ALJ/JET/tcg Mailed 11/21/2005
Decision 05-11-030 November 18, 2005
BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA
Casmalia Community Services District, Complainant, vs. Unocal Corporation, also known as Casmite Water System, Defendant. |
Case 03-09-001 (Filed September 2, 2003) |
In the Matter of the Application of The Casmite Corporation for a Certificate of Public Convenience and Necessity to Operate a Public Utility Water System Near Casmalia in the County of Santa Barbara and to Establish Rates for Service. |
Application 03-12-024 (Filed December 22, 2003) |
(See Attachment A for List of Appearances.)
OPINION ISSUING CERTIFICATE OF PUBLIC CONVENIENCE
AND NECESSITY, AUTHORIZING INITIAL RATES,
AND IMPOSING SANCTIONS
Title Page
OPINION ISSUING CERTIFICATE OF PUBLIC CONVENIENCE
AND NECESSITY, AUTHORIZING INITIAL RATES,
AND IMPOSING SANCTIONS 1
I. Background 1
II. System Description 1
III. Questions Presented 1
IV. CPCN Requirements 1
V. Past Operations 1
VI. CEQA 1
VII. Ratesetting 1
VIII. General Order 103 Requirements 1
IX. Other Issues 1
X. Comments on Proposed Decision 1
XI. Assignment of Proceeding 1
Findings of Fact 1
Conclusions of Law 1
ORDER 1
Attachment A - List of Appearances
Appendix A - Casmite Water System's Summary of Earnings at Various
Rates of Return
Appendix B - Rate Design
OPINION ISSUING CERTIFICATE OF PUBLIC CONVENIENCE
AND NECESSITY, AUTHORIZING INITIAL RATES,
AND IMPOSING SANCTIONS
In this decision, the Commission issues a Certificate of Public Convenience and Necessity to The Casmite Corporation (Casmite) to operate, as a public utility, an existing water system near the community of Casmalia, Santa Barbara County. The decision also authorizes initial rates for the water utility and imposes certain sanctions due to Casmite's operation of a public utility without a CPCN.
I. Background
In the 1940s, The Casmite Corporation (a Nevada corporation organized in 1936) commenced oil field operations in Santa Barbara County along U.S. Highway 1, half-way between San Luis Obispo and Santa Barbara. As part of these operations, Casmite constructed a water system. As an accommodation, Casmite began to provide nearby residents with water from the system. In 1953, The Union Oil Company of California (Unocal) acquired all of Casmite's stock. In 1994, Unocal sold off the oil field operations but retained the water system. Application Ex. G at 2.
This proceeding began on September 2, 2003, when those nearby residents and property owners living in Casmalia, a small community near Vandenburg Air Force Base, filed a complaint alleging that Casmite has been operating as a public utility for many years without the Commission's authorization. The complaint (Case (C.) 03-09-001) was filed by the Casmalia Community Services District's board of directors and appended the signatures of 25 Casmalia residents or property owners (the complainants are referred to herein as "Casmalia"). The complaint asks that Casmite be declared a public utility, prevented from raising current water rates, and enjoined from terminating water service.
Following a prehearing conference in C.03-09-001, Casmite indicated that it intended to file an application for a Certificate of Public Convenience and Necessity (CPCN). This application was filed on December 19, 2003, and docketed as Application (A.) 03-12-024. The Commission's Water Division protested Casmite's application on January 22, 2004. A joint prehearing conference was held in both proceedings on February 17, 2004; and the two proceedings were consolidated as a ratesetting proceeding. The Scoping Memo was issued on March 3, 2004. Casmite amended its application on May 7, 2004. The Water Division filed its findings and recommendations on July 8, 2004.
The parties indicated their desire to mediate the issues in the consolidated case, a stay was entered, and the proceeding was referred to Administrative Law Judge (ALJ) Ken Koss for mediation. A one-day mediation session was held in Casmalia in June 7, 2004, and appeared to result in a settlement. The settlement anticipated that the water system would be turned over at no cost to the Casmalia residents and property owners for them to operate as a nonregulated entity (e.g., a mutual water system). However, on August 10, 2004, the Casmalia Community Services District reported to the assigned ALJ that its board had not approved the settlement, citing the inability to raise sufficient funds to operate the system (although Casmite had offered initial financial assistance as part of the settlement).
Thereafter, an evidentiary hearing was held on September 13, 2004, on the merits of both Casmalia's complaint and Casmite's CPCN application. Christian L. Aldinger, a certified public accountant with Peasley, Aldinger & O'Bymachow, and Robert Hall, vice-president of the Casmite Water System (employed as a project manager for Unocal), testified for Casmite. Terri Strickin testified for the Casmalia Community Services District. Sazedur Rahman testified for the Water Division.
A formal public participation hearing was not held on-site during the proceeding because of travel cost; however, the residents of Casmalia had the opportunity to provide comments to the assigned ALJ during a video conference on October 27, 2004. Santa Barbara County Supervisor Joni L. Gray addressed the Commission, as did Bill Ostini, President of Casmalia Community Services District. Ostini also owns and operates the only active business in Casmalia, the Hitching Post restaurant. Gray commented that, if Casmite's proposed rates were approved, "I believe it would shut the town down. I believe that the people would have to move out of the community, leave their homes if the rates went up at that particular . . . speed." Tr. 102:16-19 (Gray, Oct. 27, 2004). Ostini commented, among other things, that the Casmalia median household income is $24,000, Casmalia residents cannot afford to pay $100 to 125 per month for water, and the cost of water for his business will increase from $350 to almost $1200 per month. Tr. 109:1-2, 111:22-23 & 113:23-25 (Ostini, Oct. 27, 2004).
The record closed on September 21, 2004; and, after briefing, the proceeding was submitted on October 29, 2004. At the parties' request, issuance of the ALJ's proposed decision was delayed until August 15, 2005, to allow further settlement discussions that eventually were unsuccessful.
