Staff Report and Legislative Hearings
The staff report describes that staff visited Sunbird on March 17, 2010 to inspect the water system, meet with California Department of Environmental Health (CDEH), the Sunbird operators, and Sunbird residents. The staff report describes that the levels of arsenic in the water supplied to Sunbird residents exceed the permissible levels of safe drinking water required by the Safe Drinking Water Act, and that Sunbird is taking various steps to test the water on a monthly basis; inform residents about the arsenic levels; and alleviate the arsenic problem, including the possibility of connecting its water supply with the Coachella Valley Water District. Staff reports that the water quality situation at Sunbird is not considered an emergency by CDEH.
Staff's meeting with Sunbird residents was attended by about forty-five persons. The following concerns were raised:
· High water bills.
· Frustration with not having water that meets safe drinking water requirements for a number of years, and related concerns over health effects.
· Contamination from leaking sewage lines on the property.
Sunbird residents also testified at the Assembly Budget Subcommittee
No. 3, Natural Resources and Environmental Protection, on April 28, 2010 and at Senate Budget and Fiscal Review, Subcommittee No. 2, on April 29, 2010. At these hearings, Sunbird residents said that there were instances where residents were evicted from Sunbird because of their inability to pay water charges. They stated that bills can exceed $500 per month in some instances and that the water is not suitable for drinking. Sunbird claims that it has not evicted any tenant for non-payment of water bills.
Staff found that Tier 1 usage accounted for 94% of volumetric revenues, followed by 2% for Tier 2, 3% for Tier 3, and less than 1% for Tier 4. So while very few Sunbird residents reach the Tier 3 and 4 rates, the few who do face extremely high water bills. The staff report describes that, in contrast, the neighboring Coachella Valley Water District charges a monthly service charge of $7.00 and a quantity charge of between $1.03 and $1.60 per ccf.
With 87 metered connections reported by staff, Sunbird is the size of a Class D water utility. Because Sunbird is a mobile home park, the Commission's ratemaking authority arises when a complaint is filed under § 2705.6 and thus we have never reviewed the reasonableness of Sunbird's rates. To prepare its report, Staff performed a cost of service analysis for Sunbird, and reported a 2009 Rate of Margin (ROM) of 38.7%, compared to a recommended ROM for Class D water utilities of 23.03%. Staff found that Sunbird's average monthly bill was $18.28 in 2009, and recommends rate changes such that the average monthly bill would be $13.73 in 2010 to achieve the staff-recommended ROM.
In addition to the recommended rate adjustments, the staff report contains recommendations for improving water quality, maintenance of the sewer system, meter testing, and leak detection. Staff recommends that Sunbird refrain from evicting Sunbird residents for non-payment of water bills.
Discussion
The staff report filed on May 3, 2010 identified several concerns over Sunbird's service, especially as they relate to the rates charged to customers for Tier 3 and Tier 4 consumption. Just prior to the release of the staff report, the Commission participated in legislative subcommittee hearing where tenants at Sunbird asserted that one or more current or former tenants were subject to eviction for non-payment of water bills. These assertions have not yet been tested through the evidentiary hearing process but, coupled with the staff report, raise significant concerns that prompt us to take immediate action pending resolution of the merits of the complaint.
Sunbird water customers who remain within the Tier 1 and Tier 2 usage levels receive bills of less than $20 per month, which are generally consistent with the rates charged by the neighboring Coachella Valley Water District. It is only because of the very significant differential in rates between Tiers 1 and 2, on the one hand, and Tiers 3 and 4 that Sunbird customers may receive high water bills, sometimes far in excess of their monthly rent bill. Coachella Valley Water District has only one tier for its water rates. (See generally, http://www.cvwd.org/service/rates/Domestic_Water_Service_Rates_070109.pdf.)
Because the parties to this proceeding have agreed to mediation, we have not yet developed a complete record to determine whether the current rate differentials or volumes for each tier are reasonable. The staff report does indicate concerns over the upper tier rates and proposes that all usage over the current Tier 2 usage limit be charged Tier 2 rates.
The staff report indicates that Sunbird claims that it has taken no action to evict tenants for non-payment of water bills. The residents who testified before the Assembly and Senate Budget Subcommittees claim otherwise. There is currently no evidence in the record to allow us to conclude which claim is correct.
This decision takes steps to ensure that the information gathering process inherent in mediation and a formal proceeding can move forward to allow us to make an informed decision on the facts without harming customers who are subject to Sunbird's current Tier 3 and Tier 4 rates, if those rates are later found to be unreasonable. Because we are concerned that the current upper tier rates may be excessive given the staff recommendation, we order Sunbird to stop billing for current Tier 3 and Tier 4 water usage at its current Tier 3 and Tier 4 rates and to instead charge for all water usage above the current Tier 2 usage level at current Tier 2 rates, pending the resolution of this complaint. Based on the staff report, only 4% of the revenue collected by Sunbird derives from Tier 3 and Tier 4 charges, so the non-collection of this amount, pending resolution of this proceeding, should not present a hardship to Sunbird.
At the same time, we do not wish to prejudice Sunbird, in the event that this proceeding determines that the revenues derived from its current rates are reasonable. To preserve the opportunity for Sunbird to seek recovery of the revenues not billed as a result of the requirement that Sunbird charge Tier 2 rates for all water usage above the current Tier 2 usage limit, Sunbird should maintain records of all usage above the current Tier 2 usage limit (11 ccf), the resulting revenues for that excess usage at Tier 2 rates, and the charges that would have been billed if current Tier 3 and Tier 4 rates had remained in effect. If this proceeding determines that Sunbird has collected less than a reasonable level of revenues as a result of the required application of Tier 2 rates to Tier 3 and Tier 4 usage, we will consider the extent to which, and in what manner, the lost revenues may be recovered. Without prejudging this issue in any way, in such a situation we may consider means such as rebilling for service already rendered or amortization of the undercollection through a surcharge on future rates.
Our other concern is that tenants whose water bills have been very high as a result of the current rate structure may fall behind on their payments and be subject to eviction or disconnection of water service, before the reasonableness of Sunbird's rates has been determined in this proceeding. In order to ensure that no tenant is evicted as a result of inability to pay charges owed Sunbird due to prior water bills that exceeded the amount allowed by this order, we will impose the following requirement: For purposes of determining whether any tenant is in arrears in the payment of water charges, as opposed to other charges owing to Sunbird, any charges previously paid for water in Tier 3 and Tier 4 shall be recalculated at the current Tier 2 rate, and any payments in excess of that recalculated charge shall be considered to have been paid, first, for any
non-water charges owed to Sunbird.
We also impose an injunction on Sunbird preventing it from using
non-payment of a water bill as a basis for eviction or disconnection of water service. Since Sunbird claims it has not taken steps to evict tenants for
non-payment of water bills, Sunbird will not be harmed by imposition of an injunction against evictions for non-payment of water bills. Because we have not determined the reasonableness of any of Sunbird's water rates, we find it reasonable to similarly prohibit disconnection of water service for non-payment of water bills, pending the outcome of this proceeding. This injunction against evictions and disconnection of water service for non-payment of water bills is issued in aid of our jurisdiction over Sunbird's water rates.
