E. The Respondents have been unable or unwilling to adequately serve its ratepayers.

On the evening of July 27, 2006, WD Staff participated in a panel discussion at a local public meeting, which was organized by the Yermo Community Services District ("YCSD"). Also on the panel were Marvin Hardy and representatives from CDPH, the Local Agency Formation Commission, and San Bernardino County. Yermo's owner, Donald Walker, did not attend.

Approximately 90 customers attended the public meeting. Among their complaints were frustration and dissatisfaction with Yermo's water quality and service: e.g., the water outages, malodorous and bad tasting water, broken water meters, inadequate water pressure to fight a fire or for washing, poor water quality, leaks in the distribution system, poor service, a lack of response to customer complaints, and an absentee owner residing in Florida. Some customers claimed that for years they have had to drink bottled water. A local school official expressed safety concerns for the students when a school was scheduled to open in August 2006, because of the unsafe drinking water. According to Marvin Hardy, only 75 out of the more than 300 Yermo meters and 50% of the fire hydrants are operational.

Mr. Kazemzadeh's July 2006 field inspection shows that in apparent violation of Section 855, the Respondents have done little if anything since the issuance of Res. W-3812 in 1993 to address ratepayers' complaints, make needed infrastructure improvements, or comply with Commission or CDPH regulatory requirements such as employing State certified water operators.

F. The Respondents have failed to fulfill their promises to Commission Staff to provide plans for remedying Yermo operational problems.

On August 15, 2006, Mr. Kazemzadeh met with Donald Walker and Marvin Hardy at the Commission's San Francisco Office to discuss Yermo's water quality, service, and operational problems. Donald Walker agreed to submit proposals for remedying Yermo's short-term and long-term operational problems, respectively, by September 4 and October 3, 2006.

On August 22, 2006, Kevin P. Coughlan, WD's Director, wrote Donald Walker memorializing the August 15 meeting. Among the short-term improvements that WD requested were installation of chlorinators and flow meters at well pumps; replacement of deteriorated valves at well sites; and hiring qualified personnel to operate the water system. According to the same letter, Yermo's long-term proposals had to include an engineering study of needed improvements to the water system and a firm date within the next 90 days when Yermo would file a GRC.

According to the August 22 letter mentioned above, Yermo had to submit its short-term proposals by September 4, 2006, and complete the implementation of these improvements by November 15, 2006. ⁴ The long-term proposals had to be submitted to WD by October 3, 2006.⁵ Also, WD reminded Yermo of its agreement to verify with supporting records the revenues and expense amounts presented by its Annual Reports for the period 2003-2005. WD warned that if Yermo failed to submit and implement its short- and long-term proposals, it could result in an Order to Show Cause as to why a receiver should not be appointed to take possession of and operate Yermo.

The Respondents met none of the deadlines mentioned above for submitting short- and long-term proposals. On October 23, 2006, Fred L. Curry, Program Manager and Chief of the WD Water Branch, wrote Yermo stating that its short- and long-term proposals were overdue. Mr. Curry also reminded Donald Walker that on September 13 and 28, 2006, he promised Mr. Kazemzadeh to fax an explanation for failing to meet the September 4 deadline and "hand-deliver" Yermo's short- and long-term proposals.

On October 30, 2006, Donald Walker in Florida wrote to Mr. Kazemzadeh, claiming a number of "Short-Term Solutions" were performed, such as "three chlorinators [were] installed," and "parts [are] on order for flow meter."⁶ Mr. Walker included some job invoices, estimates, and a "short term solution proposal," and promised: "Tomorrow we will overnight you the package for your Short-Term Solution Proposal." Mr. Walker did not deliver the promised "Short-Term Solution Proposal." WD has never received that information or any other written proposal as requested. Further, the Respondents have not provided any documentary support for Yermo's Annual Reports despite WD's requests.

G. The owner has apparently abandoned Yermo

According to a letter from Michael Henderson, Chairman of the Yermo Community Services District, to Mr. Walker, dated July 20, 2007, Donald Walker is having Yermo customer water billings, bookkeeping, and accounting performed in Florida. Further, Marvin Hardy continues to manage and operate the water system even though he lacks adequate equipment to do so and he continues to have no State certification, a violation of CDPH requirements. The water storage and other infrastructure improvements agreed to by Yermo during meetings with staff during August 2006 remain undone.

In the last fifteen months, Yermo's ratepayers have organized a group called the "Yermo Citizens for Solutions" ("YCS"). YCS supplied Commission Staff with a copy of complaint affidavits from sixty-seven customers among other documents. The YCS and the Yermo Community Services District have complained to the Commission regarding Yermo's poor water supply and quality, water outages and service quality. They have demanded that the Commission take appropriate action against Yermo.

⁴ Letter by K. P. Coughlan to D. Walker, dated Aug. 22, 2006, on file with DRA.

⁵ Id.

⁶ Letter from D. Walker to Mohsen Kazemzadeh dated Oct. 30, 2006, on file with WD and available upon request.