8. Assignment of Proceeding

Geoffrey F. Brown is the Assigned Commissioner and Glen Walker is the assigned ALJ in this proceeding.

Findings of Fact

1. Knollwood is a 116-space mobilehome park in Yucaipa.

2. In 1999, Knollwood completed a substantial capital improvement project involving delivery of gas, electricity and water service to the individual mobilehomes.

3. On February 25, 1999, Knollwood applied to the Rent Review Commission for a capital improvement rent increase by which it would pass to residents certain costs of the capital improvements.

4. The costs that Knollwood proposed to pass to residents included all of the costs of the water system replacement and most of the costs of gas and electric work between individual submeters and mobilehomes.

5. Following public hearing, the Rent Review Commission adopted Resolution 99-02 authorizing $250,572 as costs that could be passed on to residents, and approved a rent increase of $17.40 per month per space for 20 years.

6. Resolution 99-02 found that trenching costs were $111,445, and that trenching was for replacement of Knollwood's natural gas, electricity and water utility systems.

7. Resolution 99-02 passed all of the costs of trenching to residents without an allocation of trenching costs among gas, electric and water utility systems.

8. Resolution 99-02 was affirmed by the San Bernardino County Superior Court, and appeals of that decision were dismissed in the Fourth Appellate District.

9. On January 30, 2003, the Commission in D.03-01-063 dismissed the complaint in this case, concluding that the Commission 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 work on the gas and electric systems.

10. In response to an application for rehearing, the Commission in D.03-08-077 reversed D.03-01-063 as to allocation of trenching costs and remanded for further consideration of that issue.

11. On rehearing, the evidence shows that costs per utility of the capital improvement project show the following breakdown: water, $58,786 or 14.5% of total costs excluding trenching; gas, $62,186 or 15.3% of total costs excluding trenching; and electricity, $285,285 or 70.2% of total costs excluding trenching.

Conclusions of Law

1. The issues in this case are governed primarily by Pub. Util. Code § 739.5.

2. Because Knollwood receives its water from a public district not subject to the jurisdiction of this Commission, replacement of the water system at Knollwood does not come under the jurisdiction of the Commission.

3. In Resolution 99-02, the Rent Review Commission concluded that trenching costs of $111,445 were incurred for the park's natural gas, electricity and water systems.

4. Under § 739.5, some of the $111,445 in trenching costs must be allocated to submetered gas and electric system improvements, which are within the exclusive jurisdiction of this Commission.

5. It is appropriate to allocate trenching costs based on the imputed value of each utility's improvements.

6. Under an imputed value analysis, 14.5% of trenching costs are attributed to water, the rates of which are not regulated by this Commission, and 85.5% of the trenching costs are attributed to gas and electricity, the rates of which are regulated by this Commission under § 749.5.

7. Under an imputed value analysis, the trenching cost amounts to be removed from the rent increase are $17,064 for gas and $78,281 for electricity, for a total of $95,345.

8. Knollwood should be directed to remove $95,345 from the $250,572 rent increase authorized by the Rent Review Commission, reducing rents accordingly and refunding to residents their overpayments of the revised rent increase.

9. Today's order should be made effective immediately.

ORDER

IT IS ORDERED that:

1. Knollwood Mobilehome Estates (Knollwood) is directed to reduce the $250,572 rent increase authorized by the Yucaipa Rent Review Commission (Rent Review Commission) by $95,345, the amount attributable to trenching costs for gas and electric facilities that may not be recovered through rents pursuant to Pub. Util. Code § 739.5.

2. Knollwood is directed to reduce the rent increase authorized by the Rent Review Commission to $155,227, which amount excludes trenching costs that are within the sole jurisdiction of the Public Utilities Commission.

3. Within 60 days of the date of this order, Knollwood is directed to reduce its tenant rent increase of $17.40 per month for 20 years, to reflect a revised total of $155,227 for those occupants of mobilehome spaces that were subject to the increase. The revised rent increase is to be calculated in the same manner as was the increase previously in effect (i.e., pro rata portion of the total capital expense approved by the Rent Review Commission, less $95,345).

4. Within 60 days of the date of this order, Knollwood is directed to refund overpayments of the revised rent increase to all current and former residents who have been paying the $17.40 since and subsequent to 1999.

5. Within 60 days of the date of this order, Knollwood is directed to send a letter to all current and former residents who are entitled to a refund explaining the amount and manner in which the refund has been calculated for each such tenant.

6. The joint motion of Knollwood and the Western Manufactured Housing Community to consolidate this complaint case with an ongoing investigation dealing with submeter discounts is denied.

7. Objections to the supplemental declarations of two Knollwood witnesses and one plaintiffs' witness are overruled.

8. Case 01-06-008 is closed.

This order is effective today.

Dated May 27, 2004, at San Francisco, California.

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