4. The Controversy

4.1. Summary

It is undisputed that complainant is a developer/builder and was the developer/builder of the subdivided community known as Victoria Falls. Victoria Falls consisted of 337 single family homes. Complainant and defendant entered into 19 separate residential service Contracts for Extension of Electric Distribution (Rule 15 Contracts) during the course of Victoria Falls construction in the late 1990's and early 2000's.

Complainant chose the Refundable Option for 16 of the Rule 15 Contracts it entered into with Defendant. The Discount Option was elected by complainant for the remaining three contracts entered into with defendant. Each of the
19 contracts was the Commission approved form Rule 15 Contract.

4.2. Complaint

Complainant contends that defendant has failed to properly refund all amounts due in refundable construction costs advanced to defendant. Complainant seeks to recover $116,945.38 in refundable construction costs.⁸

Complainant contends that it has fulfilled all contractual obligations in a timely manner and, as a result, is entitled to a refund of all remaining refundable amounts. Specifically, complainant argues that it paid all refundable advances upon choosing the Refundable Option, constructed a distribution line extension where none had previously existed, constructed homes and set every meter within six months of the ready-to-serve date, and established permanent loads generating revenue for defendant. Complainant asserts that defendant's failure to refund the refundable deposits paid by complainant violates the executed
Rule 15 Contracts.

Complainant argues that, contrary to defendant's assertion, Rule 15 is not at issue here. Complainant asserts that this case is governed solely by the contract language contained in the executed Rule 15 Contracts. Complainant maintains that defendant never informed him that the Rule 15 Contracts were not the sole agreement governing the line extensions to Victoria Falls nor did they provide him with a copy of the tariff. Complainant also contends that the
Rule 15 Contracts do not mention any other document that might go beyond the four corners of the executed agreement.

Complainant believes that the language of the tariff, which states that, "Refunds will be made on the basis of a new customer's Permanent Load, which produces additional revenue to SCE." is different from the relevant language in the contract that states, "Refunds will be made on the basis of any new customer permanent load connected to the distribution line extension which produces additional revenues to SCE." Complainant maintains, however, that only the contract language is applicable and, if applied here, would result in a refund of the advanced refundable amounts he paid.

Complainant contends he relied to his detriment on the representations of defendant's representative, Bobby Gray, and on the Rule 15 Contract itself in selecting the Refundable Option for the majority of contracts. Complainant asserts that defendant's representative, Bobby Gray, provided an explanation of the difference between the Refundable Option and the Discount Option, as well as a "rule of thumb" that developers use to guide them in making that choice.

Complainant specifically identifies defendant's failure to pay a refund within 90 days of when the Cochella Valley Water District (CVWD) well pump (located within the Victoria Falls development) went on-line as an example of defendant's failure to meet its contractual obligations.⁹ The Complainant asserts that defendant admitted it was aware of a well site with a pump as part of the Victoria Falls project.¹⁰ Complainant contends that evidence provided by defendant shows that defendant was aware of a commercial pump (for the CVWD well) coming on line at least as early as August 11, 2003,¹¹ but that defendant failed to pay the refund due until April 6, 2010. Complainant argues that defendant bore the burden to find out if new non-residential load comes on line within three years from the ready-to-serve date for a line-extension and to issue a refund within 90 days. Complainant asserts defendant's failure to issue a refund within 90 days of August 11, 2003 was in violation of its tariff.

Complainant contends defendant must pay interest on refunds not paid within 90 days set by the tariff pursuant to California Civil Code Section 1915, which states "Interest is compensation allowed by law . . . for the use, or forbearance, or detention of money." Complainant argues that defendant had the use of the money for years and must pay interest not only on this amount, but on all remaining refundable amounts SCE continues to retain under the "guise" that it is waiting for other additional loads.

4.3. SCE's Defenses

Defendant contends complainant has failed to meet its burden of proof. Defendant believes it owes complainant no money unless and until new permanent load is added to the Distribution Line Extension, which produces additional revenues to SCE, above and beyond those revenues anticipated from the contract.

Defendant testified that when the Refundable Option is chosen the applicant advances defendant's total estimated cost to install the Distribution Line Extension, including ITCC, minus any applicable up-front allowances.¹² Defendant states that an applicant must then satisfy its contractual obligation for all allowances granted in advance, and, once enough load has come online to satisfy the up-front allowances granted, the applicant may receive additional refunds over the term of the contract for additional loads that are added from either the applicant's line extension or additional line extensions that may be connected to the applicant's line extension.¹³ Defendant explains that if an applicant fails to meet its contractual obligations, defendant will deficit bill the applicant for an additional contribution based on the allowances for the loads actually installed.¹⁴

Defendant states that when an applicant chooses the Discount Option, the applicant is responsible for paying defendant's estimated cost to install the Distribution Line Extension, including the ITCC, minus any applicable up-front allowances. In lieu of contributing the total refundable amount, applicant contributes 50% of such refundable amount on a non-refundable basis. In addition to this amount, applicant is responsible for any non-refundable amounts that are defendant's estimated value of Excavation, Substructures and Conduits, and Protective Structures required by defendant for the Distribution Line Extension under Rule 15, and the applicable ITCC.¹⁵

In this instance, defendant states that complainant paid an advance on each project which constituted defendant's estimated installed cost to complete the Distribution Line Extensions, less any allowances granted in advance of the project, plus any applicable ITCC on any contributions and advances paid by complainant. The fees were either refundable or non-refundable, depending on the option chosen. Defendant states it would not complete these projects without the customer advance monies because the total estimated cost exceeded the allowances from permanent bona-fide loads.

Defendant believes that complainant's demand for payment of all refundable amounts stems from complainant's misunderstanding of both Rule 15 and the Rule 15 Contract. Defendant maintains that it has correctly computed the amounts subject to refund and paid defendant in accordance with Rule 15 and the Rule 15 Contracts at issue. If additional revenues are generated above and beyond those for which allowances were granted, defendant agrees refunds would then apply. Defendant explains that any remaining monies that complainant has advanced will remain in a refundable account until such time as complainant or additional applicants add additional load to the applicable line extensions within the 10-year contract period.

With respect to the CVWD well pump, defendant contends that it properly issued a refund on April 6, 2010. Defendant maintains it was unaware of the well until a field verification was conducted shortly before the check was issued.¹⁶ Defendant explains that in April 2010, a commercial meter (a pump) generated sufficient revenue to result in a refund of $43,212.56.¹⁷ Defendant asserts it was not obligated to issue the refund earlier even if the well had come on line in 2003 because the well was not on the original sequence list, complainant did not notify defendant of the well, and defendant did not have knowledge of the well until a filed verification completed at a later date. Defendant contends that even if it was obligated to pay the refund at an earlier date, interest does not apply to refunds.¹⁸

⁸ However, after this complaint was filed, defendant refunded $43,212.56 on April 6, 2010 to complainant. On April 19, 2010, defendant also refunded $1,584.26 to complainant. As a result of these refunds, the remaining amount sought by complainant is $72,148.56.

⁹ The pump is located in the portion of Victoria Falls development covered by Rule 15 Contract/Work Order 6879-1810-01814. This contract was executed on August 28, 2000. SCE was first ready to serve on October 26, 2000.

¹⁰ Hearing Testimony 42:27-43:11.

¹¹ Southern California Edison Company's (U338E) Response to Request for More Information During Evidentiary Hearing dated June 30, 2010, at 1.

¹² Exhibit 200 at 5. As noted above, an allowance is an amount credited to the developer for anticipated load from the project, generally on a per meter basis for a residential development.

¹³ Exhibit 200 at 5.

¹⁴ Exhibit 200 at 5.

¹⁵ Exhibit 200 at 6.

¹⁶ Hearing Transcript at 160:18-161:5.

¹⁷ Opening Brief of SCE (U338E) at 6.

¹⁸ Reply Brief of SCE (U338E) at 4-5.