Apple Valley Ranchos Water Company
2015 General Rate Case

Background

On January 2, 2014 Apple Valley Ranchos Water Company filed a general rate case Application proposing to increase its customer rates over present levels for 2015 – 2017:

  • 2015: $3.1 million (or 14.88%) increase
  • 2016: $2.1 million (8.48%) increase
  • 2017: $2.2 million (8.19%) increase
  • Total: $7.4 million increase over 3 years

Apple Valley's request to increase its revenues would increase the average residential customer water bill by about $18 every two months.

The CPUC held a Public Participation Hearing in the Apple Valley Ranchos service territory on April 30, 2014.

The CPUC held Evidentiary Hearings at its San Francisco office June 16 - 20, 2014.

 

Partial Settlement

On August 8, 2014, ORA and Apple Valley filed a partial Settlement Agreement requesting CPUC approval of:

  • 2015: $2.8 million (or 13.53%) increase
  • 2016: $1.4 million (5.8%) increase
  • 2017: $1.5 million (6.0%) increase
  • Total: $5.7 million increase over 3 years

Increases for 2016 and 2017 are estimates and will vary based on the level of inflation at the time when AVR submits its attrition filings.

CPUC Interim Decision

In May 2015, the CPUC issued an Interim   Decision rejecting the Partial Settlement Agreement.

The Interim Decision also implements an interim rate increase, subject to refund in the Final Decision:

  • For 2015:  $2.4 million increase (or 11.56%)
  • Estimated Impact for Average Residential Customer:  Approximately 10% increase (e.g., $6.44 per month on average monthly bill of $65) 

This Interim Decision orders settling parties to submit revised consumption estimates to reflect the Governor’s Executive Order. On June 30, 2015, Apple Valley submitted its Amended Supplemental Testimony with revised consumption estimates that comply with the Governor’s Executive Order.

 

Amended Settlement Agreement

On May 11, 2015, Apple Valley and ORA submitted an Amended Settlement that revised the capital expenditures for the main replacement from $5.3 million to $4.1 million for 2015.  

 

On September 1, 2015, a CPUC email Ruling directed Apple Valley and ORA to submit a Final Amended Settlement Agreement that compares the difference in consumption estimates between its two Settlement proposals. 

 

 

ORA’s Policy Position

ORA supports the May 11 Amended Settlement Agreement because it would fairly reduce Apple Valley’s original requested rate increase, but still allows it to continue to provide safe and clean water service in an efficient and cost-effective manner. Additionally, the Amended Settlement further reduced capital expenditures for main replacement from $5.3 million to $4.1 million for 2015. 

Litigated Issues

ORA litigated the unresolved issues with Apple Valley in the best interest of customers. While ORA supports Apple Valley’s ongoing conservation efforts in furtherance of the state’s goals, ORA found that these goals could be achieved at lower cost estimates. ORA recommended that Apple Valley’s conservation expenses should continue to be tracked and subject to refund.
Additionally, ORA recommended that the CPUC should deny Apple Valley’s request for:

  • A Solar Project Memo Account because the project is open-ended and undefined.
  • Recovery of ~$25,000 in under-collected revenue requirement in its Office Remodel Balancing Account because project has not been constructed and completed, and Apple Valley is now pursuing a totally different project.
  • A proposed level payment plan option because Apple Valley failed to provide any detailed information about the mechanics of the plan or the costs associated with the plan.
  • Implementation of a Sales Reconciliation Mechanism because it erodes the cost of service processes established by the Rate Case Plan, and threatens the effectiveness and integrity of the regulatory process.
  • Tracking costs for gravity irrigation in the WRAM because conservation has not been observed in the water use trends related to gravity irrigation, and there is no specific plan for encouraging this user to conserve water.
  • Tracking chemical costs in the WRAM because these costs are under Apple Valley’s control as a normal operating expense that should not be granted balancing account treatment. 

See ORA’s Opening Brief on the litigated issues.   

See ORA’s Reply Brief.

ORA's Testimony

ORA's detailed analysis found that Apple Valley's request should be decreased due to over-estimates in operational and administrative costs, infrastructure, and forecasted water sales. ORA recommended customer rates should be adjusted as follows over present levels:

  • 2015: $1.6 million (or 7.97%) increase
  • 2016: $ $663,682 (or 2.99%) increase
  • 2017: To be determined by inflation factors at this time, and the difference between rate base in between 2015 and 2016. 

ORA's recommendation would increase an average residential water bill $9.27 every two months. 

ORA’s key recommendations include:  
Water Sales Forecast:
  
Lower AVR's estimates for water sales and lower unaccounted for water percentage. (Testimony, Chapter 2).
Operations & Maintenance and Administrative & General Expenses: 
   Lower leased water rights expenses, conservation expenses, and regulatory expenses.  (Testimony, Chapter 3).
• Pensions and Benefits Expenses: 
  
Lower AVR's estimates.  (See Chapter 5).
• Plant Investment and Rate Base: 
  
Disallow and/or reduce various AVR infrastructure addition estimates for 2014, 2015, and 2016 by 55%, 29%,
   and 27% respectively. (See Chapter 8).

   Additionally, the CPUC should require AVR to:

  • Comply with CPUC order to issue a detailed study to justify its compensation packages at all levels.
  • Continue its pilot conservation rate design program and the CPUC should adopt AVR's proposed modifications to the tier structure. 

See ORA's May 19, 2014 Amended Testimony.

 

See ORA's April 27, 2015 Comments on the CPUC Proposed Decision.

See ORA’s February 10, 2014 Protest.

 

Proceeding Docket 

See the Proceeding docket.  

 

Other Resources

2012 AVR General Rate Case Archive