Docket: Exhibit Number Commissioner Administrative Law Judge DRA Project Coordinators

: : : : :

A.12-07-007 _______________ Catherine Sandoval Robert Mason Yoke Chan; Pat Ma

DIVISION OF RATEPAYER ADVOCATES
CALIFORNIA PUBLIC UTILITIES COMMISSION

REPORT ON THE RESULTS OF OPERATIONS OF CALIFORNIA WATER SERVICE COMPANY REDWOOD VALLEY DISTRICT
General Rate Case Application 12-07-007 Test Year 2014 Escalation Years 2015 and 2016

For authority to increase water rates in its Redwood Valley District serving Guerneville, Duncan Mills, Santa Rosa, Lucerne, Dillon Beach in Sonoma, Lake and Marin counties

San Francisco, California March 1, 2013

MEMORANDUM This report is prepared by the Division of Ratepayer Advocates - Water Branch. Senior Utilities Engineers Yoke Chan and Pat Ma serve as project coordinators, under the supervision of Program and Project Supervisors Ting Pong-Yuen and Lisa Bilir and Program and Project Manager Danilo Sanchez. Selina Shek and Marian Peleo serve as DRA legal counsels in this general rate case. Listed below are DRA witnesses and their contributions to this report.

Ch. Description 1 2 3 4 5 6 7 8 9 10 11 Introduction & Summary (RO tables) Sales, Revenues & Rate Design Operations & Maintenance Expenses Administrative & General Expenses Taxes Other Than Income Income Taxes Plant In Service Depreciation Rate Base Customer Service Water Quality

DRA Witness Yoke Chan, Pat Ma & Josefina Montero Inderdeep Atwal Herbert Merida Herbert Merida Jose Cabrera Jose Cabrera Justin Menda Sung Han Victor Chan Toni Canova Justin Menda

Division of Ratepayer Advocates RESULTS OF OPERATIONS REPORT REDWOOD VALLEY DISTRICT CWS General Rate Case A.12-07-007 Table of Contents
CHAPTER 1: INTRODUCTION & SUMMARY 1-1  A. INTRODUCTION 1-1  B. SUMMARY OF RECOMMENDATIONS 1-1  C. KEY RECOMMENDATIONS 1-2  CHAPTER 2: SALES, REVENUES AND RATE DESIGN 2-1  A. INTRODUCTION 2-1  B. SUMMARY OF RECOMMENDATIONS 2-1  C. DISCUSSION 2-5  D. CONCLUSION 2-16  CHAPTER 3: OPERATIONS & MAINTENANCE EXPENSES 3-1  A. INTRODUCTION 3-1  B. SUMMARY OF RECOMMENDATIONS 3-1  C. DISCUSSION 3-1  1)  OPERATION EXPENSES 3-2  2)  MAINTENANCE EXPENSES 3-8  D. CONCLUSION 3-10  CHAPTER 4: ADMINISTRATIVE & GENERAL EXPENSES 4-1  A. INTRODUCTION 4-1  B. SUMMARY OF RECOMMENDATIONS 4-1  C. DISCUSSION 4-1  1)  ADMINISTRATIVE & GENERAL EXPENSES 4-2  2)  PURCHASED SERVICES 4-3  D. CONCLUSION 4-7  CHAPTER 5: TAXES OTHER THAN INCOME 5-1  A. See Chapter 5: Taxes Other Than Income in DRA’s Company-Wide Report of Results of Operations of California Water Service Company (General Rate Case A.12-07-007) for analysis and recommendations. 5-1  CHAPTER 6: INCOME TAXES 6-1  A. See Chapter 6: Income Taxes in DRA’s Company-Wide Report of Results of Operations of California Water Service Company (General Rate Case A.12-07-007) for analysis and recommendations. 6-1  CHAPTER 7: PLANT IN SERVICE 7-1  A. INTRODUCTION 7-1  B. SUMMARY OF RECOMMENDATIONS 7-1  i

C. DISCUSSION 7-7  1)  Carryover Projects 7-7  2)  Mains, Services and Hydrant Replacement Projects 7-8  3)  Tank Painting Projects 7-12  4)  Projects by Subarea 7-13  5)  Non-specific Capital Budgets, 2012 to 2015 7-17  D. CONCLUSION 7-20  CHAPTER 8: DEPRECIATION 8-1  A. See Chapter 8: Depreciation in DRA’s Company-Wide Report of Results of Operations of California Water Service Company (General Rate Case A.12-07-007) for analysis and recommendations. 8-1  CHAPTER 9: RATE BASE 9-1  A. See Chapter 9: Rate Base in DRA’s Company-Wide Report of Results of Operations of California Water Service Company (General Rate Case A.12-07-007) for analysis and recommendations. 9-1  CHAPTER 10: CUSTOMER SERVICE 10-1  A. See Chapter 10: Customer Service in DRA’s Company-Wide Report of Results of Operations of California Water Service Company (General Rate Case A.12-07-007) for analysis and recommendations. 10-1  CHAPTER 11: WATER QUALITY 11-1  A. INTRODUCTION 11-1  B. SUMMARY OF RECOMMENDATIONS 11-1  C. DISCUSSION 11-1  1)  Armstrong Valley 11-2  2)  Coast Springs 11-2  3)  Hawkins 11-3  4)  Lucerne 11-3  5)  Noel Heights 11-4  6)  Rancho del Paradiso 11-5  D. CONCLUSION 11-5 

ii

1

CHAPTER 1: INTRODUCTION & SUMMARY
A. INTRODUCTION This Report on the Results of Operations presents the Division of Ratepayer Advocates’ (“DRA”) analysis and recommendations on the operations of the Redwood Valley District. DRA addresses requests made in the general rate case application 12-07007 (GRC A.12-07-007) filed by the California Water Service Company (“CWS”) in July 2012 for the Test Year 2014 and Escalation Years 2015 and 2016. DRA’s team of engineers, auditors, analysts and consultants reviewed the filing, performed discovery and inspection of the district’s facilities, and provided the detailed analysis and recommendations in this Report. This report together with the following form DRA’s comprehensive response to CWS’s GRC application:  Report on the General Office of CWS,  Report on the Balances on Balancing Accounts & Memorandum Accounts,  Report on Conservation Program and Expenses, and  Report on the Company-Wide Results of Operations (Company-Wide Report). B. SUMMARY OF RECOMMENDATIONS Table 1-A below presents estimated revenue increases proposed by CWS and by DRA. Key differences between DRA’s and CWS’s estimates are summarized in the next section. Attachment 1 at the end of this chapter presents the parties’ results of operations (“RO”) estimates in further details.

2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

1-1

1

Table 1-A. Comparison of Revenue Increases.
REVENUE INCREASES - RWV Coast Springs 1. Test Year 2014 Increase (in dollars) 2. Test Year 2014 Increase 3. Escalation Year 2015 Increase 4. Escalation Year 2016 Increase DRA $65,810 15.5% -0.5% -3.3% CWS $136,984 33.1% -2.8% -5.4% CWS > DRA $71,174 17.7% -2.3% -2.1%

2

3

REVENUE INCREASES - RWV Lucerne 1. Test Year 2014 Increase (in dollars) 2. Test Year 2014 Increase 3. Escalation Year 2015 Increase 4. Escalation Year 2016 Increase
REVENUE INCREASES - RWV Unified 1. Test Year 2014 Increase (in dollars) 2. Test Year 2014 Increase 3. Escalation Year 2015 Increase 4. Escalation Year 2016 Increase

DRA $673,753 46.1% -1.1% -3.8%
DRA $205,190 35.9% 1.1% -1.3%

CWS $818,041 57.0% 2.2% -1.2%
CWS $283,537 50.3% -0.2% -2.5%

CWS > DRA $144,288 10.8% 3.2% 2.6%
CWS > DRA $78,347 14.5% -1.3% -1.2%

4 5 6 7 8 9 10 11 12

C. KEY RECOMMENDATIONS Rate of Return: DRA applies the authorized rate of return of 7.94% for Test Year 2014,1 whereas CWS uses 8.24%, the rate that was effective at the time of its GRC application filing. DRA does not expect this to be a contentious issue. Plant Investment: DRA’s estimates for plant additions are significantly lower than requested by CWS, as shown below. (Chapter 7 of this report and DRA’s CompanyWide Report) Table 1-B. Comparison of Plant Additions.
2012 DRA CWS CWS > DRA $ $ $ n/a $ $ $ 2013 181,843 258,554 76,711 70% $ $ $ 2014 184,389 224,200 39,811 82% $ $ $ 2015 213,396 367,418 154,022 58% Annual Average $ $ $ 144,907 212,543 67,636 68%

13 14 15

DRA as % of CWS

Conservation Expenses:

DRA recommends only $6,500 out of CWS’s requested

$19,350. DRA supports maintaining ongoing conservation efforts and the State’s water

1

Advice Letter 2085.

1-2

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27

conservation goals, however, these goals can be achieved at DRA’s lower cost estimates. (Report on Conservation Program and Expenses) General Office Expenses & Ratebase: CWS’s General Office expenses and rate base are allocated to individual districts based on a four-factor allocation. DRA examined expenses and capital investments of the CWS’s general office operations and recommends substantial adjustments that include among other things: disallowance of 20 of CWS’s new employee requests, 35 requested vehicles and related transportation expenses, removal of the costs included in the pension component for the Supplemental Executive Retirement Plan and exclusion of those costs from the pension balancing account beginning in January 2014, and the removal of expense included by CWS in Administrative and General salaries for stock awards granted to executive officers. (Report on the General Office) Income Taxes: In addition to the adjustments to correspond to other results of operations estimates (such as revenues, expenses and plant), DRA’s tax calculations more accurately reflect the Repair Cost and the extension of the Bonus Depreciation to 2013. DRA worked cooperatively with CWS to incorporate these recent tax law changes in its estimates and does not expect this to be a controversial issue. Depreciation: For depreciation expenses, DRA uses lower depreciation rates for mains and services that do not include cost of removal. (DRA’s Company-Wide Report, Chapter 8) Rate Base: DRA adjusts a number of components, in addition to plant balances, that make up the weighted average rate base on which the company can earn a return. These include contributions in aid of construction, materials and supplies and average lead/lag days. (DRA’s Company-Wide Report) Operating Expenses: DRA estimates lower total Operating and Maintenance expenses and Administrative and General expenses that reflect among other things reductions in source of supply, contracted maintenance and employee benefits. (Chapters 3 and 4) 1-3

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

Sales Forecasts: DRA estimates higher sales for residential and business in Coast Springs; higher sales for residential, business and multi-family in Lucerne; and higher sales for residential in Unified. DRA also recommends unaccounted for water rates of 23.72% for Coast Springs, 20.7% for Lucerne and 15.8% for Unified. (Chapter 2) In addition to adjustments to the company’s Test Year and Escalation Year forecasts, DRA also present its findings and where appropriate recommendations on customer service (Chapter 10, Company-Wide Report) and water quality (Chapter 11 of this Report). Lastly, DRA considered CWS’s 21 separate “Special Requests,” listed in Table 1-C below. Those requests include rate design- and billing-related proposals that have direct and significant impact on customers in this district include: Special Request # 6 – Phase-in of rates in 14 districts. CWS requests Commission authority to phase-in rates in certain districts if a set of criteria is met. Based on DRA’s recommended revenue requirement and phase-in criteria, phase-in rates will not be applicable. Special Request # 16 – Balanced Payment Plan. CWS requests Commission authority to offer a “Balanced Payment Plan” option to its customers. DRA recommends CWS’s balanced payment plan proposal be approved by the Commission on the condition that CWS offers it to all of its customers. For more details on the above and other Special Requests, please see DRA’s Company-Wide Report unless otherwise indicated.

1-4

1
Special Request Number 1 2 3 4 5 6 7 8 9 10 11

Table 1-C. Special Requests by CWS.
CWS’s Special Request Additional Rate Design Phase Coordination with Open Proceedings Rate Design Pilot Sales Reconciliation Mechanism Expand Rate Stabilization Mechanism Phase-in of Rates in 14 Districts Waiver of Notice for Escalation Years Subsequent Offset Increases Apply Salinas Tariff to Buena Vista Apply Kernville Tariff to James Water Closing Balancing Accounts and Memorandum Accounts Continuing Balancing Accounts and Memorandum Accounts Health Cost Balancing Account (New) Water Quality Findings Customer Service Rule Change Balanced Payment Plan Credit Card Program Chromium 6 Memo Account (New) Cross-Connection Rule 16 Change Lot and Transmission Fee Modifications Tariff For Residential Fire Service DRA’s Recommendation Allow Allow with condition Allow with clarification Disallow Allow with modifications Disallow Disallow Allow with condition Allow Allow See Report on the Balances of Memorandum and Balancing Accounts See Report on the Balances of Memorandum and Balancing Accounts Disallow See each Water Quality chapter in DRA’s Report on Results of Operations for each district. Disallow Allow with conditions Disallow Disallow Allow with reporting Allow Disallow

12 13 14 15 16 17 18 19 20 21

1-5

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53

CHAPTER 1, ATTACHMENT A REDWOOD VALLEY DISTRICT DRA’S RESULTS OF OPERATIONS TABLES Index
Coast Springs Page 2 Table 1-1: Page 3 Table 1-2: Page 4 Table 2-1: Page 5 Table 2-2: Page 6 Table 2-3: Page 7 Table 2-4: Page 8 Table 3-1: Page 9 Table 4-1: Page 10 Table 5-1: Page 11 Table 6-1: Page 12 Table 6-2: Page 13 Table 7-1: Page 14 Table 8-1: Page 15 Table 9-1: Page 16 Table 9-2: Lucern Page 17 Table 1-1: Page 18 Table 1-2: Page 19 Table 2-1: Page 20 Table 2-2: Page 21 Table 2-3: Page 22 Table 2-4: Page 23 Table 3-1: Page 24 Table 4-1: Page 25 Table 5-1: Page 26 Table 6-1: Page 27 Table 6-2: Page 28 Table 7-1: Page 29 Table 8-1: Page 30 Table 9-1: Page 31 Table 9-2: Unified Page 32 Table 1-1: Page 33 Table 1-2: Page 34 Table 2-1: Page 35 Table 2-2: Page 36 Table 2-3: Page 37 Table 2-4: Page 38 Table 3-1: Page 39 Table 4-1: Page 40 Table 5-1: Page 41 Table 6-1: Page 42 Table 6-2: Page 43 Table 7-1: Page 44 Table 8-1: Page 45 Table 9-1: Page 46 Table 9-2: SUMMARY OF EARNINGS - TEST YEAR SUMMARY OF EARNINGS - ESCALATION YEARS WATER SALES PER CUSTOMER (OR PER CONNECTION) AVERAGE NUMBER OF CUSTOMERS (SERVICE CONNECTIONS) TOTAL SALES AND SUPPLY OPERATING REVENUES AT PRESENT RATES OPERATIONS & MAINTENANCE EXPENSES - TEST YEAR ADMINISTRATIVE & GENERAL EXPENSES TAXES OTHER THAN INCOME TAXES BASED ON INCOME - TEST YEAR AT PRESENT RATES TAXES BASED ON INCOME - TEST YEAR AT PROPOSED RATES UTILITY PLANT IN SERVICE DEPRECIATION RESERVE & EXPENSE WEIGHTED AVERAGE RATE BASE - TEST YEAR WEIGHTED AVERAGE RATE BASE - ESCALATION YEAR SUMMARY OF EARNINGS - TEST YEAR SUMMARY OF EARNINGS - ESCALATION YEARS WATER SALES PER CUSTOMER (OR PER CONNECTION) AVERAGE NUMBER OF CUSTOMERS (SERVICE CONNECTIONS) TOTAL SALES AND SUPPLY OPERATING REVENUES AT PRESENT RATES OPERATIONS & MAINTENANCE EXPENSES - TEST YEAR ADMINISTRATIVE & GENERAL EXPENSES TAXES OTHER THAN INCOME TAXES BASED ON INCOME - TEST YEAR AT PRESENT RATES TAXES BASED ON INCOME - TEST YEAR AT PROPOSED RATES UTILITY PLANT IN SERVICE DEPRECIATION RESERVE & EXPENSE WEIGHTED AVERAGE RATE BASE - TEST YEAR WEIGHTED AVERAGE RATE BASE - ESCALATION YEAR SUMMARY OF EARNINGS - TEST YEAR SUMMARY OF EARNINGS - ESCALATION YEARS WATER SALES PER CUSTOMER (OR PER CONNECTION) AVERAGE NUMBER OF CUSTOMERS (SERVICE CONNECTIONS) TOTAL SALES AND SUPPLY OPERATING REVENUES AT PRESENT RATES OPERATIONS & MAINTENANCE EXPENSES - TEST YEAR ADMINISTRATIVE & GENERAL EXPENSES TAXES OTHER THAN INCOME TAXES BASED ON INCOME - TEST YEAR AT PRESENT RATES TAXES BASED ON INCOME - TEST YEAR AT PROPOSED RATES UTILITY PLANT IN SERVICE DEPRECIATION RESERVE & EXPENSE WEIGHTED AVERAGE RATE BASE - TEST YEAR WEIGHTED AVERAGE RATE BASE - ESCALATION YEAR

Chapter 1, Attachment A, page 1

REDWOOD VALLEY COAST SPRINGS DISTRICT CALIFORNIA WATER SERVICE COMPANY A.12-07-007 TABLE 1-1 SUMMARY OF EARNINGS - TEST YEAR DRAPresent Rates 425.4 CWSPresent Rates 413.6

Test Year 2014 ($000)

CWS > DRA

1a Operating Revenues Operating Expenses: 2a Operation & Maintenance 3a Administrative & General 4a Payroll 5a General Office - prorated expenses 6a Depreciation Expense 7a Taxes Other Than Income 8a California Corporate Franchise Tax 9a Federal Income Tax 10a Total Operating Expenses 11a Net Operating Revenues 12a Weighted Average Rate Base 13a Return on Rate Base

(11.9)

-2.8%

117.4 54.0 39.6 63.4 71.2 11.4 1.5 11.7 370.2 55.3 1,242.7 4.45% DRAProposed Rates 491.3

121.9 56.9 40.5 75.9 75.7 12.3 (1.3) (2.9) 378.9 34.7 1,475.9 2.35% CWSProposed Rates 550.6

4.5 3.0 0.9 12.5 4.5 0.9 (2.8) (14.6) 8.7 (20.6) 233.1 -2.10%

3.8% 5.5% 2.3% 19.7% 6.3% 7.7% -189.4% -125.1% 2.4% -37.2% 18.8% -47.1%

Test Year 2014 ($000)

CWS > DRA

1b Operating Revenues Operating Expenses: 2b Operation & Maintenance 3b Administrative & General 4b Payroll 5b General Office - prorated expenses 6b Depreciation Expense 7b Taxes Other Than Income 8b California Corporate Franchise Tax 9b Federal Income Tax 10b Total Operating Expenses 11b Net Operating Revenues 12b Weighted Average Rate Base 13b Return on Rate Base 14 Increase in Operating Revenues (1b - 1a)

59.3

12.1%

117.4 54.0 39.6 63.4 71.2 11.4 7.3 28.2 392.5 98.7 1,242.7 7.94% 65.8

121.9 56.9 40.5 75.9 75.7 12.3 10.8 35.0 429.0 121.6 1,475.9 8.24% 137.0

4.5 3.0 0.9 12.5 4.5 0.9 3.4 6.8 36.4 22.9 233.1 0.30% 71.2

3.9% 5.5% 2.3% 19.7% 6.3% 7.7% 47.0% 23.9% 9.3% 23.2% 18.8% 3.7% 108.2%

1

Chapter 1, Attachment A, page 2

REDWOOD VALLEY COAST SPRINGS DISTRICT CALIFORNIA WATER SERVICE COMPANY A.12-07-007 TABLE 1-2 SUMMARY OF EARNINGS - ESCALATION YEARS For Illustrative Purposes ($000) DRA 2015 490.9 119.9 55.3 40.4 63.2 70.6 11.2 7.3 27.4 395.2 95.6 1,203.8 7.94% DRA 2016 493.5 122.5 56.5 41.2 64.6 72.2 11.4 6.86 25.65 401.0 92.5 1,164.8 7.94% 2015-2016 Increase 2.7 2.7 1.2 0.8 1.4 1.6 0.3 (0.4) (1.7) 5.8 (3.1) (38.9) (0.0) 0.5% 2.2% 2.2% 1.9% 2.2% 2.2% 2.2% -6.0% -6.4% 1.5% -3.2% -3.2% 0.0%

1 Operating Revenues 2 Operating Expenses:* 3 Operation & Maintenance 4 Administrative & General 5 Payroll 6 G.O. Prorated Expenses 7 Depreciation Expense 8 Taxes Other Than Income 9 California Corporate Franchise Tax 10 Federal Income Tax 11 Total Operating Expenses 12 Net Operating Revenues 13 Weighted Average Rate Base 14 Return on Rate Base

* Assumed escalation factors of 2.24% for composite and 1.90% for labor, for 2016. Net-to-Gross (NTG) Multiplier for 2 Escalation Year & Other Offset Filings 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Uncollectibles Rate 100% - Uncollectibles Rate Franchise Tax Rate Franchise Tax Business License Rate Business License cost Subtotal 100% - Subtotal California Corporate Franchise Tax Rate California Corporate Franchise Tax American Jobs Creation Act Rate American Jobs Creation Act deductions * Federal Income Tax Rate Federal Income Tax Total Taxes Paid Net After Taxes NTG Multiplier
nd

with income tax effect 0.03846% 99.96154% 0.00000% 0.00000% 0.00000% 0.00000% 0.03846% 99.96154% 8.84% 8.83660% 9.00% 8.20124% 35.00% 29.02329% 37.89835% 62.10165% 1.61026

w/o income tax effect 0.03846% 99.96154% 0.00000% 0.00000% 0.00000% 0.00000% 0.03846% 99.96154%

Calculations

100% - [1] [2] x [3] [2] x [5] [1+4+6] 100% - [7] [8] x [9] [8-1]x[11]xprod% [8-10-12] x 13 [7+10+14] 100% - [15] 1 / [16]

0.03846% 99.96154% 1.00038

Capital Structure NTG Multiplier 1.00038 18 Debt 46.6% 1.61026 19 Equity 53.4% 20 Total 100.0% * prod% = ratio of total well and surface water to total water supply.

0.46618 0.85988 1.32606

w/o income taxes with income taxes Wtd. NTG Multiplier

1 2 Chapter 1, Attachment A, page 3

REDWOOD VALLEY COAST SPRINGS DISTRICT CALIFORNIA WATER SERVICE COMPANY A.12-07-007 TABLE 2-1 WATER SALES PER CUSTOMER (OR PER CONNECTION) Test Year 2014 (CCF/connection/year)* 1a 2a 3a 4a 5a 6a 7a 8a 9a 10a 11a Residential Business Multiple Family Industrial Public Authority Other Irrigation Recycled Residential Flat Private Fire Protection Public Fire Protection (CCF/connection/year)* DRA 27.8 132.0 0.0 0.0 9.0 0.0 0.0 0.0 0.0 0.0 0.0 DRA 27.8 132.0 0.0 0.0 9.0 0.0 0.0 0.0 0.0 0.0 0.0 CWS 26.4 122.4 0.0 0.0 9.0 0.0 0.0 0.0 0.0 0.0 0.0 CWS 26.4 122.4 0.0 0.0 9.0 0.0 0.0 0.0 0.0 0.0 0.0 CWS > DRA (1.4) (9.6) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -5.1% -7.3% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Escalation Year 2015 1b 2b 3b 4b 5b 6b 7b 8b 9b 10b 11b

CWS > DRA (1.4) (9.6) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -5.1% -7.3% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Residential Business Multiple Family Industrial Public Authority Other Irrigation Recycled Residential Flat Private Fire Protection Public Fire Protection * Hundred cubic feet per connection per year.

1 2

Chapter 1, Attachment A, page 4

REDWOOD VALLEY COAST SPRINGS DISTRICT CALIFORNIA WATER SERVICE COMPANY A.12-07-007 TABLE 2-2 AVERAGE NUMBER OF CUSTOMERS (SERVICE CONNECTIONS) Test Year 2014 Metered Connections: Residential Business Multiple Family Industrial Public Authority Other Irrigation Recycled Total Number of Metered Connections Unmetered Connections: Residential Flat Private Fire Protection Public Fire Protection Total Number of Unmetered Connections Total Number of Connections: Including Fire Protection Excluding Fire Protection DRA CWS CWS > DRA

1a 2a 3a 4a 5a 6a 7a 8a 9a 10a 11a 12a 13a 14a 15a

246 5 0 0 2 0 0 0 253 0 0 0 0 253 253 DRA

246 5 0 0 2 0 0 0 253 0 0 0 0 253 253 CWS

0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 CWS > DRA

0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%

Escalation Year 2015 Metered Connections: Residential Business Multiple Family Industrial Public Authority Other Irrigation Recycled Total Number of Metered Connections Unmetered Connections: Residential Flat Private Fire Protection Public Fire Protection Total Number of Unmetered Connections Total Number of Connections: Including Fire Protection Excluding Fire Protection

1b 2b 3b 4b 5b 6b 7b 8b 9b 10b 11b 12b 13b 14b 15b

247 5 0 0 2 0 0 0 254 0 0 0 0 254 254

247 5 0 0 2 0 0 0 254 0 0 0 0 254 254

0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%

1

Chapter 1, Attachment A, page 5

REDWOOD VALLEY COAST SPRINGS DISTRICT CALIFORNIA WATER SERVICE COMPANY A.12-07-007 TABLE 2-3 TOTAL SALES AND SUPPLY Test Year 2014 (KCCF) Metered Connections' Sales: 1a Residential 2a Business 3a Multiple Family 4a Industrial 5a Public Authority 6a Other 7a Irrigation 8a Recycled 9a Total Metered Connections' Sales 10a Total Unmetered Connections' Sales 11a Total Sales 12a Unaccounted For Water Rate 13a Unaccounted For Water (UAF) 14a Total Requirement (Sales + UAF) * 15a Total Requirement in Acre Feet WATER SUPPLY MIX: 16a Well Water 17a Purchased Water 18a Treated Water 19a Total Supply * Escalation Year 2015 (KCCF) DRA CWS CWS > DRA

6.8 0.7 0.0 0.0 0.0 0.0 0.0 0.0 7.5 0.0 7.5 23.7% 2.3 9.9 22.6

6.5 0.6 0.0 0.0 0.0 0.0 0.0 0.0 7.1 0.0 7.1 32.0% 3.4 10.5 24.1

(0) (0) 0 0 0 0 0 0 (0) 0 (0) 8.3% 1 1 1

-5.1% -7.3% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% -5.2% 0.0% -5.2% 35.0% 43.5% 6.3% 6.3%

9.8 0.0 0.0 9.8 DRA

10.4 0.0 0.0 10.4 CWS

1 0 0 1 CWS > DRA

6.2% 0.0% 0.0% 6.2%

Metered Connections' Sales: 1b Residential 2b Business 3b Multiple Family 4b Industrial 5b Public Authority 6b Other 7b Irrigation 8b Recycled 9b Total Metered Connections' Sales 10b Total Unmetered Connections' Sales 11b Total Sales 12b Unaccounted For Water Rate 13b Unaccounted For Water 14b Total Requirement (Sales + UAF) * 15b Total Requirement in Acre Feet

6.9 0.7 0.0 0.0 0.0 0.0 0.0 0.0 7.5 0.0 7.545 23.7% 2.3 9.9 22.7

6.5 0.6 0.0 0.0 0.0 0.0 0.0 0.0 7.1 0.0 7.1 32.0% 3.4 10.5 24.1

(0) (0) 0 0 0 0 0 0 (0) 0 (0) 8.3% 1 1 1

-5.1% -7.3% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% -5.2% 0.0% -5.2% 35.0% 43.5% 6.3% 6.3%

1 2

WATER SUPPLY MIX: 16b Well Water 9.8 17b Purchased Water 0.0 18b Treated Water 0.0 9.8 19b Total Supply * * Total Requirement and Total Supply may differ slightly due to rounding.

10.4 0.0 0.0 10.4

1 0 0 1

6.2% 0.0% 0.0% 6.2%

Chapter 1, Attachment A, page 6

REDWOOD VALLEY COAST SPRINGS DISTRICT CALIFORNIA WATER SERVICE COMPANY A.12-07-007 TABLE 2-4 OPERATING REVENUES AT PRESENT RATES Test Year 2014 ($000) Metered Revenues: Residential Business Multiple Family Industrial Public Authority Other Irrigation Recycled Total Metered Revenues Unmetered Revenues: Service Charge Residental Flat Total Unmetered Revenues Other Revenues: Private Fire Protection Public Fire Protection Other Total Other Revenues DRA CWS CWS > DRA

1a 2a 3a 4a 5a 6a 7a 8a 9a

205.5 18.6 0.0 0.0 0.2 1.6 0.0 0.0 225.9

195.1 17.3 0.0 0.0 0.2 1.5 0.0 0.0 214.1

(10.4) (1.3) 0.0 0.0 (0.0) (0.1) 0.0 0.0 (11.9)

-5.1% -7.1% 0.0% 0.0% -7.1% -7.1% 0.0% 0.0% -5.2%

10a 11a 12a

199.5 0.0 199.5

199.5 0.0 199.5

0.0 0.0 0.0

0.0% 0.0% 0.0%

13a 14a 15a 16a

0.0 0.0 0.0 0.0 425.4 DRA

0.0 0.0 0.0 0.0 413.6 CWS

0.0 0.0 0.0 0.0 (11.9)

0.0% 0.0% 0.0% 0.0% -2.8%

17a Total Revenues at Present Rates, Test Year 2014 Escalation Year 2015 ($000) Metered Revenues: Residential Business Multiple Family Industrial Public Authority Other Irrigation Recycled Total Metered Revenues Unmetered Revenues: Service Charge Residental Flat Total Unmetered Revenues Other Revenues: Private Fire Protection Public Fire Protection Other Total Other Revenues

CWS > DRA

1b 2b 3b 4b 5b 6b 7b 8b 9b

202.9 18.3 0.0 0.0 0.2 1.5 0.0 0.0 223.0

262.9 23.2 0.0 0.0 0.3 2.0 0.0 0.0 288.3

59.9 4.9 0.0 0.0 0.1 0.4 0.0 0.0 65.3

29.5% 26.8% 0.0% 0.0% 26.8% 26.8% 0.0% 0.0% 29.3%

10b 11b 12b

264.4 0.0 264.4

264.4 0.0 264.4

0.0 0.0 0.0

0.0% 0.0% 0.0%

13b 14b 15b 16b

0.0 0.0 0.0 0.0 487.4

0.0 0.0 0.0 0.0 552.7

0.0 0.0 0.0 0.0 65.3

0.0% 0.0% 0.0% 0.0% 13.4%

1 2

17b Total Revenues at Present Rates, Escal. Year 2015

Chapter 1, Attachment A, page 7

REDWOOD VALLEY COAST SPRINGS DISTRICT CALIFORNIA WATER SERVICE COMPANY A.12-07-007 TABLE 3-1 OPERATIONS & MAINTENANCE EXPENSES - TEST YEAR Test Year 2014 ($000) Operations Expenses: Purchased Water Groundwater Charges Purchased Power Purchased Chemicals Payroll Postage Transportation Purchased Services: Source of Supply Pumping Water Treatment Transmission & Distribution Customer Accounting Conservation Total Operations Exp. excluding Uncollectibles DRA CWS CWS > DRA

1 2 3 4 5 6 7 8 9 10 11 12 13 14

0.0 0.0 10.5 2.9 27.2 0.9 4.7 0.7 0.4 71.9 5.4 8.2 1.0 133.8

0.0 0.0 11.1 3.1 27.8 0.9 4.7 0.7 0.4 71.9 5.4 8.2 2.9 137.1

0.0 0.0 0.7 0.2 0.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.9 3.3

0.0% 0.0% 6.2% 6.2% 2.2% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 196.9% 2.5%

Maintenance Expenses: 15 Payroll 16 Transportation 17 Stores 18 Contracted Maintenance * 19 Total Maintenance Expenses At Present Rates Operating Revenues Uncollectible Rate Uncollectibles Expense

4.4 2.2 0.0 8.4 15.0

4.5 2.2 0.0 10.1 16.8

0.1 0.0 0.0 1.7 1.8

2.3% 0.0% 0.0% 20.2% 12.0%

20 21 22

425.4 0.0385% 0.2 149.0

413.6 0.0481% 0.2 154.2

(11.9) 0.0096% 0.0 5.2

-2.8% 25.0% 21.5% 3.5%

23 Total O&M Expenses including Uncollectibles At Proposed Rates Operating Revenues Uncollectible Rate Uncollectibles Expense

25 26 27

491.3 0.0385% 0.2 149.0

550.6 0.0481% 0.3 154.2

59.3 0.0096% 0.1 5.2

12.1% 25.0% 40.1% 3.5%

28 Total O&M Expenses including Uncollectibles

1 2

* DRA estimate include amortization of tank painting costs; CWS capitalizes tank painting costs.

Chapter 1, Attachment A, page 8

REDWOOD VALLEY COAST SPRINGS DISTRICT CALIFORNIA WATER SERVICE COMPANY A.12-07-007 TABLE 4-1 ADMINISTRATIVE & GENERAL EXPENSES Test Year 2014 ($000) Administrative & General Expenses: Payroll Benefits Transportation Expenses Purchased Services: Rents, Acct. 8110 Admin. Charges Transferred, Acct. 8120 Workers' Compensation Non-Specifics Subtotal Miscellaneous Expenses Amortization of Limited Term Investment Ratemaking Adjustments Dues & Donations Adjustments DRA CWS CWS > DRA

1a 2a 3a 4a 5a 6a 7a 8a

8.0 39.8 0.0 0.0 0.0 2.2 3.5 53.5

8.2 42.8 0.0 0.0 0.0 2.2 3.5 56.7

0.2 3.0 0.0 0.0 0.0 0.0 0.0 3.2

2.5% 7.4% 0.0% 0.0% 0.0% 0.0% 0.0% 5.9%

9a

8.4

8.4

0.0

0.0%

10a

0.0 62.0

0.0 65.1

0.0 3.2

0.0% 5.1%

11a Total A&G and Miscellaneous Adjustments

1 2

Chapter 1, Attachment A, page 9

REDWOOD VALLEY COAST SPRINGS DISTRICT CALIFORNIA WATER SERVICE COMPANY A.12-07-007 TABLE 5-1 TAXES OTHER THAN INCOME Test Year 2014 ($000) 1a Ad Valorem Taxes 2a Payroll Taxes Business License-Present Rates At Present Rates 3a Operating Revenue EXCLUDING Uncollectibles * 4a Effective Local Franchise Tax Rate 5a Franchise Taxes on applicable op. revenues 6a Total Taxes Other Than Income, At Present Rates At Proposed Rates 7a Operating Revenue EXCLUDING Uncollectibles * 8a Effective Local Franchise Tax Rate 9a Franchise Taxes on applicable op. revenues Business License-Proposed Rates 10a Total Taxes Other Than Income, At Proposed Rates DRA 7.0 4.4 0.0 425.4 0.000% 0.0 11.4 CWS 7.8 4.5 0.0 413.6 0.000% 0.0 12.3 CWS > DRA 0.8 0.1 0.0 (11.9) 0.000% 0.0 0.9 10.9% 2.5% 0.0% -2.8% 0.0% 0.0% 7.7%

491.3 0.000% 0.0 0.0 11.4

550.6 0.000% 0.0 0.0 12.3

59.3 0.000% 0.0 0.0 0.9

12.1% 0.0% 0.0% 0.0% 7.7%

1

Chapter 1, Attachment A, page 10

REDWOOD VALLEY COAST SPRINGS DISTRICT CALIFORNIA WATER SERVICE COMPANY A.12-07-007 TABLE 6-1 TAXES BASED ON INCOME - TEST YEAR AT PRESENT RATES Test Year 2014 ($000) 1 Operating Revenues at Present Rates DRA 425.4 CWS 413.6 CWS > DRA (11.9) -2.8%

Common Deductions: 2 O&M Expenses less Uncollectibles Expense 3 Uncollectibles Expense 4 A&G Expenses 5 G.O. Prorated Expenses 6 G.O. Book Depreciation (to be excluded) 7 Transportation Deprec. Expense (to be excluded) 8 Taxes On Other Than Income 9 Interest Expense 10 Total Common Deductions Calif. Corporation Franchise Tax Deductions 11 Book Depreciation - District 12 Book Depreciation - G.O. 13 Subtotal 14 Total State Deductions, incl. Common Deductions Federal Tax Deductions 16 Book Depreciation - District 17 Book Depreciation - G.O. 18 Domestic Production Activity Deductions 19 Calif. Corporation Franchise Tax (current year) 20 Subtotal 21 Total Fed. Deductions, incl. Common Deductions California Corporate Franchise Tax (CCFT) 22 Taxable Income for CCFT 23 CCFT Rate 24 Total CCFT Federal Income Tax (FIT) 25 Taxable Income for FIT 26 FIT Rate 27 Total FIT 28 Adjustment to FIT, Regulatory Liability 29 Total FIT, with Adjustment 30 Total Income Taxes for Revenues at Present Rates

148.8 0.2 62.0 63.4 (6.2) (0.2) 11.4 35.4 314.7

154.0 0.2 65.1 75.9 (7.7) (0.3) 12.3 42.1 341.6

5.1 0.0 3.2 12.5 (1.5) (0.0) 0.9 6.7 26.9

3.5% 21.5% 5.1% 19.7% 24.2% 23.6% 7.7% 19.0% 8.5%

84.2 9.6 93.7 408.4

73.3 13.9 87.2 428.8

(10.9) 4.3 (6.5) 20.4

-12.9% 45.4% -7.0% 5.0%

70.0 5.8 0.0 1.5 77.3 392.0

74.4 7.3 0.0 (1.3) 80.4 422.0

4.5 1.4 0.0 (2.8) 3.0 29.9

6.4% 24.1% 0.0% -189.4% 3.9% 7.6%

17.0 8.84% 1.5

(15.2) 8.84% (1.3)

(32.2) (2.8)

-189.4% -189.4%

33.4 35.00% 11.7 0.0 11.7 13.2

(8.4) 35.00% (2.9) 0.0 (2.9) (4.3)

(41.8) (41.8) 0.0 (14.6) (17.5)

-125.1% (1.3) 0.0% -125.1% -132.4%

1 2

Chapter 1, Attachment A, page 11

REDWOOD VALLEY COAST SPRINGS DISTRICT CALIFORNIA WATER SERVICE COMPANY A.12-07-007 TABLE 6-2 TAXES BASED ON INCOME - TEST YEAR AT PROPOSED RATES Test Year 2014 ($000) 1 Operating Revenues at Proposed Rates DRA 491.3 CWS 550.6 CWS > DRA 59.3 12.1%

Common Deductions: 2 O&M Expenses less Uncollectibles Expense 3 Uncollectibles Expense 4 A&G Expenses 5 G.O. Prorated Expenses 6 G.O. Book Depreciation (to be excluded) 7 Transportation Deprec. Expense (to be excluded) 8 Taxes On Other Than Income 9 Interest Expense 10 Total Common Deductions Calif. Corporation Franchise Tax Deductions 11 Book Depreciation - District 12 Book Depreciation - G.O. 13 Subtotal 14 Total State Deductions, incl. Common Deductions Federal Tax Deductions 16 Book Depreciation - District 17 Book Depreciation - G.O. 18 Domestic Production Activity Deductions 19 Calif. Corporation Franchise Tax (current year) 20 Subtotal 21 Total Fed. Deductions, incl. Common Deductions California Corporate Franchise Tax (CCFT) 22 Taxable Income for CCFT 23 CCFT Rate 24 Total CCFT Federal Income Tax (FIT) 25 Taxable Income for FIT 26 FIT Rate 27 Total FIT 28 Adjustment to FIT, Regulatory Liability 29 Total FIT, with Adjustment 30 Total Income Taxes for Revenues at Proposed Rates

148.8 0.2 62.0 63.4 (6.2) (0.2) 11.4 35.4 314.7

154.0 0.3 65.1 75.9 (7.7) (0.3) 12.3 42.1 341.7

5.1 0.1 3.2 12.5 (1.5) (0.0) 0.9 6.7 26.9

3.5% 40.1% 5.1% 19.7% 24.2% 23.6% 7.7% 19.0% 8.6%

84.2 9.6 93.7 408.5

73.3 13.9 87.2 428.9

(10.9) 4.3 (6.5) 20.4

-12.9% 45.4% -7.0% 5.0%

70.0 5.8 12.7 7.3 95.8 410.6

74.4 7.3 16.4 10.8 108.9 450.6

4.5 1.4 3.8 3.4 13.1 40.0

6.4% 24.1% 29.6% 47.0% 13.6% 9.7%

82.8 8.84% 7.3

121.7 8.84% 10.8

38.9 3.4

47.0% 47.0%

80.7 35.00% 28.2 0.0 28.2 35.6

100.0 35.00% 35.0 0.0 35.0 45.8

19.3 6.8 0.0 6.8 10.2

23.9% 23.9% 0.0% 23.9% 28.7%

1 2

Chapter 1, Attachment A, page 12

REDWOOD VALLEY COAST SPRINGS DISTRICT CALIFORNIA WATER SERVICE COMPANY A.12-07-007 TABLE 7-1 UTILITY PLANT IN SERVICE Test Year 2014 ($000) 1a Plant in Service - Beginning of Year 2a Adjustments Gross Additions: 3a Company-funded plant 4a Advances 5a Contributions 6a Total Gross Additions 7a Construction Overhead Adjustment 8a Retirements 9a Net Additions 10a Plant in Service - End of Year 11a Plant Weighting Factor 12a Weighted Average Plant in Service Escalation Year 2015 ($000) 1b Plant in Service - Beginning of Year 2b Adjustments Gross Additions: 3b Company-funded plant 4b Advances 5b Contributions 6b Total Gross Additions 7b Construction Overhead Adjustment 8b Retirements 9b Net Additions 10b Plant in Service - End of Year 11b Plant Weighting Factor 12b Weighted Average Plant in Service DRA 3,132.8 (1,190.0) CWS 3,334.1 (1,190.0) CWS > DRA 201.3 0.0 6.4% 0.0%

0.0 0.0 0.0 0.0 0.0 (16.3) (16.3) 1,926.5 27.94% 1,938.3 DRA 3,116.5 (1,190.0)

0.0 0.0 0.0 0.0 0.0 (16.3) (16.3) 2,127.8 36.44% 2,138.2 CWS 3,317.8 (1,190.0)

0.0 0.0 0.0 0.0 0.0 0.0 0.0 201.3 8.51% 199.9

0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 10.4% 30.5% 10.3%

CWS > DRA 201.3 0.0 6.5% 0.0%

8.6 0.0 0.0 8.6 0.5 (16.3) (7.2) 1,919.3 27.94% 1,924.5

8.6 0.0 0.0 8.6 (0.0) (16.3) (7.7) 2,120.1 36.44% 2,125.0

0.0 0.0 0.0 0.0 (0.5) 0.0 (0.5) 200.8 8.51% 200.5

0.0% 0.0% 0.0% 0.0% -110.9% 0.0% 7.0% 10.5% 30.5% 10.4%

1

Chapter 1, Attachment A, page 13

REDWOOD VALLEY COAST SPRINGS DISTRICT CALIFORNIA WATER SERVICE COMPANY A.12-07-007 TABLE 8-1 DEPRECIATION RESERVE & EXPENSE Test Year 2014 ($000) 1a Depreciation Reserve - Beginning of Year Accruals: 2a Transportation Equipment 3a Contributed Plant 4a Depreciation Accrual * 5a Total Accruals Retirements and Adjustments: 6a Net Retirements 7a Adjustments 8a Total Retirement and Adjustments 9a Net Additions 10a Depreciation Reserve - End of Year 11a Depreciation Reserve Weighting Factor 12a Weighted Average Depreciation Reserve 13a * Deprec. expense for summary of earnings calc. (does not include depreciation for transportation, etc.) Escalation Year 2015 ($000) 1b Depreciation Reserve - Beginning of Year Accruals: 2b Transportation Equipment 3b Contributed Plant 4b Depreciation Accrual * 5b Total Accruals Retirements and Adjustments: 6b Net Retirements 7b Adjustments 8b Total Retirement and Adjustments 9b Net Additions 10b Depreciation Reserve - End of Year 11b Depreciation Reserve Weighting Factor 12b Weighted Average Depreciation Reserve 13b * Deprec. expense for summary of earnings calc. (does not include depreciation for transportation, etc.) DRA 577.0 CWS 577.0 CWS > DRA 0.1 0.0%

0.0 4.0 70.0 74.0

0.0 3.8 74.4 78.3

0.0 (0.2) 4.5 4.3

0.0% -4.0% 6.4% 5.8%

19.0 0.0 19.0 51.0 628.0 50.00% 602.5 71.2

19.0 0.0 19.0 55.5 632.5 50.00% 604.8 75.7

0.0 0.0 0.0 4.5 4.5 0.00% 2.3 4.5

0.0% 0.0% 0.0% 8.8% 0.7% 0.0% 0.4% 6.3%

DRA 628.0

CWS 632.5

CWS > DRA 4.5 0.7%

0.0 4.0 69.4 73.4

0.0 3.8 73.9 77.7

0.0 (0.2) 4.5 4.3

0.0% -4.1% 6.4% 5.9%

19.0 0.0 19.0 50.4 678.4 50.00% 653.2 70.6

19.0 0.0 19.0 54.9 687.4 50.00% 660.0 75.1

0.0 0.0 0.0 4.5 9.0 0.00% 6.8 4.5

0.0% 0.0% 0.0% 8.9% 1.3% 0.0% 1.0% 6.3%

1 2

Chapter 1, Attachment A, page 14

REDWOOD VALLEY COAST SPRINGS DISTRICT CALIFORNIA WATER SERVICE COMPANY A.12-07-007 TABLE 9-1 WEIGHTED AVERAGE RATE BASE - TEST YEAR Test Year 2014 ($000) 1 2 3 Weighted Average Plant In Service Weighted Average Depreciation Reserve Net Utility Plant Deductions from Rate Base: Contribution In Aid of Contruction Advances in Construction Reserve for Amortization of Intangibles Deferred Taxes Unamortized Investment Tax Credits Total Deductions from Rate Base Additions to Rate Base: Working Capital: Materials & Supplies Working Cash, Lead-Lag Amount Withheld from Employees Total Working Capital Taxes on Advances Taxes on Contributions Total Additions to Rate Base Prorated Redwood Valley Rate Base (JM2 added) Weighted Average Rate Base, District Weighted Average Rate Base, G.O. Allocation Total Weighted Average Rate Base DRA 1,938.3 (602.5) 1,335.8 CWS 2,138.2 (604.8) 1,533.4 CWS > DRA 199.9 (2.3) 197.6 10.3% 0.4% 14.8%

4 5 6 7 8 9

109.5 0.0 68.2 93.8 0.0 271.5

109.6 0.0 68.2 73.4 0.0 251.2

0.1 0.0 0.0 (20.4) 0.0 (20.3)

0.1% 0.0% 0.0% -21.7% 0.0% -7.5%

10 11 12 13 15 16 17 18 19 20

0.0 27.2 (0.2) 27.0 0.0 0.0 27.0 100.6 1,091.2 50.9 1,242.7

0.0 28.9 (0.2) 28.7 0.0 0.0 28.7 100.1 1,310.9 64.8 1,475.9

0.0 1.7 0.0 1.7 0.0 0.0 1.7 (0.4) 219.7 13.9 233.1

0.0% 6.4% 0.0% 6.5% 0.0% 0.0% 6.5% -0.4% 20.1% 27.3% 18.8%

Interest Calculation (for Tax Deductions): 21 Weighted Avg. Rate Base, excl. Working Capital 1,215.7 1,447.1 22 Weighted Cost of Debt 2.91% 2.91% 23 Interest Expense 35.4 42.1 * * CWS's amount was incorrectly calculated & based on incorrect rate base amount.

231.4 0.00% 6.7

19.0% 0.0% 19.0%

1 2

Chapter 1, Attachment A, page 15

REDWOOD VALLEY COAST SPRINGS DISTRICT CALIFORNIA WATER SERVICE COMPANY A.12-07-007 TABLE 9-2 WEIGHTED AVERAGE RATE BASE - ESCALATION YEAR Escalation Year 2015 ($000) 1 2 3 Weighted Average Plant In Service Weighted Average Depreciation Reserve Net Utility Plant Deductions from Rate Base: Contribution In Aid of Contruction Advances in Construction Reserve for Amortization of Intangibles Deferred Taxes Unamortized Investment Tax Credits Total Deductions from Rate Base Additions to Rate Base: Working Capital: Materials & Supplies Working Cash, Lead-Lag Amount Withheld from Employees Total Working Capital Taxes on Advances Taxes on Contributions Total Additions to Rate Base Prorated Redwood Valley Rate Base (JM2 added) Weighted Average Rate Base, District Weighted Average Rate Base, G.O. Allocation Total Weighted Average Rate Base DRA 1,924.5 (653.2) 1,271.3 CWS 2,125.0 (660.0) 1,465.0 CWS > DRA 200.5 (6.8) 193.8 10.4% 1.0% 15.2%

4 5 6 7 8 9

105.6 0.0 77.3 97.8 0.0 280.8

105.8 0.0 77.3 93.9 0.0 277.0

0.2 0.0 0.0 (4.0) 0.0 (3.7)

0.2% 0.0% 0.0% -4.1% 0.0% -1.3%

10 11 12 13 15 16 17 18 19 20

0.0 27.5 (0.2) 27.4 0.0 0.0 27.4 134.1 1,017.9 51.8 1,203.8

0.0 25.8 (0.2) 25.6 0.0 0.0 25.6 131.9 1,213.6 67.0 1,412.5

0.0 (1.8) 0.0 (1.8) 0.0 0.0 (1.8) (2.2) 195.7 15.2 208.7

0.0% -6.4% 0.0% -6.4% 0.0% 0.0% -6.4% -1.7% 19.2% 29.3% 17.3%

Interest Calculation (for Tax Deductions): 21 Weighted Avg. Rate Base, excl. Working Capital 1,176.4 1,386.9 22 Weighted Cost of Debt 2.91% 2.91% 23 Interest Expense 34.2 40.3 * * CWS's amount was incorrectly calculated & based on incorrect rate base amount.

210.5 0.00% 6.1

17.9% 0.0% 17.9%

1

Chapter 1, Attachment A, page 16

REDWOOD VALLEY LUCERNE DISTRICT CALIFORNIA WATER SERVICE COMPANY A.12-07-007 TABLE 1-1 SUMMARY OF EARNINGS - TEST YEAR DRAPresent Rates 1,460.2 CWSPresent Rates 1,436.1

Test Year 2014 ($000)

CWS > DRA

1a

Operating Revenues

(24.1)

-1.6%

Operating Expenses: 2a Operation & Maintenance 3a Administrative & General 4a Payroll 5a General Office - prorated expenses 6a Depreciation Expense 7a Taxes Other Than Income 8a California Corporate Franchise Tax 9a Federal Income Tax 10a Total Operating Expenses 11a Net Operating Revenues 12a Weighted Average Rate Base 13a Return on Rate Base

444.7 252.4 394.3 272.3 193.2 62.4 (25.6) (88.1) 1,505.4 (45.2) 4,417.9 -1.02% DRAProposed Rates 2,134.0

470.1 239.6 404.1 326.3 200.3 63.6 (51.1) (119.7) 1,533.2 (97.1) 4,659.6 -2.08% CWSProposed Rates 2,254.2

25.4 (12.7) 9.8 54.0 7.1 1.2 (25.5) (31.5) 27.8 (51.9) 241.6 -1.06%

5.7% -5.0% 2.5% 19.8% 3.7% 1.9% 99.5% 35.8% 1.8% 114.7% 5.5% 103.5%

Test Year 2014 ($000)

CWS > DRA

1b

Operating Revenues

120.2

5.6%

Operating Expenses: 2b Operation & Maintenance 3b Administrative & General 4b Payroll 5b General Office - prorated expenses 6b Depreciation Expense 7b Taxes Other Than Income 8b California Corporate Franchise Tax 9b Federal Income Tax 10b Total Operating Expenses 11b Net Operating Revenues 12b Weighted Average Rate Base 13b Return on Rate Base 14 Increase in Operating Revenues (1b - 1a)

449.9 252.4 394.3 272.3 193.2 62.4 33.5 125.2 1,783.0 350.9 4,417.9 7.94% 673.8

476.4 239.6 404.1 326.3 200.3 63.6 20.6 139.3 1,870.2 383.9 4,659.6 8.24% 818.0

26.5 (12.7) 9.8 54.0 7.1 1.2 (12.9) 14.2 87.2 33.0 241.6 0.30% 144.3

5.9% -5.0% 2.5% 19.8% 3.7% 1.9% -38.4% 11.3% 4.9% 9.4% 5.5% 3.7% 21.4%

1

Chapter 1, Attachment A, page 17

REDWOOD VALLEY LUCERNE DISTRICT CALIFORNIA WATER SERVICE COMPANY A.12-07-007 TABLE 1-2 SUMMARY OF EARNINGS - ESCALATION YEARS For Illustrative Purposes 1 2 3 4 5 6 7 8 9 10 11 12 13 14 ($000) DRA 2015 2,109.6 453.9 252.6 401.8 271.6 192.5 60.3 8.5 123.0 1,764.2 345.4 4,347.7 7.94% DRA 2016 2,135.0 464.1 258.3 409.4 277.7 196.8 61.6 7.68 119.66 1,795.2 339.8 4,277.5 7.94% 2015-2016 Increase 25.5 10.2 5.7 7.6 6.1 4.3 1.3 (0.8) (3.3) 31.0 (5.6) (70.2) (0.0) 1.2% 2.2% 2.2% 1.9% 2.2% 2.2% 2.2% -9.8% -2.7% 1.8% -1.6% -1.6% 0.0%

Operating Revenues Operating Expenses:* Operation & Maintenance Administrative & General Payroll G.O. Prorated Expenses Depreciation Expense Taxes Other Than Income California Corporate Franchise Tax Federal Income Tax Total Operating Expenses Net Operating Revenues Weighted Average Rate Base Return on Rate Base

* Assumed escalation factors of 2.24% for composite and 1.90% for labor, for 2016. Net-to-Gross (NTG) Multiplier for 2 Escalation Year & Other Offset Filings 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Uncollectibles Rate 100% - Uncollectibles Rate Franchise Tax Rate Franchise Tax Business License Rate Business License cost Subtotal 100% - Subtotal California Corporate Franchise Tax Rate California Corporate Franchise Tax American Jobs Creation Act Rate American Jobs Creation Act deductions * Federal Income Tax Rate Federal Income Tax Total Taxes Paid Net After Taxes NTG Multiplier
nd

with income tax effect 0.76587% 99.23413% 0.00000% 0.00000% 0.00000% 0.00000% 0.76587% 99.23413% 8.84% 8.77230% 9.00% 0.00000% 35.00% 31.66164% 41.19981% 58.80019% 1.70067

w/o income tax effect 0.76587% 99.23413% 0.00000% 0.00000% 0.00000% 0.00000% 0.76587% 99.23413%

Calculations

100% - [1] [2] x [3] [2] x [5] [1+4+6] 100% - [7] [8] x [9] [8-1]x[11]xprod% [8-10-12] x 13 [7+10+14] 100% - [15] 1 / [16]

0.76587% 99.23413% 1.00772

18 19 20

NTG Multiplier Capital Structure 1.00772 Debt 46.6% 1.70067 Equity 53.4% Total 100.0% * prod% = ratio of total well and surface water to total water supply.

0.46960 0.90816 1.37776

w/o income taxes with income taxes Wtd. NTG Multiplier

1 Chapter 1, Attachment A, page 18

REDWOOD VALLEY LUCERNE DISTRICT CALIFORNIA WATER SERVICE COMPANY A.12-07-007 TABLE 2-1 WATER SALES PER CUSTOMER (OR PER CONNECTION) Test Year 2014 (CCF/connection/year)* 1a 2a 3a 4a 5a 6a 7a 8a 9a 10a 11a Residential Business Multiple Family Industrial Public Authority Other Irrigation Recycled Residential Flat Private Fire Protection Public Fire Protection (CCF/connection/year)* DRA 63.4 148.8 1,268.6 0.0 162.9 0.0 0.0 0.0 0.0 0.0 0.0 DRA 63.4 148.8 1,268.6 0.0 162.9 0.0 0.0 0.0 0.0 0.0 0.0 CWS 58.3 145.8 1,181.7 0.0 172.8 0.0 0.0 0.0 0.0 0.0 0.0 CWS 58.3 145.8 1,181.7 0.0 172.8 0.0 0.0 0.0 0.0 0.0 0.0 CWS > DRA (5.1) (3.0) (86.9) 0.0 9.9 0.0 0.0 0.0 0.0 0.0 0.0 -8.0% -2.0% -6.8% 0.0% 6.1% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Escalation Year 2015 1b 2b 3b 4b 5b 6b 7b 8b 9b 10b 11b

CWS > DRA (5.1) (3.0) (86.9) 0.0 9.9 0.0 0.0 0.0 0.0 0.0 0.0 -8.0% -2.0% -6.8% 0.0% 6.1% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Residential Business Multiple Family Industrial Public Authority Other Irrigation Recycled Residential Flat Private Fire Protection Public Fire Protection * Hundred cubic feet per connection per year.

1

Chapter 1, Attachment A, page 19

REDWOOD VALLEY LUCERNE DISTRICT CALIFORNIA WATER SERVICE COMPANY A.12-07-007 TABLE 2-2 AVERAGE NUMBER OF CUSTOMERS (SERVICE CONNECTIONS) Test Year 2014 Metered Connections: Residential Business Multiple Family Industrial Public Authority Other Irrigation Recycled Total Number of Metered Connections Unmetered Connections: Residential Flat Private Fire Protection Public Fire Protection Total Number of Unmetered Connections Total Number of Connections: Including Fire Protection Excluding Fire Protection DRA CWS CWS > DRA

1a 2a 3a 4a 5a 6a 7a 8a 9a 10a 11a 12a 13a 14a 15a

1,129 41 13 0 9 0 0 0 1,192 0 5 0 5 1,197 1,192 DRA

1,153 44 13 0 9 0 0 0 1,219 0 5 0 5 1,224 1,219 CWS

24 3 0 0 0 0 0 0 27 0 0 0 0 27 27 CWS > DRA

2% 7% 0% 0% 0% 0% 0% 0% 2% 0% 0% 0% 0% 2% 2%

Escalation Year 2015 Metered Connections: Residential Business Multiple Family Industrial Public Authority Other Irrigation Recycled Total Number of Metered Connections Unmetered Connections: Residential Flat Private Fire Protection Public Fire Protection Total Number of Unmetered Connections Total Number of Connections: Including Fire Protection Excluding Fire Protection

1b 2b 3b 4b 5b 6b 7b 8b 9b 10b 11b 12b 13b 14b 15b

1,119 39 12 0 9 0 0 0 1,179 0 5 0 5 1,184 1,179

1,153 44 13 0 9 0 0 0 1,219 0 5 0 5 1,224 1,219

34 5 1 0 0 0 0 0 40 0 0 0 0 40 40

3% 13% 8% 0% 0% 0% 0% 0% 3% 0% 0% 0% 0% 3% 3%

1

Chapter 1, Attachment A, page 20

REDWOOD VALLEY LUCERNE DISTRICT CALIFORNIA WATER SERVICE COMPANY A.12-07-007 TABLE 2-3 TOTAL SALES AND SUPPLY Test Year 2014 (KCCF) DRA CWS CWS > DRA

Metered Connections' Sales: 1a Residential 2a Business 3a Multiple Family 4a Industrial 5a Public Authority 6a Other 7a Irrigation 8a Recycled 9a Total Metered Connections' Sales 10a Total Unmetered Connections' Sales 11a Total Sales 12a Unaccounted For Water Rate 13a Unaccounted For Water (UAF) 14a Total Requirement (Sales + UAF) * 15a Total Requirement in Acre Feet WATER SUPPLY MIX: 16a Well Water 17a Purchased Water 18a Treated Water 19a Total Supply * Escalation Year 2015 (KCCF) Metered Connections' Sales: 1b Residential 2b Business 3b Multiple Family 4b Industrial 5b Public Authority 6b Other 7b Irrigation 8b Recycled 9b Total Metered Connections' Sales 10b Total Unmetered Connections' Sales 11b Total Sales 12b Unaccounted For Water Rate 13b Unaccounted For Water 14b Total Requirement (Sales + UAF) * 15b Total Requirement in Acre Feet

71.6 6.1 16.5 0.0 1.5 0.0 0.0 0.0 95.6 0.0 95.6 20.7% 25.0 120.6 276.9

67.3 6.4 15.4 0.0 1.6 0.0 0.0 0.0 90.6 0.0 90.6 20.7% 23.7 114.3 262.3

(4) 0 (1) 0 0 0 0 0 (5) 0 (5) 0.0% (1) (6) (15)

-6.0% 5.1% -6.8% 0.0% 6.1% 0.0% 0.0% 0.0% -5.3% 0.0% -5.3% 0.1% -5.2% -5.3% -5.3%

0.0 120.6 0.0 120.6 DRA

0.0 114.3 0.0 114.3 CWS

0 (6) 0 (6)

0.0% -5.2% 0.0% -5.2%

CWS > DRA

70.9 5.8 15.2 0.0 1.5 0.0 0.0 0.0 93.4 0.0 93.437 20.7% 24.4 117.8 270.5

67.3 6.4 15.4 0.0 1.6 0.0 0.0 0.0 90.6 0.0 90.6 20.7% 23.7 114.3 262.3

(4) 1 0 0 0 0 0 0 (3) 0 (3) 0.0% (1) (4) (8)

-5.2% 10.5% 0.9% 0.0% 6.1% 0.0% 0.0% 0.0% -3.0% 0.0% -3.0% 0.1% -3.0% -3.0% -3.0%

1

WATER SUPPLY MIX: 16b Well Water 0.0 17b Purchased Water 117.8 18b Treated Water 0.0 117.8 19b Total Supply * * Total Requirement and Total Supply may differ slightly due to rounding.

0.0 114.3 0.0 114.3

0 (4) 0 (4)

0.0% -3.0% 0.0% -3.0%

Chapter 1, Attachment A, page 21

REDWOOD VALLEY LUCERNE DISTRICT CALIFORNIA WATER SERVICE COMPANY A.12-07-007 TABLE 2-4 OPERATING REVENUES AT PRESENT RATES Test Year 2014 ($000) DRA CWS CWS > DRA

1a 2a 3a 4a 5a 6a 7a 8a 9a

Metered Revenues: Residential Business Multiple Family Industrial Public Authority Other Irrigation Recycled Total Metered Revenues Unmetered Revenues: Service Charge Residental Flat Total Unmetered Revenues Other Revenues: Private Fire Protection Public Fire Protection Other Total Other Revenues

566.0 50.9 128.6 0.0 10.8 0.0 0.0 0.0 756.2

531.8 49.4 124.7 0.0 10.4 0.0 0.0 0.0 716.3

(34.2) (1.5) (3.9) 0.0 (0.3) 0.0 0.0 0.0 (39.9)

-6.0% -3.0% -3.0% 0.0% -3.0% 0.0% 0.0% 0.0% -5.3%

10a 11a 12a

703.0 0.0 703.0

718.8 0.0 718.8

15.8 0.0 15.8

2.3% 0.0% 2.3%

13a 14a 15a 16a

0.3 0.0 0.7 1.0 1,460.2 DRA

0.3 0.0 0.7 1.0 1,436.1 CWS

0.0 0.0 0.0 0.0 (24.1)

0.0% 0.0% 0.0% 0.0% -1.6%

17a Total Revenues at Present Rates, Test Year 2014 Escalation Year 2015 ($000) Metered Revenues: Residential Business Multiple Family Industrial Public Authority Other Irrigation Recycled Total Metered Revenues Unmetered Revenues: Service Charge Residental Flat Total Unmetered Revenues Other Revenues: Private Fire Protection Public Fire Protection Other Total Other Revenues

CWS > DRA

1b 2b 3b 4b 5b 6b 7b 8b 9b

940.7 79.8 201.5 0.0 16.9 0.0 0.0 0.0 1,238.9

1,016.4 94.4 238.3 0.0 19.9 0.0 0.0 0.0 1,369.0

75.8 14.6 36.7 0.0 3.1 0.0 0.0 0.0 130.1

8.1% 18.2% 18.2% 0.0% 18.2% 0.0% 0.0% 0.0% 10.5%

10b 11b 12b

855.9 0.0 855.9

884.1 0.0 884.1

28.3 0.0 28.3

3.3% 0.0% 3.3%

13b 14b 15b 16b

0.3 0.0 0.6 0.9 2,095.7

0.3 0.0 0.6 0.9 2,254.1

0.0 0.0 0.0 0.0 158.4

0.0% 0.0% 0.0% 0.0% 7.6%

1

17b Total Revenues at Present Rates, Escal. Year 2015

Chapter 1, Attachment A, page 22

REDWOOD VALLEY LUCERNE DISTRICT CALIFORNIA WATER SERVICE COMPANY A.12-07-007 TABLE 3-1 OPERATIONS & MAINTENANCE EXPENSES - TEST YEAR Test Year 2014 ($000) Operations Expenses: Purchased Water Groundwater Charges Purchased Power Purchased Chemicals Payroll Postage Transportation Purchased Services: Source of Supply Pumping Water Treatment Transmission & Distribution Customer Accounting Conservation Total Operations Exp. excluding Uncollectibles Maintenance Expenses: Payroll Transportation Stores Contracted Maintenance * Total Maintenance Expenses At Present Rates Operating Revenues Uncollectible Rate Uncollectibles Expense Total O&M Expenses including Uncollectibles At Proposed Rates Operating Revenues Uncollectible Rate Uncollectibles Expense Total O&M Expenses including Uncollectibles DRA CWS CWS > DRA

1 2 3 4 5 6 7 8 9 10 11 12 13 14

14.3 0.0 91.8 25.0 307.2 5.1 27.6 2.5 0.6 114.4 13.3 52.2 4.2 658.2

13.8 0.0 93.1 23.7 314.8 5.2 27.6 2.5 0.6 132.1 13.3 52.2 12.4 691.4

(0.5) 0.0 1.4 (1.3) 7.6 0.1 0.0 0.0 0.0 17.7 0.0 0.0 8.2 33.2

-3.5% 0.0% 1.5% -5.2% 2.5% 2.0% 0.0% 0.0% 0.0% 15.5% 0.0% 0.0% 196.9% 5.0%

15 16 17 18 19

21.3 6.7 0.3 75.6 103.9

21.8 6.7 0.3 75.6 104.4

0.5 0.0 0.0 0.0 0.5

2.3% 0.0% 0.0% 0.0% 0.5%

20 21 22 23

1,460.2 0.7659% 11.2 773.2

1,436.1 0.7659% 11.0 806.7

(24.1) 0.0000% (0.2) 33.5

-1.6% 0.0% -1.6% 4.3%

25 26 27 28

2,134.0 0.7659% 16.3 778.4

2,254.2 0.7659% 17.3 813.0

120.2 0.0000% 0.9 34.6

5.6% 0.0% 5.6% 4.4%

1

* DRA estimate include amortization of tank painting costs; CWS capitalizes tank painting costs.

Chapter 1, Attachment A, page 23

REDWOOD VALLEY LUCERNE DISTRICT CALIFORNIA WATER SERVICE COMPANY A.12-07-007 TABLE 4-1 ADMINISTRATIVE & GENERAL EXPENSES Test Year 2014 ($000) Administrative & General Expenses: Payroll Benefits Transportation Expenses Purchased Services: Rents, Acct. 8110 Admin. Charges Transferred, Acct. 8120 Workers' Compensation Non-Specifics Subtotal Miscellaneous Expenses Amortization of Limited Term Investment Ratemaking Adjustments Dues & Donations Adjustments DRA CWS CWS > DRA

1a 2a 3a 4a 5a 6a 7a 8a

65.8 197.3 0.0 20.0 (2.6) 9.6 28.1 318.2

67.5 211.7 0.0 20.0 (2.5) 9.6 0.8 307.1

1.7 14.5 0.0 0.0 0.1 0.0 (27.3) (11.0)

2.6% 7.3% 0.0% 0.0% -4.4% 0.0% -97.2% -3.5%

9a

0.0

0.0

0.0

0.0%

10a

0.0 318.2

0.0 307.1

0.0 (11.0)

0.0% -3.5%

11a Total A&G and Miscellaneous Adjustments

1

Chapter 1, Attachment A, page 24

REDWOOD VALLEY LUCERNE DISTRICT CALIFORNIA WATER SERVICE COMPANY A.12-07-007 TABLE 5-1 TAXES OTHER THAN INCOME Test Year 2014 ($000) 1a 2a Ad Valorem Taxes Payroll Taxes Business License-Present Rates At Present Rates Operating Revenue EXCLUDING Uncollectibles * Effective Local Franchise Tax Rate Franchise Taxes on applicable op. revenues Total Taxes Other Than Income, At Present Rates DRA 40.8 21.6 0.0 1,460.2 0.000% 0.0 62.4 CWS 41.4 22.1 0.0 1,436.1 0.000% 0.0 63.6 CWS > DRA 0.7 0.5 0.0 (24.1) 0.000% 0.0 1.2 1.6% 2.5% 0.0% -1.6% 0.0% 0.0% 1.9%

3a 4a 5a 6a

7a 8a 9a

At Proposed Rates Operating Revenue EXCLUDING Uncollectibles * Effective Local Franchise Tax Rate Franchise Taxes on applicable op. revenues Business License-Proposed Rates 10a Total Taxes Other Than Income, At Proposed Rates

2,134.0 0.000% 0.0 0.0 62.4

2,254.2 0.000% 0.0 0.0 63.6

120.2 0.000% 0.0 0.0 1.2

5.6% 0.0% 0.0% 0.0% 1.9%

1

Chapter 1, Attachment A, page 25

REDWOOD VALLEY LUCERNE DISTRICT CALIFORNIA WATER SERVICE COMPANY A.12-07-007 TABLE 6-1 TAXES BASED ON INCOME - TEST YEAR AT PRESENT RATES Test Year 2014 ($000) 1 Operating Revenues at Present Rates Common Deductions: O&M Expenses less Uncollectibles Expense Uncollectibles Expense A&G Expenses G.O. Prorated Expenses G.O. Book Depreciation (to be excluded) Transportation Deprec. Expense (to be excluded) Taxes On Other Than Income Interest Expense Total Common Deductions Calif. Corporation Franchise Tax Deductions Book Depreciation - District Book Depreciation - G.O. Subtotal Total State Deductions, incl. Common Deductions Federal Tax Deductions Book Depreciation - District Book Depreciation - G.O. Domestic Production Activity Deductions Calif. Corporation Franchise Tax (current year) Subtotal Total Fed. Deductions, incl. Common Deductions California Corporate Franchise Tax (CCFT) Taxable Income for CCFT CCFT Rate Total CCFT Federal Income Tax (FIT) Taxable Income for FIT FIT Rate Total FIT Adjustment to FIT, Regulatory Liability Total FIT, with Adjustment Total Income Taxes for Revenues at Present Rates DRA 1,460.2 CWS 1,436.1 CWS > DRA (24.1) -1.6%

2 3 4 5 6 7 8 9 10

762.0 11.2 318.2 272.3 (26.6) (0.9) 62.4 120.8 1,519.4

795.7 11.0 307.1 326.3 (32.9) (0.9) 63.6 127.7 1,597.7

33.7 (0.2) (11.0) 54.0 (6.3) (0.0) 1.2 6.9 78.3

4.4% -1.6% -3.5% 19.8% 23.7% 0.0% 1.9% 5.7% 5.2%

11 12 13 14

189.8 41.1 230.9 1,750.2

357.3 59.7 417.0 2,014.7

167.5 18.6 186.2 264.5

88.3% 45.4% 80.6% 15.1%

16 17 18 19 20 21

193.2 25.1 0.0 (25.6) 192.7 1,712.0

200.3 31.2 0.0 (51.1) 180.3 1,778.0

7.1 6.1 0.0 (25.5) (12.3) 66.0

3.7% 24.1% 0.0% 99.5% -6.4% 3.9%

22 23 24

(290.0) 8.84% (25.6)

(578.6) 8.84% (51.1)

(288.6) (25.5)

99.5% 99.5%

25 26 27 28 29 30

(251.8) 35.00% (88.1) 0.0 (88.1) (113.8)

(341.9) 35.00% (119.7) 0.0 (119.7) (170.8)

(90.1) (90.1) 0.0 (31.5) (57.0)

35.8% 0.4 0.0% 35.8% 50.1%

1

Chapter 1, Attachment A, page 26

REDWOOD VALLEY LUCERNE DISTRICT CALIFORNIA WATER SERVICE COMPANY A.12-07-007 TABLE 6-2 TAXES BASED ON INCOME - TEST YEAR AT PROPOSED RATES Test Year 2014 ($000) 1 Operating Revenues at Proposed Rates Common Deductions: O&M Expenses less Uncollectibles Expense Uncollectibles Expense A&G Expenses G.O. Prorated Expenses G.O. Book Depreciation (to be excluded) Transportation Deprec. Expense (to be excluded) Taxes On Other Than Income Interest Expense Total Common Deductions Calif. Corporation Franchise Tax Deductions Book Depreciation - District Book Depreciation - G.O. Subtotal Total State Deductions, incl. Common Deductions Federal Tax Deductions Book Depreciation - District Book Depreciation - G.O. Domestic Production Activity Deductions Calif. Corporation Franchise Tax (current year) Subtotal Total Fed. Deductions, incl. Common Deductions California Corporate Franchise Tax (CCFT) Taxable Income for CCFT CCFT Rate Total CCFT Federal Income Tax (FIT) Taxable Income for FIT FIT Rate Total FIT Adjustment to FIT, Regulatory Liability Total FIT, with Adjustment Total Income Taxes for Revenues at Proposed Rates DRA 2,134.0 CWS 2,254.2 CWS > DRA 120.2 5.6%

2 3 4 5 6 7 8 9 10

762.0 16.3 318.2 272.3 (26.6) (0.9) 62.4 120.8 1,524.5

795.7 17.3 307.1 326.3 (32.9) (0.9) 63.6 127.7 1,604.0

33.7 0.9 (11.0) 54.0 (6.3) (0.0) 1.2 6.9 79.4

4.4% 5.6% -3.5% 19.8% 23.7% 0.0% 1.9% 5.7% 5.2%

11 12 13 14

189.8 41.1 230.9 1,755.4

357.3 59.7 417.0 2,021.0

167.5 18.6 186.2 265.6

88.3% 45.4% 80.6% 15.1%

16 17 18 19 20 21

193.2 25.1 0.0 33.5 251.8 1,776.3

200.3 31.2 0.0 20.6 252.1 1,856.1

7.1 6.1 0.0 (12.9) 0.3 79.8

3.7% 24.1% 0.0% -38.4% 0.1% 4.5%

22 23 24

378.6 8.84% 33.5

233.2 8.84% 20.6

(145.4) (12.9)

-38.4% -38.4%

25 26 27 28 29 30

357.7 35.00% 125.2 0.0 125.2 158.6

398.1 35.00% 139.3 0.0 139.3 159.9

40.4 14.2 0.0 14.2 1.3

11.3% 11.3% 0.0% 11.3% 0.8%

1

Chapter 1, Attachment A, page 27

REDWOOD VALLEY LUCERNE DISTRICT CALIFORNIA WATER SERVICE COMPANY A.12-07-007 TABLE 7-1 UTILITY PLANT IN SERVICE Test Year 2014 ($000) 1a 2a Plant in Service - Beginning of Year Adjustments Gross Additions: Company-funded plant Advances Contributions Total Gross Additions Construction Overhead Adjustment Retirements Net Additions DRA 13,793.6 (7,657.7) CWS 13,927.2 (7,657.7) CWS > DRA 133.6 0.0 1.0% 0.0%

3a 4a 5a 6a 7a 8a 9a

0.0 0.0 19.0 19.0 0.0 (16.3) 2.7 6,138.5 27.94% 6,136.6 DRA 13,796.3 (7,657.7)

248.3 0.0 19.0 267.3 (6.9) (16.3) 244.1 6,513.6 36.44% 6,358.4 CWS 14,171.3 (7,657.7)

248.3 0.0 0.0 248.3 (6.9) 0.0 241.4 375.0 8.51% 221.8

0.0% 0.0% 0.0% 1308.7% 0.0% 0.0% 8969.6% 6.1% 30.5% 3.6%

10a Plant in Service - End of Year 11a Plant Weighting Factor 12a Weighted Average Plant in Service Escalation Year 2015 ($000) 1b 2b Plant in Service - Beginning of Year Adjustments Gross Additions: Company-funded plant Advances Contributions Total Gross Additions Construction Overhead Adjustment Retirements Net Additions

CWS > DRA 375.0 0.0 2.7% 0.0%

3b 4b 5b 6b 7b 8b 9b

260.7 0.0 19.0 279.6 13.8 (16.3) 277.2 6,415.7 27.94% 6,216.0

347.1 0.0 19.0 366.1 (2.1) (16.3) 347.8 6,861.4 36.44% 6,640.3

86.5 0.0 0.0 86.5 (15.8) 0.0 70.6 445.7 8.51% 424.4

33.2% 0.0% 0.0% 30.9% -114.9% 0.0% 25.5% 6.9% 30.5% 6.8%

10b Plant in Service - End of Year 11b Plant Weighting Factor 12b Weighted Average Plant in Service

1

Chapter 1, Attachment A, page 28

REDWOOD VALLEY LUCERNE DISTRICT CALIFORNIA WATER SERVICE COMPANY A.12-07-007 TABLE 8-1 DEPRECIATION RESERVE & EXPENSE Test Year 2014 ($000) 1a Depreciation Reserve - Beginning of Year Accruals: 2a Transportation Equipment 3a Contributed Plant 4a Depreciation Accrual * 5a Total Accruals Retirements and Adjustments: 6a Net Retirements 7a Adjustments 8a Total Retirement and Adjustments 9a Net Additions 10a Depreciation Reserve - End of Year 11a Depreciation Reserve Weighting Factor 12a Weighted Average Depreciation Reserve 13a * Deprec. expense for summary of earnings calc. (does not include depreciation for transportation, etc.) Escalation Year 2015 ($000) 1b Depreciation Reserve - Beginning of Year Accruals: 2b Transportation Equipment 3b Contributed Plant 4b Depreciation Accrual * 5b Total Accruals Retirements and Adjustments: 6b Net Retirements 7b Adjustments 8b Total Retirement and Adjustments 9b Net Additions 10b Depreciation Reserve - End of Year 11b Depreciation Reserve Weighting Factor 12b Weighted Average Depreciation Reserve 13b * Deprec. expense for summary of earnings calc. (does not include depreciation for transportation, etc.) DRA 1,774.5 CWS 1,776.0 CWS > DRA 1.5 0.1%

0.0 6.1 193.2 199.3

0.0 6.2 200.3 206.5

0.0 0.0 7.1 7.2

0.0% 0.6% 3.7% 3.6%

20.0 0.0 20.0 173.2 1,947.7 50.00% 1,861.1 193.2

20.0 0.0 20.0 180.3 1,956.3 50.00% 1,866.2 200.3

0.0 0.0 0.0 7.1 8.7 0.00% 5.1 7.1

0.0% 0.0% 0.0% 4.1% 0.4% 0.0% 0.3% 3.7%

DRA 1,947.7

CWS 1,956.3

CWS > DRA 8.7 0.4%

0.0 6.8 192.5 199.2

0.0 6.7 203.6 210.3

0.0 (0.1) 11.1 11.0

0.0% -1.7% 5.8% 5.5%

18.1 0.0 18.1 174.4 2,122.0 50.00% 2,034.9 192.5

18.1 0.0 18.1 185.5 2,141.9 50.00% 2,049.1 203.6

0.0 0.0 0.0 11.1 19.8 0.00% 14.2 11.1

0.0% 0.0% 0.0% 6.4% 0.9% 0.0% 0.7% 5.8%

1 Chapter 1, Attachment A, page 29

REDWOOD VALLEY LUCERNE DISTRICT CALIFORNIA WATER SERVICE COMPANY A.12-07-007 TABLE 9-1 WEIGHTED AVERAGE RATE BASE - TEST YEAR Test Year 2014 ($000) 1 2 3 Weighted Average Plant In Service Weighted Average Depreciation Reserve Net Utility Plant Deductions from Rate Base: Contribution In Aid of Contruction Advances in Construction Reserve for Amortization of Intangibles Deferred Taxes Unamortized Investment Tax Credits Total Deductions from Rate Base Additions to Rate Base: Working Capital: Materials & Supplies Working Cash, Lead-Lag Amount Withheld from Employees Total Working Capital Taxes on Advances Taxes on Contributions Total Additions to Rate Base Prorated Redwood Valley Rate Base (JM2 added) Weighted Average Rate Base, District Weighted Average Rate Base, G.O. Allocation Total Weighted Average Rate Base DRA 6,136.6 (1,861.1) 4,275.5 CWS 6,358.4 (1,866.2) 4,492.2 CWS > DRA 221.8 (5.1) 216.7 3.6% 0.3% 5.1%

4 5 6 7 8 9

143.7 0.0 0.5 647.9 0.0 792.1

145.2 0.0 0.5 682.4 0.0 828.2

1.6 0.0 0.0 34.5 0.0 36.1

1.1% 0.0% 0.0% 5.3% 0.0% 4.6%

10 11 12 13 15 16 17 18 19 20

9.1 255.9 (0.7) 264.2 0.0 18.7 282.9 432.5 3,766.3 219.1 4,417.9

9.1 258.8 (0.7) 267.1 0.0 18.7 285.8 430.6 3,949.8 279.1 4,659.6

0.0 2.9 0.0 2.9 0.0 0.0 2.9 (1.9) 183.5 60.0 241.6

0.0% 1.1% 0.0% 1.1% 0.0% 0.0% 1.0% -0.4% 4.9% 27.4% 5.5%

21 22 23

Interest Calculation (for Tax Deductions): Weighted Avg. Rate Base, excl. Working Capital 4,153.7 4,392.4 Weighted Cost of Debt 2.91% 2.91% Interest Expense 120.8 127.7 * * CWS's amount was incorrectly calculated & based on incorrect rate base amount.

238.7 0.00% 6.9

5.7% 0.0% 5.7%

1

Chapter 1, Attachment A, page 30

REDWOOD VALLEY LUCERNE DISTRICT CALIFORNIA WATER SERVICE COMPANY A.12-07-007 TABLE 9-2 WEIGHTED AVERAGE RATE BASE - ESCALATION YEAR Escalation Year 2015 ($000) 1 2 3 Weighted Average Plant In Service Weighted Average Depreciation Reserve Net Utility Plant Deductions from Rate Base: Contribution In Aid of Contruction Advances in Construction Reserve for Amortization of Intangibles Deferred Taxes Unamortized Investment Tax Credits Total Deductions from Rate Base Additions to Rate Base: Working Capital: Materials & Supplies Working Cash, Lead-Lag Amount Withheld from Employees Total Working Capital Taxes on Advances Taxes on Contributions Total Additions to Rate Base Prorated Redwood Valley Rate Base (JM2 added) Weighted Average Rate Base, District Weighted Average Rate Base, G.O. Allocation Total Weighted Average Rate Base DRA 6,216.0 (2,034.9) 4,181.1 CWS 6,640.3 (2,049.1) 4,591.2 CWS > DRA 424.4 (14.2) 410.1 6.8% 0.7% 9.8%

4 5 6 7 8 9

156.2 0.0 0.5 735.8 0.0 892.5

157.8 0.0 0.5 791.0 0.0 949.4

1.6 0.0 0.0 55.2 0.0 56.8

1.0% 0.0% 0.0% 7.5% 0.0% 6.4%

10 11 12 13 15 16 17 18 19 20

9.1 232.8 (0.7) 241.2 0.0 18.4 259.5 576.6 3,548.1 223.0 4,347.7

9.1 257.8 (0.7) 266.1 0.0 18.4 284.5 567.0 3,926.4 287.9 4,781.3

0.0 25.0 0.0 25.0 0.0 0.0 25.0 (9.6) 378.3 64.9 433.6

0.0% 10.7% 0.0% 10.4% 0.0% 0.0% 9.6% -1.7% 10.7% 29.1% 10.0%

21 22 23

Interest Calculation (for Tax Deductions): Weighted Avg. Rate Base, excl. Working Capital 4,106.5 4,515.1 Weighted Cost of Debt 2.91% 2.91% Interest Expense 119.4 131.3 * * CWS's amount was incorrectly calculated & based on incorrect rate base amount.

408.6 0.00% 11.9

9.9% 0.0% 9.9%

1

Chapter 1, Attachment A, page 31

REDWOOD VALLEY UNIFIED DISTRICT CALIFORNIA WATER SERVICE COMPANY A.12-07-007 TABLE 1-1 SUMMARY OF EARNINGS - TEST YEAR DRAPresent Rates 572.0 CWSPresent Rates 563.3

Test Year 2014

($000)

CWS > DRA

1a

Operating Revenues

(8.7)

-1.5%

Operating Expenses: 2a Operation & Maintenance 3a Administrative & General 4a Payroll 5a General Office - prorated expenses 6a Depreciation Expense 7a Taxes Other Than Income 8a California Corporate Franchise Tax 9a Federal Income Tax 10a Total Operating Expenses 11a Net Operating Revenues 12a Weighted Average Rate Base 13a Return on Rate Base

124.8 94.8 135.9 88.5 98.1 19.3 0.1 (17.1) 544.4 27.7 1,925.5 1.44% DRAProposed Rates 777.2

128.2 104.0 139.3 106.3 107.1 20.2 (4.6) (35.1) 565.5 (2.2) 2,064.7 -0.11% CWSProposed Rates 846.8

3.4 9.2 3.4 17.8 9.1 0.9 (4.7) (18.0) 21.1 (29.8) 139.2 -1.54%

2.7% 9.7% 2.5% 20.1% 9.3% 4.7% -4458.6% 105.5% 3.9% -107.9% 7.2% -107.4%

Test Year 2014

($000)

CWS > DRA

1b Operating Revenues Operating Expenses: 2b Operation & Maintenance 3b Administrative & General 4b Payroll 5b General Office - prorated expenses 6b Depreciation Expense 7b Taxes Other Than Income 8b California Corporate Franchise Tax 9b Federal Income Tax 10b Total Operating Expenses 11b Net Operating Revenues 12b Weighted Average Rate Base 13b Return on Rate Base 14 Increase in Operating Revenues (1b - 1a)

69.6

9.0%

126.2 94.8 135.9 88.5 98.1 19.3 18.1 43.3 624.3 153.0 1,925.5 7.94% 205.2

130.2 104.0 139.3 106.3 107.1 20.2 20.3 49.2 676.7 170.1 2,064.7 8.24% 283.5

4.0 9.2 3.4 17.8 9.1 0.9 2.2 5.9 52.4 17.2 139.2 0.30% 78.3

3.1% 9.7% 2.5% 20.1% 9.3% 4.7% 12.2% 13.6% 8.4% 11.2% 7.2% 3.7% 38.2%

1

Chapter 1, Attachment A, page 32

REDWOOD VALLEY UNIFIED DISTRICT CALIFORNIA WATER SERVICE COMPANY A.12-07-007 TABLE 1-2 SUMMARY OF EARNINGS - ESCALATION YEARS For Illustrative Purposes ($000) DRA 2015 786.2 128.1 95.0 138.5 88.4 96.9 19.0 19.0 50.8 635.8 150.4 1,893.3 7.94% DRA 2016 794.0 131.0 97.1 141.1 90.4 99.1 19.4 18.68 49.35 646.2 147.8 1,861.0 7.94% 2015-2016 Increase 7.8 2.9 2.1 2.6 2.0 2.2 0.4 (0.4) (1.5) 10.4 (2.6) (32.2) 0.0 1.0% 2.2% 2.2% 1.9% 2.2% 2.2% 2.2% -1.9% -2.9% 1.6% -1.7% -1.7% 0.0%

1 Operating Revenues 2 Operating Expenses:* 3 Operation & Maintenance 4 Administrative & General 5 Payroll 6 G.O. Prorated Expenses 7 Depreciation Expense 8 Taxes Other Than Income 9 California Corporate Franchise Tax 10 Federal Income Tax 11 Total Operating Expenses 12 Net Operating Revenues 13 Weighted Average Rate Base 14 Return on Rate Base

* Assumed escalation factors of 2.24% for composite and 1.90% for labor, for 2016. Net-to-Gross (NTG) Multiplier for 2 Escalation Year & Other Offset Filings 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Uncollectibles Rate 100% - Uncollectibles Rate Franchise Tax Rate Franchise Tax Business License Rate Business License cost Subtotal 100% - Subtotal California Corporate Franchise Tax Rate California Corporate Franchise Tax American Jobs Creation Act Rate American Jobs Creation Act deductions * Federal Income Tax Rate Federal Income Tax Total Taxes Paid Net After Taxes NTG Multiplier
nd

with income tax effect 0.71718% 99.28282% 0.00000% 0.00000% 0.00000% 0.00000% 0.71718% 99.28282% 8.84% 8.77660% 9.00% 7.57537% 35.00% 29.02580% 38.51958% 61.48042% 1.62653

w/o income tax effect 0.71718% 99.28282% 0.00000% 0.00000% 0.00000% 0.00000% 0.71718% 99.28282%

Calculations

100% - [1] [2] x [3] [2] x [5] [1+4+6] 100% - [7] [8] x [9] [8-1]x[11]xprod% [8-10-12] x 13 [7+10+14] 100% - [15] 1 / [16]

0.71718% 99.28282% 1.00722

Capital Structure NTG Multiplier 1.00722 18 Debt 46.6% 1.62653 19 Equity 53.4% 20 Total 100.0% * prod% = ratio of total well and surface water to total water supply.

0.46937 0.86857 1.33794

w/o income taxes with income taxes Wtd. NTG Multiplier

1 Chapter 1, Attachment A, page 33

REDWOOD VALLEY UNIFIED DISTRICT CALIFORNIA WATER SERVICE COMPANY A.12-07-007 TABLE 2-1 WATER SALES PER CUSTOMER (OR PER CONNECTION) Test Year 2014 1a 2a 3a 4a 5a 6a 7a 8a 9a 10a 11a (CCF/connection/year)* DRA 67.2 227.2 828.9 0.0 154.7 0.0 0.0 0.0 0.0 0.0 0.0 DRA 66.2 227.2 816.5 0.0 154.7 0.0 0.0 0.0 0.0 0.0 0.0 CWS 64.2 262.8 828.9 0.0 154.7 0.0 0.0 0.0 0.0 0.0 0.0 CWS 63.2 262.8 816.5 0.0 154.7 0.0 0.0 0.0 0.0 0.0 0.0 CWS > DRA (3.0) 35.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -4.5% 15.7% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Residential Business Multiple Family Industrial Public Authority Other Irrigation Recycled Residential Flat Private Fire Protection Public Fire Protection

Escalation Year 2015 (CCF/connection/year)* 1b 2b 3b 4b 5b 6b 7b 8b 9b 10b 11b Residential Business Multiple Family Industrial Public Authority Other Irrigation Recycled Residential Flat Private Fire Protection Public Fire Protection * Hundred cubic feet per connection per year.

CWS > DRA (3.0) 35.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -4.5% 15.7% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

1

Chapter 1, Attachment A, page 34

REDWOOD VALLEY UNIFIED DISTRICT CALIFORNIA WATER SERVICE COMPANY A.12-07-007 TABLE 2-2 AVERAGE NUMBER OF CUSTOMERS (SERVICE CONNECTIONS) Test Year 2014 Metered Connections: Residential Business Multiple Family Industrial Public Authority Other Irrigation Recycled Total Number of Metered Connections Unmetered Connections: Residential Flat Private Fire Protection Public Fire Protection Total Number of Unmetered Connections Total Number of Connections: Including Fire Protection Excluding Fire Protection DRA CWS CWS > DRA

1a 2a 3a 4a 5a 6a 7a 8a 9a 10a 11a 12a 13a 14a 15a

417 6 3 0 3 0 0 0 429 0 0 0 0 429 429 DRA

417 6 3 0 3 0 0 0 429 0 0 0 0 429 429 CWS

0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 CWS > DRA

0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%

Escalation Year 2015 Metered Connections: Residential Business Multiple Family Industrial Public Authority Other Irrigation Recycled Total Number of Metered Connections Unmetered Connections: Residential Flat Private Fire Protection Public Fire Protection Total Number of Unmetered Connections Total Number of Connections: Including Fire Protection Excluding Fire Protection

1b 2b 3b 4b 5b 6b 7b 8b 9b 10b 11b 12b 13b 14b 15b

418 6 3 0 3 0 0 0 430 0 0 0 0 430 430

418 6 3 0 3 0 0 0 430 0 0 0 0 430 430

0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%

1

Chapter 1, Attachment A, page 35

REDWOOD VALLEY UNIFIED DISTRICT CALIFORNIA WATER SERVICE COMPANY A.12-07-007 TABLE 2-3 TOTAL SALES AND SUPPLY Test Year 2014 (KCCF) Metered Connections' Sales: 1a Residential 2a Business 3a Multiple Family 4a Industrial 5a Public Authority 6a Other 7a Irrigation 8a Recycled 9a Total Metered Connections' Sales 10a Total Unmetered Connections' Sales 11a Total Sales 12a Unaccounted For Water Rate 13a Unaccounted For Water (UAF) 14a Total Requirement (Sales + UAF) * 15a Total Requirement in Acre Feet WATER SUPPLY MIX: 16a Well Water 17a Purchased Water 18a Treated Water 19a Total Supply * Escalation Year 2015 (KCCF) DRA CWS CWS > DRA

28.0 1.4 2.5 0.0 0.5 0.0 0.0 0.0 32.3 0.0 32.3 15.8% 6.1 38.4 88.2

26.8 1.6 2.5 0.0 0.5 0.0 0.0 0.0 31.3 0.0 31.3 27.5% 11.9 43.2 99.1

(1) 0 0 0 0 0 0 0 (1) 0 (1) 11.7% 6 5 11

-4.5% 15.7% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% -3.2% 0.0% -3.2% 74.1% 95.7% 12.4% 12.4%

35.7 2.7 0.0 38.4 DRA

40.5 2.7 0.0 43.2 CWS

5 0 0 5

13.4% 0.0% 0.0% 12.5%

CWS > DRA

Metered Connections' Sales: 1b Residential 2b Business 3b Multiple Family 4b Industrial 5b Public Authority 6b Other 7b Irrigation 8b Recycled 9b Total Metered Connections' Sales 10b Total Unmetered Connections' Sales 11b Total Sales 12b Unaccounted For Water Rate 13b Unaccounted For Water 14b Total Requirement (Sales + UAF) * 15b Total Requirement in Acre Feet

27.7 1.4 2.4 0.0 0.5 0.0 0.0 0.0 31.9 0.0 31.945 15.8% 6.0 37.9 87.1

26.4 1.6 2.4 0.0 0.5 0.0 0.0 0.0 30.9 0.0 30.9 27.5% 11.7 42.6 97.9

(1) 0 0 0 0 0 0 0 (1) 0 (1) 11.7% 6 5 11

-4.5% 15.7% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% -3.2% 0.0% -3.2% 74.1% 95.7% 12.4% 12.4%

1

WATER SUPPLY MIX: 16b Well Water 35.2 17b Purchased Water 2.7 18b Treated Water 0.0 37.9 19b Total Supply * * Total Requirement and Total Supply may differ slightly due to rounding.

39.9 2.7 0.0 42.6

5 0 0 5

13.4% 0.0% 0.0% 12.4%

Chapter 1, Attachment A, page 36

REDWOOD VALLEY UNIFIED DISTRICT CALIFORNIA WATER SERVICE COMPANY A.12-07-007 TABLE 2-4 OPERATING REVENUES AT PRESENT RATES Test Year 2014 ($000) DRA CWS CWS > DRA

1a 2a 3a 4a 5a 6a 7a 8a 9a

Metered Revenues: Residential Business Multiple Family Industrial Public Authority Other Irrigation Recycled Total Metered Revenues Unmetered Revenues: Service Charge Residental Flat Total Unmetered Revenues Other Revenues: Private Fire Protection Public Fire Protection Other Total Other Revenues

234.0 11.7 17.9 0.0 6.5 0.0 0.0 0.0 270.0

223.4 12.2 18.7 0.0 6.8 0.0 0.0 0.0 261.2

(10.5) 0.6 0.9 0.0 0.3 0.0 0.0 0.0 (8.7)

-4.5% 4.9% 4.9% 0.0% 4.9% 0.0% 0.0% 0.0% -3.2%

10a 11a 12a

301.8 0.0 301.8

301.8 0.0 301.8

0.0 0.0 0.0

0.0% 0.0% 0.0%

13a 14a 15a 16a

0.0 0.0 0.2 0.2 572.0 DRA

0.0 0.0 0.2 0.2 563.3 CWS

0.0 0.0 0.0 0.0 (8.7)

0.0% 0.0% 0.0% 0.0% -1.5%

17a Total Revenues at Present Rates, Test Year 2014 Escalation Year 2015 ($000) Metered Revenues: Residential Business Multiple Family Industrial Public Authority Other Irrigation Recycled Total Metered Revenues Unmetered Revenues: Service Charge Residental Flat Total Unmetered Revenues Other Revenues: Private Fire Protection Public Fire Protection Other Total Other Revenues

CWS > DRA

1b 2b 3b 4b 5b 6b 7b 8b 9b

357.7 17.9 27.4 0.0 10.0 0.0 0.0 0.0 412.9

353.0 19.4 29.7 0.0 10.8 0.0 0.0 0.0 413.0

(4.7) 1.5 2.3 0.0 0.8 0.0 0.0 0.0 0.0

-1.3% 8.5% 8.5% 0.0% 8.5% 0.0% 0.0% 0.0% 0.0%

10b 11b 12b

429.5 0.0 429.5

429.5 0.0 429.5

0.0 0.0 0.0

0.0% 0.0% 0.0%

13b 14b 15b 16b

0.0 0.0 0.3 0.3 842.7

0.0 0.0 0.3 0.3 842.8

0.0 0.0 0.0 0.0 0.0

0.0% 0.0% 0.0% 0.0% 0.0%

1

17b Total Revenues at Present Rates, Escal. Year 2015

Chapter 1, Attachment A, page 37

REDWOOD VALLEY UNIFIED DISTRICT CALIFORNIA WATER SERVICE COMPANY A.12-07-007 TABLE 3-1 OPERATIONS & MAINTENANCE EXPENSES - TEST YEAR Test Year 2014 ($000) DRA CWS CWS > DRA

1 2 3 4 5 6 7 8 9 10 11 12 13 14

Operations Expenses: Purchased Water Groundwater Charges Purchased Power Purchased Chemicals Payroll Postage Transportation Purchased Services: Source of Supply Pumping Water Treatment Transmission & Distribution Customer Accounting Conservation Total Operations Exp. excluding Uncollectibles

16.2 0.0 16.3 1.8 107.3 2.3 10.9 2.0 3.0 18.4 8.4 24.5 1.4 212.4

15.2 0.0 16.4 2.0 109.9 2.3 10.9 2.0 3.0 19.9 8.4 24.5 4.0 218.4

(1.0) 0.0 0.1 0.2 2.6 0.0 0.0 0.0 0.0 1.5 0.0 0.0 2.7 6.1

-6.2% 0.0% 0.5% 12.5% 2.4% 0.0% 0.0% 0.0% 0.0% 8.2% 0.0% 0.0% 196.9% 2.9%

Maintenance Expenses: 15 Payroll 16 Transportation 17 Stores 18 Contracted Maintenance * 19 Total Maintenance Expenses At Present Rates Operating Revenues Uncollectible Rate Uncollectibles Expense

11.1 8.6 0.0 7.0 26.7

11.4 8.6 0.0 7.0 27.0

0.3 0.0 0.0 0.0 0.3

2.7% 0.0% 0.0% 0.0% 1.1%

20 21 22

572.0 0.7172% 4.1 243.2

563.3 0.7172% 4.0 249.5

(8.7) 0.0000% (0.1) 6.3

-1.5% 0.0% -1.5% 2.6%

23 Total O&M Expenses including Uncollectibles At Proposed Rates Operating Revenues Uncollectible Rate Uncollectibles Expense

25 26 27

777.2 0.7172% 5.6 244.6

846.8 0.7172% 6.1 251.5

69.6 0.0000% 0.5 6.9

9.0% 0.0% 9.0% 2.8%

28 Total O&M Expenses including Uncollectibles

1

* DRA estimate include amortization of tank painting costs; CWS capitalizes tank painting costs.

Chapter 1, Attachment A, page 38

REDWOOD VALLEY UNIFIED DISTRICT CALIFORNIA WATER SERVICE COMPANY A.12-07-007 TABLE 4-1 ADMINISTRATIVE & GENERAL EXPENSES Test Year 2014 ($000) DRA CWS CWS > DRA

1a 2a 3a 4a 5a 6a 7a 8a

Administrative & General Expenses: Payroll Benefits Transportation Expenses Purchased Services: Rents, Acct. 8110 Admin. Charges Transferred, Acct. 8120 Workers' Compensation Non-Specifics Subtotal Miscellaneous Expenses Amortization of Limited Term Investment Ratemaking Adjustments Dues & Donations Adjustments

17.5 69.2 0.0 8.4 0.0 3.1 14.1 112.3

18.0 74.3 0.0 8.4 0.0 3.1 18.2 122.0

0.5 5.1 0.0 0.0 0.0 0.0 4.1 9.7

2.9% 7.3% 0.0% 0.0% 0.0% 0.0% 29.1% 8.6%

9a

0.0

0.0

0.0

0.0%

10a

0.0 112.3

0.0 122.0

0.0 9.7

0.0% 8.6%

11a Total A&G and Miscellaneous Adjustments

1

Chapter 1, Attachment A, page 39

REDWOOD VALLEY UNIFIED DISTRICT CALIFORNIA WATER SERVICE COMPANY A.12-07-007 TABLE 5-1 TAXES OTHER THAN INCOME Test Year 2014 1a 2a ($000) DRA 10.0 9.3 0.0 572.0 0.000% 0.0 19.3 CWS 10.6 9.6 0.0 563.3 0.000% 0.0 20.2 CWS > DRA 0.7 0.2 0.0 (8.7) 0.000% 0.0 0.9 6.7% 2.5% 0.0% -1.5% 0.0% 0.0% 4.7%

3a 4a 5a 6a

Ad Valorem Taxes Payroll Taxes Business License-Present Rates At Present Rates Operating Revenue EXCLUDING Uncollectibles * Effective Local Franchise Tax Rate Franchise Taxes on applicable op. revenues Total Taxes Other Than Income, At Present Rates

At Proposed Rates Operating Revenue EXCLUDING Uncollectibles * Effective Local Franchise Tax Rate Franchise Taxes on applicable op. revenues Business License-Proposed Rates 10a Total Taxes Other Than Income, At Proposed Rates 7a 8a 9a

777.2 0.000% 0.0 0.0 19.3

846.8 0.000% 0.0 0.0 20.2

69.6 0.000% 0.0 0.0 0.9

9.0% 0.0% 0.0% 0.0% 4.7%

1

Chapter 1, Attachment A, page 40

REDWOOD VALLEY UNIFIED DISTRICT CALIFORNIA WATER SERVICE COMPANY A.12-07-007 TABLE 6-1 TAXES BASED ON INCOME - TEST YEAR AT PRESENT RATES Test Year 2014 1 ($000) DRA 572.0 CWS 563.3 CWS > DRA (8.7) -1.5%

Operating Revenues at Present Rates

Common Deductions: 2 O&M Expenses less Uncollectibles Expense 3 Uncollectibles Expense 4 A&G Expenses 5 G.O. Prorated Expenses 6 G.O. Book Depreciation (to be excluded) 7 Transportation Deprec. Expense (to be excluded) 8 Taxes On Other Than Income 9 Interest Expense 10 Total Common Deductions Calif. Corporation Franchise Tax Deductions 11 Book Depreciation - District 12 Book Depreciation - G.O. 13 Subtotal 14 Total State Deductions, incl. Common Deductions Federal Tax Deductions 16 Book Depreciation - District 17 Book Depreciation - G.O. 18 Domestic Production Activity Deductions 19 Calif. Corporation Franchise Tax (current year) 20 Subtotal 21 Total Fed. Deductions, incl. Common Deductions California Corporate Franchise Tax (CCFT) 22 Taxable Income for CCFT 23 CCFT Rate 24 Total CCFT Federal Income Tax (FIT) 25 Taxable Income for FIT 26 FIT Rate 27 Total FIT 28 Adjustment to FIT, Regulatory Liability 29 Total FIT, with Adjustment 30 Total Income Taxes for Revenues at Present Rates

239.1 4.1 112.3 88.5 (8.6) (0.3) 19.3 53.3 507.7

245.4 4.0 122.0 106.3 (10.7) (0.4) 20.2 57.1 544.0

6.4 (0.1) 9.7 17.8 (2.1) (0.1) 0.9 3.8 36.3

2.7% -1.5% 8.6% 20.1% 24.4% 23.6% 4.7% 7.1% 7.2%

49.8 13.4 63.1 570.9

51.5 19.4 70.9 614.9

1.7 6.1 7.8 44.1

3.4% 45.4% 12.3% 7.7%

104.8 8.2 0.0 0.1 113.1 620.8

113.9 10.2 0.0 (4.6) 119.5 663.5

9.1 2.0 0.0 (4.7) 6.4 42.7

8.7% 24.1% 0.0% -4458.6% 5.6% 6.9%

1.2 8.84% 0.1

(51.7) 8.84% (4.6)

(52.8) (4.7)

-4458.6% -4458.6%

(48.8) 35.00% (17.1) 0.0 (17.1) (17.0)

(100.2) 35.00% (35.1) 0.0 (35.1) (39.6)

(51.4) (51.4) 0.0 (18.0) (22.7)

105.5% 1.1 0.0% 105.5% 133.7%

1

Chapter 1, Attachment A, page 41

REDWOOD VALLEY UNIFIED DISTRICT CALIFORNIA WATER SERVICE COMPANY A.12-07-007 TABLE 6-2 TAXES BASED ON INCOME - TEST YEAR AT PROPOSED RATES Test Year 2014 1 ($000) DRA 777.2 CWS 846.8 CWS > DRA 69.6 9.0%

Operating Revenues at Proposed Rates

Common Deductions: 2 O&M Expenses less Uncollectibles Expense 3 Uncollectibles Expense 4 A&G Expenses 5 G.O. Prorated Expenses 6 G.O. Book Depreciation (to be excluded) 7 Transportation Deprec. Expense (to be excluded) 8 Taxes On Other Than Income 9 Interest Expense 10 Total Common Deductions Calif. Corporation Franchise Tax Deductions 11 Book Depreciation - District 12 Book Depreciation - G.O. 13 Subtotal 14 Total State Deductions, incl. Common Deductions Federal Tax Deductions 16 Book Depreciation - District 17 Book Depreciation - G.O. 18 Domestic Production Activity Deductions 19 Calif. Corporation Franchise Tax (current year) 20 Subtotal 21 Total Fed. Deductions, incl. Common Deductions California Corporate Franchise Tax (CCFT) 22 Taxable Income for CCFT 23 CCFT Rate 24 Total CCFT Federal Income Tax (FIT) 25 Taxable Income for FIT 26 FIT Rate 27 Total FIT 28 Adjustment to FIT, Regulatory Liability 29 Total FIT, with Adjustment 30 Total Income Taxes for Revenues at Proposed Rates

239.1 5.6 112.3 88.5 (8.6) (0.3) 19.3 53.3 509.2

245.4 6.1 122.0 106.3 (10.7) (0.4) 20.2 57.1 546.1

6.4 0.5 9.7 17.8 (2.1) (0.1) 0.9 3.8 36.9

2.7% 9.0% 8.6% 20.1% 24.4% 23.6% 4.7% 7.1% 7.2%

49.8 13.4 63.1 572.3

51.5 19.4 70.9 617.0

1.7 6.1 7.8 44.7

3.4% 45.4% 12.3% 7.8%

104.8 8.2 13.1 18.1 144.2 653.4

113.9 10.2 15.7 20.3 160.1 706.2

9.1 2.0 2.6 2.2 15.9 52.8

8.7% 24.1% 20.2% 12.2% 11.0% 8.1%

204.9 8.84% 18.1

229.9 8.84% 20.3

24.9 2.2

12.2% 12.2%

123.8 35.00% 43.3 0.0 43.3 61.5

140.7 35.00% 49.2 0.0 49.2 69.6

16.8 5.9 0.0 5.9 8.1

13.6% 13.6% 0.0% 13.6% 13.2%

1

Chapter 1, Attachment A, page 42

REDWOOD VALLEY UNIFIED DISTRICT CALIFORNIA WATER SERVICE COMPANY A.12-07-007 TABLE 7-1 UTILITY PLANT IN SERVICE Test Year 2014 1a 2a ($000) DRA 2,473.6 (85.9) CWS 2,589.1 (85.9) CWS > DRA 115.5 0.0 4.7% 0.0%

Plant in Service - Beginning of Year Adjustments Gross Additions: Company-funded plant Advances Contributions Total Gross Additions Construction Overhead Adjustment Retirements Net Additions

3a 4a 5a 6a 7a 8a 9a

0.0 0.0 4.9 4.9 0.0 (23.7) (18.8) 2,368.8 27.94% 2,382.4 DRA 2,454.8 (85.9)

(1.9) 0.0 4.9 3.0 0.0 (23.7) (20.7) 2,482.5 36.44% 2,495.6 CWS 2,568.4 (85.9)

(1.9) 0.0 0.0 (1.9) 0.0 0.0 (1.9) 113.6 8.51% 113.2

0.0% 0.0% 0.0% -38.5% 0.0% 0.0% 9.9% 4.8% 30.5% 4.8%

10a Plant in Service - End of Year 11a Plant Weighting Factor 12a Weighted Average Plant in Service Escalation Year 2015 ($000) 1b Plant in Service - Beginning of Year 2b Adjustments Gross Additions: 3b Company-funded plant 4b Advances 5b Contributions 6b Total Gross Additions 7b Construction Overhead Adjustment 8b Retirements 9b Net Additions 10b Plant in Service - End of Year 11b Plant Weighting Factor 12b Weighted Average Plant in Service

CWS > DRA 113.6 0.0 4.6% 0.0%

30.7 0.0 4.9 35.5 1.6 (23.7) 13.5 2,382.3 27.94% 2,372.6

354.7 0.0 4.9 359.5 (2.0) (23.7) 333.8 2,816.3 36.44% 2,604.1

324.0 0.0 0.0 324.0 (3.7) 0.0 320.3 433.9 8.51% 231.5

1056.4% 0.0% 0.0% 912.0% -226.2% 0.0% 2378.2% 18.2% 30.5% 9.8%

1

Chapter 1, Attachment A, page 43

REDWOOD VALLEY UNIFIED DISTRICT CALIFORNIA WATER SERVICE COMPANY A.12-07-007 TABLE 8-1 DEPRECIATION RESERVE & EXPENSE Test Year 2014 ($000) 1a Depreciation Reserve - Beginning of Year Accruals: 2a Transportation Equipment 3a Contributed Plant 4a Depreciation Accrual * 5a Total Accruals Retirements and Adjustments: 6a Net Retirements 7a Adjustments 8a Total Retirement and Adjustments 9a Net Additions 10a Depreciation Reserve - End of Year 11a Depreciation Reserve Weighting Factor 12a Weighted Average Depreciation Reserve 13a * Deprec. expense for summary of earnings calc. (does not include depreciation for transportation, etc.) Escalation Year 2015 ($000) 1b Depreciation Reserve - Beginning of Year Accruals: 2b Transportation Equipment 3b Contributed Plant 4b Depreciation Accrual * 5b Total Accruals Retirements and Adjustments: 6b Net Retirements 7b Adjustments 8b Total Retirement and Adjustments 9b Net Additions 10b Depreciation Reserve - End of Year 11b Depreciation Reserve Weighting Factor 12b Weighted Average Depreciation Reserve 13b * Deprec. expense for summary of earnings calc. (does not include depreciation for transportation, etc.) DRA 678.5 CWS 683.4 CWS > DRA 4.9 0.7%

0.0 2.0 104.8 106.8

0.0 2.0 113.9 115.9

0.0 0.1 9.1 9.1

0.0% 2.9% 8.7% 8.6%

29.6 0.0 29.6 75.2 753.7 50.00% 716.1 98.1

29.6 0.0 29.6 84.3 767.6 50.00% 725.5 107.1

0.0 0.0 0.0 9.1 13.9 0.00% 9.4 9.1

0.0% 0.0% 0.0% 12.1% 1.9% 0.0% 1.3% 9.3%

DRA 753.7

CWS 767.6

CWS > DRA 13.9 1.9%

0.0 2.2 103.7 105.9

0.0 2.3 112.8 115.1

0.0 0.1 9.1 9.2

0.0% 3.0% 8.8% 8.7%

29.6 0.0 29.6 74.1 827.8 50.00% 790.7 96.9

29.6 0.0 29.6 83.2 850.9 50.00% 809.3 106.1

0.0 0.0 0.0 9.1 23.1 0.00% 18.5 9.1

0.0% 0.0% 0.0% 12.3% 2.8% 0.0% 2.3% 9.4%

1 Chapter 1, Attachment A, page 44

REDWOOD VALLEY UNIFIED DISTRICT CALIFORNIA WATER SERVICE COMPANY A.12-07-007 TABLE 9-1 WEIGHTED AVERAGE RATE BASE - TEST YEAR Test Year 2014 1 2 3 ($000) DRA 2,382.4 (716.1) 1,666.3 CWS 2,495.6 (725.5) 1,770.1 CWS > DRA 113.2 (9.4) 103.8 4.8% 1.3% 6.2%

Weighted Average Plant In Service Weighted Average Depreciation Reserve Net Utility Plant Deductions from Rate Base: Contribution In Aid of Contruction Advances in Construction Reserve for Amortization of Intangibles Deferred Taxes Unamortized Investment Tax Credits Total Deductions from Rate Base Additions to Rate Base: Working Capital: Materials & Supplies Working Cash, Lead-Lag Amount Withheld from Employees Total Working Capital Taxes on Advances Taxes on Contributions Total Additions to Rate Base Prorated Redwood Valley Rate Base (JM2 added) Weighted Average Rate Base, District Weighted Average Rate Base, G.O. Allocation Total Weighted Average Rate Base

4 5 6 7 8 9

37.4 0.0 12.0 0.3 0.0 49.7

37.8 0.0 12.0 (8.1) 0.0 41.7

0.4 0.0 0.0 (8.5) 0.0 (8.1)

1.0% 0.0% 0.0% -2668.0% 0.0% -16.2%

10 11 12 13 15 16 17 18 19 20

0.0 91.5 (0.2) 91.3 0.0 5.5 96.8 140.8 1,713.4 71.3 1,925.5

0.0 100.0 (0.2) 99.7 0.0 4.8 104.5 140.8 1,833.0 90.9 2,064.7

0.0 8.5 0.0 8.5 0.0 (0.7) 7.7 0.0 119.6 19.6 139.2

0.0% 9.2% 0.0% 9.3% 0.0% -13.4% 8.0% 0.0% 7.0% 27.5% 7.2%

Interest Calculation (for Tax Deductions): 21 Weighted Avg. Rate Base, excl. Working Capital 1,834.2 1,965.0 22 Weighted Cost of Debt 2.91% 2.91% 23 Interest Expense 53.3 57.1 * * CWS's amount was incorrectly calculated & based on incorrect rate base amount.

130.7 0.00% 3.8

7.1% 0.0% 7.1%

1

Chapter 1, Attachment A, page 45

REDWOOD VALLEY UNIFIED DISTRICT CALIFORNIA WATER SERVICE COMPANY A.12-07-007 TABLE 9-2 WEIGHTED AVERAGE RATE BASE - ESCALATION YEAR Escalation Year 2015 ($000) 1 2 3 Weighted Average Plant In Service Weighted Average Depreciation Reserve Net Utility Plant Deductions from Rate Base: Contribution In Aid of Contruction Advances in Construction Reserve for Amortization of Intangibles Deferred Taxes Unamortized Investment Tax Credits Total Deductions from Rate Base Additions to Rate Base: Working Capital: Materials & Supplies Working Cash, Lead-Lag Amount Withheld from Employees Total Working Capital Taxes on Advances Taxes on Contributions Total Additions to Rate Base Prorated Redwood Valley Rate Base (JM2 added) Weighted Average Rate Base, District Weighted Average Rate Base, G.O. Allocation Total Weighted Average Rate Base DRA 2,372.6 (790.7) 1,581.9 CWS 2,604.1 (809.3) 1,794.9 CWS > DRA 231.5 (18.5) 213.0 9.8% 2.3% 13.5%

4 5 6 7 8 9

40.1 0.0 12.0 (6.7) 0.0 45.5

40.5 0.0 12.0 18.1 0.0 70.6

0.3 0.0 0.0 24.7 0.0 25.1

0.8% 0.0% 0.0% -370.0% 0.0% 55.1%

10 11 12 13 15 16 17 18 19 20

0.0 91.2 (0.2) 90.9 0.0 5.6 96.6 187.7 1,632.9 72.6 1,893.3

0.0 99.7 (0.2) 99.5 0.0 4.7 104.2 187.7 1,828.5 93.7 2,109.9

0.0 8.6 0.0 8.6 0.0 (1.0) 7.6 0.0 195.5 21.1 216.6

0.0% 9.4% 0.0% 9.4% 0.0% -17.2% 7.9% 0.0% 12.0% 29.1% 11.4%

Interest Calculation (for Tax Deductions): 21 Weighted Avg. Rate Base, excl. Working Capital 1,802.3 2,010.4 22 Weighted Cost of Debt 2.91% 2.91% 23 Interest Expense 52.4 58.5 * * CWS's amount was incorrectly calculated & based on incorrect rate base amount.

208.1 0.00% 6.0

11.5% 0.0% 11.5%

1 2 3 [END OF CHAPTER 1, ATTACHMENT A]

Chapter 1, Attachment A, page 46

1

CHAPTER 2: SALES, REVENUES AND RATE DESIGN
A. INTRODUCTION This chapter presents DRA’s analysis and recommendations regarding the forecasted number of customers, water consumption and operation revenues for CWS’ Redwood Valley District. The Redwood Valley District includes several water systems located in Lake, Marin and Sonoma Counties. DRA reviewed CWS’ application, exhibits, data responses, reports, and work papers before formulating its own estimates. B. SUMMARY OF RECOMMENDATIONS DRA generally adhered to the methods outlined in the Rate Case Plan (“RCP”) in DRA’s analysis of sales forecast and revenues, whereas the CWS’ sales forecasting method differed from the RCP. CWS proposes the use of the 2011 weather normalized sales to forecast sales in 2014. In certain instances, due to the availability of data, changes in customer classifications, or significant changes in usage that led to poor statistics, DRA and CWS used averages of recent years usage to determine a forecast for 2014 usage. This may apply to all customer classes. These occurrences are discussed individually. The Commission should uphold the methods outlined in the RCP by adopting DRA’s recommendations presented in this report and the resulting levels of customers, sales quantities, and revenues. DRA’s recommended operating revenues at present rates are shown in Chapter 1 of this report. 1) Average Active Service Connections For Unified and Coast Springs, CWS proposes to calculate the number of customers based on the three-year and five-year average change in the number of customers, respectively. DRA agrees with CWS’ proposed number of service connections for Unified and Coast Springs. For Lucerne, CWS proposes zero change in the number of customers. DRA recommends the five-year average change in the number of customers.

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DRA’s and CWS’ recommendations are shown in Table 2-2, Average Number of Customers (Service Connections, in Chapter 1). 2) Metered Sales and Supply The Commission should require CWS to use the method proposed by DRA, in accordance with the RCP, going forward, and should also adopt DRA’s estimates for metered sales and supply in this case. DRA uses the same general methodology as CWS to estimate multiple regression equations in accordance with the RCP and the “New Committee Method” (“NCM”). As is outlined in the NCM, rain, temperature and time are included in the regression model, where possible. The main difference between DRA and CWS’ forecasts is that CWS used the regression equations to calculate weatheradjusted recorded usage from 2011 and used this as its estimated sales for 2014 where the regression yielded satisfactory statistics. DRA used the regression equations when they yielded satisfactory statistics to calculate forecasted sales for 2014 based on the 30-year average rain and temperature. CWS’ Report on Forecasts, prepared by Wendy Illingsworth, presents three summary tables of forecasts. CWS prepared a summary table of the 2014 forecast based on the regression models, a summary table of 2011 weather normalized sales, and a third summary table that incorporates a 5% conservation adjustment to the 2011 weather normalized sales to reach a 2014 forecast. The conservation adjustment is made to account for CWS’ conservation programs that aim to reduce consumption by 5% from 2011 weather normalized levels in 2014. CWS did not select the conservation-adjusted forecast values for use in its calculations of sales and revenues. Instead, CWS selected the weather normalized 2011 sales as the 2014 forecast. DRA’s and CWS’ sales forecasts are shown in Table 2-1, Water sales Per Customer (or Per Connection), in Chapter 1. 3) Operating Revenues The Commission should adopt DRA’s estimates for operating revenues at present rates. CWS calculates operating revenue for metered residential customers by (1) taking the sum of estimated quantity revenues calculated for each meter size, for each month 2-2

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and for each tier of the increasing block rate design based on the three-year average sales patterns (2) adding the service charge revenues, calculated by taking the average number of customers each year and multiplying it by the service charge. DRA does not recommend any changes to CWS’ method. The differences between CWS’ and DRA’s estimates in Lucerne are primarily the result of different numbers of metered customers estimated and different sales forecasted per customer. CWS calculates operating revenues for Business, Multifamily, Public Authority, and Industrial customer classes by calculating total forecasted usage for all the nonresidential customer classes together, and multiplying that by the uniform rate to get total revenue at present or proposed rates for non-residential customers. Then, to distribute that revenue across each non-residential customer class, CWS multiplies the total revenue at present or proposed rates for non-residential customers by the three-year average ratio of usage for each non-residential customer class to the total non-residential class usage. CWS then adds the service charge revenues, calculated by multiplying the forecasted average number of customers by the meter charges. DRA recommends that CWS not apportion the revenues across customer classes using this ratio. This unnecessarily complicates and distorts the revenue allocation based upon the forecasted amounts by customer classes. This recommendation is discussed further in DRA’s Bakersfield District Report Attachment A to Chapter 2. DRA’s and CWS’ forecasted revenues at present authorized rates are shown in Table 2-4, Operating Revenues at Present Rates, in Chapter 1. 4) Unaccounted for Water Coast Springs CWS assumes 32.02% unaccounted for water in Coast Springs. However, for the past two years, unaccounted for water has been increasing in Coast Springs to a level that is much higher than the industry standard. DRA wants to encourage CWS to reduce unaccounted for water. DRA recommends that the previously adopted unaccounted for

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water from the last GRC of 23.72% should be adopted as the unaccounted for water in this case because it provides a reasonable level for this district. Lucerne CWS assumes 20.7% unaccounted for water in Lucerne. DRA does not object. Unified CWS assumes 27.51% unaccounted for water in Unified and originally stated that this was the five-year average. In Data Request response JMI-007, CWS stated that a typo was discovered due to a linking error and CWS corrected the five-year average to 15.8%. DRA recommends 15.8% should be adopted as the unaccounted for water in this case. 5) Rate Design CWS states that it is not proposing changes to the tier breaks or any other substantial modifications to the rate design structure initially adopted in the settlement agreement in the Conservation OII (D.08-02-036 in I.07-07-022).2 However, CWS states that “because the service charge component of the adopted rate design was calculated to recover approximately 35% of fixed costs of a district, and ministerial rate design changes since the Conservation OII decision have caused some rate designs to stray from this principle, Cal Water does propose minor adjustments to reestablish the appropriate proportions for fixed cost recovery in a few districts.”3 CWS explained that it used judgment to adjust the average flat rate customers portion of revenue recovery to ensure equity between the flat rate customers’ rates and the metered customers’ rates as well as to try to bring the service charge revenues to a level that recovers closer to 35% of the fixed cost for each district.4 CWS also analyzes the concept of increasing block rates (IBRs) for non-residential customers and concludes that IBRs “are not a useful rate
General Report of California Water Service Company, GRC Company Report #1, July 2012, P. 27. General Report of California Water Service Company, GRC Company Report #1, July 2012, P. 27. CWS also proposes special requests related to rate design and DRA addresses these special requests in DRA’s Company-Wide Report on the Results of Operations of CWS. 4 Telephone conference with Tu Rash on February 7, 2013.
3 2

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design tool for Cal Water’s non-residential customers.”5 In CWS’s testimony on nonresidential rate design, CWS cites the rate design principles of cost-based rates, simplicity, stable rates, conservation, fairness, avoidance of undue discrimination in rate relationships and effectiveness in yielding total revenue requirements, as articulated by Professor Bonbright in the text “Bonbright, Danielsen, Kamerschen, Principles of Public Utility Rates, second edition, 1988.”6 DRA agrees with the rate design principles of cost-based rates, simplicity, stable rates, conservation, fairness, avoidance of undue discrimination in rate relationships and effectiveness in yielding total revenue requirements. DRA also seeks to ensure the implementation of rate designs in each district that are revenue neutral and distribute revenue equitably across customer classes. DRA plans to work collaboratively with CWS and other parties during settlement to reach agreement on rate designs for CWS to implement during this GRC cycle. C. DISCUSSION Customer growth is the forecasted growth of a customer base in a given area. CWS and DRA use customer growth to project revenues for 2014-2015. The RCP, adopted in D.07-05-062 requires the number of customers to be forecast using a five-year average of the change in the number of customers by customer class, unless an unusual event occurs, in which case an adjustment to the five-year average may be made.7 CWS estimates the end of year (“EOY”) number of customers for the residential class in Redwood Valley in 2012-2015 by adding the estimated incremental change to the prior year EOY number of customers.8 CWS uses this EOY forecast to calculate the average number of customers in the test year and escalation year. CWS proposes a fiveyear average of the change in the number of customers for each customer class for Coast
Non-Residential Rate Design Testimony In Compliance with Ordering Paragraph 13 in D.10-12-017, Prepared Testimony of David Morse, P. 19. 6 Non-Residential Rate Design Testimony In Compliance with Ordering Paragraph 13 in D.10-12-017, Prepared Testimony of David Morse, P. 2, 4, 17, and 20. 7 D.07-05-062, Appendix A: RCP, p. A-23, footnote 4. 8 See “LUC Sales,” WP 4-B1, cell C24, “COS Sales,” WP 4-B1, cell C24, and “UNI Sales,” WP 4-B1, cell C24.
5

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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Springs. CWS proposes zero change in the number of customers for Lucerne for Residential, Business and Multifamily and proposes the five year average change in the number of customers for Public Authority. In the Unified region of the Redwood Valley District, CWS proposes a three-year average of the change in the number of customers for Residential, Business and Multifamily and proposes the five year average change in the number of customers for Public Authority. DRA disagrees with CWS’s proposal regarding Lucerne Residential, Business and Multifamily classes and recommends the Commission require CWS to use the five-year average change in the number of customers for this service district. DRA does not object to the Unified and Coast Springs proposals. Coast Springs The five-year average change equals 1 customer. DRA added this 1 customer to the residential metered from 2012-2015 and this resulted in the following number of customers: Table 2-a: Average Residential Metered Customers DRA 2014 2015 246 247 CWS 246 247

16 17 18 19 20

Lucerne The five-year average change equals -10 customers. DRA added these -10 customers to the residential metered from 2012-2015 and this resulted in the following number of customers: Table 2-b: Average Residential Metered Customers DRA 2014 2015 1,129 1,119 CWS 1,153 1,153

21 2-6

1 2 3 4 5

Unified The three-year average change equals 1 customer. DRA added this 1 customer to the residential metered from 2012-2015 and this resulted in the following number of customers: Table 2-c: Average Residential Metered Customers DRA 2014 2015 417 418 CWS 417 418

6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

a. Business, Multifamily, Industrial, Public Authority and Other For Business and Multifamily customer classes, CWS used the five-year average of the change in the number of customers by customer class to forecast customer growth in Coast Springs. In the Unified region of the Redwood Valley District, CWS used the three-year average of the change in the number of customers by customer class to forecast customer growth. In Lucerne, CWS used zero customer growth in the Business and Multifamily classes. . For Industrial, Public Authority, and Other water customers, CWS used the five-year average of the change in the number of customers by customer class to forecast customer growth. DRA does not oppose these forecast methods except in Lucerne where DRA recommends using the five-year average change in the number of customers for all customer classes. b. Irrigation and Recycled Based on the historical usage information presented in CWS’ Workpaper 4-D2 there have not been any sales in either of these categories for the past ten years. For this reason, DRA agrees with CWS’ forecasts of zero customers in the Irrigation and Recycled water customer classes. 2) Metered Sales and Supply Table 2-1, Water Sales Per Customer (Or Per Connection) in Chapter 1 summarizes DRA’s and CWS’ proposed metered sales in Redwood Valley District for 2-7

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

each customer class in 2014 and 2015, respectively. The differences in forecasting methodology are discussed in Attachment A to Chapter 2 of the DRA’s Bakersfield District Report. For Redwood Valley Coast Springs, Lucerne and Unified, in the Residential and Business customer classes, CWS rejected the recommendations of their consultant, Wendy Illingworth and instead used the last recorded value for usage for all customer classes. The use of regression results calculated by Wendy Illingworth resulted in dramatic changes in sales forecasts in several instances and this could have a detrimental effect on rates for these areas where usage is already very low and there are small numbers of customers. DRA recommends using a more moderate approach with threeyear averages for residential and business customer classes. a. Residential metered Coast Springs DRA rejects CWS’ use of the last recorded value for usage. DRA recommends using the three-year average. The following table summarizes DRA and CWS’ recommendations: Table 2-d: Forecasted Average Residential Metered Sales (ccf/service) DRA CWS % Difference 2014 27.8 26.4 - 5.1% 2015 27.8 26.4 - 5.1% Lucerne DRA rejects CWS’ use of the last recorded value for usage. DRA recommends using the three-year average. The following table summarizes DRA and CWS’ recommendations: Table 2-e: Forecasted Average Residential Metered Sales (ccf/service) DRA CWS % Difference 63.4 58.3 - 8.0% 63.4 58.3 - 8.0%

18 19 20 21 22 2014 2015 23

2-8

1 2 3 4 5 2014 2015 6 7 8 9 10 11 2014 2015 12 13 14 15 16 2014 2015 17 18 19 20

Unified DRA rejects CWS’ use of the last recorded value for usage. DRA recommends using the three-year average. The following table summarizes DRA and CWS’ recommendations: Table 2-f: Forecasted Average Residential Metered Sales (ccf/service) DRA CWS % Difference 67.2 64.2 - 4.5% 67.2 64.2 - 4.5% b. Business Coast Springs DRA rejects CWS’ use of the last recorded value for usage. DRA recommends using the three-year average. The following table summarizes DRA and CWS’ recommendations: Table 2-g: Forecasted Average Business Sales (ccf/service) DRA CWS % Difference 132.0 122.4 - 7.3% 132.0 122.4 - 7.3% Lucerne DRA rejects CWS’ use of the last recorded value for usage. DRA recommends using the three-year average. The following table summarizes DRA and CWS’ recommendations: Table 2-h: Forecasted Average Business Sales (ccf/service) DRA CWS % Difference 148.8 145.8 - 2.0% 148.8 145.8 - 2.0% Unified DRA rejects CWS’ use of the last recorded value for usage. DRA recommends using the three-year average. The following table summarizes DRA and CWS’ recommendations:

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1 2014 2015 2 3 4 5 6 7 8 9 10 11 12 2014 2015 13 14 15 16 2014 2015 17 18 19 20 21

Table 2-i: Forecasted Average Business Sales (ccf/service) DRA CWS % Difference 227.2 262.8 15.7% 227.2 262.8 15.7% c. Multifamily Coast Springs Based on the historical usage information presented in CWS’ Workpaper 4-D2

there have not been any sales in this category for the past year. For this reason, DRA agrees with CWS’ forecasts of zero sales in the Multifamily water customer class. Lucerne DRA rejects CWS’ use of the last recorded value for usage. DRA recommends using the three-year average. DRA makes this recommendation for the same reason as the residential and business customer classes. The following table summarizes DRA and CWS’ recommendations: Table 2-j: Forecasted Average Multifamily Sales (ccf/service) DRA CWS % Difference 1,268.6 1,181.7 - 6.8% 1,268.6 1,181.7 - 6.8% Unified DRA accepts CWS’ use of the five-year average usage. The following table summarizes DRA and CWS’ recommendations: Table 2-k: Forecasted Average Multifamily Sales (ccf/service) DRA CWS % Difference 828.9 828.9 0% 828.9 828.9 0% d. Industrial Coast Springs Based on the historical usage information presented in CWS’ Workpaper 4-D2 there have not been any sales in either this category for the past year. For this reason, DRA agrees with CWS’ forecasts of zero sales in the Industrial water customer class. 2-10

1 2 3 4 5 6 7 8 9 10 11 12 13 2014 2015 14 15 16 17 18 2014 2015 19 20 21 22

Lucerne Based on the historical usage information presented in CWS’ Workpaper 4-D2 there have not been any sales in either this category for the past year. For this reason, DRA agrees with CWS’ forecasts of zero sales in the Industrial water customer class. Unified Based on the historical usage information presented in CWS’ Workpaper 4-D2 there have not been any sales in either this category for the past year. For this reason, DRA agrees with CWS’ forecasts of zero sales in the Industrial water customer class. e. Public Authority Coast Springs DRA accepts CWS proposal to use the average of the most recent 5-year period for class usage. The following table summarizes DRA and CWS’ recommendations: Table 2-l: Forecasted Average Public Authority Sales (ccf/year) DRA CWS % Difference 900.0 900.0 0% 900.0 900.0 0% Lucerne DRA rejects CWS’ use of the last recorded value for usage. DRA recommends using the three-year average. The following table summarizes DRA and CWS’ recommendations: Table 2-m: Forecasted Average Public Authority Sales (ccf/year) DRA CWS % Difference 1,469 1,555 6.1% 1,469 1,555 6.1% Unified DRA accepts CWS’s proposal and recommends the use of the average of the most recent 5-year period for class usage. The following table summarizes DRA and CWS’ recommendations:

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1 2014 2015 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

Table 2-n: Forecasted Average Public Authority Sales (ccf/year) DRA CWS % Difference 464 464 0% 464 464 0% e. Other Coast Springs Based on the historical usage information presented in CWS’ Workpaper 4-D2

there have not been any sales in either this category for the past year. For this reason, DRA agrees with CWS’ forecasts of zero sales in the Other water customer class. Lucerne Based on the historical usage information presented in CWS’ Workpaper 4-D2 there have not been any sales in either this category for the past year. For this reason, DRA agrees with CWS’ forecasts of zero sales in the Other water customer class. Unified Based on the historical usage information presented in CWS’ Workpaper 4-D2 there have not been any sales in either this category for the past year. For this reason, DRA agrees with CWS’ forecasts of zero sales in the Other water customer class. 3) Operating Revenue DRA and CWS use present rates at proposed quantities to show operating revenues at present rates for 2014. Differences between DRA’s and CWS’ revenues are due to differences in forecasted quantities and are shown in Table 2-4 Operating Revenues at Prrsent Rates in Chapter 1. The Commission should adopt DRA’s estimates for proposed operating revenues at present rates. CWS calculates operating revenue at present rates for metered residential customers by (1) taking the sum of estimated quantity revenues calculated for each meter size, for each month and for each tier of the increasing block rate design based on the three-year average sales patterns (2) adding the service charge revenues, calculated by taking the average number of customers each year and multiplying it by the service charge. DRA does not recommend any changes to this method. The differences between 2-12

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CWS’ and DRA’s estimates in Redwood Valley are primarily the result of different forecasted water sales per customer usage. CWS calculates operating revenues at present rates for the non-residential classes by calculating total forecasted usage for all the non-residential customer classes and multiplying this total by the uniform rate to get the total revenue at present rates for nonresidential customers. This figure is then multiplied by the three-year average ratio of usage for each non-residential class to calculate each class’s proportion of the revenue at present rates. DRA recommends that CWS not apportion the revenues across customer classes using this ratio and simply generate the revenue at present rates for each of the non-residential customer class by multiplying the forecasted usage for each class by the forecasted number of customers for that class by the present rates for the class to get the operating revenue at present rates for that class. To the extent that CWS uses this same method to apportion proposed revenues across non-residential customer classes, DRA recommends CWS determine the proportion of revenue to recover from each nonresidential customer class by taking the forecasted sales per customer class as a percentage of total forecasted sales for the non-residential customer classes. a. Residential metered The CWS methodology is outlined in detail in DRA’s Bakersfield District Report Attachment A to Chapter 2. DRA does not propose any changes to this methodology. Differences in DRA’s and CWS’ revenues in Lucerne are due to the differences in the number of residential metered services and the difference in forecasted sales per metered service connection. b. Business The CWS methodology is outlined in detail in DRA’s Bakersfield District Report Attachment A to Chapter 2. DRA proposes changes that are outlined in DRA’s Bakersfield District Report Attachment A to Chapter 2. The difference in DRA’s and

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CWS’ revenue is due to the difference in forecasted sales per business service connection and the methodology used to calculate revenues in the non-residential customer classes. c. Multifamily CWS follows the same method to calculate operating revenues for Multifamily customers as for Business customers. DRA proposes changes that are outlined in DRA’s Bakersfield District Report Attachment A to Chapter 2. The difference in DRA’s and CWS’ revenue is due to the difference in forecasted sales per Multifamily service connection and the methodology used to calculate revenues in the non-residential customer classes. d. Public Authority CWS follows the same method to calculate operating revenues for Public Authority customers as for Business customers. DRA proposes changes that are outlined in DRA’s Bakersfield District Report Attachment A to Chapter 2. The difference in DRA’s and CWS’ revenue is due to the difference in forecasted sales for the Public Authority class of customers and the methodology used to calculate revenues in the nonresidential customer classes. e. Industrial CWS follows the same method to calculate operating revenues for Industrial customers as for Business customers. DRA proposes changes that are outlined in DRA’s Bakersfield District Report Attachment A to Chapter 2. DRA’s and CWS’ revenues are the same due to DRA and CWS having the same forecasted class sales. f. Irrigation and Recycled CWS forecasts zero sales for the Irrigation and Recycled water based on historical sales of zero for the past fourteen years.

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4) Unaccounted for Water The Redwood Valley District has a level of unaccounted for water that is several times higher than 7% rate referenced in the Rate Case Plan. In Unified, the water loss trend has been reducing in the last two years. Whereas Coast Springs unaccounted for water has been steadily increasing since 2009. In Lucerne, the rate of unaccounted for water has plateaued at 40+% for the last four years. CWS must take steps to reduce the unaccounted for water in these districts to more reasonable levels. DRA recommends the previously adopted unaccounted for water from the last GRC for the district in the hope of encouraging CWS to reduce unaccounted for water. DRA recognizes that the district has significant infrastructure issues including pipeline and flushing issues that contribute to high unaccounted for water. In an effort to address these issues DRA recommends that CWS should prepare an action plan to address the issue of unaccounted for water in the district. In the action plan, CWS should establish fully justified water loss reduction plans based on an economically derived business case or cost benefit analysis that will assist CWS in ensuring that economically feasible priorities are set for further water loss reduction projects in this district. The plan should summarize the existing unaccounted for water reduction efforts and activities that are already underway and being implemented, a preliminary action plan for addressing unaccounted for water in the district should be provided within six months of the decision in this rate case with a final plan prior to the next GRC which will include economically justified action plan that prioritizes projects and steps to reduce unaccounted for water based on CWS’s cost analysis of these projects. Coast Springs CWS assumes 32.02% unaccounted for water in Coast Springs. However, for the past two years, unaccounted for water has been increasing in Coast Springs to a level that is much higher than the 7% rate referenced in the Rate Case Plan. DRA wants to encourage CWS to reduce unaccounted for water. DRA recommends that the previously adopted unaccounted for water from the last GRC of 23.72% should be adopted as the 2-15

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unaccounted for water in this case because it provides a reasonable level for this district in the context of CWS taking steps to improve the system as discussed above. Lucerne CWS assumes 20.7% unaccounted for water in Lucerne. DRA does not object because the 5 year average unaccounted for water in Lucerne is 28.4% and CWS assumed unaccounted for water provides motivation to reduce unaccounted for water in the district and recognizing that CWS will take steps to improve the system as discussed above. Unified CWS assumes 27.51% unaccounted for water in Unified and originally stated that this was the five-year average. In Data Request response JMI-007, CWS stated that a typo was discovered due to a linking error and CWS corrected the five-year average to 15.8%. DRA recommends 15.8% should be adopted as the unaccounted for water in this case because of the downward trend in unaccounted for water and in the context of CWS taking steps to improve the system as discussed above. D. CONCLUSION 1) Average Active Service Connections For Lucerne, DRA recommends the Commission require CWS to use the five-year average change in the number of customers. DRA does not object to the Unified and Coast Springs proposals. 2) Metered Sales and Supply DRA recommends adherence to the RCP and NCM for forecasting metered sales and supply and recommends that the Commission adopt DRA’s forecasted sales estimates. 3) Operating Revenues DRA accepts CWS’ method for calculating operating revenues except for the method of calculating operating revenues for each non-residential customer class. DRA’s 2-16

1 2 3 4 5 6 7 8 9 10 11 12

recommended changes are discussed in DRA’s Bakersfield District Report Attachment A to Chapter 2. 4) Unaccounted for Water Coast Springs DRA recommends an assumption of 23.72% unaccounted for water. Lucerne DRA recommends an assumption of 20.7% unaccounted for water. Unified DRA recommends an assumption of 15.8% unaccounted for water. 5) Rate Design DRA plans to work collaboratively with CWS and other parties during settlement to reach agreement on rate designs for CWS to implement during this GRC cycle.

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CHAPTER 3: OPERATIONS & MAINTENANCE EXPENSES
A. INTRODUCTION This Chapter presents DRA’s analysis and recommendations on Operations and Maintenance (“O&M”) expenses in the Redwood Valley District of California Water Service Company (“CWS”). The Redwood Valley District consists of three independent ratemaking areas - Coast Springs, Lucerne, and Unified rate areas. For many expense items, CWS uses the historical average expense adjusted for inflation. Other expense line items include the addition of new expenses that CWS proposes in the new rate cycle. In order to recommend an appropriate level of expense, DRA reviewed historical and forecasted data, as well as, information gathered in discovery and during DRA’s field visits. B. SUMMARY OF RECOMMENDATIONS For Test Year 2014, Table 3A shows a comparison of total expense estimates at present rates for 2014 for the Coast Springs, Lucerne, and Unified rate areas, respectively. Table 3A: Comparison of O&M Expense Estimates for Test Year 2014
Coast Springs Lucerne Unified DRA CWS CWS exceeds DRA $149,000 $154,200 $5,200 or 3.5% $773,200 $806,700 $33,500 or 4.3% $243,200 $249,400 $6,300 or 2.6%

2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

17 18 19 20 21 22 23

C. DISCUSSION DRA conducted an independent analysis of CWS’s workpapers and methods of estimating the O&M Expenses for Test Year 2014. Methods used by CWS to project Test Year 2014 Expenses include; historical averages adjusted for inflation, last recorded year, and unit costs multiplied by production. DRA examined each Expense item and the methodology used by CWS to assess the reasonableness of CWS’s estimates. 3-1

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Both DRA and CWS apply the escalation factors established by the DRA Energy Cost of Service Branch (“ECOS”) published on April 30, 2012. ECOS has been renamed as Energy Cost of Service and Natural Gas Branch. Table 3-1 in chapter 1 summarizes the O&M expenses DRA recommends and compares them with those CWS requests for Test Year 2014. Each expense item listed is discussed below. 1) OPERATION EXPENSES a) PURCHASED WATER CWS estimates water sales and supply of 114.3 KCcf (hundred thousand cubic feet) for Test Year 2014 for the Lucerne district and of 43.2 KCcf (hundred thousand cubic feet) for Test Year 2014 for the Unified district. CWS proposes to meet its supply needs in the Lucerne district through 100% water purchased from Yolo County Flood Control and Water Conservation District while in the Unified district through 94% groundwater from company wells, and 6% water purchased from Sweetwater Springs Water District. Purchased water costs are based on the contracted rate for water delivered cost of $52.50 per Acre Foot for Lucerne and $5.00 per KCcf and an annual service charge of $1,650 for Unified. Thus, CWS estimates $13,800 for Purchased Water in Test Year 2014 for Lucerne and $15,200 for Purchased Water in Test Year 2014 for Unified. CWS indicated to DRA that the water delivered cost has been reduced to $51.50 per Acre Foot for Lucerne.9 Also, DRA witness Inderdeep Atwal recommends a lower purchase water usage for Lucerne. Thus, DRA estimates $14,300 for Purchased Water in Test Year 2014 for Lucerne. CWS also indicated to DRA that the water delivered cost has been reduced to $1.44 per KCcf but a service charge of $10,336 and a capital reduction charge of $1,947 have been added for Unified.10 Thus, DRA estimates $16,200 for Purchased Water in Test Year 2014 for Unified. Therefore, DRA recommends that the Commission adopt its estimates for Purchased Water in Lucerne and Unified.
9

10

CWS response to DRA data request HMC 023, No.2. CWS response to DRA data request HMC 024, No.2.

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Table 3B: Purchased Water DRA $0 $14,300 $16,200 CWS CWS exceeds DRA $0 $0 $13,800 ($500) $15,200 ($1,000)

Coast Springs Lucerne Unified 2 3 4 5 6 7 8 9 10 11 12 13 Coast Springs Lucerne Unified 14 15 16 17 18

b) PURCHASED POWER Purchased Power is the cost of electricity needed to operate the district, including the power used in pumping and delivering water. The estimate of Purchased Power varies with the quantity of water delivered. To estimate its purchased power expense, CWS first multiplies its estimated energy per hundred thousand cubic feet of water produced (KWh/KCcf) by its estimated annual water production quantity (in KCcf). The resulting energy requirement (in KWh) is then multiplied by the average cost per KWh purchased. DRA agrees with CWS’s methodology and average cost per KWh. The differences between CWS’s and DRA’s Test Year 2014 estimates are due to DRA’s recommended sales forecast. Table 3C: Purchased Power DRA $10,500 $91,800 $16,300 CWS $11,100 $93,100 $16,400 CWS exceeds DRA $600 $1,400 $100

c) PURCHASED CHEMICALS For Purchased Chemicals, CWS uses a five-year average (2007-2011) for Coast Spring and Lucerne and a two-year average (2010-2011) for Unified for the test year estimate based on the historical cost per unit of production, adjusted for known inflation, and multiplied by the test year production forecasts. DRA agrees with CWS’s

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methodology. The differences between CWS’s and DRA’s Test Year 2014 estimates are due to DRA’s recommended sales forecast. Table 3D: Purchased Chemicals Coast Springs Lucerne Unified DRA $2,800 $25,000 $1,800 CWS CWS exceeds DRA $3,100 $200 $23,700 ($1,300) $2,000 $200

4 5 6 7 8 9 10 11 12 13 14 15 16

d) OPERATIONS PAYROLL Payroll is allocated into three components, Operations Payroll, Maintenance Payroll, and Administrative Payroll. CWS based its request on the recorded Payroll for 2011 plus the union negotiated wage increase of 3.25% for 2012 and compensation per hour inflation rate (published by DRA’s Energy Cost of Service Branch dated April 30, 2012) for 2013, 2014 and 2015. DRA agrees with CWS’s methodology except that DRA used the ECOS Labor Inflation Factors, since they more accurately encompasses labor escalation, instead of the Compensation per hour factors used by CWS. The Labor Inflation factors are more accurate because they are used to escalate labor while the Compensation per hour factors are used to escalate materials and labor together. Therefore, DRA recommends that the Commission should adopt DRA’s Operations Payroll amounts shown below. Table 3E: Operations Payroll Coast Springs Lucerne Unified DRA CWS CWS exceeds DRA $27,200 $27,800 $600 $307,200 $314,800 $7,600 $107,300 $109,900 $2,600

17 18 19 20

e) POSTAGE EXPENSE To estimate Postage expense, CWS uses the recorded 2011 cost, (plus 2.30% increase in postal rates effective January 22, 2012) to determine the average cost per service which is then multiplied by the total number of service connections.

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DRA examined whether CWS’s calculations included postage for customers who do not receive paper bills. DRA reviewed records of postage expense and the increase in customers opting for e-billing to find that electronic bills are excluded from the recorded data upon which CWS’s estimate is based. DRA accepts CWS’s estimates for Coast Springs and Unified as reasonable and recommends that they be adopted by the Commission. For Lucerne, DRA recommends that the Commission adopt its estimate for Postage Expenses as a result of DRA’s recommended total number of service connections. Table 3F: Postage Expense Coast Springs Lucerne Unified DRA $900 $5,100 $2,300 CWS CWS exceeds DRA $900 $0 $5,200 $100 $2,300 $0

10 11 12 13 14 15 16 17 18 19 20

f) TRANSPORTATION EXPENSE Transportation Expense is also allocated into three components, Operations, Maintenance, and Administrative. CWS’s Operations Transportation Expense estimates are based on the last recorded year (2011) for Coast Spring and five year average (20072011) for Lucerne and Unified, adjusted for inflation respectively. CWS operates an average of 0.9 vehicles, 3.9 vehicles and 1.3 vehicles in Coast Springs, Lucerne and Unified respectively. DRA reviewed all calculations and assumptions used. DRA agrees with the methodology used by CWS. Thus, DRA recommends that the Commission adopt CWS’s estimate for Operations Transportation Expense. Table 3G: Transportation Expense Coast Springs Lucerne Unified DRA $4,700 $27,600 $10,900 CWS CWS exceeds DRA $4,700 $0 $27,600 $0 $10,900 $0

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g) UNCOLLECTIBLES CWS’s estimate is based on a four-year average (2008-2011) Uncollectible rate of 0.04808% for Coast Springs, a five year average (2007-2011) of 0.76587% for Lucerne and a five year average (2007-2011) of 0.71718% for Unified respectively. DRA accepts CWS’s rate and estimate as reasonable for Unified and recommends that they be adopted by the Commission. For Coast Springs, DRA recommends that the Commission adopt its five-year average (2007-2012) rate of 0.0385% for Coast Springs. For Lucerne, DRA recommends that the Commission adopt CWS’s Uncollectible rate and the difference between CWS’s and DRA’s Test Year 2014 estimates is due to DRA’s recommended operating revenue. Table 3H: Source of Supply Expense Coast Springs Lucerne Unified DRA $200 $11,200 $4,100 CWS CWS exceeds DRA $200 $0 $11,100 -$100 $4,000 -$100

12 13 14 15 16

h) SOURCE OF SUPPLY EXPENSE For Source of Supply Expenses CWS’s estimates are based on the inflation adjusted five-year average (2007-2011) expense. DRA finds CWS’s estimates reasonable when compared to CWS historical trends. Table 3I: Source of Supply Expense Coast Springs Lucerne Unified DRA $700 $2,500 $2,000 CWS CWS exceeds DRA $700 $0 $2,500 $0 $2,000 $0

17 18 19 20 21

i) PUMPING EXPENSE Pumping expenses include Pumping Labor and Expense, Miscellaneous, and Fuel for Pumping. CWS bases its estimates on a five-year average (2007-2011) adjusted for inflation. DRA finds CWS’s estimates reasonable when compared to CWS historical trends. 3-6

1 Coast Springs Lucerne Unified 2 3 4 5 6 7 8 9 10 11 12 13

Table 3J: Pumping Expense DRA $400 $600 $3,000 CWS $400 $600 $3,000 CWS exceeds DRA $0 $0 $0

j) WATER TREATMENT EXPENSE Water Treatment Expenses include water sampling at wells, laboratory expense, bacterial laboratory expense, lab fees, and miscellaneous. CWS’s requests are based on the two-year (2010-2011) historical average expenditure adjusted for inflation. DRA finds CWS’ estimates reasonable when compared to CWS historical trends for Coast Springs but recommends a three-year historical (2009-2011) average for Lucerne and a five-year historical (2007-2011) average for Unified of expenditures adjusted for inflation since they are more indicative of expenses that do not follow a standard pattern. Therefore, DRA recommends that the Commission adopt CWS’s estimate for Coast Springs and adopt DRA’s estimates for Lucerne and Unified for Water Treatment Expenses. Table 3K: Water Treatment Expense Coast Springs Lucerne Unified DRA CWS CWS exceeds DRA $71,900 $71,900 $0 $114,400 $132,100 $17,700 $18,400 $19,900 $1,500

14 15 16 17 18 19 20

k) TRANSMISSION AND DISTRIBUTION EXPENSE Transmission and Distribution (“T&D”) expenses include supervision and engineering, flushing, T&D lines, turn on and turn off of services, installation expense, and miscellaneous. CWS’s requests are based on the three-year (2009-2011) historical average expenditure adjusted for inflation for Coast Springs, and five-year (2007-2011) historical average expenditure adjusted for inflation for Lucerne and Unified respectively. DRA finds CWS’s estimates reasonable when compared to CWS historical trends. 3-7

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Table 3L: Transmission and Distribution Expense Coast Springs Lucerne Unified DRA $5,400 $13,300 $8,400 CWS CWS exceeds DRA $5,400 $0 $13,300 $0 $8,400 $0

2 3 4 5 6

l) CUSTOMER ACCOUNTING EXPENSE For Customer Accounting Expense, CWS’s estimates are based on the five-year (2007-2011) historical average adjusted for inflation. DRA finds CWS’s estimates reasonable when compared to CWS historical trends. Table 3M: Customer Accounting Expense Coast Springs Lucerne Unified DRA $8,200 $52,200 $24,500 CWS CWS exceeds DRA $8,200 $0 $52,200 $0 $24,500 $0

7 8 9 10 11 12 13 14 15 16 17 18 19

m) CONSERVATION EXPENSE For Conservation expense, please refer to DRA’s Report on Conservation Program and Expenses of CWS. 2) MAINTENANCE EXPENSES a) MAINTENANCE PAYROLL As stated previously, Payroll is allocated into Operations Payroll, Maintenance Payroll, and Administrative Payroll. As indicated in Section 1.c, CWS based total payroll on the 2011 recorded Payroll plus the union negotiated wage increase of 3.25% for 2012 and compensation per hour inflation rate (published by DRA’s Energy Cost of Service Branch dated April 30, 2012) for 2013, 2014 and 2015. As stated in Section 1.c, DRA used the ECOS Labor Inflation Factors instead of the Compensation per hour factors used by CWS. DRA recommends that the Commission adopt DRA’s estimates.

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Table 3N: Maintenance Payroll Coast Springs Lucerne Unified DRA $4,400 $21,300 $11,100 CWS CWS exceeds DRA $4,500 $100 $21,800 $500 $11,400 $300

2 3 4 5 6 7 8 9 10 11

b) TRANSPORTATION EXPENSE As mentioned previously in Section 1.f, Transportation Expense is allocated into three components, Operations, Maintenance, and Administrative. CWS’s Operations Transportation Expense estimates are based on the last recorded year (2011) for Coast Spring and five year average (2007-2011) for Lucerne and Unified, adjusted for inflation respectively. CWS operates an average of 0.9 vehicles, 3.9 vehicles and 1.3 vehicles in Coast Springs, Lucerne and Unified respectively. DRA reviewed all calculations and assumptions used. DRA agrees with CWS’ methodology and estimates. Table 3O: Maintenance Expense Coast Springs Lucerne Unified DRA $2,200 $6,700 $8,600 CWS CWS exceeds DRA $2,200 $0 $6,700 $0 $8,600 $0

12 13 14 15 16 17 18 19 20

c) MAINTENANCE STORES Maintenance Stores consists of inventory components of various accounts associated with maintenance, including service line material, pipeline repair material, replacement meters, meter boxes, and meter lids. CWS estimates $0 for Coast Springs, Lucerne and Unified and DRA agrees with CWS. d) CONTRACTED MAINTENANCE For Contracted Maintenance Expense, CWS’s estimates are based on the last recorded year (2011) adjusted for inflation for Coast Springs and Unified, and five-year (2007-2011) historical average adjusted for inflation for Lucerne respectively. For Coast 3-9

1 2 3 4 5 6 7 8 9 10

Springs, DRA’s estimate is based on a five-year historical (2007-2011) average expenditure adjusted for inflation since it is more indicative of expenses that do not follow a standard pattern. DRA agrees with CWS’s estimates for Lucerne and Unified. As recommended by DRA’s witness Sung Han (see Chapter 8 of DRA’s Company-Wide Report on Results of Operations), tank painting should be amortized over a 15 year period. Accordingly, DRA includes the amortized amounts reflecting tank painting projects, if any, recommended by DRA’s plant witness, as part of the “Contracted Maintenance” expense estimate for the purposes of developing revenue requirement for this rate case. Table 3P: Contracted Maintenance Coast Springs Lucerne Unified DRA $8,400 $75,600 $7,000 CWS CWS exceeds DRA $10,100 $1,700 $76,500 $900 $7,000 $0

11 12 13 14 15 16 17 18

D. CONCLUSION In reviewing CWS’s estimates for Operation and Maintenance Expenses, DRA found that in many areas the company made sound requests based on its historical level of spending. In other area where additional dollars were requested, DRA found that CWS’s request often lacked sufficient justification and support. Based on DRA’s analysis of CWS’s requests, supporting workpapers and justifications, the Commission should adopt DRA’s recommendations as they are more reasonable and in the best interest of ratepayers.

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CHAPTER 4: ADMINISTRATIVE & GENERAL EXPENSES
A. INTRODUCTION This Chapter presents DRA’s analysis and recommendations on Administrative and General Expenses (“A&G”) in the Redwood Valley District, which has three rate areas (Coast Springs, Lucerne, and Unified), of California Water Service Company (“CWS”). A&G Expenses include Administrative Payroll, Benefits, Rents, Workers’ Compensation and other miscellaneous or non-specific accounts. CWS’s estimates are based on historical data as well as vendor or consultant quotes. DRA reviewed historical and forecasted data, as well as, information gathered in discovery and during DRA’s field visits. For Benefits and Workers’ Compensation, DRA relied on analysis provided by its consultant, Donna Ramas. B. SUMMARY OF RECOMMENDATIONS For Test Year 2014, Table 4-A below shows a comparison of total expense estimates at present rates for Test Year 2014 for the Coast Springs, Lucerne, and Unified rate areas, respectively. Table 4-A: Comparison of A&G Expense Estimates for Test Year 2014
DRA $61,900 $318,200 $112,300 CWS $65,100 $307,100 $122,000 CWS exceeds DRA $3,200 -$11,100 $9,700

2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

Coast Springs Lucerne Unified

18 19 20 21 22

C. DISCUSSION DRA conducted an independent analysis of CWS’s workpapers and methods of estimating the A&G Expenses for Test Year 2014. Methods used by CWS to project Test Year 2014 Expenses include historical averages adjusted for inflation, last recorded year, and vendor quotes.

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DRA examined each Expense item and the methodology used by CWS to assess the reasonableness of CWS’s estimates. Both DRA and CWS apply the escalation factors established by the DRA Energy Cost of Service Branch (“ECOS”) published on April 30, 2012. ECOS has been renamed as Energy Cost of Service and Natural and Gas Branch. Tables 4-1 in chapter 1 summarizes the A&G expenses DRA recommends and compares them with those CWS’s requests for Test Year 2014. Each expense item listed is discussed below. 1) ADMINISTRATIVE & GENERAL EXPENSES a) ADMINISTRATIVE PAYROLL CWS’s estimates are based on the recorded 2011 Payroll. As indicated in Chapter 3, Section 1) item c), CWS based its total payroll (Operation, Maintenance, and Administrative) on the 2011 recorded Payroll plus the union negotiated wage increase of 3.25% for 2012 and compensation per hour inflation rate (published by DRA’s Energy Cost of Service Branch dated April 30, 2012) for 2013, 2014 and 2015. DRA’s recommendations for Test Year 2014 A&G Payroll are shown below. As stated in Chapter 3, Section 1) item c), DRA used the ECOS Labor Inflation Factors, since they more accurately encompasses labor escalation, instead of the Compensation per hour factors used by CWS. The Labor Inflation factors are more accurate because they are used to escalate labor while the Compensation per hour factors are used to escalate materials and labor together. DRA recommends that the Commission adopt DRA’s estimate.
 

Table 4B: Administrative Payroll

Coast Springs Lucerne Unified 22

DRA CWS $8,000 $8,200 $65,800 $67,500 $17,500 $18,000

CWS exceeds DRA $200 $1,700 $500

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b) BENEFITS Employee Benefits include Health Insurance, Survivor Benefits, Pension Funding, 401K matching, and retiree Group Health Insurance. According to CWS’s General Office Report on Operations, “Cal Water accounts for all Company benefits in general operations and allocates this cost by the four-factor method to each district with other general costs.” CWS further states that benefits costs may vary either based on employee payroll or the number of employees, among other factors. DRA’s witness on Benefits, Donna Ramas, estimates for Test Year 2014 are shown below. Table 4C: Benefits DRA CWS CWS exceeds DRA $39,800 $42,800 $3,000 $197,300 $211,700 $14,300 $69,200 $74,300 $5,100

Coast Springs Lucerne Unified 10 11 12 13 14 15 16 17 18 19 20

c) A&G TRANSPORTATION EXPENSE CWS estimates $0 for all three sub-districts of $0 for Test Year 2014 and DRA agrees. 2) PURCHASED SERVICES a) RENTS For the Redwood Valley District, CWS estimates $0 for the Coast Springs district, $20,000 for the Lucerne district and $8,400 for the Unified district for Test Year 2014. CWS’s estimates are based on the 2011 recorded amount adjusted for inflation. DRA reviewed CWS’s estimates and finds that the amounts requested are reasonable and should be adopted by the Commission. Table 4D: Rents DRA $0 $20,000 $8,400 CWS CWS exceeds DRA $0 $0 $20,000 $0 $8,400 $0 4-3

Coast Springs Lucerne Unified

1 2 3 4 5 6 7 8

b) ADMINISTRATION CHARGES TRANSFER Administration Charges Transfer represents credits for unregulated activity. For the Redwood Valley District, CWS estimates $0 for the Coast Springs district, a credit of $2,500 for the Lucerne district and $0 for the Unified district for Test Year 2014. CWS’s estimates are based on the 2011 recorded amount. DRA’s witness Michael Conklin agrees with CWS’s estimates for Coast Springs and Unified but estimates a credit of $2,600 for Lucerne for Test Year 2014. Table 4E: Administration Charges Transfer DRA $0 ($2,600) $0 CWS CWS exceeds DRA $0 $0 ($2,615 ) $15 $0 $0

Coast Springs Lucerne Unified 9 10 11 12 13 14 15 16 17

c) WORKERS’ COMPENSATION CWS estimates Workers’ Compensation Insurance expense based on actuarial expectations described in the guidance from actuaries at Milliman USA (“Milliman”). CWS states in its General Office Report on Operations that an assumption embedded in the estimate is a provision to account for Workers’ Compensation to including expected future payments from current employment.11 CWS estimates for Test Year 2014 are shown below. DRA’s witness, Donna Ramas agreed with CWS’s estimates for Test Year 2014. Table 4F: Worker’s Compensation DRA $2,200 $9,600 $3,100 CWS CWS exceeds DRA $2,200 $0 $9,600 $0 $3,100 $0

Coast Springs Lucerne Unified

11

GRC Company Report #1, General Report of California Water Service Company, p.57.

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d) NONSPECIFICS Nonspecific Expense generally represents miscellaneous administrative and general expenditures. The Nonspecific account contains various sub-accounts. However, CWS does not provide estimated amounts for each sub-account for future years. Instead, it provides a combined figure for Nonspecific Expenses estimate for the 2014 Test Year of $3,500 for Coast Springs, $800 for Lucerne, and $18,200 for Unified based on the five-year (2007-2011) historical average adjusted for inflation. DRA sent Data Requests to CWS asking for more detail and the breakdown of the sub-accounts. CWS provided some information but the total amounts from the Data Request responses do not match the amounts from the expense workpapers. As a result, DRA reviewed all sub-accounts within Nonspecific expense and adjusted the Other Stationary & Printing and Legal Expenses accounts for the years 2007 through 2011 by eliminating one-time expenses for the Lucerne and Unified districts. DRA then took a five-year average (2007-2011) adjusted for inflation for the Lucerne and Unified districts. Adjustments to the historical average are as follows: Redwood Lucerne Sub-Account 792400 Stationary & Printing - For 2009, DRA removed $652 for Office Supplies that CWS identified in response to HMC-049 as a File Cabinet. This expense did not occur in 2007, 2008, 2010 and 2011 so DRA considers it a one-time expense. Sub-Account 798100 Legal Expenses - For 2007, 2008, 2009, 2010 and 2011, DRA removed $29,768, $25,940, $1,859, $1,582 and $2,958 respectively for Legal Fees that CWS identified in response to HMC-049 as potentially being one-time events. Since they are considered potential one-time events by CWS, nothing assures their recurrence.

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Sub-Account 798100 Legal Expenses - For 2010, DRA removed $3,815 for the LAM Litigation that CWS identified in response to HMC-049 as a one-time event relating to an old tank and will not recur. Redwood Unified Sub-Account 798100 Legal Expenses – For 2007, 2008 and 2009, DRA removed $3,150, $12,767 and $2,012 respectively for Legal Fees that CWS identified in response to HMC-050 as potentially being one-time events. Since they are considered potential one-time events by CWS and these expenses did not occur in 2010 and 2011, nothing assures their recurrence. Also for Lucerne, a legacy amount of $40,000 that was removed in error by CWS was added back by DRA for the year 2012 per CWS through a Data Request response.12 Therefore, DRA recommends $28,100 as opposed to CWS’s request of $800 for Lucerne. DRA reviewed and agrees with CWS’s estimates for Coast Springs. DRA’s Lucerne and Unified estimates for Nonspecific Expenses are $28,100 and $14,100 respectively for Test Year 2014 and they are more reasonable. DRA’s estimates for Nonspecific Expenses for Test Year 2014 as shown below: Table 4G: Nonspecifics DRA $3,500 $28,100 $14,100 CWS CWS exceeds DRA $3,500 $0 $800 ($27,300) $18,200 $4,100

Coast Springs Lucerne Unified 18 19 20 21

e) AMORTIZATION OF LIMITED TERM INVESTMENT This expense includes the amortization of any intangible assets, such as the Water Supply and Facilities Master Plan. CWS’s estimates are shown below. CWS bases its estimates from the general method for this expense shown on CWS’s amortization

12

CWS response to DRA data request HMC 049, No.3.

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schedule. DRA reviewed this account and adopts CWS’s methodology. Any difference in the amount is attributed to plant adjustments. Table 4H: Amortization of Limited Term Investment DRA $8,400 $0 $0 CWS CWS exceeds DRA $8,400 $0 $0 $0 $0 $0

Coast Springs Lucerne Unified 4 5 6 7 8 9 10 11

f) DUES AND DONATIONS ADJUSTMENTS There are no Dues and Donations Adjustments in the Redwood Valley District. D. CONCLUSION DRA’s review and analysis of each request of CWS’s for Administrative and General Expenses results in a level of expense that affords the company necessary funds to conduct the provision of utility service and at the same time provides the ratepayer protection from burdensome rates. DRA recommends that the Commission adopt DRA’s recommendations.

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CHAPTER 5: TAXES OTHER THAN INCOME
A. See Chapter 5: Taxes Other Than Income in DRA’s Company-Wide Report of

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Results of Operations of California Water Service Company (General Rate Case A.12-07-007) for analysis and recommendations.

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CHAPTER 6: INCOME TAXES
A. See Chapter 6: Income Taxes in DRA’s Company-Wide Report of Results of

2 3 4

Operations of California Water Service Company (General Rate Case A.12-07-007) for analysis and recommendations.

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CHAPTER 7: PLANT IN SERVICE
A. INTRODUCTION
Table 7-1 in Chapter 1 of this report shows DRA’s and CWS’s estimates for the Redwood Valley District (“RWV”) Plant in Service for Test Year 2014 and Escalation Year 2015.

2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23

DRA reviewed and analyzed CWS’s testimony, application, Minimum Data Requirements, work papers, capital project details, estimating methods, Urban Water Management Plan (“UWMP”), Water Supply & Facilities Master Plan (“WSFMP”), and responses to various DRA data requests. DRA also conducted a field investigation of some of the proposed specific plant additions before making its own independent estimates including adjustments where appropriate. B. SUMMARY OF RECOMMENDATIONS Based on DRA’s review and analysis of CWS’s requested plant additions, DRA recommends disallowance, adjustment or Advice Letter treatment to the following: 6 projects (Unified) in 2012; 6 specific projects in 2013 (1 in RWV, 1 in Unified, 2 in Coast Springs, and 2 in Lucerne); 1 specific project in 2014 (Lucerne); 9 specific projects in 2015(2 in RWV, 4 in Unified, and 3 in Lucerne); main, service & hydrant replacement programs; carry-over projects; and annual budgets for non-specific projects. These recommendations form the basis of DRA’s estimates for gross plant additions as presented in Table 7-A below. Important and significant differences between DRA’s and CWS’s estimates of specific plant additions for the Unified, Coast Springs, and Lucerne subareas in CWS’s Redwood Valley District are attributed to the items listed in Tables 7-D, 7-F, and 7-H, respectively.

7-1

1 2

Table 7-A. Redwood Valley District Plant Additions, Including Carryovers and Non-Specifics
2012 DRA CWS CWS > DRA $ $ $ n/a $ $ $ 2013 181,843 258,554 76,711 70% $ $ $ 2014 184,389 224,200 39,811 82% $ $ $ 2015 213,396 367,418 154,022 58% Annual Average $ $ $ 144,907 212,543 67,636 68%

3 4

DRA as % of CWS

Table 7-B. 2012-2015 Redwood Valley Plant Comparison
2012 1 Specifics - Total Non-Specific - Total Carry-Overs - Total Project # Project Description $ $ $ $ $ DRA $ $ $ $ $ CWS $ $ $ $ $ CWS > DRA DRA as % of CWS n/a n/a n/a n/a n/a

None

5

TOTAL

2013

Project #

Project Description Install repeaters, antennas, mobile & handheld radios for $ 2-way voice communications and SCADA alarms. $ $ $ $

DRA

CWS

CWS > DRA

DRA as % of CWS

1

00068897

-

$

45,454

$

45,454

0%

Specifics - Total Non-Specific - Total Carry-Overs - Total

181,843 181,843

$ $ $

45,454 213,100 258,554

$ $ $ $

45,454 31,257 76,711

0% 85% n/a 70%

- $

6

TOTAL

2014 1 Specifics - Total Non-Specific - Total Carry-Overs - Total

Project # None

Project Description $ $ $ $ $

DRA 184,389 184,389 $ $ $

CWS - $ 224,200 224,200 $ $ $ $

CWS > DRA 39,811 39,811

DRA as % of CWS n/a n/a 82% n/a 82%

- $ - $

7

TOTAL

2015

Project #

Project Description Field - 4 New Handhelds for Meter Reading - 2 @ $ Guerneville and 2 @ Lucerne Vehicle - 0.5 Ton Pick Up with $ Accessories Cal Water RAMCAP Vulnerability $ Assessments $ $ $ $

DRA

CWS

CWS > DRA

DRA as % of CWS

1

00064849

26,020

$

26,020 $

(0)

100%

2

00064941

-

$

42,000

$

42,000

0%

3

00079998

-

$

69,298

$

69,298

0%

Specifics - Total Non-Specific - Total Carry-Overs - Total

26,020 187,376 213,396

$ $ $

137,318 230,100 367,418

$ $ $ $

111,298 42,724 154,022

19% 81% n/a 58%

- $

8

TOTAL

7-2

1

Table 7-C. RWV-Unified Plant Additions, Including Carryovers and Non-Specifics
2012 DRA CWS CWS > DRA $ $ $ 38,007 109,992 71,985 35% $ $ $ 2013 15,000 15,000 0% $ $ $ 2014 0% $ $ $ 2015 30,671 356,539 9% Annual Average $ $ 17,169 120,383 103,213 14%

325,868 $

2 3

DRA as % of CWS

Table 7-D. 2015-2015 RWV-Unified Plant Comparison
2012 1 Specifics - Total Non-Specific - Total Carry-Overs - Total Project # None Project Description $ $ $ $ $
Project Description Replace Well Pump - Sta. 101

DRA 38,007 38,007 $ $ $ $ $

CWS 109,992 109,992 $ $ $ $ $

CWS > DRA 71,985 71,985

DRA as % of CWS n/a n/a n/a 35% 35%
DRA as % of CWS 0% 0% n/a n/a 0%

4

TOTAL

2013 1 Specifics - Total Non-Specific - Total Carry-Overs - Total

Project # 00062239

DRA $ $ $ $ $ - $ - $ $ $

CWS 15,000 $ 15,000 15,000 $ $ $ $

CWS > DRA 15,000 15,000 15,000

5

TOTAL

- $

2014 1 Specifics - Total Non-Specific - Total Carry-Overs - Total

Project # None

Project Description None

DRA $ $ $ $ $ $ $ $ $ $

CWS $ $ $ $ $

CWS > DRA -

DRA as % of CWS n/a n/a n/a n/a n/a

6

TOTAL

7-3

2015

Project #

1

00061535

2

00061894

3

00061952

Project Description Seismic Upgrades Sta. 2 Steel Tank 1 Paint Interior Complete Sta. 2 Tank 1 (Guerneville) Armstrong Valley Upgrade CP System - Sta. 2 Tank 1 (Guerneville) Armstrong Valley

DRA

CWS

CWS > DRA

DRA as % of CWS 100%

$

8,640 $

8,640

$

$

- $

92,362 $

92,362

0%

$

- $

7,846 $

7,846

0%

4

00071874

Interior & Exterior Ladders - Sta. $ 2 Tank 3 Armstrong Valley Armstrong Valley Lane 580' 6" PVC; 7 $ 1" Services; and 1 Hydrant Noel Heights Sta. 2 Tanks to Toyon Drive - 410' 6" $ PVC; Reconnect 1 2" service line Rancho West Tank to Freezeout Road - 660' 4" CL&C. Need CPUC approval to install mains

10,583 $

10,583 $

0

100%

5

00064891

- $

96,780 $

96,780

0%

6

00064892

- $

47,880 $

47,880

0%

7

00064894

$

- $

81,000 $

81,000

0%

8

00055888

Retrofit RoofHatch to include vent, Install Interior $ and Exterior Ladders Hawkins Sta.1 Tank 1 $ $ $ $

11,448 $

11,448

$

-

100%

Specifics - Total Non-Specific - Total Carry-Overs - Total

30,671 30,671

$ $ $ $

356,539 356,539

$ $ $ $

325,868 325,868

9% n/a n/a 9%

1

TOTAL

7-4

1 2

Table 7-E. RWV-Coast Springs Plant Additions, Including Carryovers and Non-Specifics
2012 DRA CWS CWS > DRA $ $ $ 1,320 1,320 100% $ $ $ 2013 26,520 252,480 225,960 11% $ $ $ 2014 n/a $ $ $ 2015 8,640 8,640 100% Annual Average $ $ $ 9,120 65,610 56,490 14%

3 4

DRA as % of CWS

Table 7-F. 2012-2015 RWV- Coast Springs Plant Comparison
2012 1 Specifics - Total Non-Specific - Total Carry-Overs - Total Project # None Project Description $ $ $ $ $ DRA 1,320 1,320 $ $ $ $ $ CWS 1,320 1,320 $ $ $ $ $ CWS > DRA DRA as % of CWS n/a n/a n/a 100% 100%

5

TOTAL

2013

Project #

1

00076853

2

00064889

Project Description Obtain permit from CDPH to take pond water $ as a source of supply for the treatment plant. Cliff from Beach to Ocean View 800' 6" PVC: 340' 6" PVC Cliff from Beach to Ocean $ View and 460' 6" PVC Ocean View end to Park; 23 1" Services; and 2 Hydrants Lawsons Landing $ Emergency Tie-in Cline Well Agreement Modifications $ $ $ $ $
Project Description $ $ $ $ $

DRA

CWS

CWS > DRA

DRA as % of CWS

-

$

52,560

$

52,560

0%

-

$

173,400

$

173,400

0%

3

00070651

12,120

$

12,120

$

-

100%

4 Specifics - Total Non-Specific - Total Carry-Overs - Total

00062054

14,400 26,520

$ $

14,400 252,480

$ $

225,960 225,960

100% 11% n/a n/a 11%
DRA as % of CWS n/a n/a n/a n/a n/a

- $ - $ 26,520 $

- $ - $ 252,480 $

6

TOTAL

2014 1 Specifics - Total Non-Specific - Total Carry-Overs - Total

Project # None

DRA $

CWS $

CWS > DRA -

- $ - $ - $ - $

- $ - $ - $ - $

7

TOTAL

7-5

2015 1 Specifics - Total Non-Specific - Total Carry-Overs - Total

Project # 00061959

Project Description Seismic Upgrade Sta. 8 T1 Ravine $ Tank $ $ $ $

DRA 8,640 8,640 $ $

CWS 8,640 8,640 $ $

CWS > DRA -

DRA as % of CWS 100% 100% n/a n/a 100%

- $ - $ 8,640 $

- $ - $ 8,640 $

1 2

TOTAL

Table 7-G. RWV-Lucerne Plant Additions, Including Carryovers and Non-Specifics
2012 DRA CWS CWS > DRA $ $ $ 186,988 $ 186,988 $ 100% $ 2013 101,360 $ 233,400 132,040 43% $ $ 2014 $ 259,260 $ 259,260 $ 0% 2015 260,674 426,208 61% Annual Average $ $ 137,255 276,464 139,209 50%

165,534 $

3 4

DRA as % of CWS

Table 7-H.2012-2015 RWV-Lucerne Plant Comparison
2012 Project # Project Description Country Club Drive 17th Ave. to Strand $ near - Lucerne 1,050' 8" PVC; 26 1" Services; 3 Hydrants $ $ $ $ DRA CWS CWS > DRA DRA as % of CWS

1

00020320

-

$

-

$

-

n/a

Specifics - Total Non-Specific - Total Carry-Overs - Total

186,988 186,988

$ $ $

186,988 186,988

$ $ $ $

-

n/a n/a 100% 100%
DRA as % of CWS 98%

5

TOTAL

2013 1

Project # 00062237

Project Description Tank Tide-Flex Mixing Systems $ Sta. 2 T1 & T2 WQ Compliance DBP Removal - Sta. 1 $ - Lucerne $ $ $ $

DRA 81,360 $

CWS 83,400 $

CWS > DRA 2,040

2 Specifics - Total Non-Specific - Total Carry-Overs - Total

00064890

20,000 $ 101,360 101,360 $ $

150,000 $ 233,400 $ $ $ 233,400 $

130,000 132,040 132,040

13% 43% n/a n/a 43%

6

TOTAL

2014

Project #

Project Description 1st Ave. & Country Club - 1,110' 6" PVS; $ 20 1" Services; and 2 Hydrants - Lucerne $ $ $ $

DRA

CWS

CWS > DRA

DRA as % of CWS

1

00064851

- $

259,260 $

259,260

0%

Specifics - Total Non-Specific - Total Carry-Overs - Total

-

$ $ $

259,260 259,260

$ $ $ $

259,260 259,260

0% n/a n/a 0%

7

TOTAL

7-6

2015 1

Project # 00061812

Project Description Paint Interior Complete - Sta. 4 $ Tank 1 Lucerne Upgrade CP System Sta. 4 Tank 1 $ Lucerne Country Club Drive 14th to 10th Ave. Lucerne - 1,020' 8" $ PVC; 32 1" Services; 2 Hydrants $ $ $ $

DRA - $

CWS 92,362 $

CWS > DRA 92,362

DRA as % of CWS 0%

2

00061813

- $

7,846 $

7,846

0%

3

00020333

260,674 $

326,000 $

65,326

80%

Specifics - Total Non-Specific - Total Carry-Overs - Total

260,674 260,674

$ $ $ $

426,208 426,208

$ $ $ $

165,534 165,534

61% n/a n/a 61%

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19

TOTAL

C. DISCUSSION CWS requests $0 in 2012, $258,554 in 2013, $224,200 in 2014, and $367,418 in 2015 for gross plant additions in the RWV district. DRA recommends $0 in 2012, $181,843 in 2013, $184,389 in 2014, and $213,396 in 2015. CWS requests $109,992 in 2012, $15,000 in 2013, $0 in 2014, and $356,539 in 2015 for gross plant additions in the Unified subarea. DRA recommends $38,007 for 2012, $0 in 2013, $0 in 2014, and $30,671 in 2015. CWS requests $1,320 in 2012, $252,480 in 2013, $0 in 2014, and $8,640 in 2015 for gross plant additions in the Coast Springs subarea. DRA recommends $1,320 for 2012, $26,520 in 2013, $0 in 2014, and $8,640 in 2015. CWS requests $186,988 in 2012, $233,400 in 2013, $259,260 in 2014, and $426,208 in 2015 for gross plant additions in the Lucerne subarea. DRA recommends $186,988 for 2012, $101,360 in 2013, $0 in 2014, and $260,674 in 2015. Discrepancies between CWS’s and DRA’s 2012 carryover budget, specific cost estimations, and nonspecific budget are explained below. 1) Carryover Projects CWS identifies one specific project (Project 14844) and 10 non-specific carryover projects for the Redwood Valley. Each year, a non-specific budget is set for the district.

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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19

In the Results of Operation Report, CWS provides a non-specific budget of $0 for 2012.13 DRA is not contesting the need for the non-specific carryover projects. DRA is allowing the costs of non-specific carryover projects up to the adopted non-specific budget in the previous GRC for each subarea.14 Project 14844 is an interior and exterior tank painting and cathodic protection (“CP”) replacement specific project for Tank 1 at Station 2. The actual cost of the project exceeded the cost estimate by $55,921. CWS stated that the cause of the cost overrun was due to extra overtime and travel expenditure since there is no local CWS inspector. In addition, more EMT time and materials were required to locate the radio signal. Time required to paint the tank took longer than expected due to the cold weather.15 CWS scheduled the project late into 2012 in order to avoid taking the tank out of service during period of higher demand typical in the summer months. DRA recommends that no cost overrun from project 14844 should be recovered through rates. 2) Mains, Services and Hydrant Replacement Projects CWS requests a total of $1.095 million for all main, service, and hydrant replacement projects from 2012-2015. Of the total, $916,200 is budgeted for specific projects and $178,900 is budgeted for non-specific projects. CWS’s requests are summarized by year and category below in Table 7-I:

CWS Redwood Valley RO Report, pg. 43. D.10-12-017 (A.09-07-001), Attachment C. In the 2009 Settlement, Cal Water was allowed a non-specific budget for 2012 of $38,007, $30,406, and $111,487 for the Unified, Coast Springs, and Lucerne subareas, respectively. 15 CWS’s response to Data Request PPM-004.
13 14

7-8

1

Table 7-I. CWS’s Requested Main, Service, and Hydrant Replacement Budget
2012 Specific Total Mains Services Hydrants Total Specific Non‐specific  Mains, Services  and Hydrants $0 $0 $0 $0 $0 2013 $105,000 $55,200 $13,200 $173,400 $57,100 2014 $175,380 $67,080 $16,800 $259,260 $60,100 2015 $371,260 $93,689 $18,600 $483,549 $61,700 Total $651,640 $215,969 $48,600 $916,209 $178,900

2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Total (Specific +  Non‐specific)

$0

$230,500

$319,360

$545,249

$1,095,109

CWS’s current main replacement program aims to replace “steel mains, all mains where there are corrosion and leak problems, and mains sized smaller than 6-inch diameter that need replacement due to substandard fire flow and service pressure.”16 In response to DRA’s data request JG4-008, CWS states that its district staff prioritizes main replacements through a “developed personal knowledge of…leak histories of specific mains…as well as a sense of the likelihood of main problems in specific areas based on factors such as material of the mains and quality of construction and installation.” In the 2009 GRC both DRA and CWS agreed that a Condition Based Assessment (“CBA”) program should be implemented for prioritizing main replacement projects.17 CWS initiated a pilot program in Stockton in June 2011 and plans to implement the program across its other districts. CWS plans to use the CBA in addition to existing criteria to prioritize main replacements for all districts in its next GRC filing. According to CWS, each district has a specified contractor for 6” and 8” diameter main replacement projects under a master contract agreement. The contract is awarded through a competitive bidding process every four years, and renewed annually with pricing negotiated based on construction cost indicators such as construction material cost indexes, CWS/contractor labor experiences, and Consumer Price Indices (“CPI”).18 Each contract specifies pricing on a range of services and materials to be completed by
CWS General Report, p. 42. CWS General Report, Attachment F. 18 CWS’s response to Data Request JG4-005, q.1.
16 17

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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

the contractor.19 Eight-inch and larger main replacement projects are competitively bid on an individual basis. DRA reviewed each proposed main replacement project for reasonableness and based its analysis on CWS’s project justifications, leaks/100 miles of main CWS provided in its application, leak history in response to data requests, and information gathered by engineers on field visits. Based on its investigation, DRA recommends a main replacement budget of $0 in 2012, $0 in 2013, $0 in 2014, and $240,674 in 2015. CWS requests a total of six main replacement projects for the Redwood Valley District (1 in Coast Springs, 2 in Lucerne, and 3 in the Unified subarea) in this GRC. DRA has determined that these projects fall into two categories: projects that it supports, but disagrees with the cost, and projects it does not support. DRA recommends 1 project be allowed with cost adjustments, and 5 projects be disallowed completely. a) PID 20333(Lucerne) DRA agrees with the need for the project, but does not agree with the cost estimate. The Country Club Drive main replacement project goes from 10th to 14th Street. CWS request $326,000 to replace 760’ of pipeline, add 120’ of pipeline to tie-in to 2 mains located across the street, replace 32 services, and two hydrants. The updated project cost includes a ten percent contingency, three percent escalation factor for four years, and three percent for capital interest.20 During discovery, DRA noticed some inconsistencies in the project description. In the Project Justifications report, the project description states that the project involves 760’ of pipeline, add 120’ to tie-in to 2 mains located across the street, replace ¾” services with 1” services, and install two new hydrants. However, the Results of Operation report describes the project as 1,020’ of pipeline, 32 1” services, and 2 hydrants. CWS confirmed that the project involves a total
CWS Livermore District RO Report, p. 197. Examples of services and materials include but are not limited to: size of pipe being installed per lineal foot, equipment move on rate, backhoe rate, hand or machine tamping of trench lines, import backfill requirements of trench line for compaction, new service installations based on size and length, existing service reconnections based on size, number of “tie-ins” to existing mains based on size, material pricing on pipes, gate valves, fittings, service saddles, valve box and cover assemblies, paving, cutting or sawing, temporary and permanent asphalt, rock base, and slurry sealing. 20 Redwood Valley Project Justifications Report, Project Estimate footnote, pgs.15-16.
19

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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

of 760’ of pipeline, which includes 80’ to tie in two 2” mains located across the street. This project is intended to replace the main on Country Club Drive from 14th to 12th Avenue, not 10th.21 The cost estimate calculation CWS provided in the Project Justification report assumes that the project involves 1,020’ of pipeline. The unit cost for the one-inch services was based on unit price in 2009 escalated to estimate the unit cost in 2012.22 The cost estimate of materials and labor is then escalated by 3% per year to estimate the 2015 cost of the project. Three years of escalation is appropriate (9% total escalation according CWS’s methodology for calculating escalation) to escalate the cost in 2012 to 2015. The capitalized interest in the cost estimate was removed since the project will be started and completed within 2015, during the same year that the project is estimated to be in rate base and therefore will be earning a rate of return (which includes a cost of debt component). In addition, the contingency for the project was changed to 3% from 10%. Throughout the districts, the contingency factor used for main replacement projects among the different districts was inconsistent. The contingency used in the main replacement project ranged from 3% (e.g. in the Bakersfield district) to 10% (e.g. in the Chico district). After considering all of the aforementioned adjustments, DRA determines the appropriate cost estimate for the project to be $240,674 and recommends adopting this cost estimate for the project. b) PIDs 64889 (Coast Springs), 64851 (Lucerne), 64891(Unified), 64892(Unified), and 64894 (Unified) All six systems that make up the Redwood Valley district have high levels of unaccounted for water. The leak history becomes important to prioritize which mains need to be replaced in order to reduce the amount of unaccounted for water. According to the Leak Maps, none of the reported leaks are associated with the proposed main replacement projects in the Rancho del Paradiso and Coast Springs water systems (PIDs 64894 and 64889, respectively). For the Coast Springs system, there have been leaks
CWS’s response to Data Request JMI-012, q.7 (a). The Results of Operation report states that project involves replacing main from 14th to 10th avenue, pg. 39. 22 Redwood Valley Project Justifications Report, Project Estimate Cost Note (1).
21

7-11

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

reported on Ocean View and Cliff Street mains. However, there have been no leaks proposed in the section CWS proposes replacing. DRA asked CWS whether they perform any cost benefit analysis to determine whether it is more cost effective to replace the main as opposed to repairing the leaks. CWS replied that it does not take into consideration any cost-benefit analysis to determine whether replacing the main is more economically feasible than repairing the main.23 For some of main replacement projects (such as Projects 64851, 64891 and 64892), there has been one leak over the past five years. It does not seem cost effective to replace the entire main due to the infrequent nature of leaks. DRA disagrees with the need for these projects and recommends the Commission disallow the budgets for these projects in full. 3) Tank Painting Projects Two interior tank painting projects are being proposed (PID 61894 for the Armstrong Valley system and PID 61812 for the Lucerne system) to take place in 2015. The total cost of the tank painting projects is $184,724. Both tanks were constructed in the 1980’s and were not coated with cathodic protection. Based off of CWS’ experience, the interior of the coat cannot last more than fifteen years without cathodic protection24. While DRA understands the possible need for the project, it disagrees with allowing CWS ratepayer funding for the projects at this time for the following reasons. Upon discovery, CWS informed DRA that it has not conducted a paint inspection report for either of the tanks since acquiring the systems in 2000.25 CWS is only now planning to conduct paint inspection reports for both of the tanks in the first quarter of 2013. Therefore, until the paint inspection reports are done, there is no evidence supporting the need for painting the tanks. DRA also has an issue with the cost estimate of the projects. The unit cost used to calculate the cost to paint for both projects is based off the same tank painting project in

CWS’s response to Data Request JG4-008 q.4. CWS’s response to Data Request JMI-007 2nd Follow-up Response q.4 (a). 25 Ibid, q.4 (a).
23 24

7-12

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

the Bear Gulch district. CWS uses costs from a tank painting project that is disproportionally larger than the size of the tank painting projects. The tank in Bear Gulch has a storage capacity of 0.5 million gallons (“MG”) while the storage capacities for projects in the Unified and Lucerne subareas are 22,500 gallons and 0.1 MG respectively.26 Despite the difference in storage capacities between the two tank projects, which can result in different unit costs,27 CWS calculates that the two tank painting projects would cost the same. A tank painting project of an equivalent size should be used to estimate the cost of the projects. Due to the lack of paint inspection reports and inconsistent unit costs, DRA recommends deferring these projects to a future GRC. In addition, CWS requests $15,692 to provide cathodic protection to the two tanks (PID 61952 for the Armstrong Valley system and PID 61813 for the Lucerne system). In the project justification for these projects, it states that CWS is currently awaiting the results of the tank inspection reports.28 Similar to the other tank painting projects, since there are no available tank inspection reports, it is difficult to determine if the cathodic protection is necessary. Therefore, DRA recommends deferring these projects to a future GRC once findings from the tank inspections are available for DRA review. 4) Projects by Subarea a) Unified (i) Replace Well Pump, Station One (2013 PID 62239)   

CWS requests $15,000 to replace a well pump at Station 1 of the Hawkins system. During discovery, DRA requested the results of the most recent pump performance test. CWS stated that “pumps for the well station 1-01 are run until failure and then replaced. Cal Water has determined it not to be cost effective to perform pump test for pumps of this size and nature.”29 Due to CWS’s response, it is difficult to determine whether it is cost effective to replace the pump or indeed when CWS will replace the pump. DRA
Ibid, Appendix H. There may be additional tasks and corresponding costs required in a larger tank painting project, but not in a smaller tank painting project. 28 Justification provided in spreadsheet provided in response to Data Request PPM-004. 29 CWS’s Response to Data Request JMI-007 q.3.
26 27

7-13

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recommends that non-specific funding should be used when the pump is “run until failure” and CWS needs to replace the pump. b) Coast Springs (i) CDPH Permit to Use Pond Water as a Water Source (2013 PID 76853) In order to find an alternative source of water, CWS requests $50,000 to determine the feasibility of using pond water as a reliable source of water. On the district tour, CWS informed DRA that it cancelled the project. CDPH informed CWS that the pond would not provide a reliable source due to water quality, and would only be suitable in the event of an emergency. In addition, if the pond was used as a regular source then modifications to the treatment plant might be required. Due to CDPH’s above findings, the pond water does not appear to be a cost effective method for providing an alternative water source and because CWS cancelled the project, DRA recommends disallowing this project. c) Lucerne (i) Water Quality Compliance Disinfection Byproduct (“DBP”) Removal (2013 PID 64890) CWS requests $150,000 to address DBP in the Lucerne treatment plant due to algae in Clear Lake. Lucerne has past water quality complaints due to the algae. The purpose of this project is to obtain DBP Stage 2 compliance. During the district tour, DRA discovered that CWS has already taken the initiative to start the pilot testing which consists of aeration into a surge chamber and conducted jar testing to determine the effectiveness of the project30. CWS plans on conducting the pilot test and sampling for the duration of one year to address seasonal changes in quality of the source water. While there may be a need for the project, it does not seem reasonable to approve the project before the results of the pilot testing are known, especially without knowing how
30

CWS’s response to Data Request JMI-007 q.7 (a).

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the pilot project will perform during the change in seasons. After completing the pilot test, CWS will have a better understanding of the cost involved and the effectiveness of the treatment system required, thus minimizing any possible unforeseeable problems and costs in operating the plant. Therefore, DRA recommends only approving the cost of the pilot test and jar testing (for a combined total of $20,000) and for CWS to come back in a future GRC after completing the pilot testing and propose the treatment project that is required. (ii) Tank Tide-Flex Mixing System for Tanks 1 and 2 at Station 2 (2013 Project 64890) CWS requests $83,400 for two tank Tide-Flex Mixing Systems in order to meet Stage 2 compliance for disinfection byproducts. The proposed mixing system would prevent temperature stratification and the stagnation of water in the tank. During the district tour, CWS informed DRA that they have had success with the proposed technology in other districts. CWS provided a work order (Purchase Order 67381) for a Tank Tide-Flex Mixing System in response to data request JMI-007.31 Since Purchase Order 67381 was completed in 2012, the cost of the project was adjusted for 2013. Based on these adjustments, the appropriate cost of the project is $ 81,360. d) Redwood Valley (i) Vehicles (2013-2015) For 2013-2015 CWS budgets $42,000 for the replacement of 1 vehicle used by the district manager. DRA reviewed each of these projects and recommends deferring CWS’s request to the next GRC. In 2006, CWS adopted DGS vehicle replacement criteria for its own fleet.32 DGS’s vehicle replacement criteria are as follows: Fleet sedans, station wagons, vans, and light duty trucks or vehicles having a gross vehicle weight rating (“GVWR”) of 8500 pounds or less: 120,000 miles. Heavy duty trucks or vehicles (“Class

31 32

Purchase Order 67381 was for a Tank Tide-Flex Mixing System for the Chico district. In D.07-12-055 the Commission ruled that DGS vehicle replacement criteria should be used for CWS.

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3 and under”) having a GVWR of 8501 pounds or more and 4-wheel drive vehicles: 150,000 miles.33 In its application, CWS argues that its heavy duty vehicles should be replaced at 120,000 miles instead of 150,000 miles because “Cal Water’s heavy duty vehicles do frequently operate in…wet, dusty, muddy, and off-road environments that increase the wear and tear and component reliability issues on these vehicles.”34 CWS also references Ford Motor Company F and B series owners guide to give examples of severe service conditions that its heavy duty vehicles may be subject to. In addition to applying DGS’s policy on vehicle replacements, DRA also evaluated heavy duty vehicle replacements on the individual merit of each project. DRA recommends deferring this project to a future GRC because the vehicle did not meet the 120,000 miles driven requirement for vehicle replacement. (ii) Risk Analysis and Management for Critical Asset Protection (“RAMCAP”) Vulnerability CWS requests $69,298 in 2015 to conduct an overall vulnerability assessment of CWS’s Redwood Valley water systems according to the AWWA J100 RAMCAP guidelines.35 DRA recommends disallowing the project. For the rationale behind the disallowance, refer to the RAMCAP section in Chapter 7 of DRA’s Results of Operation Report for the Chico District. (iii) Two-way Voice Communications and SCADA Alarms CWS requests $45,454 in 2013 to install a reliable voice and SCADA message radio system. The new digital radio system would allow each district to operate on a separate frequency and would allow the general office to communicate with every district
33 34

DGS Fleet Handbook, A Guide to Fleet, Travel, and Parking Policies, p.4. Direct Testimony of Darin T. Duncan, p.31. 35 AWWA J100 is the first voluntary consensus standard created by American Water Works Association (“AWWA”) and American Society of Mechanical Engineers Innovative Technologies Institute (“ASME-ITI”) for an all-hazards risk and resilience management specifically for water and wastewater utilities. This standard received final clearance from the American National Standards Institute (“ANSI”) in May 2010 and became effective July 1, 2010.

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office simultaneously. DRA recommends that this project be disallowed. For the rationale behind the disallowance, refer to the testimony of DRA witness Jenny Au in Chapter 7 of DRA’s Results of Operations Report for the Salinas district. 5) Non-specific Capital Budgets, 2012 to 2015 CWS proposes $213,100, $224,200, and $230,100 for 2013, 2104 and 2015, respectively, for non-specific capital budget. CWS uses this budget to complete projects that “cannot be anticipated prior to a General Rate Case filing, but by nature must be completed due to unforeseen requirements.”36 According to CWS, these projects typically involve emergency replacement of failed components in pumping equipment, main line replacement, and improvement or relocation of projects in conjunction with a governmental agency’s improvements. CWS stated that the company “relies on historical spending to project the level of anticipated spending in this category.”37 CWS’s nonspecific budget estimates are based on a 10-year average expenditure escalated to 2012 dollars using the CPUC’s December 2011 Energy of Cost of Service and Natural Gas Branch’s Escalation Memorandum. This 2012 amount is then escalated, using composite escalation factors from the same memo, to arrive at the proposed 2013-2015 budgets. DRA’s review of past budgeted and expended amounts in this category indicates CWS’s historical over-spending of its budgeted and authorized amount. A look at the company-wide data between 2002 and 2011 below shows that CWS consistently and continually over-spent in this category by as much as 116%. Some districts do underspend their budgets but these occurrences are rare.

36 37

CWS Report on Results of Operations, Redwood Valley District, Page 43. Ibid.

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Table 7-J. Company Wide Historical Non-Specific Budget and Expenditure
Company‐wide Non‐specific Budget  Expenditure  Budget  $27,547,755  $12,756,327  $19,047,725  $13,112,419  $23,600,627  $13,908,189  $25,909,741  $15,809,932  $26,531,862  $16,318,715  $23,039,408  $18,065,465  $27,492,773  $17,159,074  $26,382,679  $18,672,715  $23,776,404  $18,390,922  $33,808,900  $17,011,721  $25,713,787  $16,120,548 

Year  2002  2003  2004  2005  2006  2007  2008  2009  2010  2011  Average 10‐  Yr. 

% Overspent  116%  45%  70%  64%  63%  28%  60%  41%  29%  99%  60% 

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The purpose of setting a budget in a business is to establish targets and standards and control expenditures. By consistently allowing its districts’ expenditures to consistently and continuously exceed the established budget, CWS has exhibited no desire to control cost or improve efficiency. This is a blatant disregard for the budgeting and GRC application process. It defeats the purpose if seeking Commission approval of an operating budget if CWS is allowed to spend and book into rate base beyond the amount in its budget without justification. Although emergency situations do arise beyond a utility’s control, which require some adjustments, such occurrences usually do not occur consistently over a period of 10 years. The following provides an example of some of the reasons that CWS exceeds its budgets. In 2009, CWS booked over $600,000 in this category for the cost to update the Bakersfield Water Study and Facility Master Plan. In 2012, CWS’s list of “carry-over” projects in this category includes some items that do not appear to be urgent or unanticipated replacement such as $166,000 to remodel the Bakersfield Office, $286,000 to purchase a 2-way radio, and $468,000 for a tank painting project at Station 216. These are not minor projects that require immediate action for the continual operation of a water system. DRA and the Commission do not have the opportunity to review and determine 7-18

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the need and reasonableness of these “non-specific” projects prior to their construction/implementation because the projects were not specifically identified and justified in CWS’s GRC filing. Although DRA does not seek to micromanage CWS’s operations, DRA believes that it is important for a water utility to adhere to an approved budget. In this GRC, DRA forecasts the non-specific budget for 2013 through 2015 by escalating CWS’s 2012 nonspecific budget from the 2009 GRC Settlement to recommend a budget of $181,800 for 2013, $184,400 for 2014, and $187,400 for 2015.38 DRA recommends that the Commission adopt these budget numbers for the non-specific category and require that CWS provide reasonable justification for any excess non-specific expenditures before the company can be allowed to include the cost in recorded years’ plant balances in the next rate case. Table 7-K. CWS’s Proposed and DRA’s Recommended Non-Specific Budget
Redwood Valley District's Non‐Specific Budget Year CWS's Proposed DRA's Recommendation 2012 $0 $0 2013 $213,100 $181,843 2014 $224,200 $184,389 2015 $230,100 $187,376

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In addition, DRA also recommends removal of all dollars associated with projects identified as using “non-specific” funding in CWS’s list of carry-over projects. CWS should be able to fund those projects out of the non-specific budgets recommended by DRA above. Authorizing CWS’s proposed amounts would in effect allow non-specific funding equaling the annual non-specific budget (for 2012, for example), plus the dollars estimated to completed those “non-specific carry-over” projects. This would allow CWS to continue the imprudent practice of over-spending its non-specific budget as discussed above.

38

D.10-12-017 (A.09-07-001), Attachment C. CWS’s total non-specific budget for the Unified, Coast Springs, and Lucerne subarea for 2012 is $179,900 from the 2009 GRC Settlement.

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D. CONCLUSION DRA’s recommendations have been incorporated in the calculations for DRA’s recommended Plant in Service as shown in Table 7-1 in Chapter 1 of this Report.

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CHAPTER 8: DEPRECIATION
A. See Chapter 8: Depreciation in DRA’s Company-Wide Report of Results of

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Operations of California Water Service Company (General Rate Case A.12-07-007) for analysis and recommendations.

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CHAPTER 9: RATE BASE
A. See Chapter 9: Rate Base in DRA’s Company-Wide Report of Results of

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Operations of California Water Service Company (General Rate Case A.12-07-007) for analysis and recommendations.

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CHAPTER 10: CUSTOMER SERVICE
A. See Chapter 10: Customer Service in DRA’s Company-Wide Report of Results of

Operations of California Water Service Company (General Rate Case A.12-07-007) for analysis and recommendations.

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CHAPTER 11: WATER QUALITY
A. INTRODUCTION The Rate Case Plan requires water utilities to submit information about water quality in their GRC applications. The California Department of Public Health (“CDPH”) is the primary agency responsible to ensure the water provided by the district is safe for public consumption. DRA reviewed the most recent CDPH inspection reports available for each system. B. SUMMARY OF RECOMMENDATIONS Based upon the information provided by the company and by the CDPH, CWS’s Redwood Valley District appears to be in compliance with all applicable water quality standards and requirements. Exceptions if any are noted below. C. DISCUSSION The Redwood Valley district is comprised of the following six water systems:, Coast Springs, Lucerne and Unified (Armstrong Valley, Hawkins, Noel Heights, and Rancho del Paradiso). Lucerne is located in CDPH District 3 (Mendocino); the remaining five systems are in CDPH District 18 (Sonoma). CDPH has not been issued any citations against any of the aforementioned water systems. In this GRC, CWS is required to show compliance with water quality reporting in accordance to D.10-12-017, Order Paragraph 31. According to Order Paragraph 31: “In its next general rate case, California Water Service Company shall make an affirmative showing indicating the frequency and location of complaints regarding water smells or stains left in toilets, etc. in the Redwood Valley District’s Coast Springs and Lucerne areas, and the causes and corrective actions it has taken or will take to remedy the complaints any underlying problems that led to the complaints.” 39

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39

D.10-12-017 for Application A.09-07-001, Order Number 31, pg. 90.

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CWS’s compliance with the D.10-12-017, OP 31 for the Coast Springs and Lucerne systems will be discussed in their respective sections. Each system experiences different challenges in water quality due to different water sources. The issues faced by each system (if any) are described below. 1) Armstrong Valley

The Armstrong Valley relies on the two groundwater wells to supply water to the system. Even though both wells are located close to Fife’s Creek, CDPH classifies these wells as groundwater sources due to the absence of total coliforms.40 CWS reports that this system meets all applicable drinking water standards. CDPH confirmed in an inspection report that the water system was in overall good condition, in compliance with the State’s water quality standard, and no significant deficiencies were reported.41 2) Coast Springs

Coast Springs has a groundwater system under the influence of surface water. In compliance with Order Number 31 of D.10-12-017, CWS reports that the water company has received one compliant due to taste and odor between 2009 and 2011 in the Coast Springs system. CWS claims that the complaint occurred when an alternative water source was used during the period for high demand. Some of the water sources have higher taste and odor associated with them and CWS claims to operate the system that will produce the best water quality possible based on the demand of the water system.42 In order to comply with CDPH requirements, CWS installed a membrane treatment plant. The treatment plant consists of chlorine oxidation, microfiltration, free chlorine, injection of ammonia to form chloramines and an in-line ultraviolet light (“UV”) contactor. CWS reports that CDPH conducted a sanitary survey in January 2012 and is awaiting the results of the inspection report.43 After contacting the CDPH, DRA discovered that

Direct Testimony of Chet Auckly, pg. 47. CDPH Inspection Report data February 2010 for sanitary survey conducted in July 2008. 42 RO report, Compliance with Water Quality Reporting in D.10-12-017, OP 31, pg. 17. 43 Direct Testimony of Chet Auckly, pg. 48.
40 41

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CWS’s Coast Springs system is in compliance with the State’s water quality standard and no significant deficiencies were reported.44 3) Hawkins

The Hawkins system is served through one active well. The groundwater system also includes a standby well (on standby since 2006). In the previous GRC, DRA discussed the issues the system was facing with the high concentrations of iron, and manganese and arsenic. a) Iron and Manganese Both iron and manganese are regulated by the secondary maximum contaminant levels (“SMCL”) to address taste odor, and aesthetics of the finished water. The manganese levels in the active well are about nine times the SMCL. Since the previous GRC, CWS installed an ATEC Iron and Manganese removal system in 2011. The ATEC treatment system consists of chlorination, followed by pyrolusite filter and a tank for backwash. b) Arsenic Both the active and standby wells have an arsenic concentration just under the primary maximum contaminant levels (“MCL”). Ferric chloride was added to the system to deal with the level of arsenic in the groundwater. After the installation of the ATEC iron and manganese removal system, all drinking water has complied with both state and federal standards for iron, manganese and arsenic. 4) Lucerne

The Lucerne system uses surface water from Clear Lake. CWS has experienced water quality issues due to the seasonal algal blooms during the summer months. The algal blooms has resulted in the following challenges in water quality: 1) high concentration of geosmin from the algal blooms increase the turbidity of the water; 2)
44

December 27, 2012 email communications from Marianne Watada of CDPH to DRA.

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formation of disinfection by-products (“DPB”) such as total trihalomethanes (“TTHM”) and haloacetic acids(“HAA”) due to the amount of disinfection required; and 3)taste and odor complaints from customers. During the summer months, the level of total TTHM has exceeded the MCL. Between 2009 and 2011, CWS reported thirteen complaints based on taste and odor issues. CWS indicates that the complaints coincide with the algal blooms that occur in Clear Lake. The algal bloom is also responsible for the odor issues created by the accumulation of manganese due to nutrient uptake. The Lucerne Water Treatment Plant is equipped with an advanced oxidation process which utilizes hydrogen peroxide and ultraviolet lamps to minimize any potential odor issues. Even though the advanced oxidation process is effective, CWS does not operate the system on a continual basis due to the amount of energy and chemicals required for operation. CWS started to evaluate their samples through an environmentally friendly approved and certified laboratory to determine the optimum time to operate the oxidation system. One project is being proposed in the current GRC for an aeration system to achieve compliance with the Stage two DBP rule. The proposed treatment involves using a diffuser to inject air into the surge chamber after the influent water goes through the clarifier system. CWS is conducting a pilot program for the proposed treatment plant and the jar testing results confirmed that the aeration system is effective in reducing DBPs.45 In 2010, the CDPH inspected the raw water source and the treatment plant. The department concluded that the source and treatment process was adequately managed, operated, and maintained. 5) Noel Heights

The Noel Heights system is supplied by one groundwater well under the influence of surface water. In the previous GRC, DRA discussed that the copper concentration
45

CWS’s response to Data Request JMI-007, q.7(b).

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exceeded the ninetieth percentile action level despite the corrosion control system initiated in 2006. CWS installed an air diffuser system at the treatment plant to adjust the pH of the treated water to address this problem. In 2009, an aeration system was installed in the treatment clearwell in order to comply with the lead and copper rule. CWS reports that the aeration system has reduced the concentration of copper in the customer water samples. Due to the success of the aeration system, CDPH has issued a letter of compliance with reduced the Lead and Copper Rule monitoring requirements.46 CWS reports that the overall water quality meets all applicable drinking water standards. The CDPH has not conducted a sanitary survey to evaluate the Noel Heights treatment and distribution systems in recent years. According to CWS, all correspondence has been through permit submittals and email. CDPH has been invited to observe the recent improvements to the site, but has declined and conducted all compliance correspondence through mail or email.47 6) Rancho del Paradiso

The Rancho del Paradiso system purchases water from the Sweetwater Springs Water District. The water system consists of the booster station, booster pump, storage tanks and pipeline necessary to deliver water to the customers. DPH has not conducted a sanitary survey to evaluate the Rancho del Paradiso system in recent years. According to CWS, all correspondence has been through permit submittals and email. CDPH has not requested an inspection of the system. In addition, there have not been any projects requiring permit amendments for the system.48 D. CONCLUSION Based on reviewing the information, it seems that CWS’s Redwood Valley district is in compliance with all applicable water quality standards. CWS has taken the initiative to address any current or potential issues addressed by CDPH.
Direct Testimony of Chet Auckly, pg.51. CWS’s response to Data Request JMI-011, q.5. 48 Direct Testimony of Chet Auckly, pg. 52.
46 47

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[END OF DISTRICT RESULTS OF OPERATIONS REPORT]

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