4. The Petition
Though D.01-05-058 addresses a large number of issues, the portion of the decision relevant to WMA's petition and GSMOL's response is the discussion of the "rate" a MHP owner/operator may charge its tenants for water service under Pub. Util. Code § 2705.5. That statute codifies a "safe harbor" from public utility status and attendant regulation by the CPUC - in other words, nonpublic utility status -- for MHPs (and multi-unit apartments) with submetered water systems that charge each tenant "at the rate which would be applicable if the user were receiving the water directly from the water corporation".2
With respect to this rate, also referred to in D.01-05-058 as the "applicable rate, " the decision explains:
The question of whether a MHP is charging its tenants the "rate" that qualifies for the § 2705.5 exemption can only be determined on a case by case basis. Because the "rates" of water corporations vary in numerous ways, there is no formula that we can provide beyond the clear language of the statute ..." (D. 01-05-058, mimeo. at pp. 27-28.)
Footnote 20 in D.01-05-058 summarizes some of the factors and ratemaking conventions that result in the differences among the rates set for different water corporations:
For example, as a general rule the rates of the largest water corporations (Class A) vary based on the size of the customer's water meter. Once the water meter size is identified, then "rates" include a service charge which includes up to 50% fixed costs and a commodity (or volumetric) charge that includes the balance of the fixed costs. In contrast, the charges of smaller CPUC-regulated water utilities (Classes B, C and D) are based on different generic and, sometimes, individual considerations. (Id. at 28, footnote 20.)
However, D.01-05-058 goes on to provide general guidance regarding an appropriate formulation of the "applicable rate." The first issue we address in this decision is WMA's request that we clarify that general guidance, pointing to language in D.01-05-058 which it considers confusing. The language appears at the end of a longer passage on pages 29-30 of the decision (mimeo), which we quote below. For ease of reference, we have italicized the questioned language.
In examining the water charges at a given MHP, we must consider whether the MHP's rent structure includes recovery of water expenses -specifically capital and operation costs associated with the submeter system. [footnote omitted] Consistent with our discussion above, we conclude that the MHP owner/operator may not have it both ways. Either these charges must be removed from rent altogether, and then the submeter customer may be charged the same rate applicable to any other residential customer (i.e., the "prevailing rate"), or the submeter customer may be charged only for volumetric submeter usage plus a pro rata allocation of any other charges billed to the master meter. (D.01-05-058, mimeo. at pp. 29-30, emphasis added.)
We can understand WMA's confusion and reject GSMOL's argument that the decision is clear. As the following discussion will demonstrate, the parenthetical modifying term -- (i.e., the "prevailing rate") -- should be deleted. The term "applicable rate", as D. 01-05-058 interprets it for the purposes of §2705.5, is not a synonym for "prevailing rate". Elsewhere, the decision notes that the "prevailing rate" is the term used by a number of parties to this proceeding, including WMA, to describe "the sum of all rate elements the water corporation would charge the [MHP] tenant as a directly-served end user: applicable volumetric rate, customer service charge (sometimes referred to as "readiness-to-serve charge"), and any taxes." (Id. at 24.) However, D. 01-05-058 cautions that "the water corporation's statement of `prevailing rates' is not a conclusive determination of the `applicable rate'." (Id. at 28, emphasis added.) D.01-05-058 identifies special rate components "such as surcharges or taxes collected by the water corporation for a specific purpose" as examples of components which, unlike the customer service charge, should not be assessed to tenants except as a pro rata share of the actual charge for the master meter service. (Id.) These are unique items that do not represent costs associated with the water corporation's distribution system and consequently have no relationship to the costs of a submeter system provided to MHP tenants. D.01-05-058 explains:
For example, it is reasonable to conclude that a local tax which the water corporation is obliged to charge its direct customers but which the MHP is not required to collect from submeter customers is not a component of the "applicable rate" that can be charged to each submeter customer. Instead, it is reasonable to charge submetered customers only a pro-rata share of the tax actually charged to the MHP by the water corporation. Using this method, the tax is paid, as intended, to the local government; the MHP does not reap a financial benefit from the tax collection, nor, does the MHP suffer a tax-induced financial loss. (Id. at 28-29.)
In light of this discussion, we will further modify the language at pages 29-30 of D.01-05-058 to more accurately reflect the discussion which precedes it. The revised text, with deletions marked in strikethrough format and additions in italics, should read:
In examining the water charges at a given MHP, we must consider whether the MHP's rent structure includes recovery of water expenses -specifically capital and operation costs associated with the submeter system. [footnote omitted] Consistent with our discussion above, we conclude that the MHP owner/operator may not have it both ways. Either these charges must be removed from rent altogether, and then the submeter customer may be charged the same rate applicable to any other residential customer
(i.e., the "prevailing rate"), adjusted as discussed above, or the submeter customer may be charged only for volumetric submeter usage plus a pro rata allocation of any other charges billed to the master meter.Having clarified that the "applicable rate" and the "prevailing rate" are not the same, we consider WMA's four, more specific requests for clarification:
1. In the event a MHP owner removes capital and operation costs from rent, and there is a dispute from a resident, that the Commission will be the body that will resolve such a dispute. (Petition at 4.)
We agree with GSMOL that D.98-01-058 requires no clarification on this point. D.98-01-058 indicates the answer depends, in part, upon the nature of the dispute and the particularity of the pleading. For example, the Commission lacks jurisdiction to set MHP rents, whether the park is subject to a rent control ordinance or not, and cannot confer upon itself jurisdiction it does not have. However, rent control boards are bound by the Commission's utility rate determinations. (Rainbow Disposal (1998) 64 Cal. App 4th 1159, 1167.) So, too, are the superior courts. The Commission's authority in such matters is exclusive, subject to review only by the Supreme Court and the courts of appeal. (See Pacific Telephone. & Telegraph Co. v Superior Court (1963) 60 C.2d 426, 428-30.)
2. In the event a MHP owner removes capital and operations costs from rent, identification of the components of the "same rate applicable to any other residential customer" that an MHP may assess. (Petition at 4.)
As we discuss above, D.01-05-058 addresses this issue and provides examples of specific-purpose rate components (municipal taxes, certain surcharges) that the MHP owner/operator may collect from submetered tenants only on a pro rata basis. The large number of regulated water utilities, and the differences in their sizes and operating costs and consequently, in their rate structures, does not permit a more precise formulation. We agree with GSMOL that this issue requires no further clarification.
3. Clarification of whether the "applicable rate" as discussed in the decision is that rate that results from the second option listed [in the petition]. (Petition at 4.)
In the context of WMA's petition, it is clear that WMA refers to the situation where the MHP owner/operator chooses to keep the capital and operation costs associated with the submeter water system embedded in the rent. Then, in accordance with D.01-05-058, the MHP owner/operator is limited to directly billing for water on a pass through basis. That is, the MHP owner/operator may assess each tenant only for that tenant's submetered, volumetric usage plus a pro-rata allocation of other charges billed to the master meter, which will provide full recovery of the master meter bill. Because costs of the submeter system remain embedded in rent, they continue to be recovered in rent.
We explain the meaning of the term "applicable rate" in the discussion, above, and distinguish it from the term "prevailing rate." We believe our revision to pages 29-30 of D.01-05-058 will remove any unintended confusion on this point and that no further modification is necessary.
4. Clarification of how a MHP would fall under the application of Section 2705.5 of the Public Utilities Code. (Petition at 4.)
We believe our revision to pages 29-30 of D.01-05-058 will remove any unintended confusion on this point and that no further modification is necessary.
2 Section § 2705.5 provides in relevant part: Any person or corporation ... that maintains a mobilehome park or a multiple unit residential complex and provides ... water service to users through a submeter service system is not a public utility and is not subject to the jurisdiction, control, or regulation of the commission if each user of the submeter service system is charged at the rate which would be applicable if the user were receiving the water directly from the water corporation. (§ 2705.5, emphasis added.)
