2. Factual Background
Complainant Jurupa Community Services District (Jurupa) provides water and sewage services to residential, business and public facility connections in Jurupa and some surrounding areas of Riverside County. Empire Water Corporation (Empire) is the Defendant.1 West Riverside 350 Inch Water Company (350 IWC) is a mutual water company in which Empire owns an 82.40% shareholder interest. Either Empire or 350 IWC, or both, 2 delivers non-potable water to three sites in Riverside County: (a) Indian Hills Golf Course (Golf Course), (b) a residence of John West (West) located on the Golf Course, which he co-owns, and (c) the Patriot High School (High School) within the Jurupa Unified School District (School District). These sites are within the service area of Jurupa.
Ground water is pumped under claim of right at Well Nos. 5 and 7 owned by 350 IWC, conveyed in a canal right- of-way historically owned and operated by West Riverside Canal Company (Canal Company), a Commission-regulated water company.
The water is piped from the canal to the points of delivery. The canal and its right- of- way were assigned3 to Empire by Basin Water Resources, Inc. (Basin Water) on December 21, 2007. As of May 10, 2007, Basin Water held the right to purchase various properties and corporate shares from a group of sellers composed of Indian Hills Water Conservation Corporation (IHWCC), the Canal Company, 350 IWC, and two individuals, Henry C. Cox II (Cox) and West.4
Notwithstanding the December 21, 2007 assignment of the canal assets away from the Canal Company, the Commission currently lists the Canal Company in its records5 as a regulated water utility. Events in March 2006, as well as current conditions, however, lead Empire to contend that either the Commission's jurisdiction over the Canal Company ended before the December 2007 assignment of the Canal Company's assets or that it should be effectively ended by a decision in this proceeding.
The deliveries of non-potable water to the High School for landscape irrigation were begun by the IHWCC under a July 2, 2002 water supply agreement with the School District.6 The agreement provided for delivery of between 525 and 550 gallons per minute, up to a maximum daily requirement of 0.81 acre feet, at a charge of $250 per acre foot for a 20-year term.7 No representation is made in the agreement that the $250 figure, or any subsequent escalation allowed for under the agreement, is devoid of profit and reflects only cost of service. Empire directly or indirectly (by exercising its controlling interest in the mutual water company, 350 IWC) continued deliveries under the agreement from December 21, 2007 until a December 4, 2009 assignment of that 2002 agreement from IHWCC to 350 IWC.8 Since at least December 4, 2009, then, those deliveries have been made by 350 IWC.
The water deliveries to the Golf Course were begun, at a time not established in the record, by IWHCC through an oral water supply agreement under which the charge for water was at cost. Empire or 350 IWC continued those deliveries from December 21, 2007 until a December 4, 2009 written assignment of that oral agreement from IWHCC to 350 IWC.9
The foregoing two December 4, 2009 assignments represent what Empire characterizes as a restructuring of pre-existing contracts. Empire contends that those assignments were made to both clarify and confirm that all of the water deliveries at issue in this proceeding have been made by a mutual water company, 350 IWC, allegedly either at cost (High School) or to shareholders (Golf Course and West), in conformity with § 2705 of the Pub. Util. Code.10 Both that characterization and Jurupa's differing viewpoint are analyzed below.
1 The intended defendant was and is Empire Water Corporation, a Nevada corporation that answered the complaint and participated throughout the proceedings. In filings in this proceeding, Empire Water Corporation has been erroneously identified variously as a "company," a limited liability partnership, and a limited liability company. See Complainant's Notice served on December 16, 2009, at 1-2, and the Evidentiary Hearing R.T. 31: 7-18.
2 Whether the water deliverer is Empire or is 350 IWC is a matter of factual dispute discussed later in this decision.
3 We refer to ownership here in a qualified sense because, as discussed below, the December 21, 2007 assignment of a right to assets was not approved by the Commission under § 854(a), Pub. Util. Code.
4 The cross ownership profiles for IHWCC, the Canal Company, 350 IWC and the Golf Course are somewhat complex. Before and after the 2007 conveyances Cox and West appear to have each owned 50% of the shares of IHWCC. Cox and West, or IHWCC, appear also to have been and continue to be owner(s) of the Golf Course. As of the May 10, 2007 purchase agreement, 350 IWC had 11 shareholders, including IHWCC (owning 176.03 shares, representing 82.40% of the stock) and Cox and West as individuals (owning 0.33 shares collectively, representing 0.16% of the stock). As of then, the Canal Company had 6 shareholders, including 350 IWC (owning 350 shares, representing 73.9% of the stock), IHWCC (owning 19.68 shares, representing 4.2% of the stock), and Cox and West (owning 1 share collectively, representing 0.2% of the stock). This meant that the selling parties (IHWCC, Cox and West), along with the Canal Company, collectively held 176.36 shares or an 82.56% ownership stake in 350 IWC and, along with 350 IWC, collectively held 370.68 shares or a 78.3% ownership stake in the Canal Company. The December 21, 2007, assignment resulted in Empire gaining control of the water and the canal involved in the deliveries at issue in this adjudication, subject to the requirement of Commission approval set out in §§ 851-854, Pub. Util. Code, and discussed in section 5.2.2 of this decision.
5 Commission-regulated water companies, including the Canal Company, are listed at: http://docs.cpuc.ca.gov/PUBLISHED/GRAPHICS/107172.pdf
6 Water Supply, Sale and Purchase Agreement, EWC Exhibit 106.
7 EWC Exhibit 106, sections 5 and 6.
8 Assignment Agreement between Indian Hills Conservation Corporation, West Riverside 350 Inch Water Company, and the Jurupa Unified School District, 2009, EWC Exhibit 107.
9 Assignment Agreement between Indian Hills Conservation Corporation, West Riverside 350 Inch Water Company, Henry C. Cox, II Trust, and John L. West and Beverly J. West, EWC Exhibit 108. Although bearing the same dates and including some of the same signatories, the assignments covering the water deliveries to the High School and Golf Course, respectively, were separate agreements.
10 All statutory section references in this decision are to the Public Utilities Code unless otherwise indicated.
