II. FACTUAL AND PROCEDURAL HISTORY

Yucaipa Mobilehome Residents' Association, Len Tyler, Edna Jenkins and Nancy L. Carlisle (collectively, "complainants"), representing residents of Knollwood, initiated this complaint proceeding against Knollwood to contest certain rent increases authorized by the Yucaipa Commission. Knollwood is a 116-space mobilehome park in Yucaipa. In 1998, Knollwood gave notice to the Yucaipa 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 the project was approved by a majority of the occupied spaces in the park. A contract for construction of the project was executed in August 1998 and work began soon thereafter. 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 Yucaipa Commission for a capital improvement rent increase by which it would pass through to the tenants 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 Yucaipa 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 Yucaipa Commission, and a public hearing was held on June 25, 1999. At the hearing, a representative of the tenants 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 Section 739.5. Based on the evidence introduced at the hearing, the Yucaipa Commission adopted Resolution 99-02, authorizing a rent increase of $17.40 per month per space for 20 years.

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 tenants, 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. At the request of the parties, we twice extended the statutory deadline for resolution of this case under Section 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 publicly owned water district, and that complainants' burden of proof was not met as to the work on gas and electric systems.

Complainants filed an application for rehearing of D.03-01-063. In D.03-08-077, we granted rehearing and remanded for further proceedings to determine the proper allocation of trenching costs for gas and electric submetered utility systems, and to remove those trenching costs attributable to the gas and electric improvements from the $111,445 passed on to mobilehome residents as part of the rent increase authorized by the Yucaipa Commission.

On rehearing, Knollwood was directed to serve a pleading, with appropriate supporting declarations, either agreeing with an equal sharing of trenching costs among the water, gas and electric improvements, or showing why an alternative allocation of trenching costs was appropriate. However, the comments filed by Knollwood proposed no allocation of the costs of trenching shared by water, gas and electricity infrastructure. Knollwood continued to argue that the Commission lacked jurisdiction to deal with trenching costs because the Commission regulates neither the mobilehome park nor the district water utility that serves the park. Knollwood further argued that the relevant line extension rules permit Knollwood to recover all of the trenching costs in rents and to recover an additional $35,000 in capital recovery costs through rent increases. In response, complainants argued that the trenching costs should be allocated according to the imputed value of each utility, as reflected in the total costs of installation. Complainants cited the testimony of Knollwood's own expert witness in support of this allocation method.

On June 2, 2004, we issued D.04-05-056. The Decision adopted the allocation methodology advocated by complainants, and directed Knollwood to remove $95,345 in trenching costs ($17,064 for gas and $78,281 for electricity) from the rent increase authorized by the Yucaipa Commission. The Decision directed Knollwood to reduce residents' rents accordingly and to refund to residents their overpayments of the revised rent increase.

On June 23, 2004, WMA and Knollwood (collectively, "applicants") jointly filed a timely application for rehearing of D.04-05-056.