Factual Background

Garrapata is one of the smallest public utility water companies subject to this Commission's regulatory jurisdiction.² The utility currently provides water service on a flat rate basis to Fisch, 42 other residential customers, and two commercial customers in a rural portion of Monterey County about ten miles south of Carmel. The service area includes land on both sides of State Highway No. 1 (Highway 1), which runs generally parallel to the California coastline in that area. Fisch's property is located to the west of Highway 1. The Pacific Ocean forms part of the western border of her property and Garrapata Creek, which flows under the Highway 1 bridge westerly through a steep canyon into the Pacific, marks part of the southern border.

In July 1962 the Commission granted Garrapata a certificate of public convenience and necessity (CPCN) and authorized the establishment of metered rates. (Decision (D.) 63944 [the CPCN decision].) A subsequent decision, which resolves disputes over a main extension contract executed in 1974, reviews the historical context in which the CPCN issued, stating that Garrapata "was formed in 1962 by a group of doctors to provide water service to lands which they owned and were selling." (D.83-03-011 [1983 main extension decision], mimeo. at 6.)

In September 1974 the Commission authorized Joel M. Morris (Morris) to acquire the utility from the doctors. (D.83461 [the 1974 transfer decision].) Following Morris' death in 1978, his wife Barbara Morris, now Barbara Morris Layne (Mrs. Layne), acquired the utility. She is Garrapata's president and sole shareholder. Her second husband, Donald M. Layne (Layne), is the utility's vice-president, lawyer, operations manager and, at times, its plumber.³

In 1987, the Commission directed Garrapata to switch to the present flat rate schedule. Commission staff recommended this conversion to avoid the cost of refurbishing and installing meters on the system. (D.87-11-021 [the 1987 GRC decision], mimeo. at 12.) It appears Garrapata had not been reading meters or billing on the basis of metered usage but instead had been assessing customers the annual minimum charge set out in its metered rate schedule, resulting in an ongoing operating loss.