4. Discussion

Section 739.5 provides that residents in submetered mobilehome parks cannot be charged more for gas and electric utility service than if the residents were directly served by the relevant gas or electric utility. Section 739.5(a) also provides for a discount to the master-meter customer, in this case Knollwood, to compensate Knollwood for the costs related to regular repair and maintenance of its submetered gas and electric utility systems. This discount is often referred to as the "submetering discount."

Recent cases interpreting § 739.5 have held that the regulation of gas and electric utility service and rates in submetered mobilehome parks is within the Commission's exclusive jurisdiction, and that owners of submetered mobilehome parks may not attempt to pass through to residents as rent increases costs related to the repair and maintenance of their submetered gas and electric utility systems. (See, e.g., Hillsboro Properties v. Public Utilities Commission (2003) 108 Cal.App.4^th 246, 256-259; Rainbow Disposal Co. v. Escondido Mobilehome Rent Review Bd. (1998) 64 Cal.App.4^th 1159, 1168-1169.) The rationale underlying this conclusion is that owners of submetered mobilehome parks receive a potential double recovery if they are permitted to pass through repair and maintenance costs as rent increases, in addition to collecting the submetering discount that submetered mobilehome park owners already receive through the operation of § 739.5.

Resolution 99-02, issued by the Rent Review Commission on July 6, 1999, states that "the actual out-of-pocket costs incurred in the trenching for the replacement of the Park's natural gas, electricity and water utility systems was $111,445.00." (Rent Review Commission Resolution 99-02, p. 3, Finding 17.) The Rent Review Commission also found that the replacement of the gas and electricity submetered utility systems was "necessary to protect the health and safety of the Park, its residents or its neighbors," and that the replaced natural gas and electricity systems have useful lives of 20 years. (Rent Review Commission Resolution 99-02, p. 3, Findings 13 and 18.) Despite finding that the trenching was related to improvements to the gas, electric and water systems at Knollwood, the Rent Review Commission passed through the entire trenching cost of $111,445 to residents as part of the rent increase, and performed no allocation of the trenching costs among the gas, electric and water utility systems. Thus, the fundamental problem with the decision of the Rent Review Commission is that, on its face, it imposes rent increases on residents for costs related to submetered gas and electric utility system improvements at Knollwood.

In reviewing the decision of the Rent Review Commission, the San Bernardino County Superior Court issued a decision on February 14, 2000. In that decision, the Court acknowledged that, consistent with published Commission decisions and cases interpreting Commission decisions, "costs associated with maintaining gas and electrical systems from the main meter to the submeters cannot be passed through to the park residents . . . ." (Jenkins v. City of Yucaipa, et al., Case No. SCVSS 60679, Notice of Decision, February 14, 2000, p. 5.) This analysis correctly flows from § 739.5, which, as discussed above, provides a submetering discount to master-meter customers, like Knollwood, to cover costs associated with repair and maintenance of the submetered gas and electric systems within the mobilehome park.

However, the Court in Jenkins did not address the issue of allocating trenching costs among gas, electric and water system improvements. Instead, the Court found that Resolution 99-02 did not authorize an improper pass-through of gas and electric system improvement costs to Knollwood residents, and thus did not invade the Commission's jurisdiction over gas and electricity costs in submetered mobilehome parks. This determination was based on the Court's finding that Knollwood only passed through costs incurred for gas and electric system improvements between the individual submeters and the residents' mobilehome coaches, which is permissible under § 739.5, as compared to costs incurred between the master-meter and the individual submeters, which is not permissible under § 739.5.

The Commission in its remand decision in D.03-08-077 respectfully disagreed with the conclusion of both the Rent Review Commission and the San Bernardino County Superior Court that the complete pass-through of trenching costs to Knollwood residents did not result in passing through gas and electric costs incurred between the master-meter and the individual submeters.² As the California Court of Appeal has recently affirmed, this Commission has exclusive jurisdiction over gas and electricity rates in submetered mobilehome parks, and local rent boards have no jurisdiction to order rent increases that result in higher utility rates for submetered residents, as compared to directly metered mobilehome park residents. (See Hillsboro Properties, supra, 108 Cal. App. 4^th 246, 257.)

The plain language of Rent Review Commission Resolution 99-02 indicates that the Rent Review Commission passed through to residents as rent increases costs associated with trenching for submetered gas and electric system improvements. Thus, notwithstanding the Superior Court's statement, Resolution 99-02 did pass through improper costs, since a portion of the trenching related to costs within the Commission's exclusive jurisdiction that the mobilehome park owner has arguably already been compensated for in the submetering discount. Nowhere in Resolution 99-02 does the Rent Review Commission state that the $111,445.00 in trenching costs can, or should, be attributed solely to water system improvements that fall outside the jurisdiction of this Commission.³

Because of our statutory authority and obligation thereunder, we cannot allow the Rent Review Commission or the San Bernardino County Superior Court (entities to which comity and deference are normally owed) to intrude upon our exclusive jurisdiction in this manner, particularly when the decision appears predicated on a mistake of fact that is readily corrected. In determining that the allocated cost of trenching for submetered gas and electric system improvements cannot be passed through to residents via rent increases, we fulfill our statutory responsibility under § 739.5 to ensure that submetered and directly-metered residents are treated alike with respect to utility costs. This in no way intrudes upon the rent control authority of the Rent Review Commission. As noted by the Court in Hillsboro, the Commission does not dispute the authority of local rent boards to make and enforce local ordinances and regulations, so long as such actions do not invade the Commission's jurisdiction over utility rates in submetered mobilehome parks. (Hillsboro, supra, 108 Cal. App. 4^th at 258.)

In dismissing complainants' assertion that allocation of trenching costs is required, our earlier decision denying the complaint stated that "[w]e are aware of no law or tariff that requires allocation of trenching costs, and complainants direct us to none." (D.03-01-063, p. 8.) The earlier decision also stated that "complainants present no evidence that gas and electrical work increased the cost of trenching beyond that required for replacement of the water system." (Id.) In response, complainants' rehearing application cited our decision in Florsheim Brothers v. Pacific Gas & Electric Co., D.98-09-058, 82 CPUC2d 153. In Florsheim, we stated: "Even if, as argued by PG&E, no additional trenching is required to accommodate the gas facilities, there can be no `free riders' in the trench. As pointed out by [Utility Design Inc.], there is a value attached to occupancy of the trench, and that value is certainly not zero for gas facilities." (Florsheim, 82 CPUC2d at 158.)

Knollwood attempts to distinguish Florsheim on the grounds that Florsheim arises only under § 739.5 and does not involve allocation of costs related to an exempt utility service, in this case Knollwood's water system. Knollwood also suggests that the fact that the defendant in Florsheim, PG&E, had a practice of providing refunds for costs related to gas line extensions distinguishes Florsheim from the present case. This analysis is unpersuasive for three reasons. First, it presumes that the Rent Review Commission determined that the trenching costs were attributable solely to water system improvements. As noted above, the Rent Review Commission made no such finding. Second, the present case certainly arises under § 739.5, because we have a statutory responsibility to ensure that submetered residents are treated the same as directly metered residents with respect to utility service. If, as it appears from the plain language of Resolution 99-02, the Rent Review Commission passed through costs related to trenching for submetered gas and electric system improvements, we have an obligation to enforce the requirements of § 739.5. Finally, the fact that voluntary allocation (or refunds, in the case of Florsheim) of trenching costs among utilities is common utility industry practice undercuts Knollwood's argument that trenching costs should not be allocated. (See D.03-01-063, p. 7.) If the normal industry practice includes utilities voluntarily allocating shared trenching costs, there is no reason for complainants to bear a greater burden than the average directly metered customer, and indeed such disparate treatment arguably runs afoul of § 739.5.

Complainants' case is complicated by the fact that they failed to present the Commission with evidence or testimony as to how the trenching costs should be allocated. In a complaint case, the complainants bear the burden of proving that a violation of the Pub. Util. Code has occurred. (See § 1702.) However, this failure of proof is mitigated by the fact that the documentary evidence critical to establishing a proper allocation of the trenching costs is primarily within Knollwood's control. In Home Owners Association of Lamplighter v. Lamplighter Mobile Home Park, D.99-02-001, 84 CPUC2d 727, 734, we found that the mobilehome park residents did not bear the burden of proving what portion of capital improvement costs were related to electrical service. We stated: "They [the residents] do not bear the burden of proving negatives: that some of the electrical work did not relate to tariffed service or that some of these costs may have actually related to telephone service. It is Lamplighter that bears the burden of establishing such a distinction in its own defense. This is as it should be, since it is Lamplighter that has control over all records that relate to this proceeding." (Id.)

In the present case, it is clear that some of the $111,445 in trenching costs must be allocated to submetered gas and electric system improvements, which are within our exclusive jurisdiction. By establishing that allocation is required, complainants have effectively shifted the burden of proof to Knollwood to demonstrate how much of the trenching costs should be allocated to water system improvements. (See Lamplighter, supra, 84 CPUC2d at 734.) Only those costs may be passed through in rent increases consistent with § 739.5.

The bottom line is that, without an allocation of the $111,445 in trenching costs, Knollwood obtains a potential double recovery. Knollwood already receives compensation via the submetering discount provided in § 739.5 for maintenance and repair of the submetered gas and electric systems. To permit Knollwood to characterize the trenching costs as related only to the water system⁴ and to pass through the entire cost to residents provides a powerful incentive for mobilehome parks to attribute as many costs and expenditures as possible to system improvements outside the Commission's jurisdiction.