Assignment of Proceeding
Susan P. Kennedy is the Assigned Commissioner and Victor D. Ryerson is the assigned ALJ in this proceeding.
1. The $25,000 withdrawal from Hillview's SDWBA account on January 31, 1992, was not approved by the Commission. It was, however, approved by the Department of Water Resources, and was used for utility purposes.
2. The four withdrawals from Hillview's SDWBA account on June 30, July 31, September 30, and October 30, 1993, were paid to Forrester and his ex-wife Judith, and were not approved by the Commission.
3. The respondents did not seek prior Commission approval of the $424,000 SBA loan to Hillview in 1994. Res. No. W-3833 (March 9, 1994) reflects that the Commission was by then aware of this unauthorized borrowing.
4. By July 31, 1998, Forrester paid all of the $141,546.97 owed to Hillview as partial repayment of the $350,000 the company had loaned to him and his ex-wife, Judith.
5. Hillview sought prior approval of the two CoBank loans by a draft AL filed on October 6, 1993. Res. No. F-632, issued in response to the request on November 22, 1994, reflects that the Commission was aware Hillview was in violation of Section 825 for failure to secure prior approval of Hillview's commercial debt.
6. Hillview modified certain Commission-approved service connection applications and main extension contract forms used to implement Tariff Rule 15, by inserting provisions requiring the customer to pay a nonrefundable "Supply and Storage Fee." The term, "Supply and Storage Fee" does not appear in Tariff Rule 15 or any other Commission-approved tariff that pertains to this investigation.
7. From 1982 until at least 1993, utilities were only permitted to collect fees to pay for supply and storage facilities from developers, and not from individuals, under the terms of Commission-approved tariffs.
8. Hillview collected "Supply and Storage Fees" from individual customers until 1994.
9. Hillview's failure to refund these fees as advances pursuant to the refund schedule in Paragraph C.2.c of Tariff Rule 15 was contrary to the express requirements of that tariff.
10. Hillview did not properly make the election to treat payments for customers as non-refundable contributions under applicable tariff rules.
11. Hillview's practice of collecting "Supply and Service Fees" until June 1994 was not provided for in Tariff Rule 15.
12. Hillview's alteration and use of Commission-approved forms used to implement Tariff Rule 15 without obtaining prior Commission authority was contrary to Paragraph A.1.a of that tariff.
13. Hillview's noncompliance with Commission-approved tariffs as described herein substantially harmed its customers.
14. In response to two data requests, Hillview furnished to Staff photocopies of completed application forms that had been altered by replacement of the bottoms of the original documents. The principal instance was a data request for a list of customer names. Production of the names in this fashion was responsive to the request, and any obliterated information was readily available to Staff.
15. There is no substantial evidence that the respondents altered any documents in an effort to mislead the Commission.
16. Hillview did not enter into main extension contracts with Long's Drugs or Von's Markets in compliance with Tariff Rule 15 when those customers arranged for service to the properties involved in this investigation.
17. There is no substantial evidence in the record that respondents diverted revenue collected expressly to repay its SDWBA loans from the special surcharge account and applied them to other purposes, including personal business use by Forrester, except for the withdrawals referred to in Finding of Fact 2, above, which were purportedly payments to Forrester and his ex-wife Judith in partial satisfaction of a debt owed to them by Hillview.
18. There is no substantial evidence in the record that Hillview submitted AL 53 for additional authority to expand facilities and increase indebtedness, and in it misstated the level of the special fund account due to diversion in a manner prohibited by Commission rules and orders.
19. The Forresters' assumption of a $47,900 loan to the company by Linton and cancellation of that debt as part of the 1992 loan transaction was based upon a substantiated pre-existing obligation to Linton for sums he had advanced on behalf of the company and cash he had paid to the company.
20. In the 1992 transaction, Forrester did not immediately lend $141,546.97 to the company, as reflected in the terms recorded for that loan transaction.
21. The book entry made in 1992 that included the $350,000 obligation was not properly recorded. That transaction should have been recorded as set forth in Exh. 124 under proper accounting procedure.
22. As a result of improper recording of the 1992 transaction, Hillview's CIAC was understated, and its rate base was overstated, by $141,546.97 for the 1994 test year.
23. In the 1993 General Rate Case, we adopted a low rate of return for Hillview because of its previous unauthorized borrowing activities.
24. At the time 41/49 made the $350,000 loan to the Forresters, it had already fully satisfied its obligation to contribute utility plant under its main extension contract with Hillview.
25. The $350,000 personal loan to the Forresters was not recorded as a loan to the company.
26. There is no evidence that Hillview obtained the $424,000 SBA loan in order to mislead Golden Oak Bank or the Commission.
1. Based upon the foregoing findings, the respondents violated Section 491 prior to July 31, 1994, by conduct contrary to various provisions of Commission-approved tariffs.
2. Based on the foregoing findings, the respondents did not violate Section 571 as alleged in the OII.
3. Based upon the foregoing findings, the respondents violated Section 825 by incurring indebtedness on behalf of Hillview without first obtaining an order of the Commission granting authority to do so.
4. Based upon the foregoing findings, the respondents violated Tariff Rule 15.
5. Based upon the foregoing findings, the respondents should be ordered to make refund of the unauthorized supply and storage fees collected back to individual customers in accordance with the terms of Tariff Rule 15. Each affected customers shall have six months within which to submit a written claim to the company for a refund. With respect to past due amounts, the Respondents should be ordered to provide an estimate of the total past due amounts and demonstrate what impact this total amount would have on its rate base and revenue requirement. The respondents shall submit such information to the Commission in its general rate case application.
6. Based upon the foregoing findings, the respondents shall be ordered to publish a notice regarding the refunds in the most widely circulated newspaper in Hillview's service territory within 30 days from the effective date of this decision. The respondents shall publish the same notice again three months after the publication of the first notice.
7. Based upon the foregoing findings, the respondents shall be ordered to pay a fine of $1000 and the fine shall be payable to the Commission within 60 days from the effective date of this decision.
8. Based upon the foregoing findings, a final reconciliation of Hillview's accounts should be prepared to explain and correct any discrepancies or irregularities identified in the findings, for the period from January 1, 1991, through June 30, 2003. The final reconciliation shall be included in a general rate case application, which shall be filed within nine months from the effective date of this decision.
9. Based upon the foregoing findings, Hillview shall prepare a comprehensive report on the refunds in its general rate case application.
IT IS ORDERED that:
1. Within nine months of the effective date of this order, the respondents Hillview Water Company, Inc. (Hillview) and Roger L. Forrester (Forrester), the principal shareholder and president, shall prepare and file with the Commission a general rate application which includes a final reconciliation of Hillview's accounts for the period from January 1, 1991, to and including July 30, 2003, that fully explains all of the discrepancies and irregularities identified in the Findings of Fact. This reconciliation shall include, but shall not be limited to, to the accounts set forth in Section 6 of this decision.
2. Within 30 days from the effective date of this order, the respondents shall publish a notice regarding the refunds in the most widely circulated local newspaper for duration of one-week. The respondents shall run this notice again three months after the publication of the first notice in the same newspaper and for the same duration of time. The refund notice shall be submitted for a review and approved by the Water Division prior to the publication of the first notice.
3. Within six months from the effective date of this decision, customers shall submit a written claim for refund to the company. The written claim shall include a proof of evidence, either a receipt or any other document that demonstrates the payment of the supply and storage fees. If the customer cannot provide proof of evidence, the customer shall still be eligible for the refund if the customer is on the Joint Report or provides a statement under penalty of perjury.
4. Within 60 days from the receipt of a written refund claim, Hillview shall do one of the following: (a) provide the refund; (b) request for more information regarding proof of payment; or (c) deny the claim with an explanation. Any dispute regarding the refund that cannot be resolved between the customer and the company may be brought the Commission. Hillview shall provide, to each affected customer, 2 ½ percent of the total amount of the supply and storage fee annually, until the total amount is paid off in accordance with the terms of Section C.2. of Tariff Rule 15. With respect to past due amounts Violated Commission orders on extension of service to new customers, we order Hillview to provide an estimate of how much it owes in past due amounts and demonstrate how this toil amount would impact its rate base and revenue requirement in its general rate case filing.
5. Within 60 days of the effective date of this order, the respondents, Hillview Water Company, Inc. (Hillview) and Roger L. Forrester (Forrester), the principal shareholder and president, shall pay the $1000 fine to the Commission.
6. Investigation 97-07-018 will be closed upon the respondents' filing of a general rate case application. All compliance issues, including all the reconciliation of accounts and the refund report, shall be addressed in the general rate case.
This order is effective today.
Dated September 18, 2003, at San Francisco, California.
CARL W. WOOD
LORETTA M. LYNCH
GEOFFREY F. BROWN
Commissioners
I dissent.
/s/ MICHAEL R. PEEVEY
President
I will file a dissent.
/s/ SUSAN P. KENNEDY
Commissioner
Commissioner Susan P. Kennedy, dissenting:
Today's decision of the majority is wrong on policy, wrong on the facts, and wrong on the law.
Today's decision orders the Hillview Water company to pay rebates to customers for deposits made almost ten years ago for which there are no extant records of who paid what. Yet, the decision of today's majority properly notes:
All of these fees were recorded as Contributions in Aid of Construction (CIAC) and were used to construct supply and storage facilities. They were not included in Hillview's rate base, with the consequence that the company has not earned any return on them, and customers other than those within the affected developments did not pay for the facilities.
Nevertheless, the decision of today's majority adopts a policy of ordering refunds.
Moreover, it is a plain as day that administering rebates of deposits made over 10 years ago for which everyone agrees that no clear records exist for who the customers were that paid those deposits, and then adopting offsetting rate adjustments, as our statutes require, is an absurd outcome for this case.
It will require months of work by both the company and water division to develop a complex scheme for granting the refunds and permitting Hillview to finance it.
It will benefit no one. In fact, because the utility is entitled to recover the refund in rates - current Hillview customers will be forced to pay the price of our little exercise in bureaucratic self-aggrandizement.
Furthermore, the claim for damages is so old that were a customer to make this compliant, the Commission would toss it out on Section 736 of the PU Code. The decision of today's majority begs the question: Does it really make sense for the Commission to go to such lengths in order to provide refunds in 10-year-old case?
For these reasons, I can only conclude that the decision of the majority is wrong on policy.
Second, the action of today's majority is wrong on the facts. The draft of the Administrative Law Judge indicates that Mr. Forrester was very candid in admitting his errors and cooperated fully with the investigation. This statement is absent from the order of today's majority. The Administrative Law Judge found that Hillview's failure to comply provided it with no benefit and did not harm customers. This finding is notably absent from the decision of today's majority. Thus, the selective inclusion of facts in the order of today's majority is simply wrong.
Third, because the action of today's majority is wrong on the facts, it is also wrong on the law. Although the alternate fines Mr. Forrester for a Rule 1 violation, it documents no intentional lying or misrepresentations to the Commission and makes no findings that support its legal conclusion.
Since the decision of today's majority is wrong on policy, wrong on the facts, and wrong on the law, I must respectfully dissent.
/s/ SUSAN P. KENNEY
Susan P. Kennedy
September 18, 2003
