2. Background
This proceeding deals with the water rates and water service at the 87-space Sunbird Mobile Home Park (Sunbird) in Thermal, California, a Riverside County community in eastern Coachella Valley. The water system at Sunbird is composed of a 400-foot deep well, two 5,000-gallon pressurized storage tanks, six 10,000-gallon gravity storage tanks and a pipeline distribution system.
In 2002 Sunbird, concerned over excessive discharges into its septic system, implemented a rate structure involving a monthly service charge and a 3-tier increasing rate quantity charge. In mid-2006, convinced that the 2002 rate structure was not sufficiently stemming excessive discharges, Sunbird adopted a different rate structure, one that retained the monthly service charge of $7.36 and the rates of 68 cents per unit (100 cubic feet) up to ten units for Tier 1 usage and $1.10 per unit for the eleventh unit, Tier 2 usage, but set a rate of $20 per unit for a Tier 3 (units 12-16) and a rate of $40 per unit for a Tier 4 (units above 16).
The well water at Sunbird contains naturally occurring arsenic. This water has been tested at levels that exceed the safe drinking water standard that has been in effect since 2006.2 Residents at Sunbird have been notified by Sunbird, as directed by the Riverside County Department of Environmental Health, that continued consumption of the well water that exceeds the standard may have potential adverse health effects. Also, Sunbird has made bottled water available for purchase at cost by the residents. In addition, since March 2011, Sunbird has voluntarily provided point-of-use (POU) filtered well water at a central spigot on the Sunbird premises at no special charge. There is pending an effort, described more fully later in this decision, to convert the water source for Sunbird from the local well to the supply of the Coachella Valley Water District, a public water agency not regulated by the Commission. The latter supply meets safe drinking water standards.
The Commission received an informal complaint in December 2008 from then-resident Lucas D. Hernandez about his water bill and the quality of the water at Sunbird. Hernandez, supported by 29 other residents at Sunbird,3 filed a formal complaint with the Commission on November 25, 2009, naming Sunbird, James and Betty Martin (Trustees of the Martin Family Trust that owns Sunbird), and Hawkeye Asset Management (the entity that manages Sunbird) as Defendants.
The Complaint alleges that Defendants are "charging unjustly and unconscionably high water rates" to Hernandez and "all other" Sunbird residents.4 The Complaint seeks a determination that the tiered water billing system is unjust and illegal. It further requests an order fixing just and reasonable rates and mandating arsenic-free water within six months, as well as a "restitution award" of $2,909.
Defendant's Answer, denying the allegation that the water rates are unjust and unconscionably high, states that the rates for the first tier of consumption (which includes up to 250 gallons per day, the waste discharge limit allowed each mobile home space under state law) and the second tier (10 percent higher) represent "significantly lower rates for Sunbird residents compared to customers of the local utility."5 The Answer alleges that tiers three and four are "intended to help defray the cost of pumping excess effluent as well as encourage conservation" and that Hernandez' "occasional high water bills" resulted from "excessive water usage."6 The Answer further states that the statute cited as authority for "reparations" does not exist and the issue of arsenic in the water supply was being addressed by efforts to substitute a public agency water supply.7
The parties asked for and received the appointment of a mediator from the Commission's Alternate Dispute Resolution program to aid them in an attempt to settle the dispute. The onset of the mediation effort awaited the issuance of a staff report from the Division of Water and Audits that Administrative Law Judge (ALJ) Weatherford had requested in a ruling of February 17, 2010. The staff report was issued on May 3, 2010. On May 6, 2010, the Commission took interim action in Decision (D.) 10-05-020 to modify rates and to enjoin evictions and disconnections at Sunbird. The parties met with a mediator in Indio on June 1, 2010, and pursued settlement negotiations over many weeks. By September 20, 2010, however, their efforts had failed.
The Prehearing Conference, conducted in Indio on November 4, 2010, was followed by the filing of Commissioner Dian Gruenich's Scoping Ruling on December 22, 2010, which categorized the proceeding as rate setting, identified the issues to be resolved, denied a motion by Defendants to dismiss as to Complainant Hernandez (who no longer was a resident at Sunbird), and set a schedule for evidentiary hearings.
Commission jurisdiction in this matter arises under Pub. Util. Code
§ 2705.6,8 as the mobile home park owner provides water service to the residents "from water supplies and facilities that it owns." Those jurisdictional facts are expected to change because plans are underway to convert the water supplies for domestic water service from those provided by Sunbird to those provided by the principal public water purveyor in the region, the Coachella Valley Water District (District).
Under a March 2011 conditional water delivery agreement signed between the owner of Sunbird and the District,9 the District will deliver water to Sunbird's meter and Sunbird will then distribute and bill for that water to individual submeters of the residents. Further, under that agreement, Sunbird's public water supply permit is to be surrendered to Riverside County, the on-site pipelines are to be disconnected from the Sunbird wellhead and connected to District facilities, and the District's water charges, billed to Sunbird, are to be passed through to the submetered residents at Sunbird. The District is to own, operate, maintain, and repair the off-site facilities. Sunbird is to operate, maintain, replace, repair, reconstruct, and improve the on-site pipelines that make up the distribution system from the point of connection and beyond the master meter.10
In light of Sunbird's plans to convert to a public agency water supply, Administrative Law Judge (ALJ) Weatherford requested on February 1, 2011,11 that further and updated information be gathered by the Division of Water and Audits to take into account water expenses (separate from septic system expenses) and to consider the impact of unresolved water contamination on rates and service, as well as issues posed by Defendants. The resulting Supplemental Staff Report (hereafter Report), filed on June 10, 2011,12 supersedes the May 3, 2010 staff report.
Evidentiary hearings were held in Indio on July 18-19, 2011, and continued by a videoconference and telephone connection on July 21, 2011. Complainants and Defendants thereafter filed a joint motion for approval of a partial settlement agreement13 covering water quality issues. Opening briefs were filed on August 30, 2011, reply briefs were filed on September 20, 2011, and the matter was submitted on October 7, 2011.
2 On January 23, 2006, the U.S. Environmental Protection Agency lowered the acceptable maximum contamination limit (MCL) for arsenic from 50 mg/l to 1 mg/l, and that standard has been adopted in California. Some of the well water tests at Sunbird since the new standard has been in place have revealed a range of arsenic from 11 mg/l to 15 mg/l. Supplemental Staff Report on the Sunbird Mobile Home Park. Thermal, CA, at 2.
3 Sunbird has approximately 450 residents.
4 Complaint for Unjust Water Rates and for Restitution at 1. The pleadings and other filed documents in this proceeding are accessible at the online Docket Card: http://docs.cpuc.ca.gov/published/proceedings/C0911019.htm.
5 Answer at 2-3.
6 Id. at 3-4.
7 Id. at 4.
8 § 2705.6 states:
(a) A mobilehome park that provides water service only to its tenants from water supplies and facilities that it owns, not otherwise dedicated to public service, is not a water corporation. However, that mobilehome park is subject to the jurisdiction of the commission to the extent that, if a tenant complains about the water rates charged or service provided by the mobilehome park, the commission shall determine, based on all the facts and circumstances, whether the rates charged are just and reasonable and whether the service provided is adequate.
(b) Complaints filed pursuant to subdivision (a) are subject to the provisions of this code and to the Rules of Practice and Procedure of the commission governing complaints and commission investigations.
(c) The commission may afford rate relief or may order the mobilehome park to improve its water supply, facilities, and services on those terms that it finds just and reasonable, or both.
(d) The public adviser created pursuant to Section 321 and necessary staff of the commission shall assist the complainant.
9 The Agreement between Coachella Valley Water District and James M. Martin and Betty A. Martin, Co-Trustees of the Martin Family Trust, dated March 16, 2011, can be found at Attachment G of Supplemental Staff Report on the Sunbird Mobile Home Park, Thermal, CA, filed June 17, 2011.
10 Id. at 3, Para. 4.
11 Administrative Law Judge's Ruling, at 4.
12 Supplemental Staff Report on the Sunbird Mobile Home Park, Thermal, CA, C.09-11-019 (Report). As authorized by an ALJ ruling, Defendant filed comments on this report on July 1, 2011, and Complainants replied on July 6, 2011. In the wake of the Report, Complainants also served supplemental testimony which Defendants countered with additional testimony.
13 Partial Settlement and Mutual Release Agreement, stated to be effective as of March 5, 2010, and attached here as Appendix A and attached also to the Joint Motion for Approval of Partial Settlement and Mutual Release Agreement filed August 26, 2011.
