ALJ/KJB/jt2 Mailed 6/22/2007

Decision 07-06-026 June 21, 2007

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Application of HARBOR BREEZE CORP. for authority to operate as a vessel common carrier in nonscheduled/on-call passenger ferry service between Long Beach, California and all points and places on Santa Catalina Island, and between all points and places at and between Long Beach and San Pedro, California; and to establish a Zone of Rate Freedom.

Application 06-05-011 (Filed May 9, 2006)

(See Appendix A for List of Appearances)

DECISION GRANTING APPLICATION FOR CERTIFICATE OF PUBLIC CONVENIENCE AND NECESSITY AS A VESSEL COMMON CARRIER

1. Background

On May 9, 2006, Harbor Breeze Corp (Applicant) filed this application to be licensed as a vessel common carrier providing on-call service between Long Beach and Santa Catalina Island, as well as water taxi service between Long Beach and San Pedro and points in between. The application was protested by two existing vessel common carriers (VCCs) who serve the Catalina market, Catalina Channel Express, Inc., Certificate No. VCC-52 (Express) and Pacific Adventure Cruises, Inc., Certificate No. VCC-78.

A prehearing conference (PHC) was held in San Francisco on August 14, 2006, at which Applicant and both protestors appeared through counsel. At the hearing, Administrative Law Judge (ALJ) Karl Bemesderfer admitted two additional parties, Catalina Explorer Co., Inc. (Explorer) and Catalina Classic Cruises (Classic), both of whom are VCCs serving the Catalina market.

At the PHC, the following factual issues were identified:

1. Is there significant unmet demand for on-call service between Long Beach and Santa Catalina Island?

2. What effect will the entry of another on-call carrier into the Long Beach-Santa Catalina market have on existing service providers? In addressing this issue, parties should be prepared to introduce evidence regarding the size and composition of the existing market; seasonality; profitability of existing services; and cross-subsidization between scheduled and on-call services.

3. Is the Applicant qualified to provide the requested service? Protestors allege that the Applicant is currently ferrying passengers to Santa Catalina without a license and that certain of the factual representations made in the application are untrue.

On August 17, 2006, assigned Commissioner John Bohn issued his Scoping Memo which included the three factual issues identified at the PHC. Three days of evidentiary hearings were held January 22-24, 2007. The Applicant submitted its post-hearing brief on March 22, 2007 and the protestors submitted their reply briefs on April 6, 2007.