The Ratemaking Process

Rates for California American Water are established by the California Public Utilities Commission (CPUC). Only the CPUC may authorize a utility to charge higher rates to (a) recover expenses which are appropriate and prudently incurred, and (b) provide a fair return on the utility’s capital investment. There is no guarantee that any investor-owned utility will receive a rate increase, either to offset higher operating costs or for capital investments.

Rate increases are initiated by filing an application with the CPUC which is based on historical information such as customer usage, operating costs, revenue from water bills and other factors. The ratemaking process includes many opportunities for review and input from customers, the Office of Ratepayer Advocates (ORA) and other interested parties. The public oversight of the CPUC ensures that increases in water rates are thoroughly and publicly scrutinized by an independent body with experts in utility regulation.

California American Water’s rates are based on the true cost of providing water service to our customers.

What Your Water Bill Pays For

There are several major cost components that make up the water rates of each California American water district:

• Operating and Maintenance Costs expenses – These are annual, recurring expenses related to the operations and maintenance of the water system, similar to the kinds of expenses the average household has each year for food and clothing. These are passed on at the direct expense to the customer.
• Interest on debt – It’s the same as the unpaid mortgage on a home.
• Return on equity – This is the return on the investment the company makes in plant and equipment assets. The rate of return is the marginal overhead charge on capital construction costs, usually capped at approximately 8% in California.
• Administrative and general office costs – Costs related to the corporate office.

Shareholders’ investment is not guaranteed. Shareholders only receive a dividend on their investment after all other expenses are paid, including interest on debt that supports investments.

Monterey Peninsula Mandatory Water Conservation

Water Conservation Plan for Monterey Peninsula Unlike other areas of California, water conservation on the Monterey Peninsula is not voluntary - it is required by MPWMD ordinance 92 and further defined by ordinance 119. This plan, approved by the CPUC in 1999, includes California American Water’s responsibilities under the ordinance, as well as the rules restricting non-essential water use for Monterey Peninsula residents and businesses.

Equivalent Consumption Unit (ECU)

Water rates for residential customers in the Monterey service area are partly determined by factors such as household size, lot size, and whether or not you own large animals. This information is used to define an Equivalent Consumption Unit (ECU) which establishes a baseline level of water usage for each household. When residents use more than their monthly ECU, they are charged at a higher rate for each unit. Click here to see the rates for the main Monterey service area, including ECU calculations.

Monterey Peninsula Water Rates

See the California American Water Monterey district rate schedule for current water rates as approved by the CPUC.

Public Notifications

All decisions made by the CPUC and other regulatory agencies go through a public review process. Notifications for changes under discussion are listed here.

APPLICATION TO THE CPUC FOR SALE OF AMERICAN WATER STOCK
May 22, 2006 - APPLICATION A.06-05-025

CPUC Public Hearing Notice - July 18, 2006
CALIFORNIA AMERICAN WATER - COASTAL WATER PROJECT