SAN JOSE, Calif., Dec. 6, 2001 — The California Public Utilities Commission has adopted a resolution that jeopardizes the ability of water utilities to recover higher electricity and other direct water production costs, according to a statement released by the California Water Services Group.
In adopting the resolution, the commission implemented its staff's interim recommendation concerning practices and policies that enable water utilities to recover increases in purchased water, electricity, and pump taxes. These expenses are referred to as ``offsetable expenses.''
The commission also directed its staff to open a proceeding to evaluate offsetable expense recovery practices and policies, and recommend permanent revisions. Historically, offset rate increases have enabled water utilities to recover increases in offsetable expenses that were not anticipated when customer rates were established and are beyond the utility's control.
As ordered by the commission, requests to recover offsetable expenses will be processed only if a district has filed a General Rate Case (GRC) application within its three-year rate case cycle and the district is not earning more than its authorized rate of return on a forward-looking, pro-forma basis. Neither of these requirements applied to offset rate increases prior to adoption of the resolution.
The company can continue to track offsetable expenses in a regulatory memorandum account for potential recovery subject to the commission's future determination of appropriate practices and policies.
During 2001, the rates charged to the company by electric power suppliers have increased about 50%. In May 2001, immediately after the commission authorized substantial electric rate increases for the state's two largest power companies, the company filed applications requesting authorization to recover $5,930,000 in higher power costs for 20 of its 24 regulated California districts.
Several months later, the company was authorized rate increases in four districts totaling $2,760,000 in additional annual revenue. The company's applications to recover power cost increases in its 20 other districts will be processed in accordance with the resolution adopted by the commission.
Although the company said it was hopeful that it will be authorized to recover the additional offsetable expenses, it was unable to predict the timing or amount of such recoveries.
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 companies provide regulated and non-regulated water service to more than 2 million people in 98 communities. Group's common stock trades on the New York Stock Exchange under the symbol ``CWT''. Additional information about the Company is available at its Web site at www.calwater.com.
