For the years 2012 to 2014, three of California’s large investor owned water utilities - California American Water (Cal Am), San Jose Water (SJW) and Golden State (GSW) - requested the CPUC to authorize increases to their return-on-equity (ROE) to 11.50%, from its previously authorized 10.2%. California Water Service (CWS) had requested an increase in their ROE from 10.2% to 11.25%. The authorized return-on-equity determines the amount of profit that the utilities may earn on their prudent and reasonable investments in California's infrastructure. In November 2011, ORA signed on to a settlement agreement with the four water utilities to lower the ROE to 9.99%, which was approved by the CPUC on July 12, 2012.
Read more background on the Water Cost of Capital proceedings and summaries.
ORA supported a settlement to lower the return-on-equity (ROE) to 9.99% because compared to 2009, when cost of capital rates were last authorized, the current settlement agreement reflects the lower overall costs for financing water utilities’ capital projects. The settlement will save customers $7.5 million annually.
See ORA’s August 31, 2011 Testimony on Cost of Capital for large water utilities.See ORA’s May 31, 2011 initial Protest to the utilities’ application.
See the proceeding docket for more details.
Applications to establish Cost of Capital rates for the years 2015 to 2017 will be filed by the large water utilities in May 2014.
The CPUC advances to the Cost of Capital proceeding for the small water utilities: Park/Apple Valley, Suburban Water, San Gabriel Valley Water and Great Oaks.