IX. Assignment of Proceeding

Rami Kahlon is the principal hearing officer in this proceeding.

Findings of Fact

1. Del Oro requested a Certificate of Public Convenience and Necessity to operate a new water system as a public utility, which will serve a new development of currently undeveloped lots near Shingletown, Shasta County.

2. When fully built out, this system will serve 132 customers.

3. The name of the new system is Mt. Lassen Woods.

4. Del Oro is a corporation, owned by Robert Fortino, which provides water service to approximately 7,000 customers across California.

5. Del Oro proposes to purchase the water distribution system for the Mt. Lassen subdivision from R.H. Emmerson & Son, LLC (Emmerson or developer), for $165,000.

6. Del Oro estimates that developer will spend $2,537,500 to build water system.

7. Del Oro will pay Emmerson $1,250 per lot, as lots are sold, for a total of $165,000.

8. Del Oro requests that it be authorized to charge flat stand-by monthly rates of $35.67 for third party residential customers.

9. Del Oro requests that it be authorized to charge flat stand-by monthly rates of $30.46 for unsold lots - this rate would be paid by Emmerson, the developer.

10. Del Oro requests that it be authorized to charge a meter hook-up fee of $750.

11. Del Oro requests that it be authorized to charge a quantity rate of $0.96/100 cubic feet and a service charge of $32.88, when water service is requested by a customer and a meter is installed.

12. Del Oro requests application of flat rates until the next rate case cycle.

13. The Mt Lassen system will consist of: 1) one primary well, one back-up well, and one well that is plumbed and ready if needed in the future; 2) a bolted steel storage tank, measuring 30 feet tall by 50 feet in diameter, with a capacity of 326,400 gallons; 3) a distribution system consisting of six-inch I.D. C900 PVC distribution pipe as well as two pumps and a booster station; and 4) treatment consisting of chlorination at the wellhead, with provision for adding iron and manganese treatment in the future.

14. Del Oro provided its Articles of Incorporation in its application.

15. Del Oro received a Temporary Conditional Permit for a Small Community Public Water System from the Shasta County Department of Resource Management - Environmental Health Division.

16. Del Oro provided a map of the new system.

17. Dell Oro provided the 2006 balance sheets and income statements for the consolidated utility, as well as for each individual district currently operated by Del Oro.

18. Del Oro provided a list of potential competitors in the vicinity of the Mt. Lassen system.

19. Del Oro provided R.H. Emmerson's CEQA Mitigated Negative Declaration, with conditions.

20. Del Oro provided requested rates and results of operation.

21. Del Oro estimates that the number of customers served in the Mt. Lassen Woods system will be 10 in 2008, 22 in 2009, and 40 in 2010.

22. Del Oro satisfied all of the applicable requirements of Pub. Util. Code § 1002(a) and Rules of Practice and Procedure 3.1 and 3.2.

23. Del Oro partially satisfied the applicable requirements of Pub. Util. Code § 1004 with the provision of their articles of incorporation.

24. Del Oro satisfied the applicable requirements of Commission Resolution M-4708 concerning Class D water utilities.

25. Del Oro satisfied the requirements of CEQA in the current case through submittal of R.H. Emmerson's Mitigated Negative Declaration and associated documents for its Mt. Lassen subdivision.

26. Amounts recorded in Account 271-Contributions in Aid of Construction, do not earn a rate of return.

27. Del Oro's proposed rate design and results of operations (Table 1), does not satisfy our criteria for water utility rate design.

28. The rate design and results of operations based on the Purchase Agreement (Table 2), does not satisfy our criteria for water utility rate design.

29. The requested meter hook-up fee of $750 is not supported by General Order 103, § 525 of the Water Code, and the record.

30. A meter hook-up fee of $235 is supported by General Order 103, § 525 of the Water Code, and the record.

31. Use of flat rates in 2008 and 2009 is in compliance with California Water Code § 525.

Conclusions of Law

1. Since Del Oro has only received a Temporary Conditional Permit for a Small Community Public Water System, the CPCN issued should be conditional on Del Oro's receiving a Final Permit for a Small Community Public Water System and providing such to the Director of the DWA.

2. Public utility regulation of Del Oro is necessary and convenient to safeguard a small number of customers who have no water supply alternatives, and ensure reasonable and fair rates for both the ratepayers and the company.

3. Del Oro should be awarded a CPCN authorizing it to operate as a public water utility within the state of California with all the rights and obligations thereof.

4. Del Oro should be awarded a CPCN and Del Oro should assume the obligation to serve, as set forth in the Pub. Util. Code (including, but not limited to Pub. Util. Code § 451 and 453).

5. Once granted a CPCN, Del Oro's Mt. Lassen system should be classified as a Class D water utility.

6. Del Oro should record the difference between the developers cost of building the system ($2,537,500) and the total amount it will pay for the system ($165,000) in Account 271-Contributions in Aid of Construction.

7. A 23% Rate of Margin should be authorized as a reasonable and just rate of margin for Del Oro.

8. A rate design and results of operations which utilizes a Rate of Margin and bases revenues on expenses, depreciation, taxes, and a reasonable return, is reasonable to use to develop the rate design for the Mt. Lassen service area.

9. Del Oro should charge all customers a stand-by rate of $35.34 per month.

10. Once residential customers are metered, Del Oro should charge a quantity rate of $0.96/100 cubic feet and a monthly service charge of $32.88.

11. All customers should be defined as third party owners of lots and the developer.

12. Del Oro should file a Tier Three Advice Letter general rate case in 2010 for a 2011 test year, for metered rates.

13. Del Oro should comply with all applicable State and local laws, regulations, and rules, in the operation of the Mt. Lassen Woods water system.

14. The specific ratesetting calculations set forth in Appendices A and B should be adopted by the Commission.

ORDER

IT IS ORDERED that:

1. The Del Oro Corporation (Del Oro) is granted a conditional Certificate of Public Convenience and Necessity (CPCN) for operation of a water utility, within the service area known as the Mt. Lassen subdivision, near Shingletown, Shasta County, as generally described as "Section 26, Township 31 North, Range 01 East (U.S. Geological Survey's Hagaman Gulch 7.5-minute quadrangle)(USGS 1985)", and is also identified as "Shasta County Assessor's Parcel Number 095-170-004," as set forth in Exhibit E to Del Oro's Application in this proceeding.

2. Del Oro shall fulfill its obligation to serve, as set forth the Public Utilities (Pub. Util.) Code and prior decisions and orders of the Commission.

3. In order to be granted a Final CPCN, Del Oro shall satisfy the following conditions:

a. Issuance of a Final Permit for a Small Community Public Water System from the Shasta County Department of Resource Management-Environmental Health Division (SCDRM) to Del Oro, and provision of a copy of said Final Permit to the Director of the Commissions Division of Water and Audits (DWA); and

b. Compliance by developer and Del Oro with all California Environmental Quality Act (CEQA) conditions set out by the County of Shasta - Planning Division, and provision of proof of such compliance to the Director of the Commission's DWA.

4. Del Oro shall record the difference between the developers cost of building the Mt. Lassen water system and the total amount to be paid by Del Oro for the system in Account 271-Contributions in Aid of Construction.

5. Del Oro shall file a general rate case in 2010 for a 2011 test year.

6. The rate of margin to be used initially for the Mt. Lassen service area is 23%.

7. Del Oro shall charge all customers in its Mt. Lassen service area the same flat stand-by fee of $35.34.

8. Del Oro shall charge all customers a quantity rate of $0.96/100 cubic feet and a service charge of $32.88, when water service is requested by a customer and a meter is installed.

9. Del Oro shall charge all customers, for which a meter is installed, a meter hook-up fee of $235.

10. The summary of earnings and rate for the years 2008-2010 are authorized in conformance with this decision and as set forth in Appendix A. Del Oro is authorized to file in accordance with General Order (GO) 96-A (or its successor), and to make effective on no less than five days' advance notice, a tariff containing the new rates as provided in this decision.

11. Del Oro shall file, within 15 days of the effective date of this decision, a Tier One Advice Letter compliance filing containing the Preliminary Statement and tariffs necessary to implement the Flat Stand-By Rate, General Metered Rate, and Meter Hook-up Fee Rate authorized in this decision.

This order is effective today.

Dated June 26, 2008, at San Francisco, California.

MICHAEL R. PEEVEY

President

DIAN M. GRUENEICH

JOHN A. BOHN

RACHELLE B. CHONG

TIMOTHY ALAN SIMON

Commissioners

Appendix A - Summary of Earnings

(End of Appendix A)

Appendix B - Acronyms and Abbreviations

(End of Appendix B)