Background

Cypress Ridge Community (Cypress Ridge) is a new residential development located in the northwest portion of the Nipomo Mesa in San Luis Obispo County, adjacent to the City of Arroyo Grande. It includes 386 single-family lots, a golf course, and a 6.3 acre commercial village with a community center, swimming pool and tennis courts, a post office, and other facilities. Some homes have already been built and occupied, and most of the remainder are to be completed over the next two to three years. The developer also has near-term plans to obtain approvals to construct and operate a hotel, restaurant and spa complex.

On August 31, 2000 Cypress Ridge Service Company, Inc. (Cypress), a California corporation,¹ filed Application (A.) 00-08-056 requesting a certificate of public convenience and necessity to provide sewer service to Cypress Ridge. On February 2, 2001 Rural Water Company (Rural) filed a competing application, A.01-02-006, for the same service territory. Rural has been a Commission-regulated water utility in the area for many years and in September 2000 expanded its water service territory to include Cypress Ridge. Cypress is currently providing sewer service in Cypress Ridge without charge. Cypress now supports Rural's sewer application and seeks its own sewer certificate only if the Commission were to deny Rural's application.

The assigned Administrative Law Judge (ALJ) issued a ruling consolidating the applications on July 25, 2001.

Both applications were protested by the Commission's Office of Ratepayer Advocates (ORA). A nearby public district, Nipomo Community Services District, initially protested on the grounds that the District could provide better service at lower cost, but subsequently officially withdrew entirely from the consolidated proceeding.

The ALJ held a prehearing conference in the first application on December 19, 2000, at which time Rural first appeared and indicated its desire to serve. The parties requested that evidentiary hearings be held in abeyance while Cypress and Rural jointly explored their options. A second prehearing conference was held on July 25, 2001, followed by two days of evidentiary hearings on December 10 and 11, 2001. The consolidated proceeding was submitted on closing briefs due January 28, 2002.