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Regulatory Matters: | 3 Months Ended
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Mar. 31, 2017
Regulated Operations [Abstract] |
Regulatory Matters | Regulatory Matters: In accordance with accounting principles for rate-regulated enterprises, Registrant records regulatory assets, which represent probable future recovery of costs from customers through the ratemaking process, and regulatory liabilities, which represent probable future refunds that are to be credited to customers through the ratemaking process. At March 31, 2017, Registrant had approximately $58.0 million of regulatory assets, net of regulatory liabilities, not accruing carrying costs. Of this amount, $26.6 million relates to the underfunded position in Registrant's pension and other post-retirement obligations, $5.5 million relates to a memorandum account authorized by the CPUC to track unrealized gains and losses on BVES' purchase power contracts over the term of the contracts, and $20.7 million relates to deferred income taxes representing accelerated tax benefits flowed through to customers, which will be included in rates concurrently with recognition of the associated future tax expense. The remainder relates to other items that do not provide for or incur carrying costs. Regulatory assets represent costs incurred by GSWC for which it has received or expects to receive rate recovery in the future. In determining the probability of costs being recognized in other periods, GSWC considers regulatory rules and decisions, past practices, and other facts or circumstances that would indicate if recovery is probable. If the CPUC determines that a portion of GSWC’s assets are not recoverable in customer rates, GSWC must determine if it has suffered an asset impairment that requires it to write-down the assets’ value. Regulatory assets are offset against regulatory liabilities within each rate-making area. Amounts expected to be collected or refunded in the next 12-months have been classified as current assets and current liabilities by rate-making area. Regulatory assets, less regulatory liabilities, included in the consolidated balance sheets are as follows:
(dollars in thousands) |  | March 31, 2017 |  | December 31, 2016
GSWC |  |  |  |
Water Revenue Adjustment Mechanism, net of Modified Cost Balancing Account |  | $ | 55,298 |  |  | $ | 47,340 |
Costs deferred for future recovery on Aerojet case |  | 11,705 |  |  | 11,820 |
Pensions and other post-retirement obligations (Note 7) |  | 27,452 |  |  | 28,118 |
Derivative unrealized loss (Note 4) |  | 5,460 |  |  | 4,901 |
Flow-through taxes, net (Note 6) |  | 20,708 |  |  | 20,134 |
Low income rate assistance balancing accounts |  | 8,502 |  |  | 8,272 |
General rate case memorandum accounts |  | 14,689 |  |  | 13,929 |
Other regulatory assets |  | 17,477 |  |  | 17,633 |
Various refunds to customers |  | (5,304 | ) |  | (5,866 | )
Total |  | $ | 155,987 |  |  | $ | 146,281 |
Regulatory matters are discussed in detail in the consolidated financial statements and the notes thereto included in the Form 10-K for the year ended December 31, 2016 filed with the SEC. The discussion below focuses on significant matters and developments since December 31, 2016. Alternative-Revenue Programs: GSWC records the difference between what it bills its water customers and that which is authorized by the CPUC using the Water Revenue Adjustment Mechanism (“WRAM”) and Modified Cost Balancing Account (“MCBA”) accounts approved by the CPUC. The over- or under-collection of the WRAM is netted against the MCBA over- or under-collection for the corresponding rate-making area and bears interest at the current 90-day commercial paper rate. GSWC has implemented surcharges to recover its WRAM/MCBA balances as of December 31, 2016. For the three months ended March 31, 2017 and 2016, surcharges (net of surcredits) of approximately $4.0 million and $1.4 million, respectively, were billed to customers to recover previously incurred under-collections in the WRAM/MCBA accounts. During the three months ended March 31, 2017, GSWC recorded additional net under-collections of $11.6 million in the WRAM/MCBA accounts. As of March 31, 2017, GSWC had a net aggregated regulatory asset of $55.3 million which is comprised of a $40.0 million under-collection in the WRAM accounts and $15.3 million under-collection in the MCBA accounts. As required by the accounting guidance for alternative revenue programs, GSWC is required to collect its WRAM balances, net of its MCBA, within 24 months following the year in which an under-collection is recorded. In April 2012, the CPUC set the recovery period for under-collected balances that are up to 15% of adopted annual revenues at 18 months or less. For under-collected balances greater than 15%, the recovery period is 19 to 36 months. As of March 31, 2017, the recovery periods for GSWC's WRAM/MCBA balances are primarily within the 12 to 18-month period; however, there were some ratemaking areas that had recovery periods related to the 2015 WRAM balances that are greater than 24 months. As a result, during the fourth quarter of 2015, GSWC did not record $1.4 million of the 2015 WRAM under-collection balance as revenue. This amount is being recognized as revenue when it is determined that it will be collected within 24 months and, therefore, approximately $320,000 and $910,000 was recognized during the first quarter of 2017 and during the year ended December 31, 2016, respectively, with the remaining balance to be recognized in future periods. Water General Rate Case: In December 2016, the CPUC issued a decision in GSWC's water general rate case for all its water ratemaking areas and the general office to determine new rates for the years 2016, 2017 and 2018. The new rates approved were retroactive to January 1, 2016. However, because of the delay in issuing a decision, the CPUC ordered GSWC to bypass implementing 2016 rates and to implement 2017 rates after the correction of some minor rate calculations in the December 2016 decision, which the CPUC completed and subsequently issued a final decision in March 2017. Any revenue shortfall due to differences between the actual rates charged in 2016 and early 2017 while the decision was still pending and the new rates adopted in the March 2017 final decision will be recovered through a rate surcharge. The new rates were implemented in April 2017. Because of the delay in the final decision, GSWC accumulated $10.2 million in its general rate case memorandum accounts as of March 31, 2017, the majority of which were accumulated during 2016, representing the rate difference between interim rates and final rates authorized by the CPUC in March 2017, retroactive to January 1, 2016. Surcharges are expected to be implemented later in 2017 to recover the retroactive rate difference over approximately 12 - 24 months for the majority of GSWC's water ratemaking areas. Other Regulatory Matters: Cost of capital application In early April 2017, GSWC filed its water cost of capital application with the CPUC. The application filed with the CPUC recommends an overall weighted return on rate base of 9.11%, including an updated cost of debt of 6.6% and a return on equity ("ROE") of 11%. The current authorized return on rate base is 8.34%, including an ROE of 9.43%. A decision on the application is scheduled to be received by the end of 2017 and to become effective January 1, 2018. At this time, management cannot predict the outcome of this application and whether the CPUC will approve GSWC's request. Formal Complaint Filed with the CPUC In June 2016, a third party filed a formal complaint with the CPUC against GSWC about a water main break that occurred in 2014 causing damage to a commercial building. Repairs to the building have been delayed for a variety of reasons, including a dispute and litigation between two of GSWC's insurance carriers regarding their respective coverage obligations, as well as questions as to the nature and extent of the building’s damage and the costs associated therewith. The complaint filed with the CPUC requests, among other things, that the CPUC investigate the main break, the damage to the commercial building and the delay of its repairs, and order GSWC to immediately complete repairs. GSWC believes it has reasonable defenses to the complaint filed with the CPUC. In July 2016, GSWC filed an answer to the formal complaint with the CPUC as well as a motion to dismiss the complaint. Previously, the owners of the commercial building filed suit in Ventura County Superior Court against GSWC for damages to the building. The trial of this lawsuit is expected to begin in May 2017. GSWC believes it has sufficient insurance coverage to cover any judgment entered in the civil suit pending in Superior Court. However, GSWC cannot predict the outcome of the Superior Court litigation, the dispute and litigation between its insurers, or the CPUC proceeding, and as a result, cannot make an estimate of a loss or range of loss, if any, at this time.

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- Definition The entire disclosure for detailed information about regulatory assets and liabilities, including current and noncurrent assets created when regulatory agencies permit the deferral of costs to the balance sheet that would otherwise be required to appear on the company's income statement and would be charged against current expenses or revenues, as well as current and noncurrent liabilities created when regulatory agencies permit. + References No definition available. + Details
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