5 a law intended to protect water utilities from losses resulting from regulatory delays. Second, we were successful in urging the California Public Utilities Commission (Commission) to allow water utilities to recover higher purchased water and electricity costs incurred prior to November 29, 2001, but not yet billed to customers. In the first quarter of 2003, we filed a request with the Commission to recover $6.4 million as a result of this decision; we expect the Commission to respond to our request by mid-year 2003. In January 2003, the Commission authorized additional step rate increases in several California districts totaling $1.6 million in annual revenue. More significantly, the Commission finally issued a draft of a pro- posed decision on the 15 General Rate Case applications that we filed in mid-2001. We expect final decisions in the first or second quarter of 2003, which could add nearly $13 million to annual revenue. Decisions on the General Rate Case applications submitted in 2002 are expected in the third quarter of 2003. Another significant development at the Commission was Governor Gray Davis’ January 1, 2003, appointment of a new Commission president and a new commissioner. The Company is encouraged by these appointments and hopeful that with the new leadership, the Commission will return to processing rate applications in a timely fashion and granting fair and reasonable rate relief. Rounding out our efforts to grow the business and seek better regulatory treatment was our continued focus on prudent fiscal management. We launched a program late in 2002 to refinance several series of first mort- gage bonds with lower interest rate senior notes. As a result of the refinancing program, which will be completed in May 2003, we expect to realize a $1.5 million annual reduction in interest costs, which will benefit both stockholders and customers. In 2002, we faced a 6% increase in purchased water and  purchased power costs and pump taxes, as well as higher wage and benefit expenses and increases in income taxes resulting from higher income. We responded to increased costs by improving efficiency and applying strict  budgetary controls in every area of our operation. It is a reflection of our employees’ commitment that we made such strides in reducing costs without adversely impacting customer service or water quality, and we commend  each and every employee for helping us achieve improved results. OTHER PENDING RATE CASES AND REGULATORY ISSUES PRUDENT FISCAL MANAGEMENT