218293570 Docket Exhibit Number Commissioner Admin. Law Judge ORA Proj. Coordinator : : : : : A.19-01-001 Cal Advs- Clifford Rechtschaffen Hazlyn Fortune Mehboob Aslam PUBLIC ADVOCATES OFFICE

CALIFORNIA PUBLIC UTILITIES COMMISSION REPORT ON THE

RESULTS OF OPERATIONS SAN GABRIEL VALLEY WATER COMPANY

GENERAL OFFICE, SPECIAL REQUESTS AND RURBAN MUTUAL WATER COMPANY ACQUISITION

Test Year 2020-2021 and Escalation Years 2021-2022 and 2022-2023

Application 19-01-001

Los Angles, California July 19, 2019

218293570 i TABLE OF CONTENTS Pages

MEMORANDUM ................................................................................................................ I EXECUTIVE SUMMARY ................................................................................................. II CHAPTER 1: GENERAL OFFICE EXPENSES ............................................................. 1-1 A. INTRODUCTION ................................................................................................. 1-1 B. SUMMARY OF RECOMMENDATIONS ........................................................... 1-1 C. DISCUSSION ........................................................................................................ 1-1 1.) New Positions .................................................................................................. 1-2 2.) IT Upgrade Project-Related New Positions - Business System Upgrade ........................................................................................................... 1-6 3.) IT Upgrade Project-Related Costs – Software License Fees .......................... 1-7 D. CONCLUSION ..................................................................................................... 1-7 CHAPTER 2: GENERAL OFFICE RATE BASE ............................................................ 2-9 A. INTRODUCTION ....................................................................................................... 2-9 B. SUMMARY OF RECOMMENDATIONS.................................................................. 2-9 C. DISCUSSION .............................................................................................................. 2-9 1) Proposed Upgrade to the Financial, Customer and Work Management Information Systems ................................................................ 2-10 a. Cost Uncertainties ................................................................................. 2-12 b. Implementation Schedule Uncertainties ................................................ 2-12 D. CONCLUSION .......................................................................................................... 2-13 CHAPTER 3: COST ALLOCATIONS (AFFILIATES & 4-FACTOR) .......................... 3-1 A. INTRODUCTION ................................................................................................. 3-1 B. SUMMARY OF RECOMMENDATIONS ........................................................... 3-1 1) Allocation of Administrative Salaries and Other Costs to Affiliated Companies....................................................................................... 3-1 2) Recovery of New Development Costs ............................................................ 3-2 D. CONCLUSION ..................................................................................................... 3-5 CHAPTER 4: SPECIAL REQUESTS .............................................................................. 4-1 A. INTRODUCTION ................................................................................................. 4-1

218293570 ii B. SUMMARY OF RECOMMENDATIONS ........................................................... 4-1 C. DISCUSSION ........................................................................................................ 4-2 1) Special Request A (FWC Facilities Fees) ....................................................... 4-2 2) Special Request D (Including Subsequent Offsets) ........................................ 4-6 3) Special Request E (Continue Water Right Memorandum Account) .......................................................................................................... 4-7 a. Water Supply ........................................................................................... 4-7 b. Water Rights ............................................................................................ 4-8 c. Water Rights Memorandum Account ...................................................... 4-8 4) Special Request F (Request New Tariff Schedules) ....................................... 4-9 5) Special Request H (Revising Sales Forecast Due to Montebello Hills Development) ....................................................................................... 4-11 6) Special Request I (Overhead Rate) ............................................................... 4-13 D. CONCLUSION ................................................................................................... 4-14 CHAPTER 5: RURBAN HOMES MUTUAL WATER SYSTEM ACQUISITION ........................ 5-1 A. INTRODUCTION ................................................................................................. 5-1 B. SUMMARY OF RECOMMENDATIONS ........................................................... 5-1 C. DISCUSSION ........................................................................................................ 5-1 1) BACKGROUND ............................................................................................. 5-1 D. CONCLUSION ..................................................................................................... 5-3 APPENDIX A – QUALIFICATIONS

218293570 i MEMORANDUM 1 This Report is prepared by the Public Advocates Office – Water Branch. 2 Mehboob Aslam serves as Project Coordinator, under the supervision of Program and 3 Project Supervisors Victor Chan. Shanna Foley serves as the Public Advocates Office 4 legal counsel in this general rate case. The Public Advocates Office witnesses and their 5 contributions to this report are listed in Executive Summary. Appendix A of this report 6 contains the Qualifications and Prepared Testimony of the Public Advocates Office 7 witnesses. 8 9

218293570 ii EXECUTIVE SUMMARY 1 San Gabriel Valley Water Company (“San Gabriel” or “SGVWC”) filed 2 Application (A.) 19-01-001 on January 2, 2019 requesting a revenue requirement 3 increase of $9,626,900 (14.0%) in Test Year 2020-2021, $4,979,800 (6.2%) in Escalation 4 Year 2021-2022, and $3,054,100 (3.6%) in Escalation Year 2022-2023. The Public 5 Advocates Office recommends a revenue requirement increase of $2,445,100 (3.2%) in 6 the Test Year 2020-2021, an estimated revenue increase of $5,275,244 (4.8%) in 7 Escalation Year 2021-2022, and an estimated revenue increase of $2,470,347 (2.0%) in 8 2022-2023. The Public Advocates Office’s recommendation is consistent with the 9 provision of safe, reliable, and affordable utility service. 10 Key Recommendations 11 The Commission should adopt the following recommendations: 12 ● Disallow ten new general office positions from revenue requirement 13 because it is more cost effective to use outside services. (Chapter 1) 14 ● Require Advice Letter treatment for the proposed IT project due to its 15 budget and timing uncertainty. (Chapter 2) 16 • The Commission should require San Gabriel to seek recovery of any 17 costs associated with providing emergency water to and its acquisition 18 of Rurban in its next general rate case (“GRC”). The Commission 19 should also require San Gabriel in its next GRC to clearly show the 20 costs associated with providing emergency water service to Rurban 21 from the costs associated with acquiring Rurban. (Chapter 5) 22 • Approve higher facility fees in the Fontana Division consistent with 23 similar fees charged by nearby agencies. (Special Request A, Chapter 4) 24 • Include subsequent rate offsets which results in either rate increase or 25 decrease, in a final general rate case (“GRC”) decision (to the extent 26 they are reasonable). The subsequent rate offsets are limited to those 27 that the Commission can process by the date of issuance of the final 28 decision. (Special Request D, Chapter 4) 29 • Allow San Gabriel to continue to maintain its Water Rights 30 Memorandum Account for both Los Angeles and Fontana Divisions. 31 (Special Request E, Chapter 4) 32 • Approve the request to create two new tariff schedules for the Los 33 Angeles and Fontana Divisions. (Special Request F, Chapter 4) 34

218293570 iii • Issue a Finding of Fact that the Los Angeles and Fontana Divisions have 1 operated in compliance with all applicable safe drinking water quality 2 standards since its last GRC. (Special Request G, Chapter 4) 3 • Deny the request to revise its sales forecast in the Escalation Years due 4 to the Montebello Hills Development. (Special Request H, Chapter 4) 5 • Adopt the current overhead capitalization rates for Stores and 6 Transportation and adopt an administrative overhead rate of 10%. 7 (Special Request I, Chapter 4) 8 • Require San Gabriel to file a Tier 2 advice letter proposing new revenue 9 requirements during its escalation year/attrition year filings. (Chapter 6) 10 11 The Public Advocates uses San Gabriel’s rate of return of 8.12% adopted in 12 Decision D.18-12-002 to reflect San Gabriel’s current cost of debt. 13

218293570 iv ORGANIZATION OF REPORT

Organization of Report

Chapter Number

Description Witness - Executive Summary Mehboob Aslam 1 Introduction Mehboob Aslam 2 General Office Expenses James Simmons 3 General Office Rate Base James Simmons 4 Cost Allocations (Affiliates & 4-Factors) James Simmons 5 Special Requests Kelsey Choing, James Simmons, Jose Cabrera 6 Rurban Mutual Water Company Acquisition Mehboob Aslam Appendix A Qualifications All 1

1-1 CHAPTER 1: GENERAL OFFICE EXPENSES 1 A. INTRODUCTION 2 This chapter presents the analyses and recommendations for San Gabriel Water 3 Company’s (“SGVWC’s” or San Gabriel’s) request for the General Office Division 4 (“GO”) for Test Year (“TY”) 2020-2021, including expenses, rate base, and cost 5 allocations. 6 B. SUMMARY OF RECOMMENDATIONS 7 The Commission should approve $13,593,200 for GO expenses for Test Year 8 2020-2021. 9 The Commission should deny San Gabriel’s request for 10 new GO positions 10 because San Gabriel’s requested plant additions provide adequate funds for the activities 11 most of the new positions would perform. 12 C. DISCUSSION 13 San Gabriel is a California corporation engaged in the business of producing, 14 treating, storing, distributing, and selling water in Los Angeles and San Bernardino 15 Counties. The Los Angeles County Division (“LA”) Division had 48,747 customers 16 including private fire services and the Fontana Water Company (“FWC”) Division had 17 47,298 customers including private fire services as of June 30, 2018.1 The GO is located 18 at 11142 Garvey Avenue, El Monte, California 91734. 19 Generally, San Gabriel averaged five years of recorded historical expenses and 20 applied escalation factors to forecast GO expenses for TY 2020-2021. In some cases, 21 San Gabriel only escalated the last recorded year (2018) to forecast the TY 2020-2021 22

1 In the prior GRC, the Public Advocates Office (formerly named the Office of Ratepayer Advocates) noted in its Report on the General Office that, as of December 31, 2014, the LA Division had 48,308 customers and the FWC Division had 45,655 customers including private fire services. (General Office Report, p. 1-1.) FWC’s compound average annual customer growth rate over the past three years is approximately 1.0% and the LA Division’s is approximately 0.26%. Thus, the FWC growth rate is approximately four times greater than the LA Division.

218293570 1-2 GO expenses. In general, San Gabriel and the Public Advocates Office use the 1 Commission’s December 5, 2018 Energy Cost of Service and Natural Gas Branch 2 (“ECOS”) Memorandum escalation factors. However, in some cases, San Gabriel used 3 escalation factors derived from its own sources. 4 Details of the Public Advocates Office’s analysis and recommendations on GO 5 expenses are discussed in Chapter 1, San Gabriel’s requested additions to rate base to 6 upgrade its Information System are discussed in Chapter 2, and Cost Allocations are 7 discussed in Chapter 3. Chapter 5 presents the Public Advocates Office 8 recommendations on San Gabriel’s Special Requests. 9 1.) New Positions 10 San Gabriel requests 10 new GO positions: 11

� One Geographical Information Systems ("GIS") Developer 12 � One Field Engineer 13 � One Engineering Assistant 14 � One Senior Engineer 15 � One Surveyor 16 � One Assistant Engineer 17 � One Project Manager 18 � One Designer 19 � One Information Technology ("IT") Project Manager 20 � One Enterprise Resource Plan ("ERP") Business Analyst.2 21 San Gabriel states that it historically purchased Outside Services to supplement its 22 staffing shortages and capitalized 100% of the cost of these purchased outside services 23 because the work performed was directly related to capital projects.3 San Gabriel states 24 that its outside services cost estimates (both capitalized and expensed) use a hybrid of 25

2 Direct Testimony of San Gabriel’s Joel Reiker, p, 25 3 Data Request Public Advocates -JJS-001 (See Attachment 2-1.)

218293570 1-3 internal and external resources, depending on which type of resource it expects to be 1 available.4 2 San Gabriel requests revenue requirements to fund the new positions and intends 3 to replace these formerly purchased Outside Services with permanent employees. San 4 Gabriel states that internalizing these functions with new positions will save costs. 5 However, San Gabriel is unable to show the expected cost savings in its revenue 6 requirement calculations5 7 San Gabriel allocates the forecasted payroll costs to capitalized and expensed 8 labor accounts in the same ratio as San Gabriel historically incurred its payroll costs in 9 2017, effectively expensing approximately 92% of the forecasted payroll costs of its 10 proposed new positions.6 The payroll workpapers show that 8.27% of total payroll 11 4 San Gabriel’s Response to DR Public Advocates JJS-006, Q. 2 (See Attachment 2-2.) 5 San Gabriel’s Response to DR Public Advocates JJS-006, Q. 1 states: “The cost estimates that are provided in Exhibit SG-7 and its attachments are based on the historical unit costs for projects of similar scope and magnitude. The cost estimates were prepared under the assumption that San Gabriel would utilize its employees to perform the planning, engineering, design, inspections, construction management, and project administration, and that San Gabriel would retain consultants to perform specialized engineering services, such as geotechnical inspection and testing, foundation and structural materials testing, and coating inspections. Therefore, cost- savings associated with hiring additional employees are already reflected in those cost estimates provided in Exhibit SG-7, and its attachments (Attachment B (Los Angeles County Division Plant Project Justifications – Volume I), Attachment C (Los Angeles County Division Plant Project Justifications – Volume II), Attachment D (Los Angeles County Division Miscellaneous Project Justifications), Attachment F (Fontana Water Company Division Plant Project Justifications), and Attachment G (Fontana Water Company Division Miscellaneous Project Justifications)). However, if San Gabriel cannot hire additional employees to provide engineering services in-house, then the actual costs of the planned work would likely be higher than the cost estimates. Because San Gabriel is currently short-staffed, the Company is utilizing consultants to provide engineering services that San Gabriel could otherwise provide with its own staff, if additional positions were available to fill. For example, San Gabriel is issuing a Request for Proposals to provide engineering services to plan and design the Plant F10 project, which is described in Attachment F.1. San Gabriel has planned, designed and permitted several similar sites in-house, such as Plant F15, F16, F21, and F23 that involved the replacement of water storage reservoirs, additional water storage reservoirs, and related piping, grading, fencing and walls, landscaping, site improvements and street improvements.” (See Attachment 2-2.) 6 PayrollWorkpapers100DAYUPDATE.xlsx, Tab PR10, line 202, shows 8.27% of total payroll (including leave costs) charged to Account 100-3 (CWIP), leaving 91.73% charged to expenses. However, the amount of payroll shown in Tab PR10 as charged to CWIP has no effect on the proposed level of plant additions, these being directly input based upon project-specific (i.e., “bottoms up”) cost

218293570 1-4 (including leave costs) is charged to capital projects (Account 100-3 (CWIP)), with 1 91.73% charged to expenses.7 Furthermore, San Gabriel states that approximately 86% 2 of its GO engineering employee costs are capitalized.8 3 San Gabriel’s practice of adding the cost of these new positions to revenue 4 requirements produces two unintended and undesirable consequences by: 5 1.) Shifting the risk of funding San Gabriel’s requested new positions from 6 shareholders to ratepayers. San Gabriel’s shareholders formerly funded these 7 costs as rate base additions by their addition to Plant. San Gabriel’s proposed 8 new payroll positions shift this risk to ratepayers, who will be funding 92% of 9 the cost of these new positions through revenue requirements as current 10 expenses; and 11 estimates. “The specific payroll costs allocated to work in progress (account 100-3) on line 52 of payroll Work Paper PR11 are neither incorporated in nor reflected in the Company’s revenue requirement work papers because any necessary capitalized labor costs are already reflected in the individual capital project cost estimates included in the proposed capital budget.” San Gabriel’s Response to DR Public Advocates JJS-006, Q. 2.c. (See Attachment 2-2.) 7 (PayrollWorkpapers100DAYUPDATE.xlsx, Tab PR10, line 202) 8 San Gabriel’s Response to DR Public Advocates-JJS-001, Q. 1.d. says: “RESPONSE: As stated in part b above, all of the costs for Outside Services listed in ATTACHMENT 3 were charged to capital projects and thus capitalized. Therefore, no other adjustments to Outside Services Expense are necessary. However, after further analysis, there may be a lower impact on forecasted Labor Expense from adding these new engineering positions than is produced by San Gabriel’s standard Labor Expense forecasting methodology.” “Given the fact that the Outside Services costs referenced in part b, above, were capitalized, one can reasonably expect a greater percentage of the forecasted salaries of the new engineering positions proposed in this GRC to be capitalized as compared to the historical companywide average. As shown in cell B52 of Work Paper PR11, San Gabriel’s forecasted payroll expense in this GRC currently reflects an overall companywide payroll capitalization rate of 8.27%. Thus, 8.27% of the forecasted salaries for proposed new positions, including proposed new engineering positions, are projected to be capitalized rather than expensed. This 8.27% capitalization rate reflects the overall blended payroll capitalization rate for all employees, including engineering employees, for the recorded year 2017.” “Based on an analysis of the payroll capitalization rates for engineering employees only, approximately 86% engineering department salaries are capitalized. Applying this 86% engineering department payroll capitalization rate to the forecasted salaries of the eight additional engineering employees requested in this GRC results in reductions in forecasted Labor Expense of $509,158 in 2020 and $518,832 in 2021, as shown in ATTACHMENT 4 hereto. The second tab of ATTCHMENT 4 itemizes these amounts by individual expense account.” (See Attachment 2-1.)

218293570 1-5 2.) Unnecessarily duplicating 92% of the forecasted new position costs as current 1 expenses, which San Gabriel has already included in its forecasted cost of 2 Plant Additions through its historical purchase and capitalization of Outside 3 Services.9 This occurs because San Gabriel intends its proposed new GO 4 positions to largely replace the Outside Services that it purchased to 5 supplement its staffing shortages.10 San Gabriel capitalized 100% of the cost 6 for these positions as Plant Additions.11 Thus, in its forecasted revenue 7 requirements, SGVWC is requesting costs for these new positions twice: once 8 as operating expenses and a second time as plant additions. 9 The Commission should address San Gabriel’s request by: 10 1) excluding San Gabriel’s proposed cost for new positions from revenue 11 requirements; and, 12 2) adopting a reasonable level of recommended Plant Additions. 13 The Commission should adopt the Public Advocates Office’s recommended Plant 14 Addition estimates because they are reasonable. Consistent with prior rate cases, these 15 recommended Plant Additions to rate base will provide shareholders with adequate 16 incentives to invest in plant, providing for both a fair rate of return on their investments 17 and the regular recovery of capital costs through depreciation expense. 18 Accordingly, adopting this alternative approach will incent San Gabriel to pursue a 19 least cost approach, which may include internalizing functions that were formerly met by 20 purchasing Outside Services. Working within the financial limits of a reasonable revenue 21 requirement, San Gabriel is free to hire new employees in lieu of purchasing Outside 22 Services if it believes this approach is cost-justified. 23 9 See footnote 8, supra. 10 San Gabriel’s Response to DR JJS-001, Q. 1.b. 11 Id.

218293570 1-6 2.) IT Upgrade Project-Related New Positions - 1 Business System Upgrade 2 The Commission should exclude the cost for the IT Project Manager and ERP 3 Business Analyst related to the project to upgrade its IT systems because San Gabriel 4 does not know when this project will be completed. Costs for this project should not be 5 included in rates until the project is completed and becomes useful. 6 In the last general rate case (GRC),12 San Gabriel requested $14 million to upgrade 7 its IT systems. San Gabriel hired an outside IT consulting firm, AAC Utility Partners 8 (“AAC”) to evaluate its IT systems and make recommendations for replacing or 9 upgrading these systems.13 Pursuant to AAC’s recommendation, San Gabriel planned to 10 upgrade three IT systems: Financial Management Information System (“FMIS”); 11 Customer Information System (“CIS”); and Work Management Information System 12 (“WMIS”) (collectively, “IT Upgrade Project”). San Gabriel decided to start with the 13 FMIS system first (Phase-1). The CIS and WMIS upgrades would be completed in 14 Phase-2. Phase-1 was to be completed during the currently effective 2017-2020 GRC 15 cycle and Phase-2 was to be completed during the upcoming 2020-2023 GRC cycle at an 16 estimated cost of $14 million to upgrade all three systems. 17 As discussed in Chapter 3, the Commission should exclude from revenue 18 requirements all costs associated with the IT Upgrade Project until the project is 19 completed. The Commission should also exclude related expenses from Test Year 20 revenue requirements for the cost of the IT Project Manager and the ERP Business 21 Analyst because they are directly related to the IT Upgrade Project. Please see Chapter 3 22 for a detailed discussion of the IT Upgrade Project. 23 Below is a summary of the differences between the Public Advocates’ Recommended 24 and San Gabriel’s requested Common Operating Expenses. 25

12 Application (A.) 16-01-002. 13 A. 16-01-002, Exhibit. SG-4, Batt, Page 26.

218293570 1-7 3.) IT Upgrade Project-Related Costs – Software 1 License Fees 2 Related to the IT Upgrade Project, San Gabriel includes $462,273 in its forecast of 3 Miscellaneous Expenses (Account 799) in each of the years 2020 and 2021 for Cloud-4 Based Software Service Fees. As for the other IT Upgrade Project costs, Public 5 Advocates’ forecasted GO Expenses exclude San Gabriel’s proposed software license 6 fees due to the uncertainty of the timing of the project. 7

D. CONCLUSION 8 The Commission should approve $13,593,200 for GO expenses for Test Year 9 2020-2021. The Commission should also deny San Gabriel’s request for 10 new GO 10 positions. 11 12 13

218293570 1-8 Table 1-1 General Office Expenses 1 2

3 Cal Advs SGVWC Item (A) (B) (C) (D)Common O & M Expenses Payroll $71.5 $74.8 $3.3 4.4%Materials & Supplies $13.7 $13.7 $0.0 0.3%Outside Services $0.0 $0.0 $0.0 0.0%Utilities & Rents $8.0 $8.0 ($0.0) 0.0%Miscellaneous $24.2 $24.2 ($0.0) 0.0%Total $117.4 $120.7 $3.3 2.7%Common Customer Account ExpensePayroll $733.6 $766.8 $33.2 4.3%Materials & Supplies $26.6 $26.6 $0.0 0.1%Outside Service $0.0 $0.0 $0.0Utilities & Rents $2.0 $2.0 $0.0 1.4%Postage $0.0 $0.0 $0.0Miscellaneous $2.9 $2.9 ($0.0) 0.0%Total $765.1 $798.3 $33.2 4.2%Common A & G ExpensePayroll $5,946.2 $6,215.4 $269.2 4.3%Materials & Supplies $149.3 $149.3 $0.0 0.0%Transportation $102.7 $102.7 $0.0 0.0%Outside Service $564.3 $564.3 $0.0 0.0%Utilities & Rents $150.4 $150.4 $0.0 0.0%Postage $15.8 $15.8 $0.0 0.2%Miscellaneous $4,559.2 $5,392.6 $833.4 15.5%Total $11,487.7 $12,590.5 $1,102.8 8.8%Total Operating Expense $12,370.2 $13,509.5 $1,139.3 8.4%Depreciation Expense $600.1 $1,324.1 $724.0 54.7%Ad valorem Tax $25.6 $32.6 $7.0 21.5%Payroll Tax $597.3 $627.5 $30.2 4.8%Bank ChargesOperation SavingsRental Expense for Building ATotal Common Operating Expense $13,593.2 $15,493.7 $1,900.5 12.3%Four Factor AllocationLos Angeles Division Allocation (%) 49.27% 49.27%Fontana Division Allocation (%) 50.73% 50.73%COMMON OPERATING EXPENSES(Thousands of dollars)TABLE 1-1 SGVWC Exceeds Cal AdvsTest Year 2020-2021 Test Year 2020-2021SAN GABRIEL VALLEY WATER COMPANY

218293570 2-9 CHAPTER 2: GENERAL OFFICE RATE BASE 1 2 A. INTRODUCTION 3 This chapter presents the analyses and recommendations for San Gabriel’s request 4 for the GO rate base for Test Year 2020-2021. 5 B. SUMMARY OF RECOMMENDATIONS 6 The Commission should exclude from rate base $13,332,000 for San Gabriel’s IT 7 Upgrade Project and instead authorize recovery of these costs through a Tier-3 advice 8 letter after the project is completed. 9 Phase-1 of the IT Upgrade Project has fallen significantly behind the schedule San 10 Gabriel presented in the last GRC and San Gabriel is uncertain about the technology it 11 will use to complete the project. As a result, the project cost estimates are speculative 12 and the schedule for completing the project is uncertain. Project costs should not be in 13 rate base or customer rates until the project becomes useful. 14 C. DISCUSSION 15 Previously approved costs for Phase-1 of this project have been in customer rates 16 since July 1, 2017 but Phase-1 still has not been completed and San Gabriel does not 17 know when it will be completed. This has resulted in an unreasonable revenue windfall 18 for the company on the backs of ratepayers. 19 Table 2.1 compares San Gabriel’s requested and the Public Advocates Office’s 20 recommended year-end Plant in Service and rate base balances: 21

218293570 2-10 Table 2.1 Year End Plant and Rate Base Balances (Thousands of Dollars) 1 2 3

1) Proposed Upgrade to the Financial, Customer and 4 Work Management Information Systems 5 As previously mentioned, in the prior GRC, San Gabriel claimed that it needed to 6 modernize its IT systems because it had not kept pace with technological and software 7 advances that met water utility industry “Best Practices.”14 The Commission approved 8 $5.75 million to complete Phase-1 (the FMIS upgrade) with costs spread over three years 9 as follows: 10

14 A.16-01-002, Exhibit. SG-4, Batt, Page 25. Forecasted Utility PlantAverage Year Balances

Forecasted Test Year Test Year2019 2020-2021 2021-2022

Public Advocates Recommended $21,890.9 $22,237.9 $22,266.3SGVWC Requested $23,586.7 $30,185.1 $34,148.6SGVWC Exceeds Public Advocates $1,695.9 $7,947.1 $11,882.3

Forecasted Rate BaseForecasted Test Year Test Year

2019 2020-2021 2021-2022Public Advocates Recommended $19,329.3 $19,426.0 $19,236.0SGVWC Requested $20,947.9 $26,607.9 $29,449.8SGVWC Exceeds Public Advocates $1,618.6 $7,181.9 $10,213.8

218293570 2-11 Table 2.2: Cost Estimates for FMIS Project (3-Year Phase) 1 2 The Commission also approved the cost of two positions needed to implement and 3 operate the FMIS.15 4 The Commission approved an overall cap of $14 million for the entire project but 5 included in the revenue requirements for the 2017-2020 rate case cycle the cost for 6 Phase-1. San Gabriel now requests authority to add to rate base during the current 2020-7 2023 GRC cycle the remaining costs to reach the $13.33 million cap in estimated project 8 costs. 16 9 Rate base and customer rates should only include the cost of necessary and useful 10 utility plant. The need for the IT Upgrade Project was decided in the last GRC. 11 However, the project is not yet useful. As discussed below, San Gabriel has not timely 12 implemented this project and Phase-1 has fallen significantly behind schedule. 13 The delays completing Phase-1 have burdened ratepayers with $1,713,733 in 14 unreasonable costs from July 1, 2017 through June 30, 2019. This is because Decision 15 (D.) 17-06-008 authorized $5.75 million of new capital investment for which ratepayers 16 are receiving no benefit. The Commission should exclude all the IT Upgrade Project 17 costs from revenue requirements to prevent this windfall from continuing and require San 18 Gabriel to request recovery of these costs through a Tier 3 advice letter after it has fully 19 implemented both phases of the project. 20 15 AAC recommended that SGVWC would need five to seven new employees to implement the FMIS. San Gabriel requested four new employees at an incremental cost of $484,400 in the prior GRC. The Commission approved two of these positions at an initial average annual cost of $ $243,666. (Id.) 16 San Gabriel has reduced its estimated Phase 1 cost by $700,000, thus the total cost for the IT Upgrade Project now stands at $13.3 million instead of $14 million. Year Estimated Amount 1 $1,670,0002 $2,940,8003 $1,140,800Total $5,751,600

218293570 2-12 a. Cost Uncertainties 1 San Gabriel’s cost estimates for completing the project are speculative because 2 more cost-effective solutions are available, and these solutions could substantially reduce 3 project costs. Specifically, San Gabriel states that it is implementing a cloud-based 4 system in Phase-1, and expects to save approximately $700,000 in Phase-1 costs.17 San 5 Gabriel states that it cannot yet estimate similar expected cost savings for Phase-2 6 because it has not decided which technology it will implement. 18 7 San Gabriel’s uncertainty about which technology it will use renders its cost 8 estimates speculative and unreliable. Therefore, the Commission should not authorize 9 the recovery of IT Upgrade Project costs at this time and require San Gabriel to request 10 recovery via a Tier 3 advice letter. 11 b. Implementation Schedule Uncertainties 12 San Gabriel’s IT Upgrade Project has fallen significantly behind the schedule 13 presented in the last GRC. San Gabriel originally planned to begin in May 2018 but 14 informed the Public Advocates Office that it would instead begin in February-2019, nine 15 months behind schedule. 16 The Commission authorized funding for two new IT positions beginning in July 17 2017 but San Gabriel did not spend any money on the new positions until 18 months after 18 rates were increased to pay for the positions.19 One position was filled in December 2018 19 and San Gabriel states that it expects to fill the second position in March 2019.20 San 20 Gabriel states that the delays implementing Phase-1 are due to the time needed to develop 21 the Request for Proposals, select a vendor and negotiate contracts/statement of work.21 22 17 San Gabriel’s Response to DR Public Advocates-JJS-002, Q.4.f. (See Attachment 3-1.) 18 Id. 19 See Attachment 3-1, “JJS-002 workpapers supplement.” (Attachment 3-1.) 20 Id., Q. 5.c. (Attachment 3-1.) 21 Id., Q. 2.a. and 2.b. (Attachment 3-1.)

218293570 2-13 Phase-1 of the IT Upgrade Project has fallen significantly behind the schedule and San 1 Gabriel has not yet determined which technology it will use for Phase-2. Therefore, the 2 Commission should remove all past and present IT Upgrade Project costs from the 3 revenue requirement adopted in this GRC. Instead, the Commission should authorize San 4 Gabriel to request recovery of IT Upgrade Project costs via a Tier-3 advice letter after it 5 has fully implemented both phases of the project. 6 D. CONCLUSION 7 The Commission should exclude from rate base $13,332,000 for San Gabriel’s IT 8 Upgrade Project and instead authorize recovery of these costs through a Tier-3 advice 9 letter after the project is completed. 10 11 12

3-1 CHAPTER 3: COST ALLOCATIONS (AFFILIATES & 4-FACTOR) 1 2 A. INTRODUCTION 3 This chapter presents the analyses and recommendations for San Gabriel’s request 4 for the GO cost allocations based on 4-factor methodology. 5 B. SUMMARY OF RECOMMENDATIONS 6 The Commission should find San Gabriel’s cost allocations including its 4-factor 7 method reasonable except that it should direct San Gabriel to address in its anticipated 8 space study the charges to its developers. Specifically, the study should include San 9 Gabriel’s plan to exercise due diligence to identify and charge to developers all costs that 10 new development causes in order to protect current ratepayers from development-driven 11 revenue requirement increases. 12

C. DISCUSSION 13 1) Allocation of Administrative Salaries and Other Costs to 14

Affiliated Companies 15 San Gabriel has four affiliated companies for which eight of its corporate officers 16 provide services.22 Pursuant to D.93-09-036, San Gabriel has a written Services 17 Agreement (Agreement) that requires it to track and bill affiliates for the time the officers 18 and support personnel spend rendering services to its affiliates. 19 The Corporate officers and support personnel record their respective time spent on 20 affiliate matters on an hourly basis and San Gabriel uses their monthly timesheets to 21 prepare invoices for each affiliate. The invoiced amounts are based on each employee’s 22 hourly labor rate and hours spent, plus an additional rate for fringe benefits and 10% for 23 overhead costs. San Gabriel removes the associated amount from regulated expenses 24 through Account 812. 25 22 Utility Investment Company, Arizona Company, Rosemead Properties, and United Resources.

218293570 3-2 D.011-10-034 governs the Affiliate Transactions and Appendix A of this decision 1 contains the rules applicable to various categories of affiliate transactions. Rule 2 IV.D.3(a) states, “when the affiliate obtains the services of an executive employee, 3 compensation to the utility shall be priced at a minimum of the greater of fully loaded 4 cost plus 15% of direct labor cost, or fair market value.”23 Section II.F (4) defines 5 “fully-loaded costs” as the total cost of the activity, which is the sum of direct costs, 6 direct overhead costs and indirect overhead costs, as these terms are defined in Rules 7 II.F.1, 2 and 3. 8 9

2) Recovery of New Development Costs 10 The Commission should require San Gabriel to address in its next GRC how it will 11 ensure that developers pay their fair share of San Gabriel’s costs in connection with its 12 proposed expansion of the El Monte Office Complex 13 The Public Advocates Office is concerned that the fast growth rate of 14 development, especially in the FWC Division, may be exerting upward pressure on 15 general revenue requirements and rates. It appears that San Gabriel is not taking steps to 16 ensure that developers pay their appropriate share of costs that San Gabriel incurred on 17 their behalf. Evidence of this is San Gabriel’s request in this GRC for new building 18 facilities to house its growing workforce. 19 San Gabriel requests to place in rate base the entire amount ($2,531,880) it spent 20 in 2018 on a site acquisition and demolition of a motel property. Please see the Public 21 Advocates Office’s LA Division Report, Chapter 6 for more details on San Gabriel’s 22 request for costs associated with the proposed expansion of the El Monte Office 23 Complex. 24 23 D.10-10-019, Appendix A, Page A-6.

218293570 3-3 San Gabriel incurs substantial costs on behalf of developers while performing 1 work related to developer-funded projects but does not propose to recover any portion of 2 the costs it expects to incur for the land or other costs associated with the proposed 3 expansion of its El Monte Office Complex. 4 San Gabriel also requests funds to conduct an Office Space Planning Study 5 (“Study”) to support its request to expand the El Monte Office Complex. The 6 Commission should approve funds for the Study and require San Gabriel to submit the 7 Study results before it approves any costs related to the proposed office expansion. The 8 Commission should require San Gabriel to include in the Study analyses of and 9 recommendations for how San Gabriel will ensure that developers pay their fair share of 10 San Gabriel’s costs in connection with the proposed office expansion. 11 San Gabriel should recover the costs of new development directly from 12 developers, either through direct charges to developers, or through facilities fees, and not 13 through general revenue requirement increases. These charges must recover all overhead 14 costs, such as rental payments, use of equipment and building facilities (including capital, 15 operation and maintenance costs), and labor related pension and benefits expenses. 16 The Table 3.1 shows the General Office Engineering Department direct payroll 17 costs incurred for developer-funded and company-funded projects and the percentage of 18 those costs borne by developers and San Gabriel (i.e., ratepayers):24 19 20 21 24 Workpaper spreadsheet - Summary of Engineering Payroll Bet CO and Dev Funded Projects.xlsx; Source: San Gabriel’s Response to Data Request JJS-005, Questions 10 and 13.

218293570 3-4 Table 3.1: GO Engineering Payroll Breakdown 1 2 The Table 3.2 shows the split between capitalized Outside Services purchased for 3 company vs. developer-funded projects:25 4

Table 3.2: Capitalized Outside Service Breakdown 5 6 Data from above two tables show that San Gabriel incurs substantial direct costs 7 for new development-related work, which have been as high as 31% of total Engineering 8 Department expenditures in 2017. Similarly, the 22.9% of purchased and capitalized 9 Outside Services costs in 2015 are related to new development. Clearly, San Gabriel’s 10 General Office Engineering Department performs substantial work related to new 11 developments. Accordingly, the Commission should direct San Gabriel to properly 12 isolate the costs of new developments from general revenue requirements in order to 13 25 Workpaper spreadsheet - O.S. Services - Company vs Developer Funded JJS-008 ATTACHMENT 1.xlsx Company Developer Total DeveloperPercentage2013 1,164,336 93,255 1,257,591 7%2014 1,126,882 175,127 1,302,009 13%2015 1,079,081 224,548 1,303,629 17%2016 925,434 381,959 1,307,393 29%2017 1,114,769 508,270 1,623,038 31%2018 1,526,935 276,708 1,803,643 15%AmountGO Engineering Payroll Breakdown by Funding/YearCaptialized Outside Services Breakdown by Funding/YearCompany-Funded Developer-Funded Grand Total Developer Percentage2013 1,064,574 260,577 1,325,151 19.7%2014 965,007 140,914 1,105,921 12.7%2015 568,786 169,218 738,004 22.9%2016 408,339 29,701 438,039 6.8%2017 746,132 150,332 896,463 16.8%2018 2,319,072 469,637 2,788,709 16.8%

218293570 3-5 protect ratepayers from unnecessary rate increases for work that developers should fund. 1 The Commission should direct San Gabriel to include the impact of work related to new 2 developments when conducting the Study to support its request to expand the El Monte 3 Office Complex. 4 D. CONCLUSION 5 The Commission should find San Gabriel’s cost allocations including its 4-factor 6 method reasonable except that it should direct San Gabriel to address in its anticipated 7 space study the charges to its developers. 8

4-1 CHAPTER 4: SPECIAL REQUESTS 1 2 A. INTRODUCTION 3 This chapter presents analysis and recommendations for San Gabriel’s nine special 4 requests, which are: 5 • To increase the Fontana Water Company (“FWC”) Division Facilities Fees, 6 • To amortize six Los Angeles Division and five FWC Division balancing accounts, 7 • To amortize six Los Angeles Division and seven FWC Division memorandum 8 accounts, 9 • To incorporate in the final decision in this general rate case (“GRC”) any rate 10 changes adopted since January 1, 2019, 11 • To continue the Los Angeles Division and FWC Division Water Rights 12 memorandum accounts, 13 • To create new separate tariff schedules listing all Commission authorized 14 surcharges and surcredits for the Los Angeles Division and FWC Division, 15 • The Commission issue a Finding of Fact that San Gabriel has operated in 16 compliance with all applicable water quality standards since the last GRC, 17 • Authority to adjust the adopted sales and revenue requirement forecasts adopted in 18 this GRC by the actual number of additional customers served within the 19 Montebello Hills development, 20 • To maintain the current overhead capitalization rates for Stores and Transportation 21 and adopt a 10% administrative overhead rate. 22 23 B. SUMMARY OF RECOMMENDATIONS 24 The Commission should adopt the following recommendations: 25

• Approve higher facility fees in the Fontana Division consistent with 26 similar fees charged by nearby agencies. (Special Request A) 27 • Approve Public Advocates Office recommendation on various 28 balancing and memorandum accounts. (Special Request B and C, see 29 LA Division and FWC Division Result of Operations Reports) 30 • Include subsequent rate offsets which results in either rate increase or 31 decrease, in a final GRC decision (to the extent they are reasonable). 32

4-2 The subsequent rate offsets are limited to those that the Commission can 1 process by the date of issuance of the final decision. (Special Request 2 D) 3 • Allow San Gabriel to continue to maintain its Water Rights 4 Memorandum Account for both Los Angeles and Fontana Divisions. 5 (Special Request E) 6 • Approve the request to create two new tariff schedules for the Los 7 Angeles and Fontana Divisions. (Special Request F) 8 • Issue a Finding of Fact that the Los Angeles and Fontana Divisions have 9 operated in compliance with all applicable safe drinking water quality 10 standards since its last GRC. (Special Request G, see Chapter 13 in LA 11 Division and FWC Division Result of Operations Reports) 12 • Deny the request to revise its sales forecast in the Escalation Years due 13 to the Montebello Hills Development. (Special Request H) 14 • Adopt the current overhead capitalization rates for Stores and 15 Transportation and adopt an administrative overhead rate of 10%. 16 (Special Request I) 17 18

C. DISCUSSION 19 1) Special Request A (FWC Facilities Fees) 20 The Commission should approve the following Fees schedule which are higher than San 21 Gabriel’s request for meter sizes larger than 3/4 inches: 22

23

4-3 Table 5-1: Public Advocates Office Recommendations for Facilities Fees in 1 FWC Division 2 3 4 Recommended Fees for the meter sizes 1-inch and less are set above the average 5 Fees of neighboring utilities. Fee for the larger service sizes are higher than those 6 proposed by San Gabriel but lower than neighboring utilities. The recommended Fees 7 will benefit ratepayers by optimizing the credit to rate base. 8 San Gabriel charges Fees for installing new connections in the FWC Division.26 9 Real estate developers typically pay the Fees in connection with new construction. The 10 Fees vary with meter size, ranging from 5/8 x 3/4-inch to 12-inch. The most common 11 size is the 1-inch meter service. Fees for the FWC Division were last increased in 2017.27 12

26 There are no Facilities Fees in the Los Angeles Division. 27 See D.17-06-008 (San Gabriel’s last general rate case decision). Fees are shown in Tariff Schedule No. FO-FF. Meter Size Fee Amount

(Dollars)5/8 x 3/4-inch 8,0003/4-inch 9,0001-inch 12,0001-1/2-inch 24,0002-inch 33,0003-inch 54,0004-inch 84,0006-inch 159,0008-inch 249,00010-inch 354,00012-inch 504,000

4-4 For ratemaking purposes, Fees are treated as contributions and are accounted for 1 as a credit to Plant in service when calculating San Gabriel’s rate base.28 As such, the 2 higher the Fee level, the larger the credit to Plant in service and the less ratepayers pay in 3 revenue requirements. 4 Real estate developers, cities, building associations, unions, and neighboring 5 municipal utilities all have an interest in the level of San Gabriel’s Fees. If Fees are set 6 substantially above neighboring Fees, San Gabriel may receive complaints from local 7 governments that want to encourage development and from developers who must pay the 8 Fees. If Fees are substantially below neighboring Fees, municipal utilities may be 9 concerned with losing potential new customers to competing privately owned water 10 utilities. 11 San Gabriel conducted a study comparing its current Fees with those charged by 12 five neighboring water agencies in the general vicinity of the FWC Division service 13 area.29 Based on the results of the study, San Gabriel proposes to increase Fees for meter 14 sizes larger than 5/8 x 3/4-inch. San Gabriel’s Fees for the smaller sizes are equivalent or 15 slightly higher than surrounding utilities. However, the survey also showed that San 16 Gabriel’s Fees for meter sizes 1-1/2-inch and larger are far below the five-neighboring 17 water agencies’ development fees or capacity charges. For example, for a 10-inch meter, 18 San Gabriel’s Fees are 400% lower than the five neighboring water agencies.30 19 Below are San Gabriel’s current and proposed Fees: 20 21 22 28 Facilities Fees are governed by Standard Practice U-17-W, Contracts and Deviations and Main Extension Agreements Under General Order 96-B. Under Section F of U-17-W, Fees are established by Commission Resolution or Decision and are explicit in the Tariffs. 29 SG-6, Reiker, page 79. 30 Exhibit SG-4, DiPrimio, pg. 29. The results of the Facilities Fees Study are provided in Attachment C of Exhibit SG-4.

4-5 Table 5-2: San Gabriel’s Proposed Facilities Fees in FWC Division 1 2 3 The proposed Fees for 3-inch and smaller meter sizes are higher than the current 4 Fees but are still substantially lower than the average Fees charged by neighboring 5 utilities and agencies. 6 Public Advocates Office recommends that the meter ratios and Fees for the two 7 smaller meter sizes (5/8 x 3/4-inch, and 3/4-inch) remain unchanged from San Gabriel’s 8 initial proposal to keep the pricing on these sizes competitive with other neighboring 9 water agencies. However, the Public Advocates recommends that the Fees for the meters 10 higher than size 3/4-inch be consistent with the fees charged by the neighboring water 11 agencies. 12 The Commission should approve Special Request A and adopt the Fees shown in 13 Table -1 above. 14 Meter Size Current Fees (Dollars)

San Gabriel’s Proposed Fees (Dollars)5/8 x 3/4-inch 8,000 8,0003/4-inch 8,000 9,0001-inch 10,640 11,0001-1/2-inch 16,000 16,0002-inch 21,360 22,0003-inch 32,000 36,0004-inch 42,640 56,0006-inch 64,000 106,0008-inch 85,360 166,00010-inch 106,640 236,00012-inch 128,000 336,000

4-6 2) Special Request D (Including Subsequent Offsets) 1 The Commission should approve Special Request D to incorporate adopted 2 changes to base rates after January 1, 2019 into the final decision in this GRC because it 3 furthers the Commission’s goal of simplifying and streamlining the GRC process. 4 This Special Request is largely procedural in nature. San Gabriel seeks incorporation of 5 rate changes approved in other proceedings or by Advice Letters after January 1, 2019 6 and prior to the date of a Commission decision in this GRC proceeding. 7 San Gabriel made this same request in its previous GRC and this uncontested 8 request was included in the Settlement Agreement approved by D.17-06-008. 9 Water rates can change outside a GRC as the result of advice letter filings or other 10 applications. Some changes are not affected by the GRC decision. However, changes 11 affecting base rates can also occur as the result of a newly authorized rate of return, water 12 cost offset(s), other expense and rate base offsets or other items.31 These base rate 13 changes can be adopted and implemented while a GRC decision is pending. Unless 14 specifically authorized, such base rate changes are not included in the GRC decision 15 because the base rates adopted by the GRC decision supersede prior base rate 16 adjustments. If this occurs, after the GRC rates are implemented San Gabriel must make 17 separate requests through application or advice letter in order to reinstate the prior base 18 rate changes. This is inefficient and causes customer confusion. 19 Following is a list of San Gabriel’s base rate changes that have been or will be 20 implemented after January 1, 2019 and before the beginning of the Test Year, July 1, 21 2020. 22 Los Angeles Division: 23 24 1. Water Cost Offset (Advice Letter No. 540 to be filed), effective July 1, 2019, to 25 increase rates by $1.3M (1.7%). 26 2. Anticipated Water Cost Offset, effective January 1, 2020, to increase rates by 27 $.8M - $1.0M (1.0%). 28 29 31 Such as the application of Facilities Fees to reduce rate base.

4-7 Fontana Water Company Division: 1 2 1. Application of Facilities Fees or rate base reduction (Advice Letter No. 541 filed 3 on June 3, 2019), effective July 1, 2019, to decrease rates by $547,722 (-0.8%). 4 2. Anticipated Water Cost Offset, effective January 1, 2020, to increase rates by 5 $.8M - $1.0M (1.0%). 6 The Commission should approve Special Request D. Any adjustments to base 7 rates adopted subsequent to the filing of this GRC proceeding and not reflected in the 8 proposed revenue requirement for this GRC, should be incorporated into the adopted base 9 rates in the final decision in this GRC. This procedure furthers the Commission’s goal of 10 simplifying and streamlining the GRC process. 11 3) Special Request E (Continue Water Right Memorandum Account) 12 The Commission should allow San Gabriel to continue to maintain its Water 13 Rights Memorandum Accounts in both its LA and FWC Divisions. This account will 14 allow San Gabriel the flexibility to acquire additional water rights when they become 15 available in the open market. 16 a. Water Supply 17 In the LA Division, the water mix is approximately 92% groundwater and 8% 18 recycled water.32 Groundwater is pumped from 37 active wells. San Gabriel’s 39 storage 19 tanks have an aggregate capacity of approximately 30.5 million gallons. Additionally, 20 San Gabriel can receive up to 15 cubic feet per second of treated water from the 21 Metropolitan Water District of Southern California, but this connection is active only on 22 a standby basis.33 San Gabriel spends approximately $2.6 million on leased water rights 23 as of 2019.34 24

32 San Gabriel file “LAWorkpapers,” tab “TABLE 4B-2,” cells B27:B31. 33 San Gabriel Report on Operations – Los Angeles County Division, Chapter 3, page 2. 34 San Gabriel file “LAWorkpapers,” tab “Water Cost ‘19,” cell H15.

4-8 b. Water Rights 1 San Gabriel owns approximately 20,384 acre-feet of prescriptive pumping rights 2 in the Main Basin. However, its 2017/2018 production rights were reduced to 3 approximately 15,471 acre-feet due to historically low groundwater levels in the basin.35 4 Additionally, San Gabriel is allowed to pump 2,565 acre-feet in the Central Basin.36 5 c. Water Rights Memorandum Account 6 D.17-06-008 authorized the LA and FWC Division’s Water Rights Memorandum 7 Accounts.37 San Gabriel states that it is necessary to continue acquiring groundwater 8 pumping rights when they are available because its adjudicated pumping rights are far 9 less than projected demand and the ability to lease unused water rights has become less 10 predictable in recent years.38 11 San Gabriel’s sales forecast for the LA Division is approximately 32,000 acre-feet 12 for TY 2020-2021.39 As noted in Section (b) above, San Gabriel’s production right in the 13 Main Basin has been reduced by approximately 5,000 acre-feet to 15,471 acre-feet, and 14 its allowed pumping allocation in the Central Basin is 2,565 acre-feet. Furthermore, due 15 to the historically low operating safe yield of the Main Basin,40 surplus water for lease 16 from other parties holding water rights in the Main Basin will inevitably be lower. 17 Although San Gabriel may pump above its production rights in the Main Basin, the 18 35 San Gabriel Direct Testimony of Robert J. DiPrimio, page 8, lines 23-25. 36 San Gabriel Los Angeles County Division – 2015 Urban Water Management Plan (amended December 2017), Chapter 6, page 28 (https://www.sgvwater.com/wp-content/uploads/2018/09/Volume-I-FINAL-AMENDED_2015-UWMP_San Gabriel_LACD.pdf). 37 D.17-06-008, page 47. 38 San Gabriel Direct Testimony of Robert J. DiPrimio, page 8, lines 8-27, and page 9, lines 1-15. 39 San Gabriel file “LAWorkpapers,” tab “LRV2,” cell M38. 40 Main San Gabriel Basin Watermaster 2017-2018 Annual Report, Appendix A, page 3: “On May 2, 2018, Watermaster conducted a public hearing and approved Resolution No. 05-18-291 establishing the Operating Safe Yield at 150,000 acre-feet for Fiscal Year 2018-19, 130,000 acre-feet for Fiscal Year 2019-20, 130,000 acre-feet for Fiscal Year 2020-21, 130,000 acre-feet for Fiscal Year 2021-22, and 130,000 acre-feet for fiscal year 2022-23.”

4-9 Watermaster requires San Gabriel to pay to replace the pumped water that exceeds its 1 production rights. Replacement water primarily comes from the Metropolitan Water 2 District of Southern California, which states that replacement water may only be 3 available three out of every ten years in the future.41 4 At the time of this report, San Gabriel has not acquired any additional water rights 5 in the LA Division since establishing the LA Division Water Rights Memorandum 6 Account. As a result, the current balance of this account is $0. However, San Gabriel 7 has signed an agreement to purchase approximately 218 acre-feet of Main San Gabriel 8 Basin water rights through its acquisition of the Rurban Homes Mutual Water Company. 9 After completing the transaction, San Gabriel will record in the LA Division Water 10 Rights Memorandum Account the final cost of these water rights.42 11 The Commission should approve San Gabriel’s requests continue to maintain its 12 Water Rights Memorandum Accounts in both its LA and FWC Divisions. 13 4) Special Request F (Request New Tariff Schedules) 14 The Commission should approve Special Request F to authorize San Gabriel to 15 establish new tariff schedules listing all Commission authorized surcharges and surcredits 16 for the Los Angeles and Fontana Water Company Divisions. 17 Special Request F is largely administrative because there are no quantitative 18 implications. San Gabriel seeks to simplify the process of updating its tariff schedules 19 listing various surcharges and surcredits in each of its Division, thereby making it easier 20 for customers to research and locate surcharges and surcredits more expeditiously. The 21 new tariff schedules will be called Tariff Schedule LA-AS for the Los Angeles Division 22 and Tariff Schedule FO-AS for Fontana Water Company Division.43 23

41 Email from Shane Chapman, Assistant General Manager of Metropolitan Water District of Southern California, to Robert J. DiPrimio of San Gabriel, dated July 1, 2019. Provided to Kelsey Choing of Public Advocates Office in an email dated July 3, 2019. 42 Email from Joel Reiker of San Gabriel to Kelsey Choing of Public Advocates Office, dated June 26, 2019. 43 San Gabriel A.19-01-001, page 11, Special Request F.

4-10 1 Currently, San Gabriel lists its surcharges and surcredits in the Special Conditions 2 section of each applicable tariff schedule for both the Los Angeles and Fontana Water 3 Company Divisions. This results in a list of surcharges and surcredits appearing in 4 multiple tariff schedules for both Divisions. When a change is needed, such as adding an 5 approved new surcharge or surcredit or deleting an expired surcharge or surcredit, San 6 Gabriel must amend each tariff sheet in each of the affected Divisions.44 Further, when 7 San Gabriel requests other changes to the various tariff schedules, it must review the 8 Special Conditions and request the deletion of every Special Condition that contains an 9 expired surcharge or surcredit.45 10 In case the Commission approves the Special Request F, Schedule No. LA-AS, 11 additional Surcharges/Surcredits will list all authorized surcharges and surcredits in the 12 Los Angeles Division and Schedule No. FO-AS, Additional Surcharges/Surcredits will 13 list authorized surcharges and surcedits in the Fontana Water Company Division. San 14 Gabriel will also delete the Special Conditions on other tariff sheets that are no longer 15 relevant. 16 Public Advocates Office does not oppose Special Request F. Other Class A water 17 utilities list all surcharges and surcredits for each ratemaking area on separate tariff 18 sheets.46 Special Request F requests similar treatment. Allowing San Gabriel to create 19 the two new tariff schedules is consistent with the Commission’s goal of simplifying and 20 streamlining the general rate case process.47 21 44 SG-6, Reiker, page 84. 45 Surcharges and surcredits are usually effective for only 6, 12, 24 or 36 months. 46 For example, California Water Service. 47 In the Rate Case Plan decision, the Commission’s goal was to simplify and streamline the general rate case process. D.04-06-018, June 9, 2004, Section B (4), page 10.

4-11 The Commission should approve Special Request F. This request furthers the 1 Commission’s goal of simplifying and streamlining the GRC process and enhances San 2 Gabriel’s ability to provide clear and accurate rate information to its customers. 3 The proposed tariff schedules will make it easier for San Gabriel’s customers to 4 locate and identify applicable surcharges and surcredits without having to examine every 5 Special Condition on the tariff schedules. Further, by listing all surcharges and surcredits 6 in one place for each division mitigates the risk of inconsistencies among the Special 7 Conditions that now are listed in multiple tariff schedules and reduces the number of 8 tariff schedules that must be changed each time a new surcharge or surcredit is 9 established or deleted. 10 5) Special Request H (Revising Sales Forecast Due to Montebello Hills 11

Development) 12 The Commission should deny Special Request H because the request does not 13 comply with the Rate Case Plan for Class A Water Utilities48 (“RCP”) and the Revised 14 Rate Case Plan for Class A Water Utilities (RRCP).49 15 The Hills development project has a history of protracted delays50 and these delays 16 continue.51 Therefore, San Gabriel should wait until the Montebello Hills development is 17 completed. New customers from the Montebello Hills development can be included in 18 the sales forecast as part of the utility’s request in the next GRC. 19 The Commission should deny San Gabriel’s request because (1) it is not in 20 compliance with RCP, and (2) it is difficult to ensure a review outside a typical GRC 21 process so that Los Angeles Division customers do not subsidize new customers in the 22 Montebello Hills development. The Montebello Hills development is a 488-acre future 23 residential living development of approximately 1,200 dwelling units to be constructed in 24 48 D.04-06-018. 49 D.07-05-062 50 SG-6, Reiker, Special Request H, page 86. 51 According to the Hills project Developer, the first phase is scheduled for grading in September 2019.

4-12 the City of Montebello, just east of downtown Los Angeles. The future development is 1 within San Gabriel’s Los Angeles (“LA”) Division service area.52 2 Special Request H seeks Commission approval to adjust the adopted sales and 3 revenue requirement forecasts in this GRC by the actual number of new (additional) 4 customers served in the Hills development. San Gabriel proposes to file one or more 5 Advice Letters to implement these adjustments in its escalation year(s) rates for the LA 6 Division.53 7 Since its inception, the Montebello Hills development has been subject to delays. 8 There have been a variety of lawsuits, for example, related to environmental issues and 9 disputes over contractual obligations between the former and current developers. Actual 10 construction of the first phase of the development is scheduled to begin sometime in 11 2020. Before any homes can be built, a complex array of water infrastructure must first 12 be built, including new and rebuilt reservoirs and pumping stations.54 Before the water 13 infrastructure can be built, a recycled water distribution system must be constructed to 14 provide water to be used for construction, dust control, and irrigation of landscaped areas. 15 As of January 28, 2019, the recycled water distribution system has not been completed 16 because of issues relating to costs, cost sharing, and design changes and other issues.55 17 The RCP provides that escalation year filings must be based on adopted figures in 18 the GRC. Except for a customer growth factor established during the rate case, there is 19 no provision in the RCP to allow retroactively adjusting sales and production cost 20 estimates established in a GRC for new customers not forecasted in the GRC.56 Further, 21 the RCP states, “Estimate sales for the escalation years for the residential, multifamily, 22 and business classes by multiplying the number of customers for each escalation year by 23 52 March 4, 2019 email response from Joel Reiker. 53 SG-6, Reiker, p. 86. 54 March 8, 2019 phone discussion with Developer’s consultant, Stephen Dopudja, West Yost Associates. 55 Central Basin Municipal Water District, January 28, 2019- Board Meeting Memorandum. 56 Customer growth in escalation years is discussed in D.04-06-018, section B (4), pages 10 and 11.

4-13 the test year sales per customer. Use the test year sales for all other customer classes for 1 both escalation years.”57 2 San Gabriel’s escalation years are 2021-2022 and 2022-2023. San Gabriel is not 3 likely to serve any customers in the Montebello Hills development during the escalation 4 years. San Gabriel should wait until the existence of actual new customers, if any, and 5 include them in subsequent GRC filings instead of adjusting the sales and production cost 6 forecasts adopted in this GRC via subsequent advice letter filings. 7 Further, San Gabriel’s proposal would require it to file multiple advice letters in 8 the escalation years to implement the revised sales forecasts. This would create two 9 unintended consequences. First, this would make it difficult for both the Public 10 Advocates Office and the Commission’s Water Division to perform a thorough and 11 necessary review of the advice letters to ensure that Los Angeles Division customers are 12 not subsidizing new customers in the Hills development due to limited time. Second, 13 multiple Advice Letter filings would be contrary to the goal of the RCP of simplifying 14 and streamlining the GRC process.58 15 The Commission should deny Special Request H. San Gabriel should be required 16 to wait until its next GRC filing for the Test Year 2023-2024 to include new customers, if 17 any in its Los Angeles Division. 18 6) Special Request I (Overhead Rate) 19 The Commission should adopt an administrative overhead rate of 10%. 20 San Gabriel requests authorization to maintain the current overhead capitalization 21 rates for its Stores and Transportation expenses at the rates of 4% and 0.6% 22 respectively59. However, San Gabriel requests increasing the administrative overhead 23

57 D.07-05-062, Appendix A, Section VII, Method 9. (Emphasis added). 58 D.04-06-018, page 10. 59 Direct Testimony of Mr. Harris, Exhibit SG-5, Attachment F

4-14 capitalization rate from 8.2% to 10%, expressed as a percentage of capital additions. 1 (Exhibit SG-5). 2 The Public Advocates reviewed San Gabriel’s request to increase its overhead 3 capitalization rate to 10% of plant additions and finds it to be reasonable. The Public 4 Advocates recommends that the Commission should approve this request. 5 The Commission should adopt the Public Advocates’ recommendations for San 6 Gabriel’s Special Request I. 7 D. CONCLUSION 8 The Commission should approve Public Advocates Office’s recommendations 9 regarding the various special requests as discussed above. 10

5-1 1 CHAPTER 5: RURBAN HOMES MUTUAL WATER SYSTEM ACQUISITION 2 3

A. INTRODUCTION 4 This chapter presents the Public Advocates Office’s recommendations regarding 5 San Gabriel’s emergency service to and acquisition of the Rurban Home Mutual Water 6 System (“Rurban”). 7 B. SUMMARY OF RECOMMENDATIONS 8 The Commission should require San Gabriel to seek recovery of any costs 9 associated with providing emergency water to and its acquisition of Rurban in its next 10 general rate case (“GRC”). The Commission should also require San Gabriel in its next 11 GRC to clearly show the costs associated with providing emergency water service to 12 Rurban from the costs associated with acquiring Rurban, so the Commission can ensure 13 that only just and reasonable costs are approved for recovery. 14 C. DISCUSSION 15

1) BACKGROUND 16 On May 1, 2019, San Gabriel wrote a letter to the Commission’s Water Division 17 (“Letter”) stating that it is in the process of acquiring Rurban.60 The Letter states that the 18 water system is situated wholly within San Gabriel’s existing Los Angeles (“LA”) 19 Division service area and serves approximately 306 customers. San Gabriel states that 20 Rurban ceased operations because Rurban’s sole remaining well went dry in 2018. 21 On March 7, 2019, the State Water Resources Control Board, Division of 22 Drinking Water cited Rurban for failing to comply with the source capacity and storage 23 capacity requirements of the California Waterworks Standards (“Citation”).61 According 24 60 See May 1, 2019 letter to Rami Kahlon (attached). 61 See Citation 04_22_19C_001 (Attachment 1 to May 1, 2019 letter to Rami Kahlon).

5-2 to the Citation, San Gabriel has been providing water service to Rurban customers via 1 three emergency connections since approximately October 2018, pursuant to the May 13, 2 2014 Emergency Service Agreement Rurban (“Agreement”). 3 The Public Advocates Office understands that San Gabriel intends to acquire 4 Rurban for approximately $5 million, including facilities and right-of-way and 217-acre 5 feet of Main San Gabriel Basin prescriptive pumping rights.62 6 San Gabriel states that Rurban’s former customers will be subjected to San 7 Gabriel’s LA Division tariffs. San Gabriel must obtain Commission authority to do 8 this.63 However, it is not clear whether San Gabriel has obtained authority to apply its 9 tariffs to Rurban’s former customers.64 10 San Gabriel does not require Commission authorization to acquire a mutual water 11 company.65 However, San Gabriel does require Commission approval to recover in rates 12 any costs associated with the acquisition.66 In this GRC, San Gabriel did not include in 13 its LA Division’s revenue requirement any costs associated with providing emergency 14 service to or the acquisition of Rurban. San Gabriel intends to include the cost, sales 15 forecast, expenses, and capital additions associated with this acquisition in the next 16 GRC.67 17 It appears that the Rurban system will require substantial infrastructure repairs and 18 improvements. According to the Letter, San Gabriel has or will install fire hydrants, 19 service connections, water meters and additional water mains, if necessary. 20 The Public Advocates Office is concerned about the potential impact the 21 acquisition of Rurban could have on existing San Gabriel customer rates. If San Gabriel 22 62Telephone conference between Public Advocates Office and San Gabriel on May 15, 2019. 63 See Decision (D.) 99-10-064, Appendix D, Section 4.02. 64 As of July 19, 2019, the Commission’s advice letter tracking system does not list any advice letters requesting authority to apply San Gabriel’s tariffs to Rurban’s former customers. 65 See D.99-10-064, Appendix D, Section 4.01. 66 See Public Utilities Code § 451. 67 Telephone conference between Public Advocates Office and San Gabriel on May 15, 2019

5-3 pays $5 million for Rurban, on a per customer basis, the acquisition could be the costliest 1 regulated utility acquisition of a water system in California history (more than $16,300 2 per customer/connection), and this does not include what will likely be substantial 3 additional capital costs. San Gabriel’s existing customers will likely be expected to 4 absorb the costs because it is not likely that Rurban customers will be able to bear such 5 costs alone. 6 D. CONCLUSION 7 The Commission should require San Gabriel in its next GRC to clearly show the 8 costs associated with providing emergency water service to Rurban and the costs 9 associated with acquiring Rurban, so the Commission can ensure that only just and 10 reasonable costs are approved for recovery11

5-1 APPENDIX A QUALIFICATIONS AND PREPARED TESTIMONY

218293570 A-1 QUALIFICATIONS AND PREPARED TESTIMONY 1 OF 2

MEHBOOB ASLAM 3 4 Q.1. Please state your name and business address. 5 A.1. My name is Mehboob Aslam. My business address is 320 West 4th Street, Suite 6 500, Los Angeles, CA 90013. 7 8 Q. 2. By whom are you employed and in what capacity? 9 A. 2. I am employed by the California Public Utilities Commission as a Public Utilities 10 Regulatory Analyst (PURA)-V. 11 12 Q. 3. Please briefly describe your educational background and work experience. 13 A. 3. I graduated from the University of Engineering & Technology, Lahore, Pakistan 14 with a Bachelor of Science Degree in Mechanical Engineering, and also graduated 15 from Western Kentucky University with a Master of Science Degree, in Business 16 Administration with an emphasis in Accounting and Finance. 17 I have been employed by the CPUC since 2001. From 2001 through 2002, I was a 18 member of the Consumer Protection and Safety Division, where I studied energy 19 utilities’ operating practices to enforce the rules and regulations relating to safe 20 use of the plant and workforce. I Performed engineering reviews and conducted 21 incident investigations for both gas and electric utilities. I have also helped resolve 22 customers’ complaints. 23 24 From 2002 through present, I have been working for Division of Ratepayer 25 Advocates in its Water Branch; mostly dealing with Class-A water utilities. I have 26 performed evaluations of public utility plant and properties, regulation of utility 27 tariffs and rates, studies of cost of service, and studies of the utility’s operating 28 practices to enforce the rules and regulations relating to ratemaking. I have 29 presented my findings and recommendations as an expert witness at public 30

218293570 A-2 hearings before the Commission. I have also been actively involved with few of 1 Commission’s OIR/OII proceedings. 2 3 Q. 4. What is your area of responsibility in this proceeding? 4 A. 4. I am the project lead in the San Gabriel Valley Water GRC. I am also sponsoring 5 Cal Advocates Office’s Report on the Results of Operations’ Executive Summary, 6 Chapter 1 – Introduction and Summary and Chapter 15 − Escalation Year 7 Increases. 8 9 Q. 5. Does this conclude your prepared testimony? 10 A. 5. Yes, it does. 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40

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JAMES J. SIMMONS 3 4 Q1. Please state your name and business address. 5 A1. My name is James J. Simmons. My business address is 505 Van Ness Avenue, 6 San Francisco, California 94102. 7 8 Q2. By whom, and in what capacity are you employed? 9 A2. I am employed by the California Public Utilities Commission (CPUC) as a Public 10 Utilities Regulatory Analyst (PURA) V in the Office of Ratepayer Advocates 11 (ORA). 12 13 Q3. Please summarize your educational background, professional certifications, and 14 professional work experience. 15 A3. Education Bachelor of Science degree in Business Administration from the 16 University of Maryland, College Park, MD, with an emphasis in Accounting. 17 Certifications 18 • 1984 - Certificate of Certified Public Accountant (CPA) and license 19 from the West Virginia Board of Accountancy. 20 • 2007 - Certificate of Certified Rate of Return Analyst (CRRA) from 21 the Society of Utility and Regulatory Financial Analysts (SURFA.) 22 Professional Work Experience and Duties: 23 � West Virginia Public Service Commission (1979-1985) 24 � Senior Utilities Analyst in the West Virginia Public Utilities 25 Commission (WVPSC) staff: investigation and the preparation of 26 audit and revenue requirement reports on regulated utilities and 27 testifying as a staff expert witness in rate setting proceedings before 28 the WVPSC. 29 Division of Ratepayer Advocates (1985-1996) 30 Financial Examiner (FE) IV and Public Utilities Regulatory Analyst (PURA) V in 31 the CPUC’s Division of Ratepayer Advocates (DRA): participated in the financial 32 examinations, analyses and review of major regulated public utilities, testifying on 33 behalf of ratepayers in rate proceedings before the CPUC. Among other 34 assignments, I worked on the 1991 Implementation Rate Design of Pacific 35 Telephone Company and General Telephone Company of California, on the issues 36 of rate design of Message Telecommunications Services, Directory Assistance 37 Services, and elasticity. I worked on: the general rate cases (GRCs) of AT&T 38 Communications, Pacific Bell, and General Telephone Company of California; a 39 review of the affiliate transactions of Pacific Bell Directory; and the Roseville 40

218293570 A-4 Telephone Company’s Test Year 1995 GRC and Application for regulation under 1 the New Regulatory Framework as project coordinator. 2 Telecommunications Advisory and Compliance Staff (1996-2000) 3 PURA V in the CPUC’s Telecommunications Division: assisting administrative 4 law judges and the Commission in an advisory capacity in the preparation of 5 decisions and resolutions; the review and processing of applications for certificates 6 of public convenience and necessity (CPCN) and of advice letters of local 7 exchange telecommunications companies; and serving as staff liaison to the 8 following Public Policy Programs: the Universal Lifeline Telephone Service 9 (ULTS) Marketing Board; the ULTS Administrative Committee; and the 10 Community Technology Fund; oversight and all CPUC staff administrative 11 functions for the ULTS program, including the preparation of budgets, contracts, 12 and Commission-authorizing resolutions. Among my major TD assignments, I 13 advised and assisted the Administrative Law Judge (ALJ) assigned to Pacific Bell 14 Telephone Company’s Rate Design Application to rebalance rates to distribute the 15 Universal Service subsidies received from the California High Cost Fund-B 16 (CHCF-B) and other assignments related to the Commission’s implementation of 17 the Telecommunications Act of 1996. 18 Office of Ratepayer Advocates (2001-Present) 19 PURA V in the CPUC Office of Ratepayer Advocates (ORA): participation in 20 major proceedings before the CPUC in a position of ratepayer advocacy; among 21 other duties, preparing formal reports and testifying in the general rate cases of the 22 following companies: San Gabriel (Fontana District), California Water Service, 23 San Jose, California-American, and Apple Valley Water Companies. In 2010, I 24 investigated and prepared a protest to Golden State’s Region 1 Annual Water 25 Revenue Adjustment Mechanism (WRAM) and Modified Cost Balancing 26 Accounts (MCBA) Advice Letter. 27 28 Q4. What is the purpose of your testimony today? 29 A4. I have prepared and am sponsoring the following Chapters of ORA’s Report on 30 General Office and Special Requests for Test Year 2020-2021 in this proceeding: 31 Chapter 2: General Office Expenses 32 Chapter 3: General Office Rate Base 33 Chapter 4: Cost Allocations (Affiliates & 4-Factor) 34 Chapter 5: Special Request I (Administrative Overhead Rate) 35 36 Q5. Does that complete your prepared direct testimony in this proceeding? 37 A5. Yes, at this time. 38 39 40

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PATRICIA ESULE 3 Q.1. Please state your name, business address, and position with the California Public 4 Utilities Commission (Commission). 5 6 A.1. My name is Patricia Esule. My business address is 320 W. 4th Street, Ste. 500, Los 7 Angeles, CA 90013. I am a Public Utility Regulatory Analyst (“PURA IV”). 8 9 Q.2. Please summarize your education background. 10 A.2. I received an Associate Degree in Liberal Arts from College of the Sequoias in 11 Visalia, California in 1979. I attended NARUC Rate School in 2004. I have also 12 completed Utility Finance & Accounting for Non-Professionals course in 2007. 13 14 Q.3. Briefly describe your professional experience. 15 A.3. I have been employed by the Public Advocates Office - Water Branch since May 16 2003. During my employment in the Public Advocates Office, I have provided 17 testimony in many GRCs as an analyst/witness on capital projects, operational and 18 administrative expenses, low-income programs and water conservation. 19 Additionally, I have performed the duties of project lead for the Great Oaks Water 20 Company GRC filed in 2009, and most recently the application filed in May 2017 21 by California Water Service Company for Certificate of Public Convenience and 22 Necessity (“CPCN”) required to create a new Travis district. I have provided 23 analyses and recommendations on various applications and advice letter filings. 24 My previous professional experience includes the position of Associate 25 Transportation Representative in the Commission’s Consumer Protection and 26 Enforcement Branch (“CPED”), and Supervisor in the Consumer Affairs Branch. 27 Prior to coming to the Commission, I was employed as a Sales Representative and 28 a Billing Specialist at AT&T Communications. 29 30 Q.4. What is your responsibility in this proceeding San Gabriel Water Company A. 19-31 01-001? 32 A.4. I provide California Public Advocates’ testimony on San Gabriel’s proposed 33 O&M and A&G Expenses for the Los Angeles and Fontana Districts, and 34 company-wide Pension & Benefits Expense. 35 36 Q.5. Does this conclude your prepared direct testimony? 37 A.5. Yes, it does. 38 39

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OGE ENYINWA, P.E. 3 4 Q.1. Please state your name and business address. 5 A.1. My name is Oge Enyinwa. My business address is 505 Van Ness Avenue, San 6 Francisco, California 94102. 7 8 Q.2. By whom are you employed and in what capacity? 9 A.2. I am employed by the State of California at the California Public Utilities 10 Commission (CPUC) as a Senior Utilities Engineer in the Public Advocates 11 Office. 12 13 Q.3. Please describe your educational background and professional experience. 14 A.3. I graduated from The Federal University of Technology, Nigeria, with a Bachelor 15 of Science degree in Electrical & Electronics Engineering, emphasis in Power 16 Systems Engineering. I am also a licensed Professional Engineer. I have worked as 17 an engineering intern with Mobil Exxon and moved from there to Continental 18 Transmitter Services, as an Associate Engineer, before joining the CPUC as a 19 Utilities Engineer in 2008. My primary job for the last nine years has been as an 20 analyst and utilities engineer for the California Public Utilities Commission. I 21 have worked on water, electric and gas industry issues. My responsibilities have 22 included sponsoring reports/testimony in proceedings, such as reasonableness 23 reviews, pipeline safety, technical research and reports, natural gas proceedings, 24 infrastructure expansions, incentive ratemaking, OIIs, CPCNs, General Rate 25 Cases, rate design, conflict resolutions between water companies and the rate 26 payers and serving in the capacity of a technical adviser to ALJs in formal 27 proceedings. 28 29 Q.4. What is your area of responsibility in this proceeding? 30 A.4 I am sponsoring Chapter-06: Plant in Service, Chapter-07: Depreciation, Chapter-31 08: Rate Base, and Chapter-09: Water Quality. 32 33 Q.5 Does that complete your prepared testimony? 34 A.5 Yes, it does. 35 36 37 38 39 40 41 42 43

218293570 A-7 1 QUALIFICATIONS AND PREPARED TESTIMONY 2

OF 3 JOSE R. CABRERA 4

5 Q.1 Please state your name, business address, and position with the California Public 6 Utilities Commission (Commission). 7 8 A.1 My name is Jose R. Cabrera. My business address is 505 Van Ness Avenue, 3rd 9 floor, San Francisco, California 94102. I am employed by the Commission as a 10 Public Utilities Regulatory Analyst V in the Public Advocates Office, Water 11 Branch. 12 13 Q.2 Please summarize your education background. 14 A.2. I am a graduate of California State University, Sacramento, with a Bachelor of 15 Science Degree in Accounting. I also hold a Master of Science Degree in 16 Taxation from Golden Gate University, San Francisco. 17 18 Q.3 Briefly describe your professional experience. 19 20 A.3. Prior to the Commission, I worked for the Department of the Treasury, Internal 21 Revenue Service, for 5-1/2 years as an Internal Revenue Agent, and in public 22 accounting with a certified public accountancy firm. 23 24 From 1988 to 1992 I was a part-time Lecturer of Accounting in the Department of 25 Accounting, School of Business, at California State University, San Francisco. 26 Prior to this, I was an Adjunct Professor at National University in the Graduate 27 School of Taxation. 28 29 As the tax witness, I am responsible for estimates of federal and state income 30 taxes, taxes other than income as well as regulated tax policy positions in general 31 rate cases and other proceedings. I have also worked on a variety of general rate 32 cases in which I was responsible for expense forecasting, recommendations on 33 proposed balancing and memorandum accounts, as well as a variety of Special 34 Requests. 35 36 Q.4. What is your responsibility in this proceeding? 37 A.4. I am responsible for the preparation of Chapter 9, “Income Taxes,” and Chapter 38 10, “Taxes Other Than Income,” in the Report on the Results of Operations for 39 San Gabriel Valley Water Company general rate case test year 2020. I am also 40 responsible for Special Requests A, D, F and H. 41

218293570 A-8 1 Q.5. Does this conclude your prepared direct testimony? 2 A.5 Yes, it does. 3 4

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KELSEY CHOING 3 4 Q.1. Please state your name and business address. 5 A.1. My name is Kelsey Choing. My business address is 505 Van Ness Ave, San 6 Francisco, CA 94102. 7 8 Q.2. By whom are you employed and in what capacity? 9 A.2. I am employed by the Public Advocates Office – Water Branch as a Public Utilities 10 Regulatory Analyst. 11 12 Q.3. Please briefly describe your educational background and work experience. 13 A.3. I received a Bachelor of Science Degree from Carnegie Mellon University in 14 2015, where I double-majored in Economics and Policy & Management and 15 joined the Public Advocates Office shortly thereafter. I previously prepared 16 testimony in GRC proceedings A.18-07-001, A.17-07-010, and A.16-07-002. 17 18 Q.4. What is your area of responsibility in this proceeding? 19 A.4. I am responsible for reviewing San Gabriel Valley Water Company’s balancing 20 and memorandum accounts. 21 22 Q.5. Does this conclude your prepared testimony? 23 A.5. Yes, it does. 24 25 26 27 28 29