SAN JOSE, Calif., Dec. 18, 2002 -- California Water Service Group expects to recover up to $6.4 million in higher power costs incurred prior to November 29, 2001, as a result of a decision issued Tuesday by the California Public Utilities Commission.
For two decades, water utilities were allowed to recover significant increases in certain uncontrollable costs, such as the costs of purchased water and electricity used to operate wells and pumps. These costs had been tracked in balancing accounts and recovered in customers' water rates. On November 29, 2001, the Commission abruptly changed its procedure and suspended balancing accounts. Many California water utilities were allowed to recover their balancing account balances as of that date, while other companies, including Cal Water, were not.
Yesterday's decision will allow utilities to recover balancing accounts existing at the time of the change in procedure. Much of the $6.4 million in the Company's balancing accounts resulted from an overall 48% increase in electricity rates that became effective in 2001.
Cal Water will file its request for recovery immediately; after the Commission processes the request, which could take two to three months, the Company will recover the revenues over a twelve- to twenty-four-month period.
"We have been adversely impacted by delays and unfair decisions by the Commission, so obviously we are pleased that we will at least be able to recover some of the higher costs that have been incurred," said Stan Ferraro, California Water Service Group's Vice President of Regulatory Affairs.
Since November 29, 2001, water utilities have tracked increased water production costs in what the Commission terms "memorandum accounts." The Commission is considering subjecting the recovery of memorandum accounts to a new procedure that takes into account whether a utility is earning over or under its authorized rate of return and whether it has filed a general rate case within its established three-year cycle. Since November 29, 2001, the amount tracked in memorandum accounts has grown by $5.3 million as of September 30, 2002.
"We will continue to respond proactively to a difficult regulatory environment, and protect both our customers and our stockholders," Ferraro said.
California Water Service Group is the parent company of California Water Service Company, Washington Water Service Company, New Mexico Water Service Company, and CWS Utility Services. The subsidiaries provide regulated and non-regulated water service to over 1.7 million people in 98 communities. The Company's common stock trades on the New York Stock Exchange under the symbol "CWT".
