2. Background

Knollwood is a 116-space mobilehome park in Yucaipa. In 1998, Knollwood gave notice to the Rent Review Commission that it planned a substantial capital improvement project at the park involving the delivery of gas, electricity and water service to individual mobilehomes. Knollwood obtained two bids for the project and then met with residents to present the proposed project and its cost. The project was approved by at least 51% of the occupied spaces in the park, as required by Yucaipa's Rent Stabilization Ordinance. A contract for construction of the project was executed in August 1998 and work began soon after. In February 1999, the City of Yucaipa issued its final inspection of the project and notice of completion.

On February 25, 1999, Knollwood applied to the Rent Review Commission for a capital improvement rent increase by which it would pass through to residents the portion of the gas and electrical project that ran from the submeters to the coaches and all of the cost of the water system project. The administrator

of the Rent Review Commission denied the application based on this Commission's exclusive jurisdiction over the cost of utility improvements within submetered mobilehome parks. Knollwood appealed the decision to the Rent Review Commission, and a public hearing was held on June 25, 1999. At the hearing, a representative of the residents raised objections to the proposed rent increase, and Knollwood's representative presented evidence defining the water project and defining those parts of the gas and electric project that it argued were not subject to this Commission's jurisdiction under Pub. Util. Code § 739.5.¹ Based on the evidence introduced at the hearing, the Rent Review Commission adopted Resolution 99-02, passing on about half of the costs ($250,572) to residents and authorizing a rent increase of $17.40 per month per space for 20 years to recover that amount.

Certain Knollwood residents then brought an action in San Bernardino County Superior Court. The Court rejected the residents' claims, finding that costs associated with maintenance of the submetered gas and electrical system from the master meter to the submeters cannot be passed through to residents, while the costs associated with the gas and electric utility systems from the submeters to the coaches can be passed through to residents. The Court also found that Commission regulations do not apply to the water system utility in this case because water service comes from the Yucaipa Valley Water District, an independent special district. (Jenkins v. City of Yucaipa, et al., Case No. SCVSS 60679, Notice of Decision, February 14, 2000.) Cross-appeals were filed by the plaintiffs in the Jenkins case and by Knollwood in the Fourth Appellate District, Division Two, but on September 19, 2000, the parties stipulated to a dismissal of all appeals. (Jenkins v. City of Yucaipa, et al., Case No. E027449.)

On June 4, 2001, complainants initiated this complaint proceeding at the Commission against Knollwood. On November 27, 2001, the assigned Administrative Law Judge (ALJ) dismissed those portions of the complaint seeking reversal of the rent increase as to replacement of the water system and improvements to gas and electrical components between submeters and individual mobilehomes. Complainants agreed that water system costs were not subject to Commission jurisdiction, and did not challenge exclusion of costs for gas and electric components between submeters and individual mobilehomes.

On January 11, 2002, the assigned Commissioner issued a Scoping Memo setting dates for hearing and defining the issues to be decided as follows: 1) Do trenching costs include any amount solely attributable to gas and electricity in such a manner as to fall within the exclusive jurisdiction of the Commission?; 2) Were items such as pedestals and meters improperly included in costs that were passed along to residents?; 3) Were administrative costs improperly included in costs that were passed along to residents?; and 4) Are residents precluded from bringing this action because of the earlier decisions of the Rent Review Commission and the Superior Court?

At the request of the parties, and as an accommodation to complainants, the Commission twice extended the statutory deadline for resolution of this case under § 1701.2(d). A hearing was conducted on July 18, 2002. Concurrent briefs were filed on September 20, 2002, reply briefs were filed on October 4, 2002, and the case was then deemed submitted for decision.

On January 30, 2003, we issued D.03-01-063. We dismissed the complaint, concluding that we lacked jurisdiction to rule on improvements to the water system, which is served by a district water utility, and that complainants' burden of proof was not met as to the work on gas and electric systems. On March 3, 2003, complainants filed an application for rehearing. In D.03-08-077, the Commission reversed the earlier decision as to allocation of trenching costs and remanded for further consideration of that issue.