2021 Cost of Capital Application

On May 3, 2021, Cal Water filed Application (A.) 21-05-002 with the California Public Utilities Commission (CPUC) to increase rates to establish its authorized Cost of Capital (CoC) for the period of Jan. 1, 2022 through Dec. 31, 2024. For 2022-2024, Cal Water’s application requests an increase in the rate of return of 7.5% from the current rate of 7.48%. Overall, the proposed changes to the CoC would increase Cal Water’s currently authorized revenues statewide by $4,408,700 (0.6%). Rates would increase no sooner than January 1, 2022.

What is Cost of Capital?

All utilities, whether public or private, must obtain funding to finance the cost of infrastructure improvements and repay debt. This ensures funds are available to make infrastructure improvements, so water mains, wells, pumps, tanks, treatment systems, and other parts of the water system continue to provide a safe, reliable water supply. Cal Water proposes a financing structure in its CoC application that includes the amount of return needed to attract investors and secure long-term debt (loans and financial obligations longer than one year). As the agency regulating Cal Water, the CPUC is tasked with ensuring the CoC is reasonable.