Discussion

As stated in the OII, the burden at the May 2-3 hearing was on the respondents to show cause why the Commission should not petition the Tehama County Superior Court to appoint a receiver to take possession of and operate Ponderosa pursuant to Section 855 of the Public Utilities Code.

Based upon the McCrea Declaration and the evidence presented at the hearing, we agree with the Water Division that the appointment of a receiver should be sought in this case. The record leaves no doubt that Orville and Kevin Figgs have been unable or unwilling to serve Ponderosa's ratepayers adequately, and that Orville - who has had effective control of the water system since July 2000 - has been unresponsive to rules and orders of the Commission.

While it is a close question, we do not agree with the Water Division that both the Figgs brothers can be said to have actually or effectively abandoned the water system. It seems clear from the record that Orville has not abandoned the system and has tried, however ineptly, to operate Ponderosa since the late 1990s. Kevin, on the other hand, effectively abandoned the water system in July 2000, and reiterated his refusal to be involved when he declined Orville's request for assistance with meter-reading in April 2001. While Kevin's abandonment of Ponderosa appears to be due principally to Orville's refusal to give him any say in the water system's finances (as well to the brothers' physical altercation in July 2000), these circumstances cannot be allowed to excuse the effects of the brothers' antagonism on Ponderosa's ratepayers. These effects include erratic billing, interruption of water service on November 1, 2001 (due to the power cut-off by PG&E), and a failure to test the water system for bacteria in the five months thereafter.

The first effect, erratic billing, requires little discussion. As noted above, Orville acknowledged at the hearing that Ponderosa's customers were not billed from February 2001 until November 2001, even though the water system's tariffs provide for quarterly billing. Although the OII does not mention Commission General Order (GO) 103, the failure to bill regularly is a clear violation of section VII.2 of that order, which provides that "each [water] utility shall render a bill to each customer for each billing period." Moreover, while Orville claimed at the hearing that he had responded to customer complaints by Don Canada, Carlon Ginn-Edwards and Donald and Barbara Webber about irregular billing in prior periods, he could not substantiate his claim with records. (Tr. 178-80.) His inability to produce the responses to these complaints suggests a violation of section I.8. of GO 103.⁹

Although the erratic billing is troublesome, the most inexplicable element in this whole story is Orville's continuing passivity and indifference, especially after he wrote to the Commission on April 9, 2001 requesting an emergency rate increase to pay power bills. After this letter was received, McCrea wrote back to Orville making it very clear that Orville would need to fill out the Informal Rate Change Workbook so that a GRC could be processed. McCrea also offered to assist Orville in filling out the workbook when McCrea visited the area on May 18, 2001.

The workbook that Orville gave McCrea on May 18 was admitted into evidence at the hearing. As McCrea testified, the pages dealing with "Changes to Ratebase" (i.e., capital expenditures) are not filled out. In light of this, we accept McCrea's testimony that the workbook given to him was incomplete, and that over the next five months, he regularly tried to telephone Orville to request that the missing capital items be supplied. We also accept McCrea's testimony that on the one occasion during this period when he was apparently able to speak with Orville directly, Orville led him to believe that he understood what McCrea wanted, but needed to do some research to get the data. This situation continued until PG&E cut off Ponderosa's power on November 1, 2001 and Commission intervention was necessary to get it restored.

Orville's version of events during the May 18 - November 1, 2001 time period is unworthy of belief. First, in his April 26 response, he asserted that McCrea had made no objection on May 18 to the incomplete workbook.¹⁰ Then at the hearing, he tried to claim that he was not aware of any attempts by the Commission to contact him during the May to November period. (Tr. 165-66.) He also sought to argue that he had been "promised" a rate increase, and therefore didn't need to do anything further.¹¹ The truth seems to be that, as Orville eventually admitted, he did not understand the nature of the "capital items" for which McCrea was requesting data, but was too embarrassed to admit it.¹² Orville and McCrea do agree, however, that Orville never submitted the additional data needed to finish processing a GRC.

Orville's failure to provide the Water Division with the data it needed to process a rate increase, which culminated in the power shut-off of November 1, 2001, constitutes an unwillingness or inability to serve Ponderosa's ratepayers adequately. Further, under the unusual circumstances of this case, it also constitutes a violation of section II.2.a. of GO 103, which requires that each water utility "shall make all reasonable efforts to prevent [emergency] interruptions of service[,] and when such interruptions occur shall endeavor to reestablish service with the shortest possible delay consistent with the safety to its customers and the general public." Although it appears that Orville acted promptly on November 1^st to notify the Water Division of PG&E's intent to cut off power later that day, it was his failure to pay PG&E's bills for five months that had produced this crisis.

Even after the power was restored on November 1^st -- as a result of which Ponderosa became obligated to make more than $12,000 in payments to PG&E by February 25, 2002, (McCrea Declaration, Ex. 9) -- Orville apparently made no effort to find out what additional data the Commission needed to grant a rate increase.¹³ Instead of honoring the payment schedule he had agreed to (Tr. 70), Orville made a series of partial payments that, by the time of the hearing, left Ponderosa owing approximately $6,000 to PG&E. We agree with the Water Division that this conduct "puts the ratepayers at risk of losing their water service should PG&E disconnect the power to [Ponderosa] again." (Water Division Brief, p. 3.) As such, it constitutes another instance of the respondents' unwillingness or inability to serve Ponderosa's ratepayers adequately.

Orville's failure to communicate with the Water Division during the May-November 2001 period appears to be part of a pattern in which Orville made himself inaccessible when he didn't want to communicate with regulatory authorities. At the hearing, McCrea testified that in March 2002, he had twice sent a letter to Orville by certified mail with a return receipt requested, but that both mailings had been returned by the post office as unclaimed. (Tr. 67-69.) ¹⁴ Hinrichs of DHS testified that he had also sent Orville certified letters that were refused or returned as unclaimed, and that Orville was not consistent about returning telephone calls. (Id. at 125-28.)¹⁵ Kevin testified that he had also experienced frequent difficulties in contacting his brother. (Id. at 146.) Finally, Potanovic of Tehama EHD testified that shortly before the hearing, he had tried to telephone Orville, but the latter's phone was disconnected. (Id. at 139.)¹⁶

Another obvious instance of the respondents' failure to serve Ponderosa's ratepayers and to follow Commission orders is the failure to conduct bacteriological testing from November 2001 through March 2002. As Potanovic testified, this basic test -- which is only one of a number required by law (Tr. 131-35) -- is "important intrinsically for the protection of public health." (Id. at 142.) ¹⁷ Moreover, section II.1.a. of GO 103 requires that "any utility supplying water for human consumption" must hold or apply for a permit from the state or local Department of Health Services "and shall comply with the laws and regulations" of that department. Potanovic testified that in July 2001, his department assumed responsibility for enforcing the California Safe Drinking Water Act for systems like Ponderosa, and that he had issued a citation to Kevin and Orville due to their failure to conduct the required bacteriological testing. (Tr. 137-38.)¹⁸

The failure of the Figgs brothers to pay property taxes on the parcel containing most of Ponderosa's assets (as well as its principal source of supply) is another instance of failure to serve the ratepayers adequately. The taxes that are now past due on this parcel ($18,149.49) are approximately one and one-half times the annual operating revenue for the system. (Tr. 183.) Moreover, the Tehama County Tax Collector testified that the only property taxes on this parcel that have been paid on time since 1993 were those due on June 30, 1998, and that happened only because timely payment of those taxes was a condition precedent for entering into a five-year payment plan, on which Orville subsequently defaulted. (Id. at 194-95.)¹⁹

Not only has Orville been unresponsive to Commission orders and failed to serve Ponderosa's ratepayers adequately, but neither he nor Kevin has any viable plan for operating the system. Orville testified that unless the water system could be sold,²⁰ the best hope lay in filing for bankruptcy under Chapter 13. Orville's plan once that happened would be to pay PG&E as much as possible on the past-due power bill, and to take out a two-year loan to pay the past-due property taxes. (Tr. 183-85.) Kevin also expressed interest in a Chapter 13 Bankruptcy filing. (Id. at 149-50.) However, the root cause of Ponderosa's problems (in addition to the brothers' antagonisms) is a lack of adequate revenue, and without a rate increase - which a bankruptcy court cannot grant, and for which Orville has failed to submit the necessary data to the Commission -- it is not apparent how more revenue can be obtained.

In summary, we agree with the Water Division that for Ponderosa, there is "no alternative to requesting that the Superior Court appoint a receiver." (OII, p. 7.) We recognize that the appointment of a receiver has been characterized as a "violent and drastic" remedy, Bank of Woodland v. Stephens, 144 Cal. 659, 660 (1904), but in appropriate cases we have sought one. In our

recent decision concerning Arrowhead Manor Water Company, for example, we concluded that it was appropriate to seek a receiver under § 855 because the water company had been cited many times by DHS for deficiencies in water quality monitoring, and because the company's long history of failing to make repairs on its system demonstrated an inability to serve ratepayers adequately. See, D.02-07-009, mimeo. at 14-16, 37-38.²¹

When it enacted § 855 in 1980, the Legislature expressly empowered the Commission to seek a receiver for a water or sewer company upon making any one of the three findings -- inability or unwillingness to provide adequate service to ratepayers, actual or effective abandonment, or unresponsiveness to Commission rules or orders -- that are set forth in the statute. As the discussion above makes clear, we find in this case that Kevin has abandoned the water system, and that Ponderosa under Orville's management has been unable or unwilling to provide adequate service to its ratepayers and has been unresponsive to Commission rules and orders. Thus, we are in the sad and unusual position of having to conclude that all three of the findings set forth in § 855 must be made.

"Upon complaint to the utility by a customer either at its office, by letter or be telephone, the utility shall promptly make a suitable investigation and advise the complainant of the results thereof. It shall keep a record of all complaints which shall show the name and address of the complainant, the date and nature of the complaint, and the adjustment or disposition thereof for a period of two years subsequent to the final settlement of the complaint."

"Until just yesterday I did not realize that the capital improvements account had been changed from the plant acquisitions account, that the capital improvements is what used to be called plant acquisitions, if you buy pumps or make major additions to your facilities. And he [McCrea] was calling that the `capital improvements account.' Which capital, to me, meant money, like in your bank account." (Tr. 181.)

"[T]he State Drinking Water Act requires community water systems to monitor bacteriological quality on a monthly basis. That entails submitting water samples to a state-approved laboratory for bacteriological examination monthly, and [relaying] these sample results to the [county] health department. Since this department has assumed responsibilities for Sky Ranch in July, the sampling results have not been forthcoming as required by law." (Tr. 137.)