3. Violation of Rule 13.1

Rule 13.1 of the Commission's Rules of Practice and Procedure (Rules) requires water utilities to give notice of a hearing, not less than five nor more than 30 days before the date of a hearing, to entities or persons who may be affected thereby, by posting notice in public places and by publishing notice in a newspaper or newspapers of general circulation in the area or areas concerned, of the time, date, and place of hearing.

To comply with this rule, SGV would have had to post and publish notice of the December 4, 2007 evidentiary hearing between November 4 and November 29, 2007. However, this was not done.

SGV explained that it did provide all notices required by statute and the Commission's Rules in connection with the filing of its application. Since there were no public participation hearings in this proceeding, notice of the evidentiary hearing was inadvertently overlooked. SGV also stated that many other tasks dominated the attention of its general rate case (GRC) team at the time the routine notice should have been provided, including its review of the Division of Ratepayer Advocates' (DRA) prepared testimony, preparation of rebuttal testimony, settlement negotiations, preparation for participation in a prehearing conference (PHC) on its Fontana Division's water action plan, as well as other complex filings. These other complex filings included a preliminary comparison exhibit for this proceeding and a data-intensive advice letter concerning the company's Sandhill project and Facilities Fees revenue.

Unquestioningly, SGV violated Rule 13.1 by not publishing notice of the evidentiary hearing. The question here is whether SGV should be fined for its violation. Decision (D.) 89-12-075 set forth five criteria to be considered in assessing a fine. Those criteria consist of an analysis of the severity of the offense, conduct, financial resources, totality of the circumstances, and the role of precedent.¹

The severity of an offense is measured by the extent of physical harm, economic harm, and harm to the regulatory process. We find SGV's violation of Rule 13.1 by not posting notice in public places and not publishing notice in a newspaper of its evidentiary hearing to be a serious offense.

SGV's conduct is measured by its action to prevent, detect, to disclose, and to rectify a violation. SGV points out that the notice requirement at issue is not a statutory requirement but rather a provision of the Commission's Rules of Practice and Procedure. As such, it seeks permission to deviate from the notice requirement for good cause, pursuant to Rule 1.2. Good cause was identified to exist because SGV had made positive and substantial efforts with other parties to compromise their interests in order to achieve a timely and fair partial settlement that enabled parties to concentrate on a relatively few contested issues. SGV also explained that its mistake was a one-time error and pledged that it will not allow a recurrence of its mistake.

While Rule 1.2 authorized a deviation from the Commission rules for good cause, the Commission rarely authorizes deviations from its rules on a nunc pro tunc basis. Irrespective, SGV's pledge to prevent a recurrence of its mistake argues in favor of a mitigated fine.

The financial resources of the violator are considered to determine the size of a fine that would deter applicants from future violations without becoming excessive. The financial statements attached to its application showing net worth of approximately $170 million substantiate that the company has the financial resources to pay a penalty. Accordingly, a fine could effectively deter future violations.

The totality of circumstances is measured by the degree of wrongdoing and public interest. The facts of this violation show that SGV's violation of Rule 13.1 was unintentional. In addition, the absence of significant customer correspondence from SGV's mailing notice of its application to each customer and to all cities and public agencies in its service territory allows us to infer that customers did not experience a significant hardship.

Finally, the precedent that an assessment of a fine may have on other proceedings is considered. Failure to impose a fine in this instance may result in other utilities relaxing their customer notification procedures thereby adversely impacting the ability of customers to provide input to the Commission. Hence, a fine is warranted and should be imposed.

Based on our application of the criteria adopted by the Commission in D.98-12-075 to the facts in this proceeding, a $1,000 fine is warranted pursuant to Section 2107 of the Public Utilities Code. The size of the fine that is being imposed is based on the unique facts and circumstances of SGV's violation and should not be used as a precedent by other utilities.

¹ 84 CPUC2d 154, at 182-85.