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CALIFORNIA AMERICAN WATER – CWP EXAMPLE OF RETURN DETERMINATION (standard PUC financing) (a) PLANT $100 M (b) CUSTOMER FUNDED 30% $ 30 M COMPANY FUNDED $ 70 M 1) (a) – (b) DEBT 60% $ 42 M (c) * 60% (e) EQUITY 40% $ 28 M (c) * 40%
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CALIFORNIA AMERICAN WATER – CWP EXAMPLE OF RETURN DETERMINATION • (standard PUC financing) • (a) PLANT $100 M • (b) CUSTOMER FUNDED 30% $ 30 M • COMPANY FUNDED $ 70 M 1) (a) – (b) • DEBT 60% $ 42 M (c) * 60% • (e) EQUITY 40% $ 28 M (c) * 40% • (f) AUTHORIZED RETURN @ 10.5% $ 2.9 M (e) * 10.5% • (g) INTEREST EXPENSE @ 7% $ 2.9 M (f) * 7% • (h) TOTAL FINANCING COVERAGE $ 5.8 M (f) + (g) • (total capital cost in application was 8.55% - it applies to only CAW funded portion) • O&M COSTS $ 3.0 M (covered dollar for dollar) • (No return allowed on O&M Costs)
This example is the normal utility financing method – other options might be available The customers only pay for the project once it is used and usefulCustomers only pay for the Company funded portion of the Project not already recovered (Rate Base)Rate Base equals total Project cost – less Customer Contributions – less Depreciation – less Deferred TaxesRate Base declines every year Prior to completion of the project – CAW has requested that the debt and interest carrying costs be capitalized to the Project
