1. Water Conservation Update Seaneen M Wilson Division of Water & Audits September 17, 2008

2. 2 Governor Issues Executive Order Governors’ Issues Executive Order S-06-08 in June. Order addresses current lack of water supply in California. Among other things, S-06-08 Orders Commission and Department of Water Resources to: Coordinate identification of investor-owned water utilities at risk of experiencing health and safety impacts due to drought and supply shortages, and Mitigate impacts.

3. 3 Commission Coordinates With State Agencies To ensure water utility compliance with local, state, and federal health and safety regulations, the Commission frequently coordinates with: California Department of Public Health and Department of Water Resources.

4. 4 Drought and Water Shortage Immediate Plan July 31, 2008, Division of Water and Audits (DWA) met with Class A and B water utilities and California Water Association to discuss institution of Rule 14.1 and related drought and water shortage issues. Rule 14.1 governs actions of utility under voluntary rationing, mandatory rationing, and service connection moratoria. Several Commission–regulated water utilities already have a Tariff Rule 14.1.

5. 5 Implementation By letter in August 2008, DWA requested all Class A and B water utilities to institute Rule 14.1: Ensures that a conservation/rationing plan is in place, given the current lack of water supply across the state. Enables utilities to quickly address water supply shortages.

6. 6 Water Conservation OII – Phase 1B Phase 1B addresses: Conservation rate design for Golden State Water and San Jose Water. California Water request for additional conservation funding. Whether risk adjustment should be made in association with Water Rate Adjustment Mechanism (WRAM) and Modified Cost Balancing Account (MCBA). D.08-08-030 adopted settlements for Golden State Water, San Jose Water, and California Water Service.

7. 7 D.08-08-030 for Golden State Water Implements conservation rates, revenue adjustment mechanism, modified cost balancing account, customer education and outreach, and data collection and reporting. Region I – Metered Residential & Non-residential, lower service charge, uniform quantity rate that covers higher percentage of fixed costs. Region II and III – Metered Residential, lower service charge, two-tier increasing block quantity rate. WRAM tracks difference between adopted and actual revenues. MCBA tracks difference between adopted and actual costs (purchased water, purchased power, and pump tax).

8. 8 D.08-08-030 For San Jose Water Orders conservation rates, pricing adjustment mechanism, customer education and outreach, and data collection and reporting. Residential, two-tier increasing block quantity rate. “Monterey style” WRAM will track difference between revenue from actual metered sales through tiered quantity rate and revenue would have received through single-tier quantity rate.

9. 9 D.08-08-030 For California Water Service Orders additional conservation funding to be booked into memorandum account due to delay in GRC for ten districts and sub- districts.

10. 10 D.08-08-030 Rejects Risk Adjustment D.08-08-030 rejected proposal to adjust return on equity (ROE) with institution of WRAM and MCBA for the following reasons: Generic Cost of Capital (Generic COC) proceeding is proper venue to determine if WRAM and MCBA affect risk. Generic COC allows for assessment of all risks and policies that may impact ROE.