IN THE SUPREME COURT OF 

CALIFORNIA

GOLDEN STATE WATER COMPANY,

Petitioner,

v.

PUBLIC UTILITIES COMMISSION,

Respondent.

S269099

Cal.P.U.C. Decision No. 20-08-047

__________________________________________________

CALIFORNIA-AMERICAN WATER COMPANY et al.,

Petitioners,

v.

PUBLIC UTILITIES COMMISSION,

Respondent.

S271493

Cal.P.U.C. Decision Nos. 20-08-047 and 21-09-047

July 8, 2024

Justice Kruger authored the opinion of the Court, in which 

Chief Justice Guerrero and Justices Corrigan, Liu, Groban, 

Jenkins, and Evans concurred.
1

GOLDEN STATE WATER COMPANY v. PUBLIC 

UTILITIES COMMISSION*

S269099

Opinion of the Court by Kruger, J.

In recent decades, California has experienced severe and 

recurring drought conditions that have heightened concerns 

about how water is sold. Like any other service provider, water 

companies typically have a financial incentive to sell more of 

their service. To reduce that financial incentive to sell more 

water to more consumers, and thus to encourage water 

conservation, the Public Utilities Commission in 2008 allowed 

certain water companies to structure their rates in a way that 

“decouples” revenue from the amount of water sold. More than 

a decade later, in a proceeding ostensibly focused on improving 

the accuracy of water sales forecasts necessary for use of this 

decoupling mechanism, the Commission ordered that the 

mechanism be eliminated altogether. 

The issue before us does not concern the merits of this 

decision, but the process that led up to it. The question is 

whether the Commission gave adequate notice that the 

elimination of the decoupling mechanism was one of the issues 

to be considered in the proceeding. We conclude that the answer 

is no. We further conclude that the Commission’s failure to give 

adequate notice requires us to set the order aside.

* Consolidated with California-American Water Company et 

al. v. Public Utilities Commission (S271493).
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I.

Petitioners are five large water utilities and an association 

that represents investor-owned water utilities’ interests; for 

simplicity’s sake, we refer to the utilities collectively as the 

Water Companies. They seek to set aside an order of the Public 

Utilities Commission eliminating a type of conservation-focused 

ratesetting mechanism known as the Water Revenue 

Adjustment Mechanism, based on defects in the proceedings 

that led to the issuance of the order. This case does not concern 

the substance of the Commission’s decision, but some 

understanding of the substance helps to explain the nature of 

the procedural dispute now before us. We therefore begin by 

offering a brief overview of the mechanisms at issue in the 

challenged order before turning to the history of how that order 

came to be. 

A. Water Revenue Adjustment Mechanism

and Modified Cost Balancing Account

The Water Companies are what is known as Class A water 

utilities, a term the Commission uses to refer to water utilities 

with more than 10,000 service connections. Under the Public 

Utilities Code, these large water utilities must periodically seek 

the Commission’s approval of future rates through a formal 

“general rate case” (often abbreviated as “GRC”) application 

process. (See Pub. Util. Code, § 455.2, subd. (c).)1 

One issue relevant to the amount and structure of rates is 

California’s interest in water conservation. Because water 

1 Other, smaller utilities must also seek the Commission’s 

approval to change the rates they charge customers. (See, e.g., 

Pub. Util. Code, § 454, subd. (b).)
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utilities’ revenue comes in part from quantity charges — that is, 

charges based on the amount of water sold to customers —

companies in the business of selling water generally have a 

financial incentive to sell more water. That incentive is in 

tension with California’s interest in reducing water 

consumption — an interest that is particularly acute in an era 

marked by frequent and sustained periods of drought. 

Seeking to alleviate that tension, the Commission in 2008 

authorized certain utilities to implement concepts known as the 

Water Revenue Adjustment Mechanism and the Modified Cost 

Balancing Account. A Water Revenue Adjustment Mechanism 

(WRAM) works by tracking the difference between quantity-rate 

revenues authorized by the Commission and quantity-rate 

revenues billed by a utility. If the Commission authorizes more 

quantity-rate revenue than the utility bills, the utility may be 

able to surcharge customers. If the Commission authorizes less 

quantity-rate revenue than the utility bills, a credit to 

customers might instead be appropriate. To determine whether 

a surcharge or credit is warranted, and in what amount, the 

difference between authorized and actual quantity-rate revenue 

is netted against a Modified Cost Balancing Account (MCBA), 

which tracks the difference between certain authorized and 

actual water provision costs. 

As the Commission has explained, “[t]he major purpose” 

of adopting this approach “was to decouple sales from revenues 

and thus promote conservation.” The incentive to sell more 

water is reduced if revenues above those authorized must be 

returned to customers and revenues below those authorized can 

be surcharged. Because the WRAM approach depends on 

tracking the difference between actual quantity-rate revenues 
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and revenues approved by the Commission, the mechanism 

depends on forecasting water sales. Forecasts affect the 

quantity revenue rates approved by the Commission and thus

whether customers will have to pay WRAM surcharges on their 

water bills.

In the 2020 order challenged here, the Commission 

prohibited the water companies from proposing the 

WRAM/MCBA approach but allowed water companies to 

instead propose using something known as a Monterey-style 

WRAM (M-WRAM) with an Incremental Cost Balancing 

Account (ICBA). Although the names are similar, the 

mechanisms are meaningfully different. The Monterey-style 

WRAM with ICBA is also a revenue adjustment mechanism, but 

in contrast to a WRAM, it is not a full decoupling mechanism; 

the M-WRAM instead adjusts for the difference between 

revenue collected under a tiered “conservation” rate structure, 

designed to impose increased costs for use of water exceeding 

certain thresholds, and the revenue that would have been 

collected, at actual sales levels, with a uniform rather than 

tiered structure in place. 

B. Prior Commission Proceedings Addressing

Water Revenue Adjustment Mechanisms

and Modified Cost Balancing Accounts

After approving the Water Revenue Adjustment 

Mechanism/Modified Cost Balancing Account approach in 2008, 

the Commission conducted various proceedings addressing the 

efficacy and advisability of maintaining that approach. 

In 2012, the Commission concluded that it “require[d] a 

more vigorous review of the Water Revenue Adjustment 

Mechanism/Modified Cost Balancing Account (WRAM/MCBA) 
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mechanisms and options to the mechanisms, as well as sales 

forecasting,” to be conducted in pending and future general rate 

case proceedings. (Decision Addressing Amortization of Water 

Revenue Adjustment Mechanism Related Accounts and 

Granting in Part Modification to Decision (Apr. 19, 2012) 

Cal.P.U.C. Dec. No. 12-04-048 [2012 Cal.P.U.C. Lexis 191, *60–

*61] (Decision 12-04-048).) The Commission ordered that in 

these upcoming general rate case proceedings, applicants should 

provide testimony addressing various alternatives, including 

“eliminat[ing] the WRAM mechanism” and “adopt[ing] a 

Monterey-style WRAM rather than the existing full WRAM.” 

(Id., at pp. *62, *61.)

In 2013, in connection with Golden State Water 

Company’s general rate case, the Commission issued a decision 

addressing “the first review of Golden State’s conservation rate 

pilot programs . . . , including a review of the Water Revenue 

Adjustment Mechanism (WRAM) and Modified Cost Balancing 

Account (MCBA).” (Decision on the 2011 General Rate Case for 

Golden State Water Company (May 9, 2013) Cal.P.U.C. Dec. 

No. 13-05-011 [2013 Cal.P.U.C. Lexis 221, *2].) The decision

found “that the WRAMs/MCBAs are achieving their stated

purpose by severing the relationship between sales and revenue

and removing most disincentives for Golden State to implement

conservation rates and conservation programs.” (Id., at pp. *2–

*3.) The decision acknowledged difficulties with

implementation: “Because Golden State is authorized to collect

via the WRAM the difference between its authorized and actual

revenues, the over-estimate of forecasted water consumption

has resulted in substantial under-collection of authorized

revenues. Parties identify the sales forecasting methodology as
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a factor leading to large WRAM balances but state that other

factors such as weather, the economy, drought declarations, or

community involvement in conservation programs also reduce

consumption and thereby affect WRAM balances. Whatever the

cause, the large revenue under-collections result in large WRAM

surcharges that customers perceive as punishment for

conserving water.” (Id., at p. *102, fn. omitted.) Nevertheless,

“[b]ecause the WRAMs/MCBAs established for Golden State are

functioning as intended,” the Commission determined that none

of the alternatives described in the 2012 order “should be

adopted at this time.” (Id., at p. *110.) The Commission thus

declined to either eliminate the WRAM or switch to a Montereystyle WRAM. The latter option, the Commission concluded,

“should not be adopted because [it] would tie sales to revenues,

and, as a result, could discourage Golden State from offering

conservation rates and conservation programs, and undermine

efforts to reduce water consumption.” (Id., at p. *113.)

In 2015, the Commission issued a scoping memo in

connection with a rulemaking proceeding. By statute, a scoping

memo issues after the start of a proceeding and, among other

things, “describes the issues to be considered” in that

proceeding. (Pub. Util. Code, § 1701.1, subds. (b)(1), (c).) The

2015 scoping memo solicited feedback on 16 topics, several of

which centered on Water Revenue Adjustment Mechanisms and

Modified Cost Balancing Accounts. Among other things, the

scoping memo asked whether these mechanisms encourage

conservation and how they might be refined. 

In December 2016, the Commission considered evidence

collected in response to that scoping memo and a related

workshop. (See Decision Providing Guidance on Water Rate
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Structure and Tiered Rates (Dec. 1, 2016) Cal.P.U.C. Dec.

No. 16-12-026 [2016 Cal.P.U.C. Lexis 682, *1, *17–*24, *128]

(Decision 16-12-026).) The Commission “conclude[d] that, at 

this time, the WRAM mechanism should be maintained.” (Id.,

at p. *63.) But “to lessen resort to and impact of WRAMs” (ibid.), 

the Commission ordered investor-owned Class A water utilities 

to “propose improved forecast methodologies in their General 

Rate Case application, or in standalone, separate applications” 

(id., at p. *130). That decision (D.16-12-026) and the 

rulemaking in connection with which it was issued (R.11-11-

008) are cited in the initial scoping memo for the proceeding at 

issue here, which began about seven months later.

C. Proceedings in This Rulemaking Before 

Issuance of the Proposed Decision

In July 2017, the Commission commenced the rulemaking 

that culminated in the order challenged here. Among other 

things, that order requires the discontinuation of 

WRAMs/MCBAs. 

The central question now before us is whether the 

Commission gave adequate notice that eliminating the 

WRAMs/MCBAs was on the table, so our recitation of the 

relevant background focuses on the notice the parties received 

with respect to that issue. We focus in particular on four memos 

or rulings of note: (1) the initial scoping memo; (2) an amended 

scoping memo; (3) a June 2019 Administrative Law Judge (ALJ) 

ruling; and (4) a September 2019 ALJ ruling. 

1. Initial Scoping Memo

The Commission entered an order instituting rulemaking

on July 10, 2017. After a prehearing conference and two 

workshops, the assigned commissioner issued a scoping memo
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stating that “[t]he issues to be addressed in this proceeding 

relate to a review of low-income rate assistance programs for 

water utilities.” 

The proceeding was to be divided into two phases. The 

first phase was to address the following issues:

“1. Consolidation of at risk water systems by regulated 

water utilities. [¶] a. How could the Commission work with the 

[State Water Resources Control Board] and Class A and B water 

utilities to identify opportunities for consolidating small nonregulated systems within or adjacent to their service territories 

that are not able to provide safe, reliable and affordable drinking 

water? Should the Commission address consolidation outside of 

each utility’s general rate case (GRC)? [¶] b. In what ways can 

the Commission assist Class A and B utilities that provide 

unregulated affiliate and franchise services to serve as 

administrators for small water systems that need operations & 

maintenance support as proscribed [sic] by Senate Bill (SB) 552 

(2016)?

“2. Forecasting Water Sales [¶] a. How should the 

Commission address forecasts of sales in a manner that avoids 

regressive rates that adversely impact particularly low-income 

or moderate income [sic] customers? [¶] b. In Decision (D.)16-

12-026, adopted in Rulemaking 11-11-008, the Commission 

addressed the importance of forecasting sales and therefore 

revenues. The Commission, in D.16-12-026, directed Class A 

and B water utilities to propose improved forecast 

methodologies in their GRC application. However, given the 

significant length of time between Class A water utility GRC 

filings, and the potential for different forecasting methodologies 

proposals in individual GRCs, the Commission will examine 
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how to improve water sales forecasting as part of this phase of 

the proceeding. What guidelines or mechanisms can the 

Commission put in place to improve or standardize water sales 

forecasting for Class A water utilities?

“3. What regulatory changes should the Commission 

consider to lower rates and improve access to safe quality 

drinking water for disadvantaged communities?

“4. What if any regulatory changes should the 

Commission consider that would ensure and/or improve the 

health and safety of regulated water systems?”

The scoping memo further specified that the issues to be 

addressed “in Phase II or if necessary a Phase III” were as 

follows: “5. Program Name; [¶] 6. Effectiveness of [Low Income 

Rate Assistance (LIRA)] Programs; [¶] 7. Monthly Discounts;

[¶] 8. Program Cost Recovery; [¶] 9. Commission Jurisdiction 

Over Other Water Companies; and [¶] 10. Implementation of 

Any Changes to Existing LIRA Programs.” 

The California Water Association, among others, filed 

comments addressing these issues. In response to the sales 

forecasting question, the Association argued that “the 

Commission should also consider folding the Water Revenue 

Adjustment Mechanism/Modified Cost Balancing Account . . . 

recovery into base rates instead of surcharges.” “Approving 

mechanisms to update forecasts between general rate cases,” it 

added, “is the best way to minimize the need for surcharges that 

alienate all customers, including low-income or moderateincome customers.” 
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2. Amended Scoping Memo

Several months later, in July 2018, the assigned 

commissioner issued an amended scoping memo. Citing 

developments since the issuance of the first scoping memo in 

January 2018, the amended scoping memo added two issues to 

the proceeding: “1. How best to consider potential changes in 

rate design such that there is a basic amount of water that 

customers receive at a low quantity rate; and [¶] 2. Whether the 

[Commission] should adopt criteria to allow for sharing of lowincome customer data by regulated investor-owned energy 

utilities with municipal water utilities.” 

3. June 2019 ALJ Ruling

A workshop about rate design followed nearly a year later. 

In June 2019, after Commission staff prepared a report 

summarizing the workshop, an ALJ issued a ruling that called 

for comments on the report and that scheduled an August 2019

workshop “to discuss potential changes to enhance water 

affordability, including the existing low-income programs.” The 

June 2019 ruling also posed several questions to be discussed at 

that future workshop. None of the 11 enumerated questions 

(nor any of their subquestions) mentioned the WRAM/MCBA. 

The questions included: “What if any changes should the 

Commission consider as to its water forecasting? How do we 

include the potential for drought in forecasting future sales, or 

what other mechanism can be implemented to ensure a more 

accurate forecast? [¶] . . . Should there be a mechanism to 

adjust rates mid-year or end of year as the shortfalls occur, 

especially during drought years?” 

The issue of eliminating the WRAM/MCBA was raised in 

comments submitted in response to the ALJ’s ruling. 
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Specifically, in response to the question whether there should be 

a mechanism to adjust rates in the middle or at the end of the 

year as water shortfalls occur, the Public Advocates Office at the 

Commission took the view that it would be better to adopt a 

different approach to water revenue adjustment altogether. The 

Office explained: “The Commission should . . . order conversion 

of full Water Revenue Adjustment Mechanisms (WRAMs) to 

Monterey-style WRAMS, which are directly tied to the impact of 

conservation efforts on water consumption. The Commission 

should then explore eliminating any and all decoupling 

mechanisms because compliance to conservation mandates is 

now required by law, addressing any disincentives utilities 

might have to achieve conservation outcomes.” 

The California Water Association filed a reply. The 

Association objected that the Public Advocates Office’s 

suggestion to abandon decoupling mechanisms went “well 

beyond the appropriate scope of the questions presented” and

“falls well outside the scope of this proceeding.” The Association 

also disagreed with the Office’s proposal on the merits. 

4. September 2019 ALJ Ruling

The Commission held the August workshop “to address 

outstanding issues and party comments received on the 

following topics: 1) consolidation of at-risk systems;

2) forecasting/drought; and 3) rate design.” Commission staff 

prepared a report about that workshop as well. An ALJ ruling 

followed in September 2019, noting that “the proposed decision 

in this proceeding may include amendments to the 

Commission’s program rules in the areas of consolidation, 

forecasting, rate design, and other implementation measures to 

enhance water affordability, including low-income programs.” 
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“In order to ensure a complete record for consideration in this 

proceeding the parties, in addition to commenting on the . . . 

Staff Report, are to respond to the questions set out below.” The 

ruling then enumerated 18 sets of questions, most notably: “6. 

For utilities with a full Water Revenue Adjustment Mechanism 

(WRAM)/Modified Cost Balancing Account (MCBA), should the 

Commission consider converting to Monterey-style WRAM with 

an incremental cost balancing account? Should this 

consideration occur in the context of each utility’s GRC? [¶] 7. 

Should any amortizations required of the Monterey-style 

WRAM and incremental cost balancing accounts be done in the 

context of the GRC and attrition filings?” 

The record prepared by the parties in this case includes 

excerpts or complete copies of comments and reply comments 

filed by the California Water Association and the Public 

Advocates Office. The most notable of those comments 

addressed question six, regarding whether the Commission 

should “consider converting to Monterey-style WRAM.” 

The Public Advocates Office answered “Yes.” It 

elaborated: “[T]he Commission should provide the clear and 

unambiguous policy direction in this Rulemaking that utilities 

should convert full WRAMs to Monterey-style WRAMs. 

Implementation of this policy can then proceed efficiently in 

pending and future GRCs of all Class A water utilities.” 

The California Water Association’s reply expressed 

“vehement[]” disagreement with the proposal to convert to MWRAMs. In its initial comments, the Association argued that 

converting “to Monterey-style WRAMs in this rulemaking 

proceeding is a procedurally improper method for seeking to 

modify several final Commission Decisions and falls well outside 
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the scope of this proceeding. These mechanisms do not have 

anything to do with providing assistance to low-income 

customers.” On the merits, the Association also argued, among 

other things, that “the Monterey-style WRAM does not decouple 

sales from revenues and therefore fails to address the perverse 

incentive for water utilities to increase water sales and discount 

conservation efforts.” 

Responding to this latter claim, the Public Advocates 

Office contended that the “statement is not supported by actual 

data.” The Office included a graph that it described as showing 

that “water utilities with and without full decoupling WRAM 

have shown almost identical trends in annual sales 

fluctuations.”2 

D. Proposed Decision

The assigned commissioner issued a proposed decision in 

July 2020. The decision proposed to order, among other things, 

that several water companies, “in their next general rate case 

applications, shall transition existing Water Revenue 

Adjustment Mechanisms to Monterey-Style Water Revenue 

Adjustment Mechanisms.”

Several water companies objected to the proposed 

decision. In addition to concerns about the merits of requiring 

2 Several months later, the assigned commissioner issued a 

second amended scoping memo “to request comments to 

consider potential Commission response to the COVID-19 

pandemic and initiate[] Phase II” of the rulemaking. The 

additional questions set out in the ruling concern Phase II of the 

rulemaking and are not at issue here.
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such a transition, the companies expressed concerns about the 

procedures leading up to the proposed decision. 

The California-American Water Company, for example,

argued that “[t]he issue of elimination of the WRAM/MCBA is 

outside the scope of the proceeding and was never explicitly 

identified in the scoping memos. If the [Commission] intends to 

address this issue, it should do so in a separate proceeding that 

would provide parties, particularly those interested in 

conservation issues, a fair and full opportunity to participate.” 

The Company further argued that “[t]he record in this 

proceeding on the conservation impact of the decoupling 

WRAM/MCBA is incomplete and ignores the significant 

conservation achievements of the utilities with 

WRAM/MCBAs.” Others similarly contended that the proposed 

decision contained factual errors related to the limited 

procedures leading up to the decision. 

A former commissioner submitted a letter in her personal 

capacity. She wrote, among other things, that the proposal to 

order utilities to abandon Water Revenue Adjustment 

Mechanisms was “not within this proceeding’s scope and thus 

not fully litigated in this proceeding.” She explained that the 

proposed decision “fail[ed] to recognize the functional difference 

between forecasting (a set of tools used to project water 

consumption and assist in rate-setting) [and] the WRAM and 

MCBA (mechanisms to collect rates and track the difference 

between authorized rates and revenues).” 

E. Decision and Order

A few weeks after receiving comments on the proposed 

decision, the Commission entered its Decision No. 20-08-047
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and accompanying order. Among other things, the decision and 

order mandated a shift away from use of WRAMs.

The Commission explained that its “decision evaluates the 

sales forecasting processes used by water utilities and concludes 

that, after years as a pilot program, the Water Revenue 

Adjustment Mechanisms have proven to be ineffective in 

achieving its [sic] primary goal of conservation. This decision 

therefore identifies other benefits the Water Revenue 

Adjustment Mechanisms provide that are better achieved 

through the Monterey-Style Water Revenue Adjustment 

Mechanisms and requires water utilities to propose MontereyStyle Water Revenue Adjustment Mechanisms in future general 

rate cases.” The Commission ordered that the Water Companies 

“shall not propose continuing existing Water Revenue 

Adjustment Mechanisms/Modified Cost Balancing Accounts but 

may propose to use Monterey-Style Water Revenue Adjustment 

Mechanisms and Incremental Cost Balancing Accounts.” 

Responding to the objection that terminating WRAMs was 

outside the scope of the proceeding, the Commission stated:

“Consideration of changes to the WRAM/MCBA is and has 

always been within the scope of this proceeding as part of our 

review of how to improve water sales forecasting.” The

Commission noted that its decision was supported by evidence 

presented by the Public Advocates Office reply comments to the 

September 2019 ALJ ruling (comments which included the 

aforementioned graph) and emphasized “the fundamental point 

that no party has presented evidence or arguments that 

persuade us that the pilot WRAM/MCBA mechanism provides 

discernable benefits that merit its continuation.” Further, the 

Commission stated, “no water company or any other party 
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offered any alternative to the WRAM/MCBA process other than 

allowing companies to use a Monterey-Style WRAM in future 

GRCs.” The decision and order does not explicitly respond to 

objections that the record was insufficient to decide whether to 

prohibit future use of WRAMs, nor does the decision and order 

explicitly respond to some of the examples offered by the 

California Water Service Company, in response to the proposed 

decision, as alternative ways to “minimize WRAM balances 

and/or recover under-collected revenues relating to decoupling.” 

(Fn. omitted.)

Commissioner Randolph dissented, faulting the majority 

for eliminating the Water Revenue Adjustment Mechanism 

“instead of focusing on improving sales forecasts” to decrease 

WRAM balances.

F. Rehearing

Several water companies sought rehearing, raising a 

litany of procedural and substantive concerns. The Commission 

denied rehearing. As in the original decision, the Commission 

rejected the idea that parties lacked notice that the Commission 

was considering eliminating the WRAM/MCBA approach in this 

proceeding. The Commission reasoned that “[t]he issue of the 

decoupling WRAM was included in the original Scoping Memo 

as part of the water sales forecasting issue.” It elaborated: “One 

of the main reasons that water sales forecasting is important to 

the Commission is that when forecast sales are higher than 

actual sales, the WRAM utilities recover that difference in 

revenue through surcharges on customer’s bills. Therefore, the 

risk of inaccurate forecasting is borne by the ratepayers. For 

non-WRAM utilities, if the water sales forecast is higher than 

actual sales, there is no mechanism to true-up the difference, 
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therefore the risk is borne by the utility. Our concern about 

water sales forecasting and its effect on rates is, therefore, 

heightened because of the WRAM.” 

The Commission further addressed objections concerning 

the evidence supporting its decision. It acknowledged that 

“Golden State argues that Finding of Fact #11, which states that 

the WRAM/MCBA has led to substantial under-collections and 

subsequent increases in quantity rates, is unsupported by 

current data,” and that Golden State “alleges that its comments 

on the [proposed decision] provided more current data reflecting 

it had over-collections in two of its service areas in recent years.” 

The Commission rejected this argument because “comments on 

the [proposed decision] are not included in the evidentiary 

record.” The Commission also concluded that the decision to 

eliminate the WRAM was supported by record evidence, relying 

again in part on the graph the Public Advocates Office 

submitted in reply comments, and faulting the parties for not 

seeking “permission to respond to the graph they now dispute or 

to have the graph stricken from the record.” The Commission 

further argued that the problems certain utilities identified with 

the graph “related to the measurement or interpretation of the 

data provided in” the graph, rather than contending “that the 

data are inaccurate.” 

II.

We issued writs of review in May 2022 and consolidated 

these cases soon after. (See Pub. Util. Code, § 1756, subd. (f).) 

That September, the Governor signed Senate Bill No. 1469

(2021–2022 Reg. Sess.) (Senate Bill No. 1469), concerning 

conservation-related decoupling mechanisms. The Commission 

has asked us to dismiss review on grounds that the new 
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legislation renders the case moot. We will begin with that 

threshold issue.

In enacting Senate Bill No. 1469, the Legislature found 

that “[b]ecause water suppliers have very significant fixed costs 

that do not fluctuate with changes in consumption patterns, 

they have a financial disincentive to encourage water 

conservation as reductions in water consumption directly 

translate into cost recovery challenges.” (Sen. Bill No. 1469 

(2021–2022 Reg. Sess.) § 1, subd. (a)(5).) To address this 

concern, the Legislature announced its intention “to ensure that 

water corporations are authorized to establish revenue 

adjustment mechanisms that provide for a full decoupling of 

sales and revenue in order to further incentivize water 

conservation efforts.” (Id., § 1, subd. (b).) As amended, the 

Public Utilities Code now instructs that “[u]pon application by a 

water corporation with more than 10,000 service connections, 

the commission shall consider, and may authorize, the 

implementation of a mechanism that separates the water 

corporation’s revenues and its water sales, commonly referred 

to as a ‘decoupling mechanism.’ ” (Pub. Util. Code, § 727.5, subd. 

(d)(2)(A).)

Shortly after Senate Bill No. 1469 was enacted, the 

Commission moved for dismissal on grounds of mootness or else 

reconsideration of our initial issuance of the writs of review. We 

denied the motion without prejudice to the Commission “raising 

arguments concerning mootness in its answer brief” in this 

court. In its answer brief, the Commission renewed those 

arguments. 

A case becomes moot when events “ ‘render[] it impossible 

for [a] court, if it should decide the case in favor of plaintiff, to 
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grant him any effect[ive] relief whatever.’ ” (Paul v. Milk 

Depots, Inc. (1964) 62 Cal.2d 129, 132; accord, In re D.P. (2023) 

14 Cal.5th 266, 276.) A case is not moot if the parties retain a 

concrete interest in the outcome. (Ellis v. Railway Clerks (1984) 

466 U.S. 435, 442; accord, Chafin v. Chafin (2013) 568 U.S. 165, 

172 (Chafin).) 

Here, the Commission argues that Senate Bill No. 1469 

gives the Water Companies everything they seek in this 

action — namely, a full opportunity to address the merits of 

WRAMs and MCBAs. But the statute refers only to 

consideration of a mechanism for decoupling revenue from 

sales — that is, a WRAM. It does not, at least in terms, address 

the MCBA, which concerns costs rather than revenues.

3

 Nor is 

the statute’s requirement to “consider” authorizing “a

mechanism” to decouple sales from revenues (Pub. Util. Code, 

§ 727.5, subd. (d)(2)(A)) necessarily equivalent to what the 

Water Companies are asking for here, which is to vacate the 

Commission’s past decision forbidding them from proposing 

continuation of their “existing Water Revenue Adjustment 

Mechanisms/Modified Cost Balancing Accounts.” The practical 

difference between these remedies may well be limited, but we 

consider it “enough to save this case from mootness.” (Chafin, 

supra, 568 U.S. at p. 176.) And even if the case were technically 

3

Indeed, even the Commission’s position on what the 

legislation requires appears to have evolved. In its motion to 

dismiss, the Commission argued that “[a]s a result of SB 1469, 

the water companies are now authorized to file for 

WRAM/MCBA protection in their future general rate case 

applications.” (Italics added.) By contrast, in its merits brief, 

the Commission described the companies as “now authorized to 

file for WRAM protection.” (Italics added.)
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moot, we may decide a case on the merits when, as here, the 

public interest favors resolution of an important question. (In 

re D.P., supra, 14 Cal.5th at p. 282.) We therefore proceed to the 

substance of the Water Companies’ challenge to the 

Commission’s decision.4

III.

The Public Utilities Code instructs that “[i]n reviewing 

decisions pertaining solely to water corporations,” our review is 

limited to determining “whether the commission has regularly 

pursued its authority, including a determination whether the 

order or decision under review violates any right of the 

petitioner under the Constitution of the United States or this 

state.” (Pub. Util. Code, § 1757.1, subd. (b); see also id., 

§§ 1757.1, subd. (c), 1760.) We conclude that the Commission 

failed to regularly pursue its authority when it ordered the 

Water Companies not to “propose continuing existing Water 

Revenue Adjustment Mechanisms/Modified Cost Balancing 

Accounts” “in their next general rate case applications” because 

the scoping memos do not fairly include the issue whether the 

Water Companies should be permitted to continue using these 

mechanisms. 

At the outset of a quasi-legislative proceeding, the Public 

Utilities Code and Commission rules alike require the assigned 

commissioner to issue a scoping memo that identifies the issues 

under consideration. (See Pub. Util. Code, § 1701.1, subds. (c) 

4 Unfortunately, to address that substance, the 

Commission’s merits brief purports to incorporate by reference 

portions of the Commission’s earlier briefing, which makes the 

merits briefing less helpful to the court than it might have been. 

We caution litigants to avoid this practice in the future.
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[requiring, in quasi-legislative proceedings, that “[t]he assigned 

commissioner shall . . . issue . . . a scoping memo that describes 

the issues to be considered”], (b) [same for adjudication and 

ratesetting proceedings]; Cal. Code Regs., tit. 20, § 7.3 [“The 

assigned Commissioner shall issue the scoping memo for the 

proceeding, which shall determine the . . . issues to be 

addressed”].) Identifying the issues under consideration 

facilitates informed participation — including presentation of 

arguments and evidence — by those who may have a stake in 

the resolution of those issues.

If the Commission cannot fairly be said to have complied 

with the statutory scoping memo requirement, it has failed to 

regularly pursue its authority. (See Pub. Util. Code, § 1701.1; 

cf. California Trucking Assn. v. Public Utilities Com. (1977) 19 

Cal.3d 240 [annulling orders issued without statutorily required 

opportunity to be heard]; Greyhound Lines, Inc. v. Public 

Utilities Com. (1967) 65 Cal.2d 811 [annulling order issued 

without statutorily required findings].) The Commission does 

not dispute the point. Nor does the Commission dispute that, to 

comply with the requirement, the scoping memos should have 

given notice of the issues under consideration in the proceeding. 

The Commission’s central argument, rather, is that the 

initial scoping memo did, in fact, give adequate notice of the 

issues relevant to its order regarding the Water Revenue 

Adjustment Mechanisms and Modified Cost Balancing 

Accounts. The Commission summed up this view in its original 

decision, which asserted that “[c]onsideration of changes to the 

WRAM/MCBA is and has always been within the scope of this 

proceeding as part of our review of how to improve water sales 

forecasting.” On rehearing, the Commission reiterated that 
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Opinion of the Court by Kruger, J.

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“[t]he issue of the decoupling WRAM was included in the 

original Scoping Memo as part of the water sales forecasting 

issue.” 

We are unpersuaded. The initial scoping memo described 

the forecasting issues as follows: “Forecasting Water Sales [¶]

a. How should the Commission address forecasts of sales in a 

manner that avoids regressive rates that adversely impact 

particularly low-income or moderate income [sic] customers? 

[¶] b. In Decision (D.)16-12-026, adopted in Rulemaking 11-11-

008, the Commission addressed the importance of forecasting 

sales and therefore revenues. The Commission, in D.16-12-026, 

directed Class A and B water utilities to propose improved 

forecast methodologies in their GRC application. However, 

given the significant length of time between Class A water 

utility GRC filings, and the potential for different forecasting 

methodologies proposals in individual GRCs, the Commission 

will examine how to improve water sales forecasting as part of 

this phase of the proceeding. What guidelines or mechanisms 

can the Commission put in place to improve or standardize 

water sales forecasting for Class A water utilities?” In the cited 

decision, the Commission had “conclude[d] that, at this time, the 

WRAM mechanism should be maintained.” (Decision 16-12-026,

supra, 2016 Cal.P.U.C. Lexis 682 at p. *63.) It was in that 

context that the Commission ordered water utilities to “propose 

improved forecast methodologies in their General Rate Case 

application, or in standalone, separate applications” (id., at 

p. *130) “to lessen resort to and impact of WRAMs” (id., at 

p. *63).

This forecasting issue does not fairly include the 

possibility that the Commission would order the Water 
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Companies not to “propose continuing existing Water Revenue 

Adjustment Mechanisms/Modified Cost Balancing Accounts” “in 

their next general rate case applications.” Even if, as the 

Commission’s original decision and decision on rehearing 

conveyed, the scoping memo suggested that some issues 

relevant to the WRAM/MCBA approach might be addressed, the 

scoping memos gave no signal that the forecasting issue 

included elimination of the Water Revenue Adjustment 

Mechanisms and Modified Cost Balancing Accounts — as 

opposed to, for example, “improved forecast methodologies” 

(Decision 16-12-026, supra, 2016 Cal.P.U.C. Lexis 682 at

p. *130) that might “lessen resort to and impact of WRAMs” (id.,

at p. *63). The connection between those approaches and 

questions about how to improve forecasting is simply too 

attenuated to have given fair notice that the potential 

elimination of these approaches was within the scope of the 

proceeding.5 

This is not to say that a scoping memo must detail every 

possible outcome of a proceeding. But that is not the nature of 

the deficiency here. Rather, the scoping memo at issue cannot 

5 Likewise, the Commission’s claim that “comments made 

by parties throughout the proceeding show the parties 

understood that the WRAM and sales forecasting were to be 

addressed by the Rulemaking” (italics added) does not 

demonstrate that the Water Companies understood elimination

of these mechanisms to be within the scope of the proceeding. 

For example, the California Water Association’s comments on 

the original scoping memo addressed how WRAM/MCBA 

recovery could be modified to reduce surcharges — reflecting an 

understanding that the WRAM and MCBA mechanisms would 

continue to be used.
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fairly be said to have “describe[d] the issues to be considered” at 

a basic level. (Pub. Util. Code, § 1701.1, subd. (c).) 

Consideration of the history of this proceeding reinforces 

the conclusion. As mentioned, the Commission had recently 

approved the use of Water Revenue Adjustment Mechanisms 

and Modified Cost Balancing Accounts, following proceedings 

that quite explicitly conveyed that the viability of those 

mechanisms was at issue. (See pt. I.B., ante.) For example, a

list of questions issued in connection with a 2015 scoping memo

included: 

• “Should the Commission consider a tiered inclining

block pricing structure that would be designed to

recover the full revenue requirement of utilities

within the revenue collected from the lower tiers,

with the revenues from the highest tier designated

for the purpose of recovering the balances in the

WRAMs and the MCBAs and/or to fund conservation

programs or provide rebates to customers?”;

• “What rate structure and accounting mechanisms

are best suited to offer safe, reliable water service at

just and reasonable rates, provide incentives to

conserve, and provide sufficient revenue for water

system operation and investment needs?”;

• “Do WRAMs and MCBAs, by decoupling the

utilities’ revenue functions from changes in sales,

succeed in neutralizing the utilities’ incentive to

increase sales? Is there a better way?”;
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• “Are WRAMs and MCBAs effective mechanism[s]

to collect authorized revenue in light of tiered

inclining block conservation rates?”;

• “Do WRAMs and MCBAs appropriately incentivize

consumer conservation? Are adjustments needed? 

Would another mechanism be better suited for the

utility to collect authorized revenue for water system

needs and encourage conservation . . . ?”;

• “Are WRAMs and MCBAs effective at encouraging

conservation when decreases in volumetric

consumption by some or all consumers lead to large

balances in WRAMs and MCBAs being assessed on

all ratepayers? What adjustments in the WRAM or

MCBA mechanisms are needed to encourage

conservation?”;

• “Do WRAMs and MCBAs achieve the statutory

objective of safe, reliable water service at just and

reasonable rates?”;

• “What changes, if any, should be made to the

Revised Rate Case Plan adopted by D.07-05-062 or

other Commission policies adopted to reduce the

balances in WRAMs and MCBAs and reduce the

degree of inter-generational transfers and/or rate

shock?”;

• “Is there a policy or procedure that would

accomplish the same results as the WRAM and

MCBAs without the attendant issues discussed”

elsewhere in the memo?;
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• “Should the WRAM and MCBAs account for

changes in sales generally, or should its effect be

limited to changes in sales induced by the CPUC and

other government agents?”; and

• “Should WRAM and MCBA balances continue to be

collected through surcharges on quantity sales? 

Would other forms of surcharge be more efficient or

equitable, or better accomplish safe, reliable service,

at just and reasonable rates and incentivize

conservation? Such other methods could include,

but are not limited to, a minimum quantity charge,

a minimum bill, or a fixed surcharge that does not

vary with quantity consumed.” 

After this detailed and recent inquiry, the Commission 

“conclude[d] that, at this time, the WRAM mechanism should be 

maintained.” (Decision 16-12-026, supra, 2016 Cal.P.U.C. Lexis

682 at p. *63.) With this context in mind, an informed observer

would not reasonably have understood from the scoping memos

in this proceeding that the Commission was contemplating the

elimination of the Water Revenue Adjustment Mechanisms and

Modified Cost Balancing Accounts.

The Commission also argues that “the parties had notice 

that changes to the WRAM/MCBA would be considered in the 

proceeding because, as a pilot program, the continuation of the 

WRAM and MCBA was regularly under consideration.” That 

argument misses the mark. This case is about whether 

petitioners had notice that their WRAMs and MCBAs were 

under consideration in this proceeding, not whether they had 

notice that the mechanisms could or even would be under 

frequent reconsideration in the future. Especially when viewed 
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Opinion of the Court by Kruger, J.

27

in the context just discussed, such notice was lacking here. 

Likewise, it appears undisputed that each WRAM had been 

authorized in connection with proceedings in which all relevant 

information was considered. The absence of a request for such 

information in the scoping memos is striking. 

To be sure, it would not have been improper for the 

Commission to reassess whether policy considerations 

supported ending use of the WRAM/MCBA approach, much as 

it did in the early 2010’s, after ordering some of the Water 

Companies, in upcoming general rate case proceedings, to

address whether the WRAM should be eliminated or replaced 

with an M-WRAM. (Decision 12-04-048, supra, 2012 Cal.P.U.C. 

Lexis 191 at pp. *61–*62.) But it was improper for the 

Commission to do so under the auspices of the first scoping 

memo, which referred to improving forecasting methodologies

without making any reference to potential changes to — let 

alone wholesale elimination of — that approach.

Finally, the Commission argues that even if the scoping 

memos were deficient, the Water Companies have failed to show 

that they were prejudiced by the deficiency. Assuming a 

showing of prejudice is in fact required, we disagree; the lack of 

notice prejudiced the Water Companies by depriving them of an 

adequate opportunity to present their case for preserving the 

use of decoupling mechanisms. It is true that once the Public 

Advocates Office first raised the issue of eliminating use of the 

WRAM/MCBA, the ALJ posed certain questions on that subject. 

But the ALJ’s questions, posed years into this proceeding, could 

not and did not cure the lack of notice provided by the scoping 

memos. There is no argument that the ALJ could expand the 

scope of the proceeding, and the most relevant questions 
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posed — “should the Commission consider converting to [a] 

Monterey-style WRAM . . . ? Should this consideration occur in 

the context of each utility’s GRC?” — are reasonably understood 

to contemplate a separate, future proceeding. Finally, the 

record indicates that the lack of notice hampered the Water 

Companies’ efforts to submit and contest evidence relevant to 

whether the mechanisms at issue should be maintained. The 

Commission was not required to agree with the Water 

Companies, but its failure to issue an adequate scoping memo 

frustrated the Water Companies’ ability to advocate effectively 

for their position.

IV.

We set aside the portion of the Commission’s order, and 

the accompanying findings and conclusions, directing that the 

Water Companies, “in their next general rate case applications, 

shall not propose continuing existing Water Revenue 

Adjustment Mechanisms/Modified Cost Balancing Accounts.” 

(See Pub. Util. Code, § 1758.) 

 KRUGER, J.

We Concur:

GUERRERO, C. J.

CORRIGAN, J.

LIU, J.

GROBAN, J.

JENKINS, J.

EVANS, J.
See next page for addresses and telephone numbers for counsel who 

argued in Supreme Court.

Name of Opinion Golden State Water Company v. Public Utilities 

Commission

__________________________________________________________ 

Procedural Posture (see XX below)

Original Appeal

Original Proceeding XX

Review Granted (published)

Review Granted (unpublished) 

Rehearing Granted

__________________________________________________________ 

Opinion Nos. S269099, S271493

Date Filed: July 8, 2024

__________________________________________________________ 

Court: 

County: 

Judge: 

__________________________________________________________ 

Counsel:

Sheppard, Mullin, Richter & Hampton, Joseph M. Karp, Christine A. 

Kolosov, Robert J. Stumpf, Jr., John D. Ellis; Nossaman, Lori Anne 

Dolqueist, Willis Hon, Martin A. Mattes, Alexander J. Van Roekel; 

California-American Water Company, Sarah E. Leeper; Prospera Law, 

Victor T. Fu and Joni A. Templeton for Petitioners.

BRB Law, Patrick M. Rosvall and Sarah J. Banola for National 

Association of Water Companies as Amicus Curiae on behalf of 

Petitioners.

Christine Hammond, Dale Holzschuh and Darlene M. Clark for 

Respondent.
Counsel who argued in Supreme Court (not intended for 

publication with opinion): 

Sheppard, Mullin, Richter & Hampton LLP

Joseph M. Karp

Four Embarcadero Center, 17th Floor

San Francisco, CA 94111

(415) 774-3118

Darlene M. Clark

505 Van Ness Avenue

San Francisco, CA 94102

(415) 703-1650