The Scope of the OII
As noted above, the OII was commenced pursuant to Section 855 of the Public Utilities Code, which provides in pertinent part:
"Whenever the commission determines, after notice and hearing, that any water or sewer system corporation is unable or unwilling to adequately serve its ratepayers or has been actually or effectively abandoned by its owners, or is unresponsive to the rules or orders of the commission, the commission may petition the superior court for the county within which the corporation has its principal office or place of business for the appointment of a receiver to assume possession of its property and to operate its system upon such terms and conditions as the court shall prescribe."
The OII alleged that all three of the conditions justifying the appointment of a receiver under Section 855 (i.e., inability to serve customers adequately, actual or effective abandonment, and unresponsiveness to Commission orders) held true with respect to Ponderosa:
"The [Water] Division believes, based on the record, that Figgs is unable to operate the water system, which includes meeting regulatory requirements, and [is] unwilling to work with the Division to determine the rates necessary to meet [Ponderosa's] financial obligations. Figgs' inability or unwillingness to pay [Ponderosa's] property taxes has caused the Tehama County Tax Collector to schedule an auction for the parcel where the supply well is located. Because it is vital that proper rates are calculated, electricity costs be covered and water be delivered, it is necessary to replace Figgs with someone who will communicate with the Commission. Figgs' failure to adequately serve [Ponderosa's] ratepayers cannot be allowed to continue. Figgs' conduct constitutes an effective abandonment of the water system.
"Based on our experience with other small water utilities[,] the Division believes that it may be financially impossible for [Ponderosa] to pay its electric bill at its present rates, but, without the cooperation of its owner, the Commission cannot fulfill its legal mandate to assure that rates are just and reasonable. This level of inaction is unacceptable, and to the extent it results in underpayment, dangerous to the supply reliability of [Ponderosa]. The Division sees no alternative to requesting that the Superior Court appoint a receiver." (OII, p. 7.)
On the legal question of the burden of proof, the OII pointed out that in an order-to-show-cause proceeding, "the burden is on the respondent to show good cause why the proposed legal action should not go forward." (Id. at 8.) Since the proposed legal action under Section 855 is a petition to the superior court to appoint a receiver, and a Commission proceeding under Section 855 is not penal in nature (id. at 9-10), the hearing held by the Commission would be "limited to the question of whether Respondents can show that their operational and financial conduct does not fall into one or more of the [three] categories" listed in the statute. (Id. at 9, Ordering Paragraph (OP) 2.)
Pursuant to OP 2 of D.02-04-022, the assigned Administrative Law Judge (ALJ) issued a ruling on April 19, 2002 providing that the order-to-show-cause hearing would be held in Red Bluff beginning on May 2, 2002. The ALJ also directed that any written response to the OII by the respondents should be submitted via facsimile no later than 3 p.m. on April 26, 2002. Orville faxed a response on behalf of himself and Ponderosa to the ALJ within the time allowed. The contentions in this response, which is hereinafter referred to as the "April 26 Response," are discussed below.
Pursuant to the April 19 ruling, the hearing on the order to show cause was held in Red Bluff on May 2 and 3, 2002. At the conclusion of the hearing, the ALJ set May 17, 2002 as the due date for briefs, a deadline that was subsequently extended to May 24, 2002. The Water Division submitted a brief on that date, but neither of the Figgs brothers did so.
