
04:59PM
___________________________ )
PROTEST OF THE MONTEREY PENINSULA WATER MANAGEMENT
DISTRICT TO THE AMENDED APPLICATION OF CALIFORNIA-AMERICAN
WATER COMPANY (U 210 W) FOR AN ORDER AUTHORIZING: THE
COLLECTION OF A SURCHARGE TO FUND THE CARMEL RIVER
MITIGATION PROGRAM, THE COLLECTION OF A SURCHARGE TO FUND
THE CARMEL RIVER PHASE 1 AQUIFER STORAGE AND RECOVERY
FACILITIES; AND TO ESTABLISH A MEMORANDUM ACCOUNT FOR
PHASE 2 AQUIFER STORAGE AND RECOVERY FACILITIES

DeLAY & LAREDO
606 Forest Avenue
Telephone: (831) 646-1502
Facsimile: (831) 646-03 77
De LAY & LAREDO
Telephone: (805) 681-8822
Facsimile: (805) 681-8823
Email: ffarina@cox.net
MPWMD Protest to Amended Application

A.I0-01-012
244

In the Matter ofthe Application of

Collection and Remittance ofthe
)
)
)
)
)
PROTEST OF THE MONTEREY PENINSULA WATER MANAGEMENT

DISTRICT TO THE AMENDED APPLICATION OF CALIFORNIA-AMERICAN
WATER COMPANY (U 210 W) FOR AN ORDER AUTHORIZING: THE
COLLECTION OF A SURCHARGE TO FUND THE CARMEL RIVER
MITIGATION PROGRAM, THE COLLECTION OF A SURCHARGE TO FUND
THE CARMEL RIVER PHASE 1 AQUIFER STORAGE AND RECOVERY
FACILITIES; AND TO ESTABLISH A MEMORANDUM ACCOUNT FOR
PHASE 2 AQUIFER STORAGE AND RECOVERY FACILITIES
I. INTRODUCTION
Pursuant to Rule 2.6(a) of the California Public Utilities Commission's Rules of
Practice and Procedure (Rule), the Monterey Peninsula Water Management District
(MPWMD or District) hereby protests the Amended Application (A.) 10-01-012 filed by
California American Water Company (CAW or Cal-Am) on August 22, 2011.
The
Water Management District's Protest is timely filed both pursuant to the procedural
schedule set forth in the Amended Application as well as Rule 2.6. 1 This pleading is
timely filed.
Amended Application, p. 18. Notice ofthe filing of the Amended Application appeared in the
Commission's Daily Calendar published August 30, 2011; accordingly, pursuant to Rule 2.6, the last day to
protest the amended application is September 29,2011.
A.l0-01-012
Page 1
245
While, as set forth below, MPWMD supports the over-all goals of the Amended
Application, MPWMD must participate as protestant in this proceeding?
By its
continued participation, MPWMD does not waive (1) any of the jurisdictional, legal or
procedural objections already set forth in its pending application for rehearing of D. 1103-035 or (2) its right to advance new objections during the course of this proceeding.
II. ISSUES
MPWMD does not contest the necessity of the Carmel River Mitigation Program
(Mitigation Program) or funding for the District's Phase 1, Aquifer Storage and Recovery
Facilities (ASR).
In support of CAW's Amended Application, MPWMD submitted
testimony by staff regarding the need for, and purpose of, the Mitigation Program and
ASR. MPWMD plans to perform the Mitigation Program if funded as proposed by CAW
in its Amended Application.
The District strenuously contests, however, submitting the scope and costs of a
program the District has been pursuing without interference or complaint for 21 years, to
review by another agency of the government - the Commission. MPWMD has, at all
times, acted pursuant to statutory authority and that statutory authority does not provide
for Commission review of MPWMD's actions. MPWMD's arguments set forth in its
application for rehearing, on file in this proceeding, are incorporated herein by reference.
Without
limitation,
MPWMD
expressly
protests
CAW's
proposal
to
independently construct and own Phase 2 of the ASR facilities? MPWMD and CAW
have worked cooperatively for almost ten years to construct and implement the ASR
2
Rule 1.4(a)(2) provides that a person may become a party to a proceeding by filing a protest or response
to an application or petition.
3
Amended Application, p. 3.
A.I0-01-012
Page2
246
Program. MPWMD has been instrumental in completing much of the feasibility analysis,
design work, and permitting.4 Further, MPWMD holds water rights suitable for use for
the Phase 2 ASR Project.
MPWMD has sought rehearing of D. 11-03-035 5 and awaits a Commission
decision on its unopposed application for rehearing.
Accordingly, while MPWMD
continues to work cooperatively with CAW (as it has throughout the course of this
docket), it will preserve its legal objections to the underlying decision.
III. CATEGORIZATION AND PROPOSED SCHEDULE

Pursuant to Rule 2.6(d), MPWMD agrees with. CAW that the proper
categorization for this proceeding is ratesetting.
MPWMD also agrees evidentiary
hearings are necessary. MPWMD has reviewed CAW's procedural schedule for this
proceeding, and has no comments.
IV.
CONCLUSION
MPWMD agrees the Mitigation Program is necessary and agrees to implement it

if funded as proposed by CAW in its Amended Application.
However, MPWMD
protests the Amended Application as it does not address the District's statutory authority
to impose its User Fee for collection and remittance by CAW. MPWMD further protests
CAW's proposal to independently construct and own Phase 2 of the ASR facilities. For
the reasons stated herein, MPWMD shall participate as a protestant in the full scope of
the proceeding.
Testimony of Joe Oliver, January 5, 2010, pp. 12- 13.

MPWMD filed a timely application for rehearing ofD. 11-03-035.
A.l0-01-012
Page3
247
Dated: September 29, 2011
IslDavid Laredo
DAVID C. LAREDO
DeLAY & LAREDO
Attorneys for
MONTEREYPENINSULA WATER
MANAGEMENT DISTRICT
U:\GENERAL
(NEW)\MPWMD- Main\PUC- A.10-01-012\Fina1 Protest.doc

A.I0-01-012
Page4
248
14

In the Matter of the Application of California

American Water Company (U21 OW) for an
09-29-11
04:59PM

I.
INTRODUCTION
Pursuant to Rule 2.6 of the Rules of Practice and Procedure of the California
Public Utilities Commission ("Commission"), the Division of Ratepayer Advocates

("DRA") hereby protests
Califomi~
American Water Company's ("Cal Am") amended
Application 10-01-012. This amended application, filed pursuant to Decision

("D.") 11-03-035, Ordering Paragraph No.2 A, requests authorization to collect a
surcharge to fund the Carmel River Mitigation Program, to collect a surcharge to fund the
Carmel River Phase I Aquifer Storage and Recovery Facilities, and to establish a
memorandum account for Phase II Aquifer Storage and Recovery Facilities. After being
granted an extension pursuant to a May 24, 2011letter from the Commission's Executive
Director, this application was filed onAugust 22, 2011. It was filed on August 26, 2011.
Administrative Law Judge Bushey granted ORA permission to late-file this protest in an
October 11, 2011 email.
This Protest provides a non-exhaustive identification of issues that DRA ~ill
examine in this proceeding. DRA anticipates that some issues may be resolved, and
others may arise, as discovery proceeds.
II.
ISSUES
DRA is still reviewing Cal Am's Application, but has identified several issues that
it intends to review and potentially address during this proceeding.
521435
249
1) DRA will evaluate the budgets for the requested projects and may recommend
adjustments;
2) DRA will review the Cal-Am's ratemaking proposals for these projects,
including the requested memorandum account; and
3) DRA reserves the right to identify other issues once it had completed its review
of this application.
Ill.
CATEGORIZATION AND PROPOSED SCHEDULE

DRA agrees with Cal Am's proposed categorization of this proceeding as rate
setting. DRA does not anticipate the need for evidentiary hearings at this time; however,
as DRA completes its review of the application, evidentiary hearings may be necessary to
resolve the issues raised by the application. At this time, DRA is not opposed to the
proposed schedule for the proceeding. However, DRA can address specific dates when
the schedule is set at the prehearing conference.
IV.
CONCLUSION
For the above stated reasons, DRA will conduct discovery to develop its testimony
and recommendations. Hearings may be required and a schedule should be established at

the prehearing conference that allows for a thorough review of the application. Since
DRA has not completed discovery or filed a report, it reserves the right to assert any issue
discovered after this Protest has been filed.
521435
250
Respectfully submitted
Is/
ALLISON BROWN
Allison Brown
Staff Counsel
Advocates
September 29, 2011
521435

505 Van Ness Avenue
Phone: (415) 703-5462
Fax: (415) 703-2262
aly@cpuc.ca. gov
251

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Case No.

Monterey Peninsula Water Management District,

PETITIONER'S APPENDIX OF EXHIBITS IN SUPPORT

In the Matter of the Application of CaliforniaAmerican Water Company (U 210 W) for an

Resolution ALJ 176-3247. Preliminary

Response of Monterey Peninsula Water

Protest of the Division of Ratepayer

Motion to Approve Settlement Agreement

Proposed Decision Denying Approval of

Comments of California-American Water

Comments of the Monterey Peninsula Water

Comments ofthe Division of Ratepayer

D.ll-03-035: Decision Denying Approval

Application of the Monterey Peninsula

Amended Application of CaliforniaAmerican Water Company

Protest of the Monterey Peninsula Water

Protest of the Division of Ratepayer

Petition of the Monterey Peninsula Water

Response of the Division of Ratepayer

Administrative Law Judge's Ruling Setting

California American Water Company

Proposed Interim Decision Authorizing

Scoping Memo and Ruling of Assigned

Opening Comments of the Division of

Comments of California-American Water

Comments of the Monterey Peninsula Water

Comments of the Monterey Peninsula Water

Opening Comments of the Division of

Reply Comments of the Division of

Administrative Law Judge's Ruling Setting

Response of California-American Water

Interim Decision Authorizing Aquifer

California-American Water Company

D.13-0l-040: Order Modifying D.ll-03-035

OF THE STATE OF CALIFORNIA

In the Matter of the Application of

IN THE MATTER OF THE APPLICATION OF CALIFORNIA-AMERICAN

Stephen A. S. Morrison, Esq.

BEFORE THE PUBLIC UTILITIES COMMISSION

In the Matter of the Application of

IN THE MATTER OF THE APPLICATION OF CALIFORNIA-AMERICAN

In this Application and supporting testimony, California American Water

2. PROCEDURAL BACKGROUND AND HISTORY

2.2. Activities Since Issuance ofD.09-07-021

3.1.1. The MPWMD's ASR Program is a Necessary and Cost Effective

See Baird v. California American Water Company, D.94-03-0 15

3.1.2. The MPWMD Mitigation Program is Required by Law, Prudently

SWRCB Order 95-10, Condition No. 2. Order 95-10 may be viewed at

Order 95-10, Ordering Paragraph No. 11.

While it is typical Commission practice to abstain from reviewing local

3.1.4. Commission Review of California American Water's Memorandum

administrator of a conservation agreement between California American Water and

4. SB 960 SCOPING MEMORANDUM

Docketing and formal

March 11, 2010

(if no protests received)

February 22, 2010-

(if protests received)

September 20, 2010

September 22, 2010-

November 18, 2010

October 22, 2010

November 22, 2010

December 21, 201 0

-"::'-.'-~r;:-.:.~--'r:',.. . . . ;;{l)af~sg~~~ ~-.~~~~ .~AltiN(; .