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CALIFORNIA PUBLIC UTILITIES COMMISSION DIVISION OF WATER AND AUDITS Advice Letter Cover Sheet [ ] APPROVED [ ] WITHDRAWN [ ] REJECTED Signature: Comments: Date: Utility Name: California Water Service Company Date Mailed to Service List: 12/03/2019 District: All Districts except Grand Oaks CPUC Utility #: U-60-W Protest Deadline (20 th Day): 12/22/2019 Advice Letter #: 2357-A Review Deadline (30 th Day): 01/02/2019 Tier: 2 3 Compliance Requested Effective Date: 01/01/2020 Authorization: N/A Rate Impact: N/A Description: Preliminary Statement M Modification The protest or response deadline for this advice letter is 20 days from the date that this advice letter was mailed to the service list. Please see the “Response or Protest” section in the advice letter for more information. Utility Contact: Melody Singh Utility Contact: Natalie Wales Phone: 916-329-1856 Phone: (408) 367-8566 Email: msingh@calwater.com Email: [email protected] DWA Contact: Tariff Unit Phone: (415) 703-1133 Email: [email protected] DWA USE ONLY DATE STAFF COMMENTS

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Page 1: CALIFORNIA PUBLIC UTILITIES COMMISSION DIVISION OF … · 1/1/2020  · purchased water, power , and pump taxes, and actual water production costs. For metered customers, the WRAM

CALIFORNIA PUBLIC UTILITIES COMMISSION DIVISION OF WATER AND AUDITS

Advice Letter Cover Sheet

[ ] APPROVED [ ] WITHDRAWN [ ] REJECTED

Signature: Comments:

Date:

Utility Name: California Water Service Company Date Mailed to Service List: 12/03/2019

District: All Districts except Grand Oaks

CPUC Utility #: U-60-W Protest Deadline (20th Day): 12/22/2019

Advice Letter #: 2357-A Review Deadline (30th Day): 01/02/2019

Tier: ☐1 2 ☐3 ☐ Compliance Requested Effective Date: 01/01/2020 Authorization: N/A

Rate Impact: N/A Description: Preliminary Statement M Modification

The protest or response deadline for this advice letter is 20 days from the date that this advice letter was mailed to the service list. Please see the “Response or Protest” section in the advice letter for more information.

Utility Contact: Melody Singh Utility Contact: Natalie Wales

Phone: 916-329-1856 Phone: (408) 367-8566

Email: [email protected] Email: [email protected]

DWA Contact: Tariff Unit

Phone: (415) 703-1133

Email: [email protected]

DWA USE ONLY DATE STAFF COMMENTS

Page 2: CALIFORNIA PUBLIC UTILITIES COMMISSION DIVISION OF … · 1/1/2020  · purchased water, power , and pump taxes, and actual water production costs. For metered customers, the WRAM

CA LIF ORNIA W A TER S ERVICE COMPA NY 1720 NORTH FIRST STREET SAN JOSE, CA 95112 (408) 367-8200 F (408) 367-8428

December 3, 2019

Advice Letter No. 2357-A

CALIFORNIA WATER SERVICE COMPANY (U 60 W)

To The Public Utilities Commission of the State of California:

California Water Service Company (“Cal Water”) hereby transmits for filing the following changes in its tariff schedules and four copies of each are attached hereto:

New/Revised Cancelling CPUC CPUC

Sheet No. Title of Sheet Schedule No. Sheet No. xxxxx-W Preliminary Statement M xxxxx-W xxxxx-W Preliminary Statement M xxxxx-W xxxxx-W Table of Contents (Page 5) TOC xxxxx-W xxxxx-W Table of Contents (Page 1) TOC xxxxx-W

Summary

The purpose of this advice letter filing is to update the Water Revenue Adjustment Mechanism (WRAM)/ Modified Cost Balancing Account (MCBA) Preliminary Statement. The update includes the following changes:

• Removing the authorized revenue lag for the WRAM • Removing the adopted costs lag for the MCBA • Updating verbiage to be in compliance with D.12-04-048 and D.10-12-017. • Eliminating the MCBA charges and credits to flat-rate customers

Cal Water requests that this filing becomes effective on January 1, 2020 and submits this as a Tier 2 advice letter. This filing does not affect WRAM and MCBA balances incurred in 2019 or earlier, with the exception that Cal Water is proposing that one proposed change to the mechanism – the elimination of MCBA charges and credits to flat-rate customers – starting with the WRAM/MCBA true-up to be filed in 2020.

Supplement In Advice Letter 2357, Cal Water inadvertently omitted its request to remove from its WRAM/MCBA calculations the revenue and cost lags for the WRAM and MCBA, respectively, as a “me-too” request to parallel the practices of two other Class A water companies with full WRAM/MCBAs, California American Water (“Cal-Am”) and Golden State Water (“GSWC”). The full WRAM/MCBA mechanisms of Cal-Am and GSWC are substantially the same as that of Cal Water.

Page 3: CALIFORNIA PUBLIC UTILITIES COMMISSION DIVISION OF … · 1/1/2020  · purchased water, power , and pump taxes, and actual water production costs. For metered customers, the WRAM

CA LIF ORNIA W A TER S ERVICE COMPA NY Advice Letter 2357-A, Modification of Preliminary Statement M Page 3

This Supplement clarifies Cal Water’s request, and provides the relevant pages of the WRAM/MCBA Preliminary Statements of those companies as attachments. Approving this request would appropriately align Cal Water’s methodology for calculating WRAM/MCBA with those of Cal-Am and GSWC.

Discussion

Cal Water’s Preliminary Statement M consists of two pages with introductory language followed by several pages with the adopted revenue and water production costs for each ratemaking area. This advice letter requests authority to modify language on the initial two pages of Preliminary Statement M.

Removing the authorized revenue lag for the WRAM & adopted cost lag for the MCBA

Cal Water requests removing the revenue and adopted cost lag because authorized revenues and costs are annualized and the billing lag doesn’t affect the difference between authorized and recorded quantities. The current methodology overly complicates the calculations and Cal Water proposes to remove the lag to have a similar calculation and methodology to other Class A Water Utilities. On July 1, 2008, Cal Water filed Advice Letter 1863 to memorialize the WRAM/MCBA approved in D. 08-02-036. Supplemental Advice Letter 1863-A was filed on August 12, 2008 to clarify the significant change in the water mix definition. Advice Letter 1863 authorized the WRAM/MCBA Preliminary Statement, which formalized the recording, treatment, and other provisions of the two accounts. In addition, the Preliminary Statement also included tables of adopted quantities that are authorized on an annual basis. The next revision to the WRAM/MCBA Preliminary Statement was filed in Advice Letter 1882 on September 30, 2008. This advice letter approved Cal Water’s request to modify the accounting rules for the WRAM to recognize the billing lag. The intent was to adjust the adopted revenue to align with the billing lag because a customer receiving a bill within 30 days after a rate increase pays a prorated increase. On June 14, 2010 Cal Water filed Advice Letter 1994 to include a lag in the treatment of the adopted cost for the MCBA, similar to the lag on adopted revenues for the WRAM. The current adopted language for item 9 of Preliminary Statement M from Advice Letter 1994 states: 9. RATE CHANGES

Whenever a rate change is implemented that affects adopted WRAM revenues and MCBA costs as contained in this preliminary statement, the change in monthly WRAM revenue and MBCA cost for the first two months after its effective date should be pro-rated to reflect standard billing lag according to the following formula:

Page 4: CALIFORNIA PUBLIC UTILITIES COMMISSION DIVISION OF … · 1/1/2020  · purchased water, power , and pump taxes, and actual water production costs. For metered customers, the WRAM

CA LIF ORNIA W A TER S ERVICE COMPA NY Advice Letter 2357-A, Modification of Preliminary Statement M Page 4

However, the adopted WRAM revenues and adopted MCBA costs represent the annual quantity revenues and purchased water, power and pump tax costs that the utility is authorized to collect from its customers. Because the authorized revenues and MCBA expenses are annualized, the billing lag does not affect the difference between the authorized and recorded quantity revenues and MCBA costs. Updating verbiage to comply with D.10-12-017 and D.12-04-048

In Ordering Paragraph 29 of D.10-12-017, Cal Water was authorized to include recycled water revenues and costs in its WRAM/MCBAs. Consistent with D.10-12-017, Cal Water properly reflected recycled water in the revenues and water production costs in an updated Preliminary Statement M, but did not update the verbiage in the initial pages of the document due to an oversight. This advice letter requests the appropriate language modifications to the first two pages of the document to reflect the inclusion of recycled water.

In D.12-04-048, the Commission authorized several changes to the full WRAM/MCBA mechanism of Cal Water and other water companies. Cal Water has been in compliance with those changes since D.12-04-048 was adopted, but did not make the necessary verbiage changes to the first two pages of Preliminary Statement M. The tariff changes proposed in this advice letter filing include updating the filing date to November 30th to reflect the net accumulated balance as of September 30th of the preceding calendar year, changing the threshold for amortization from 2.5% to 2.0%, and giving the utility the option to amortize balances that are less than 2%.

Eliminating MCBA Charges and Credits to flat-rate customers

The purpose of the WRAM/MCBA mechanism is to decouple revenues from sales to remove Cal Water’s disincentive to encourage conservation. With the implementation of a conservation rate design, the WRAM tracks the difference between authorized quantity revenue and actual recorded quantity revenue. The MCBA tracks the difference between what was collected in rates for purchased water, power, and pump taxes, and actual water production costs. For metered customers, the WRAM and MCBA are netted against each other so that customers receive the MCBA benefit of using less water.

Due to the lack of a water meter, however, flat-rate customers do not receive a conservation pricing signal; flat-rate revenue is therefore not tracked in the WRAM/MCBA. In fact, the actual water usage of flat-rate customers is unknown. Historically, Cal Water has nevertheless calculated the MCBA true-up and applied the over- or under-collection to both flat-rate and metered customers (with metered customers receiving a net WRAM/MCBA charge or credit). Cal Water

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CA LIF ORNIA W A TER S ERVICE COMPA NY Advice Letter 2357-A, Modification of Preliminary Statement M Page 5

proposes to eliminate the MCBA-only charges and credits for flat-rate customers for the reasons discussed below.

• When actual WRAM revenue and actual water production costs in the MCBA are lower than adopted in a district because metered customers have conserved water, the district’s metered customers are likely to receive a net WRAM/MCBA surcharge (assuming the decrease in WRAM revenue exceeds the avoided water production costs) at the same time that flat-rate customers receive a credit (to return the over-collected water costs in the MCBA). This outcome is counter to the Commission’s conservation goals – flat-rate customers are receiving a benefit for water conservation that is likely the result of the activities of metered customers, who have a conservation incentive.

• When actual WRAM revenue and actual water production costs in the MCBA are higher than adopted because metered customers have used more water than expected, metered customers are likely to receive a net WRAM/MCBA credit (assuming the increase in WRAM revenue exceeds the increased water production costs) at the same time that flat-rate customers receive a surcharge (to recover the under-collected water costs tracked in the MCBA).

These outcomes for flat-rate customers are counter-intuitive to the general public. Given the lack of data about the actual water usage of flat-rate customers, and therefore the inability to properly allocate MCBA costs, Cal Water proposes that flat-rate customers no longer receive either MCBA credits or surcharges, starting with the WRAM/MCBA true-up that will be filed in 2020. This approach will more closely align actual water production costs, and the actual water consumption that is the result of the conservation rates, for the purposes of the WRAM/MCBA true-up. Requested Effective Date Pursuant to Ordering Paragraph 4 of D.12-09-020, this filing is a Tier 2 advice letter, effective January 1, 2020. Notice

Customer Notice: This is a compliance advice letter that does not require customer notice, as provided in under Water Industry Rule 3.2 of General Order 96-B.

Service List: In accordance with General Order 96-B, General Rules 4.3 and 7.2, and Water Industry Rule 4.1, a copy of this advice letter will be mailed or electronically transmitted on December 3, 2019 to competing and adjacent utilities and other utilities or interested parties having requested such notification. Response or Protest

Anyone may respond to or protest this advice letter. When submitting a response or protest, please include the utility name and advice letter number in the subject line. A response supports the filing and may contain information that proves useful to the Commission in evaluating the

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CA LIF ORNIA W A TER S ERVICE COMPA NY Advice Letter 2357-A, Modification of Preliminary Statement M Page 6

advice letter. A protest objects to the advice letter in whole or in part and must set forth the specific grounds on which it is based. These grounds are:

(1) The utility did not properly serve or give notice of the advice letter; (2) The relief requested in the advice letter would violate statute or Commission order, or

is not authorized by statute or Commission order on which the utility relies; (3) The analysis, calculations, or data in the advice letter contain material error or

omissions; (4) The relief requested in the advice letter is pending before the Commission in a formal

proceeding; or (5) The relief requested in the advice letter requires consideration in a formal hearing, or is

otherwise inappropriate for the advice letter process; or (6) The relief requested in the advice letter is unjust, unreasonable, or discriminatory

(provided such a protest may not be made where it would require relitigating a prior order of the Commission.)

A protest shall provide citations or proofs where available to allow staff to properly consider the protest. A response or protest must be made in writing or by electronic mail and must be received by the Water Division within 20 days of the date this advice letter is filed. The address for mailing or delivering a protest is:

Tariff Unit, Water Division, 3rd floor California Public Utilities Commission, 505 Van Ness Avenue, San Francisco, CA 94102 [email protected]

On the same date the response or protest is submitted to the Water Division, the respondent or protestant shall send a copy by mail (or e-mail) to Cal Water at the following address:

Natalie Wales California Water Service Company 1720 North First Street, San Jose, California 95112 Fax 408/367-8430 or E-mail [email protected]

Cities and counties requiring Board of Supervisors or Board of Commissioners approval to protest should inform the Water Division within the 20-day protest period so a late-filed protest can be entertained. The informing document should include an estimate of the date the proposed protest might be voted on. The advice letter process does not provide for any responses, protests or comments, except for the utility’s reply, after the 20-day comment period.

Replies: The utility shall reply to each protest and may reply to any response. Each reply must be received by the Water Division within 5 business days after the end of the protest period and shall be served on the same day to the person who filed the protest or response. If you have not

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CA LIF ORNIA W A TER S ERVICE COMPA NY Advice Letter 2357-A, Modification of Preliminary Statement M Page 7

received a reply to your protest within 10 business days, contact California Water Service Company at (408) 367-8200. CALIFORNIA WATER SERVICE COMPANY /s/ __________ Melody Singh, Rates Analyst Enclosures

cc: Ting-Pong Yuen, Public Advocates Office

Page 8: CALIFORNIA PUBLIC UTILITIES COMMISSION DIVISION OF … · 1/1/2020  · purchased water, power , and pump taxes, and actual water production costs. For metered customers, the WRAM

CALIFORNIA WATER SERVICE COMPANY1720 North First Street, San Jose, CA 95112 Revised CPUC Sheet No. XXXXX-W(408) 367-8200 Canceling CPUC Sheet No. 12138-W

Table of Contents - Page 1

The following listed tariff sheets contain all effective rates and rules affecting the rates and service of the Utility together with information relating thereto:

Sheet Subject Matter Service Area Schedule No. CPUC Sheet No.

Title Page 5613-WTable of Contents

Page 1 Table of Contents XXXXX-W (C)Page 2 Preliminary Statements XXXXX-W (C)Page 3 Preliminary Statements 12130-WPage 4 Preliminary Statements 12017-WPage 5 Rate Schedules - All Districts 12106-WPage 6 Rate Schedules - District Specific 12118-WPage 7 Rate Schedules - District Specific 12136-WPage 8 Rate Schedules - District Specific 12112-WPage 9 Rate Schedules - District Specific 12023-WPage 10 Rate Schedules - District Specific 12125-WPage 11 Service Area Maps 12080-WPage 12 Rules 11860-WPage 13 Rules 11643-WPage 14 Sample Forms 12061-WPage 15 Sample Forms 2926-W

(continued)

(To be inserted by utility) Issued by (To be inserted by CPUC)Advice Letter No. GREG A. MILLEMAN Date Filed

Decision No. Name EffectiveVice President Resolution No.

TITLE

2357-A

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CALIFORNIA WATER SERVICE COMPANY1720 North First Street, San Jose, CA 95112 Revised CPUC Sheet No. XXXXX-W(408) 367-8200 Canceling CPUC Sheet No. 12137-W

Table of Contents - Page 2

Preliminary Statements

Sheet Subject Matter Service Area CPUC Sheet No.

Preliminary Statements

A Territory Served by the Territory Served by the UtilityPage 1 9240-WPage 2 8212-W

B-D Types and Classes of Service, Procedure to Obtain Service, 610-Wand Symbols

F Methyl Tertiary Butyl Ether Memorandum Account 8312-W(MTBE MA)

H Low-Income Ratepayer Assistance (LIRA) Memorandum 11323-WAccount

K Wausau Memorandum Account (WMA) 7313-WM Water Revenue Adjustment Mechanism/ Modified Cost

Balancing Account (WRAM/MCBA)Page 1 XXXXX-W (C)Page 2 XXXXX-W (C)

Bakersfield BK 11958-WBay Area Region BAR 11959-WBear Gulch BG 12115-WChico CH 12038-WDixon DX 11955-WDominguez DOM 12132-WEast Los Angeles EL 11953-WHermosa Redondo HR 12090-WKern River Valley KRV 11951-WLivermore LV 12044-WLos Altos LS 12108-WLos Angeles County Region LAR 12097-WMarysville MR 11947-WMonterey Region MOR 11946-WOroville OR 11945-WSelma SL 11944-W

(continued)

(To be inserted by utility) Issued by (To be inserted by CPUC)Advice Letter No. GREG A. MILLEMAN Date Filed

Decision No. Name EffectiveVice President Resolution No.

TITLE

2357-A

Page 10: CALIFORNIA PUBLIC UTILITIES COMMISSION DIVISION OF … · 1/1/2020  · purchased water, power , and pump taxes, and actual water production costs. For metered customers, the WRAM

CALIFORNIA WATER SERVICE COMPANY Revised Cal. P.U.C. Sheet No. 1720 North First Street, San Jose, CA 95112(408) 367-8200 Canceling Revised Cal. P.U.C. Sheet No.

M. WATER REVENUE ADJUSTMENT MECHANISM / MODIFIED COST BALANCING ACCOUNT(WRAM/MCBA)

1. PURPOSE: The purpose of the WRAM Balancing Account and the MCBA is to track water revenues and water productionrelated costs for future disposition. The Commission has determined that these accounting mechanisms are appropriate in coordination with a trial program of increasing block rate structures and increased conservation activities.The trial program will be reviewed in Cal Water's General Rate Case proceedings.

2. APPLICABILITYThe WRAM Balancing Account and the MCBA apply to all areas served.

3. DEFINITIONSA. Non-WRAM revenue is all revenue excluded from the WRAM account, including metered

service charges, raw water quantity charges, construction meter monthly and quantity charges, public and private (D)fire protection service, flat rate residential service, and other unmetered miscellaneous revenue. In addition, surcharges and surcredits, unless specifically included in adopted revenue requirement, are excluded from WRAM accounting.

B. WRAM-eligible revenue is all revenue not excluded in 3.A, above. Generally, WRAM eligible revenue results from potablequantity charges to permanent residential and non-residential customers, and from quantity charges to recyled water customers. (C)

C. Recorded WRAM-eligible revenue is the amount of revenue billed to customers in a particular period.

D. Adopted WRAM-eligible revenue is the amount of metered usage-related revenue necessary inconjunction with adopted non-WRAM revenue to generate the adopted revenue requirement.

4. ACCOUNTING PROCEDURE:A. The following entries will be recorded monthly in U.S. Dollars ($) to each district’s WRAM

Balancing Account:1. Recorded WRAM-eligible revenue2. Adopted WRAM-eligible revenue (See Paragraph 8)3. Total net WRAM balance = (1) minus (2)

B. The following entries will be recorded monthly in U.S. Dollars ($) to each district’s MCBA:1. Recorded purchased water cost, if applicable2. Adopted purchased water cost, if applicable (See Paragraph 8)3. Difference between (1) and (2)

4. Recorded purchased power cost5. Adopted purchased power cost (See Paragraph 8)6. Difference between (4) and (5)

7. Recorded groundwater charges, if applicable8. Adopted groundwater charges, if applicable (See Paragraph 8)9. Difference between (7) and (8)

10. Total net MCBA balance = (3) + (6) + (9)

5. Cal Water will record the accumulated WRAM Balance monthly, by adding its entry in section A. 3. to the prior accumulatedmonthly balance. Cal Water will record the accumulated MCBA Balance, by adding its entry in Section B.10. to the prior month'saccumulated balance. Cal Water shall apply interest to the average net balance in the WRAM and MCBA accountsat a rate equal to one twelfth the interest rate on three month Commercial Paper for the previous month as reportedin the Federal Reserve Stastical Release, H.15. or its successor. Accumulated interest will be included in the amounton which interest is charged, but will be identified as a separate component of the WRAM and MCBA accounts.

(To be inserted by utility) Issued by (To be inserted by Cal. P.U.C.)

Advice Letter No. 2357-A GREG A. MILLEMAN Date Filed NAME

Decision No. Vice President Effective TITLE

Resolution No. -

XXXX-W

7345-W

Preliminary Statement(continued)

(continued)

Page 11: CALIFORNIA PUBLIC UTILITIES COMMISSION DIVISION OF … · 1/1/2020  · purchased water, power , and pump taxes, and actual water production costs. For metered customers, the WRAM

CALIFORNIA WATER SERVICE COMPANY Revised Cal. P.U.C. Sheet No. 1720 North First Street, San Jose, CA 95112(408) 367-8200 Canceling Revised Cal. P.U.C. Sheet No.

M. WATER REVENUE ADJUSTMENT MECHANISM / MODIFIED COST BALANCING ACCOUNT(WRAM/MCBA)

6. DISPOSITION:A. By November 30th of each year, Cal Water will provide the Water Division a written report on the status (C)

of the WRAM and MCBAs (with a copy to the Public Advocates Office). The written report will include |a section on the WRAM in each district showing the net accumulated balance as of September 30th |of the preceding calendar year. The written report will include a section on the MCBA in each district |showing the net accumulated balance as of September 30th of the preceding calendar year. If this report |shows that the combined net accumulated balance for the WRAM and the MCBA in any district exceeds |2% of the district’s total recorded revenue requirement for the prior calendar year, Cal Water will file |an advice letter by March 31st of the following year that amortizes the balance in both of the accounts in |the district. Cal Water also has the option to amortize net accumulated balances that are less than 2% (C)

(D)B. In each general rate case filing, Cal Water will address and request amortization of any remaining (C)

amounts in the WRAM and MCBA.

C. Recovery of under-collections will be passed on to metered ratepayers through volumetric surcharges. (C)Refunds of over-collections will be passed on to metered ratepayers through surcredits on monthly service charges. (C)

(D)7. MAINTAINING LEAST COST WATER MIX:

If there are significant changes in purchased water in a district that has multiple sources (which in turnaffects the amount of purchased power and pump tax), Cal Water will make a showing in the district’snext GRC filing demonstrating that it has exercised due diligence in ensuring the least-cost mix for itswater sources, and that the significant change in water purchases was reasonable. For the purpose of theTrial Program, significant changes in water purchases are defined as when the annual volume of purchasedwater in a district is greater than 10% of the purchased water adopted in the most recent GRC for thatdistrict.

8. WRAM/MCBA ADOPTED QUANTITIESIn order to properly record and report on the WRAM/MCBA balances, Cal Water proposes thispreliminary statement as a central location to memorialize the adopted quantities by month forparagraph 4.A.2 (WRAM adopted revenue), 4.B.2 (MCBA adopted purchased water cost), 4.B.5 (MCBAadopted purchased power cost), and 4.B.8(MCBA adopted groundwater fees). Any time Cal Water files arate change or other advice letter affecting these components, it will file to amend the appropriate section (D)of the preliminary statement.

(D)

(To be inserted by utility) (To be inserted by Cal. P.U.C.)

Advice Letter No. 2357-A GREG A. MILLEMAN Date Filed NAME

Decision No. Vice President Effective TITLE

Resolution No.

XXXXX-W

8372-W

Preliminary Statement(continued)

Issued by

Page 12: CALIFORNIA PUBLIC UTILITIES COMMISSION DIVISION OF … · 1/1/2020  · purchased water, power , and pump taxes, and actual water production costs. For metered customers, the WRAM

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