CPUC proposes granting Cal Water $7.6 million rate increase

California Water Service Group announces CPUC's proposed decision on 2004 general rate case applications. The proposed decision is currently scheduled to be considered by the commission on July 21. Company expects to file for rate hikes for another eight of its 24 districts in 2005...

SAN JOSE, CA, June 28, 2005 (BUSINESS WIRE) -- California Water Service Group (CWT) has received a proposed decision from the California Public Utilities Commission (CPUC) on its 2004 General Rate Case applications for its largest subsidiary, California Water Service Company (Cal Water); the proposed decision, which reflects a settlement agreement made between CPUC staff and the company, authorizes rate increases that will add $7.6 million to annual revenues.

The proposed decision is currently scheduled to be considered by the Commission on July 21, 2005. The Commission may or may not approve the proposed decision; therefore, the final decision may reflect different amounts.

"Ratemaking is a complex process, and we are pleased that we were able to reach this agreement with the CPUC staff. We rarely receive everything we ask for. The process involves compiling our projected costs and the capital improvements we would like to make and starting the discussions there," said Francis S. Ferraro, Vice President of Regulatory Affairs.

Cal Water initially requested additional revenues of $26 million. The difference in the initial request and the settlement agreement can be attributed mainly to four factors: 1) the company initially requested a 12.15% return on equity (ROE), while the proposed decision authorizes a 10.1% ROE; 2) some of the dollars requested initially were granted subsequently by the CPUC in other proceedings--these are step rate annual increases totaling $4.4 million that became effective in January 2005, and a $0.8 million annual increase for the company's Stockton District related to higher purchased water and pump taxes that became effective in May 2005; 3) Cal Water agreed to recoup the costs of certain capital projects through Advice Letter filings after the projects are completed, which are estimated to impact revenues by about $2.0 million on an annual basis; and 4) expense projections were reduced, particularly in the labor category, as fewer new positions will be added than initially requested.

"We will continue to take an aggressive approach to ratemaking. Everyone benefits--stockholders, employees, and customers--when rates accurately reflect the costs of providing water service and allow us to earn a reasonable return on capital investments," Ferraro said.

Cal Water expects to file General Rate Case applications for another eight of its 24 districts in 2005.

California Water Service Group (www.calwatergroup.com) is the parent company of California Water Service Company, Washington Water Service Company, New Mexico Water Service Company, Hawaii Water Service Company, Inc., and CWS Utility Services. Together these companies provide regulated and non-regulated water service to more than 2 million people in 100 California, Washington, New Mexico, and Hawaii communities.

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