1. Conservation Cal Water’s Approach with the California Public Utilities Commission Darin Duncan, Bear Gulch District Manager Low-Income Oversight Board Meeting January 17, 2007

2. Background: Cal Water  Largest investor-owned water utility in California  Serves 58 communities through 24 operating districts  Approximately 450,000 service connections  Delivers 100 billion gallons of water to customers in California per year

3. Standard CPUC Ratemaking Practice  Service charge covers half of fixed costs  Single-block quantity rate covers variable costs plus remainder of fixed costs  Strong disincentive to conservation  Water savings reduce recovery of fixed costs

4. Water Action Plan  CPUC policy document adopted unanimously in December 2005  Maintain water quality  Strengthen water conservation programs to a level comparable with those of energy utilities  Promote water infrastructure investment  Assist low-income ratepayers  Set rates that balance investment, conservation, and affordability

5. Cal Water Actions  Made joint recommendations to Commission with other water utilities, NRDC, Mono Lake Committee, and other environmental groups  Proposed low-income program (LIRA)  Proposed increased budget for conservation  Proposed sales decoupling  Requested conservation rate design

6. Joint Recommendations with Environmental Groups  Decoupling sales  Implementing increasing block rates  Increasing conservation activity and accountability  Further studying of long-run marginal costs  Financial incentives to aggressively implement Urban Water Conservation Council’s Best Management Practices

7. Low-Income Rate Assistance (LIRA)  In November 2006, Commission adopted Cal Water’s program of low-income ratepayer assistance  50% reduction in service charge  Applies to customers who participate in or meet the criteria for the energy utility low-income programs  Small surcharge of $0.01 per Ccf on all other customers

8. Increased Conservation Budget  1.5% of revenues requested as conservation target  CPUC-regulated energy utilities spend 3% of revenues on conservation  Enhanced expense reporting  Cost-effective programs using Best Management Practices (BMPs)

9. Current Conservation Programs BMP02 - Plumbing Retrofit: cost-effectiveness 1.2 to 5. Participating Districts: All 24 Cal Water districts BMP05 – Large Landscape Programs and Incentives: cost-effectiveness 1.2 to 5. Participating Districts: Los Altos – coordinating efforts with Santa Clara Valley Water District BMP06 - Washing Machine Rebate Program: cost-effectiveness 1.0 to 2.0 Participating Districts: 14; 10 coordinating efforts with the wholesaler and or Prop 50 grant BMP07 Public Information Program: Participating Districts: All 24 Cal Water Districts BMP08 – School Education Program: Participating districts: All 24 Cal Water districts Palos Verdes – coordinating efforts with the Southern California Gas Company BMP09 – Commercial Industrial and Institutional Program: cost-effectiveness 1.2 to 6 Los Altos coordinating with Santa Clara Valley Water District BMP14 – ULFT Rebate Program: cost-effectiveness 1.1 to 5.3 Participating Districts: 17; 8 coordinating efforts with the wholesaler

10. Planned Conservation Programs BMP02 – Plumbing Retrofit: cost-effectiveness 1.2 to 5. Participating Districts: All 24 Cal Water districts BMP05 – Large Landscape Programs and Incentives: cost-effectiveness1.2 to 5. Participating Districts: 7; 6 coordinating efforts with the wholesaler BMP06 - Washing Machine Rebate Program: cost-effectiveness 1.0 to 2.0 Participating Districts: 15; 10 coordinating efforts with the wholesaler and Prop 50 grant BMP07 Public Information Program: Participating Districts: All 24 Cal Water Districts BMP08 – School Education Program: Participating districts: All 24 Cal Water districts; 6 coordinating efforts with the Gas Company and Edison BMP09 – Commercial Industrial and Institutional Program: cost-effectiveness 1.2 to 6 commercial high efficiency washing machines, x-ray film retrofit, high efficiency urinals, and cooling tower retrofit. Participating districts: 10; 7coordinating efforts with the wholesaler and Prop. 50 grant BMP14 – ULFT Rebate Program: cost-effectiveness 1.1 to 5.3 Participating Districts: 20; 10 coordinating efforts with the wholesaler and Prop. 50 grant

11. Proposed Conservation Rate Design  Retaining service charge at current levels  Increasing block rates for residential  Exploring increasing block rates for:  Residential master meter  Commercial  Industrial  Irrigation  Public authority

12. Questions?