ALJ/JRD/avs DRAFT 4/4/2002

Agenda ID #390

Decision ___________________

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Investigation on the Commission's Own Motion Into the Status, Rates, Rules, Operations, Service, Facilities, Contracts, and Practices of the Union Pacific Railroad Company in the Supply, Distribution, and Sale of Water by the Keene Water System to the Communities of Keene and Woodford in Kern County.

Investigation 00-05-020 (Filed May 18, 2000)

(See Appendix B for a list of appearances.)

OPINION FINDING KEENE WATER
SYSTEM DEDICATED TO PUBLIC USE

TABLE OF CONTENTS

Title Page

OPINION FINDING KEENE WATER SYSTEM DEDICATED TO PUBLIC USE 11

I. Procedural Background 22

II. Historical Background 33

III. Position of Union Pacific 55

IV. Position of ORA 55

V. Position of Stonybrook Corporation 66

VI. Position of Beard 77

VII. Discussion 77

VIII. Remaining Issues 1212

A. Water Rate 1212

1. Operating Cost 1313

2. Depreciation and Return on Capital 1313

3. Water Consumption 1616

4. Water Rates 1717

B. Abandonment of Service 1717

IX. Objections to Stonybrook's Testimony 1818

X. Comments on Proposed Decision 1818

A. Estoppel 1818

B. Customers 2020

C. Abandonment of Service 2121

D. Dedication 2121

E. Rates 2222

F. Keene Housing 2323

Findings of Fact 2424

Conclusions of Law 2525

ORDER 2727

1. Upper and Lower Keene Groups Agreements ii

2. National Farm Workers Service Center/Stonybrook
Corporation Agreements ii

3. Kern County Fire Department Agreement iiii

4. Cummings Settlement Agreement iiiiii

5. Schneider and Barker (Three Peaks Ranch) Easement iiiiii

6. Tony Martin Connection iviv

APPENDIX A
APPENDIX B
APPENDIX C

This decision addresses the issue of whether the Keene Water System operated by Union Pacific Railroad Company (Union Pacific or Respondent) has been dedicated to public use. We find that a dedication has occurred and that Union Pacific is operating a public utility water system in the communities of Keene and Woodford in Kern County. Further, we set new interim water rates.

I. Procedural Background

On May 18, 2000, we issued an order instituting investigation (OII) to determine whether the Keene Water System, which is currently operated by Union Pacific, is a public utility water system, as defined by Section 2701 of the Public Utilities Code.¹

This Commission has never regulated the Keene Water System as a public utility. However, based on the information in the declarations of employees of the Department of Health Services and of Commission staff member, the OII stated that the Keene Water System may by its conduct have become a public utility as described in Section 2701 and, thus, subject to the Commission's jurisdiction. Accordingly, the Commission, on its own motion, instituted this investigation.

As noted in exhibits to our investigation, this matter is also in Kern County Superior Court where the California Department of Health Services (DHS) has petitioned to appoint a receiver. DHS has found an individual who has experience in operating the Keene Water System and who has agreed to be appointed receiver. The court ordered Union Pacific not to abandon ownership of the Keene Water System, to continue to operate and maintain it, and to continue to provide water to existing residents and customers pending the results of the Commission's investigation and further hearing on the petition.

Today's decision examines whether the operation of the water system has changed over the intervening years, as the railroad's water use for railroad operations declined and ceased altogether, and the railroad entered into agreements with various customers and modified and updated the system.

Two days of hearings were held on February 13 - 14, 2001, and two public participation hearings were held on August 4, 2000, and January 29, 2001. No customers were present at the first PPH. At the second PPH, several customers, including Bridget Beard (Beard), expressed their concerns about poor water quality, resale prospects for their homes, and the connection of Tony Martin to the line as a special favor when others similarly situated had requested and been denied a direct connection. The following parties presented testimony: Union Pacific; the Office of Ratepayer Advocates, Water Branch (ORA); Stonybrook Corporation (Stonybrook); and Beard. The assigned administrative law judge granted Stonybrook and Beard leave to serve testimony late and ORA leave to serve supplemental testimony. Parties filed opening briefs on March 12, 2001, and reply briefs on March 19, 2001.