Working together. Achieving results. “Implementation of D : Growth in Water Utility CARW/LIRA Programs” California Water Association Low-Income Oversight Board October 29, 2012 Sacramento, CA

Presentation Overview Overview of California PUC-Regulated Water Utilities Summary of R and D Existing Investor-Owned Water Company (IOWC) California Alternative Rates for Water (CARW) or Low-Income Rate Assistance (LIRA) Programs 2

Presentation Overview (cont.) Low-Income Data-Sharing: Program and Goals Results of Data-Sharing w/ Energy Utilities (by company) Increases in IOWC CARW/LIRA Participation IOWC Low-Income Conservation Programs Current Proceedings Affecting CARW/LIRA Programs Conclusions/Observations/Lessons Learned 3

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CWA Overview Class A and B Members – 12 – Cal Water; Golden State; San Jose; Cal-Am; San Gabriel Valley; Suburban, Valencia, Park, Apple Valley Ranchos, Alco, Del Oro, East Pasadena Class C and D Members – 25 Represents Business Interests of All 137 CPUC- Regulated IOWCs Principal Activities – Promote sound water policy: utility/customer balance – Provide consensus on regulatory, legislative positions – Internal and external communications – Small system assistance – Forum for sharing best management practices 5

IOWCs in California Total Service Connections: 1.47 million out of 7.5 million total in the state (≈ 20%) Population Served: 5.6 million out of 37 million (≈15%) Class A Company Annual Revenues: $1.4 Billion − PG&E ($15b); SCE ($10.6b); Sempra ($7.2b) Customer Base: 81-90% residential Water Revenues from Res./Commercial Customers: 57% - 93% - most companies derive >80% of their revenues from their smaller customers 6

Most Capital Intensive Industry Source: 2009 AUS Utility Reports EPA rules require large investment in water quality Substantial investment needed for distribution system More capital per revenue than all other utilities Marginal cost of new source is very high Capital Investment Required to Produce $1 of Revenue 7

Cost Structure vs. Rate Structure 8

Customer Info-Sharing OIR Class A IOWC 2007 CARW/LIRA Penetration Rate: 16.1% Energy Utilities’ CARE 2008 Penetration Rate: 78.8% Objectives of Order Instituting Rulemaking (R )  Enhance penetration of IOWC CARW programs among eligible customers  Develop an open yet secure exchange of information that benefits customers and utilities alike  Provide clear guidance on information sharing to regulated and municipal utilities  Protect the confidential nature of customer information Proceeding Concluded in May 2011 w/D

Summary of D Adopted Guidelines for Sharing Low-Income Customer Information Eligibility Requirements Adopted for Energy IOUs Apply to IOWCs IOWCs to Prepare and File Data-Sharing Plans w/CPUC IOWCs to Establish Memo Accounts to Track Costs IOWCs, Energy IOUs Executed MOUs/Non-Disclosure Agreements; Coordinated IT Interface; Undertook Trial Information Exchanges in First Half of 2012 Commenced Formal Data Exchanges in September

Existing CARW/LIRA Programs Apple Valley Ranchos Water (CARW) Eligible customer discount: $6.69/month Non-qualifying customer surcharge: $0.55/month California American Water (LIRA) Eligible customer discount: As set, per customer discount in all districts except Monterey varies from $6 to $23 per month; in Monterey Main Service Area, discount is a set amount per service, depending on the number of residents at the premise - it varies from $10 - $20 per month Non-qualifying customer surcharge: None (tracked in memo account) California Water Service (LIRA) Eligible customer discount: 50% off monthly service charge (approx. $6/month) Non-qualifying customer surcharge: $0.06/Ccf Non-qualifying customer temporary surcharge: $0.0182/Ccf 11

Existing CARW/LIRA Programs Golden State Water (CARW) Eligible customer discount: Flat discount equivalent to 15% of avg. CARW customer monthly bill (excluding surcharges) Non-qualifying customer surcharge: Region 1 - $0.033/Ccf/month; $1.00/month for flat rate customers; Region 2 - $0.0056/Ccf/month; Region 3 - $0.0035/Ccf/month Great Oaks Water (LIRA) Eligible customer discount: 50% of bi-monthly service charge Non-qualifying customer surcharge: None (tracked in memo account) Park Water (CARW) Eligible customer discount: $5.50/month (current); $6.65/month (1/1/2013) Non-qualifying customer surcharge: $0.00/month; $6.07/month (1/1/2013) 12

Existing CARW/LIRA Programs San Gabriel Valley Water (CARW) Eligible customer discount: 50% off monthly service charge Non-qualifying customer surcharge: None (incorporated into rate design of monthly service charge; will change in new GRC ) San Jose Water (WRAP) Eligible customer discount: 15% off total monthly bill Non-qualifying customer surcharge: $0.20/month Suburban Water (LIRA) Eligible customer low-income credit: $6.50 per month Non-qualifying customer surcharge: $0.014/Ccf Valencia Water (LIRA) Eligible customer discount: 50% off monthly service charge Non-qualifying customer surcharge: $0.04/month 13

Low-Income Data Sharing Program Details Data-sharing w/energy utilities Hard matches automatically enroll in IOWC LIRA/CARW programs Soft matches automatically enrolled upon verification 14

Low-Income Data Sharing Goals Align energy and water IOU CARE/LIRA programs Increase water utility LIRA/CARW penetration Long-term goal of achieving energy IOU penetration levels 15

Low-Income Data Sharing Issues Largely increased water customer participation Low revenue base over which to spread increased costs Water companies are highly residential revenue-driven Water companies have filed to increase the surcharge levels that fund their CARW/LIRA programs 16

Low-Income Data Sharing Results Apple Valley Ranchos Water  175% increase in participation in LIRA Program  Surcharge increase (recovery from non-LIRA qualifying customers and other customer classes) - will remain at $0.55/month until next GRC (2015) California American Water  207% increase in participation  Surcharge increase - TBD California Water Service  128% increase in participation  Surcharge increase from $0.01 to $0.06 per Ccf  Temporary surcharge:$0.0182/Ccf 17

Low-Income Data Sharing Results Golden State Water  53% increase in participation in CARW Program  Surcharge increase TBD (pending GRC application) Great Oaks Water  469% increase in participation in LIRA Program  Surcharge increase TBD Park Water  328% increase in participation in LIRA Program  Surcharge increase from $2.27/month to $0.00 to $6.65/month 18

Low-Income Data Sharing Results San Gabriel Valley Water  % increase in participation in CARW program - TBD  Surcharge increase from $0.00 to $0.1297/Ccf (Fontana Water Co. Division – effective when current GRC is completed) and (probably) from $0.00 to $0.0637/Ccf for the Los Angeles Division (in its next GRC) San Jose Water  128% increase in participation in WRAP  Surcharge increase TBD Suburban Water  % increase in participation in LIRA Program - TBD  Surcharge increase TBD Valencia Water  386% increase in participation in LIRA Program  Surcharge increase from $0.04/month to $0.91/month 19

Increases in Participating Customers Pre-SharingAfter Apple Valley Ranchos Water 1,7074,695 California American Water 5,477 16,800 California Water Service40,965 93,732 Golden State Water30,304 46,504 Great Oaks Water 4312,452 Park Water 2,2669,697 San Gabriel Valley Water22,455 23,566 San Jose Water 7,994 18,241 Suburban Water 4,085 TBD Valencia Water 4462,168 20

Current Penetration Increases 2009 Current Apple Valley Ranchos Water: 6.9%24.2% California American Water: 14.5%44.8% California Water Service: 41.6%93.8% Golden State Water: 31.1%58.0% Great Oaks Water: 13.2% 77.0% Park Water: 7.1%35.6% San Gabriel Valley Water:72.3% TBD San Jose Water:19.9%55.8% Suburban Water: 5.5% TBD Valencia Water: 6.5%31.1% Methodology: Each company’s residential customer count was applied to its respective household eligibility percentage, as derived in the CPUC Div. of Water & Audits report, “Assessment of Water Utility Low-Income Assistance Programs” (October 2007; page 17), to derive an estimate of LIRA-eligible customers. The 2009 and 2012 LIRA customer totals were divided by the estimate of LIRA-eligible customers to calculate the penetration percentages above. 21

LIRA Customers as % of Total Residential Customers YE 2011 Current Apple Valley Ranchos Water9.9% → 26.7% California American Water3.7% → 11.3% California Water Service 12.4% → 23.4% Golden State Water 15.0% → 22.0% Great Oaks Water2.2% → 12.8% Park Water 8.4% → 38.7% San Gabriel Valley Water 19.2% → 28.4% San Jose Water3.9% → 9.3% Suburban Water5.1% → TBD Valencia Water1.5% → 8.4% 22

Low-Income Conservation Programs Apple Valley Ranchos Water  Three-tiered conservation quantity rates for residential customers  Free water audits to all customers  Cash for Grass to all customers – partnership with Mojave Water Agency California American Water  Low Income Toilet Direct Install Program  Low Income Toilet exchange program (self install) California Water Service  Three-tiered conservation quantity rates for residential customers  Bathroom Fixture Replacement Program  Conservation Kit Program  Residential Water Use Survey Program  High-efficiency sprinkler nozzles 23

Low-Income Conservation Programs Golden State Water  Low-income toilet direct install program; Multi-family direct install  Free water audits; free indoor conservation kits; free outdoor conservation kits/devices Great Oaks Water  Three-tiered conservation quantity rates  Recommendations to obtain free water audit Park Water  Two-tiered conservation quantity rates for residential customers  Low Income Toilet Direct Install Program  Low Income Toilet Direct (self-installed)  Free water audits to all customers 24

Low-Income Conservation Programs San Gabriel Valley Water  Direct toilet install to CARW customers only  Rebates, conservation kits, turf removal directed to all customers San Jose Water  Two-tiered conservation quantity rates for residential customers  Free water audits to single- and multi-family customers  Rebate programs offered to SJWC customers via SCVWD Suburban Water  High-efficiency toilet program Valencia Water  Upon enrollment in LIRA, outreach letter is sent offering free water saving devices, free water audits, and explaining rebate programs. 25

Advertising and Promotion Apple Valley Ranchos Water/Park Water  Bill inserts; Company Newsletters; All public events, fairs, PPHs, etc.  Company websites w/link to application  Application presented to all new customers  English, Spanish (Park) California American Water  Bill inserts; website; outreach at all community events  CSR notices to delinquent or near-delinquent customers  English, Spanish California Water Service  Bill inserts (full color flyer w/applications; company website  Applications in customer centers  English, Spanish (where applicable) 26

Advertising and Promotion Golden State Water  Website, customer mailers, pamphlets at public meetings  “Hotline” for customers to speak directly w/Low-Income Dept. CSR  English, Spanish, Chinese Great Oaks Water  Information on LIRA program provided on every bill  CSRs personally discuss LIRA program eligibility and discounts w/customers who have trouble paying their bills San Gabriel Valley Water  Bill inserts; website; direct-mail postcard to CARW customers; outreach at public/community events  Customer service representatives  English, Spanish 27

Advertising and Promotion San Jose Water  Bill inserts; website; customer service representatives  English, Spanish, Vietnamese Suburban Water  Community outreach and education conservation programs Valencia Water  Upon enrollment in LIRA, outreach letter is sent offering free water saving devices, free water audits, and explaining rebate programs  Website, posted in lobby, customer bills 28

Proceedings Affecting LIRA Programs California American Water’s Current GRC Settlement: Low-Income Assistance Proposal D – California Water Service  Temporary surcharge (36 months) to amortize memorandum account balance  Increase in Surcharge from $0.01 per Ccf to approximately $0.06 per Ccf  Establish balancing account for implementation costs  Maintain memorandum account for administrative costs R : Rate Consolidation OIR 29

Lessons Learned The information-sharing program has been successful – dramatic increases to date in water IOU LIRA programs The IT issues with the energy utilities were far more complex and difficult than originally contemplated LIRA/CARW eligibility criteria limits ability of water IOUs to achieve high penetration levels of energy IOUs  CPUC’s eligibility percentages derived from 2000, 2006 census data and encompass all residential citizens; water IOU participation limited to single-family dwellings, so eligibility universe should be limited to single-family dwellings  Primary eligibility based on customer participation in the energy CARE program; however, water companies solicit all residential customers Difficulty reconciling existing recertification procedures with the automatic enrollment from the data-exchange program 30