I. Violations

If proven at an evidentiary hearing, the information discussed above would constitute the following violations of Section 855 and thus warrant appointment of a receiver:

1. The Respondents have been or are unable or unwilling to adequately serve its ratepayers, because:

a. The Respondents have not responded to customer complaints 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, leaking distribution system, poor service, a lack of response to customer complaints.

b. The Respondents have failed to maintain complaint logs in compliance with G.O. 103, section I, subsection 8, showing dates, times, and nature of the complaints, including the identity of the complainant, and the actions taken to resolve the complaints.

2. The Respondents have actually or effectively abandoned the Yermo water system, because:

a. Respondents have failed to file a plan of action detailing the repair work, system upgrading, new personnel hired, and/or equipment purchases made as a result of the rate increases granted in Res. W-3812.

b. Since the effective date of Res. W-3812, the Respondents have failed to file (once every six months) a report showing the progress completed and work remaining unaccomplished in the above plan of action.

c. Several years ago, Donald Walker, the owner/operator of Yermo, moved his domicile from California to Florida from where has he conducted customer billings, accounting, hiring or firing of employees, supervision, and otherwise (mis)managed and controlled Yermo and its water system.

d. Based on a Staff field inspection on July 27, 2006, the Respondents have inadequate storage capacity, a leaking and obsolescent distribution system, and half or more of its 25 fire hydrants are inoperable thereby placing the Yermo community in immediate peril.

e. Since Res. W-3812 was issued, the Respondents have not filed a GRC as directed by Commission Staff, to increase rates for the needed infrastructure improvements.

f. The Respondents have not employed for several or more years a qualified and State certificated water operator maintaining, operating, or testing the Yermo water system.

3. The Respondents have been and/or are unresponsive to the rules or orders of the Commission, because:

a. Since the issuance of Commission Res. W-3812 on November 23, 1993, Respondents have failed to comply with that Resolution's Ordering Paragraphs 6, 7, and 8.

b. Contrary to G.O. 103, section I, subsection 10, and other Commission rules and regulations, Respondents have failed to pay the annual PUC Reimbursement Fee since 2003 and to file Annual Reports with the Commission for the period 2001 - 2005. The Report for 2006 was incomplete.

c. In 2004, Respondents attempted to sell Yermo and its water system to Jeff Bentow without having complied with Section 851 which requires prior Commission approval for such sale.

d. Respondents failed to report to the Commission any interruptions of service, such as the water outages occurring in July 2006 at Well No. 1, contrary to the requirements of G.O. 103.9

e. The Respondents have been and/or are unresponsive to CDPH rules or orders from 1997-2007, as described above at section 2.8 et seq. of this OII. Violations of CDPH requirements in turn represent a violation of corresponding Commission rules or orders according to G.O. 103.10

f. The Respondents' failure to comply with Commission orders, rules and regulations, such as Res. W-3812's OPs 6 - 8, are violations under Sections 2107 and 2108, for which fines and sanctions may be imposed either severally or jointly.11

1. An investigation on the Commission's own motion is instituted into the operations and practices of the following Respondents: the Yermo Water Co., a water corporation, and Donald Walker, Yermo's owner.

2. The Respondents are directed to show cause why the Commission should not petition the San Bernardino County Superior Court for the appointment of a receiver to assume possession and operation of Yermo and its water system pursuant to section 855 of the California Public Utilities Code, based on the above stated information and described violations.

3. The Respondents are further directed to show cause why an order imposing fines, penalties, or other remedies should not be issued for their violations of Commission rules, regulations, or orders, as stated herein.

4. A hearing will be held as soon as practical after an assigned Administrative Law Judge (ALJ) convenes a Prehearing Conference pursuant to Rule 7.2 and calendars a date, time, and location for a hearing in a subsequent ruling or order. The ALJ will determine the findings of fact and conclusions of law regarding the issues stated herein.

5. The Respondents must provide the Chief ALJ (within 30 days after the date of this order) a written statement indicating whether the Respondents will appear at the hearing and present evidence in response to the issues stated herein. If the Respondents fail to file the written statement within the time specified above, the Respondents will be deemed to have waived their right to a hearing. In that event, the assigned ALJ (or the Chief ALJ if no ALJ has yet been assigned) will schedule no hearing. Instead, the allegations in this OII will be deemed admitted and constitute this proceedings record of evidence. A proposed order based on such record of evidence will be prepared to include findings of fact and conclusions of law of record, as well any fines and penalties to be imposed on the Respondents, and directing the General Counsel of the Commission to apply to the San Bernardino County Superior Court for judicial appointment of a receiver to assume possession and operation of Yermo and its water system.

6. The Respondents must also submit in writing to the Director of the Water Division within 30 days after the date of this Order, the following:

A full and complete verification of any and all financial data stated in its Annual Reports for the period 2003 - 2005;

A listing of the name, billing address, classification (e.g., residential, commercial), type of service (i.e., meter or flat-rate), and date and amount of last billing;

A copy of Yermo's customer complaint log and a copy of each and every customer complaint received by Yermo, including all complaint data required by General Order 103, section I(8)("Complaints") and regarding the period 2002 - 2007.

7. The Respondents must obtain the Commission's prior written approval before executing any agreement for the sale, transfer, or encumbrance of any ownership interests in Yermo or its water system.

8. This OII constitutes the Notice of Opportunity for Hearing pursuant to Section 855.

9. During the pendency of this proceeding, Respondents must comply with and cease and desist from any and all violations of any Commission order, rule, or regulation and any pertinent Public Utilities Code statutory provision.

10. Staff may propose amending this OII to include additional Respondents or charges. Any such proposal must be presented to the Commission in the form of a motion to amend the OII.

11. The Water Division, if it elects to do so, may present additional evidence either by testimony or through documentation, bearing on the operations and/or practices of the Respondents. The additional evidence may show whether the Respondents continued to engage in improper conduct after the issuance of the OII, which may affect the type and level of fines or sanctions imposed in this proceeding. Any additional information that Staff wishes to advance as evidence in this proceeding must be provided to the Respondents in advance of any hearings in accordance with the schedule established by the assigned Administrative Law Judge or Commissioner at a Prehearing Conference. Staff need only respond to discovery regarding the issues stated above in this order.

12. All applications submitted by Respondents after today and while this proceeding is open will be consolidated with this proceeding for consideration.

13. The Respondents, and any agent, representative, employee, consultant, or other individual or person acting on behalf of the Respondents, are ordered to cooperate with the Water Division Staff in accordance with Section 314 and provide access to the Yermo's accounts, books, records, and other papers (whether in electronic or paper form), which the Respondents must preserve until further orders by the Commission.

14. This ordering paragraph suffices for the "preliminary scoping memo" required by Rule 5.2 of the Commission Rules of Practice and Procedure (Rule). This proceeding is categorized as an adjudicatory proceeding and will be set for evidentiary hearing. The issues of this proceeding are framed in the above order. A Prehearing Conference shall be scheduled for the purpose of setting a schedule for this proceeding, including dates for the exchange of additional written testimony, determining which of the Staff's witnesses will need to testify, and addressing discovery issues. As to categorization of this proceeding, this order is appealable pursuant to Rules 7.1(c) and 7.6. Any person filing a response to this Order Instituting Investigation, Notice with Opportunity to be Heard, and Order to Show Cause must state in any response the objections to such orders and notice regarding the need for hearings; the issues to be considered; or the proposed schedule. However, objections must be confined to jurisdictional issues that could nullify any eventual Commission decision adjudging the merits of the alleged violations and may not address factual allegations that an evidentiary hearing will decide.

15. The Executive Director will send by certified mail, return receipt requested, a copy of this Order to the Respondents at the following addresses:

Donald Walker, Owner

Yermo Water Co.

1275 Spring Garden Ranch Road

Delon Spring FL 32130

Donald Walker, Owner

Yermo Water Co.

P.O. Box 14

Apple Valley CA 92307

Donald Walker, Owner

Yermo Water Co.

P.O. Box 910

Yermo CA 92398

This Order is effective as of the date shown below.

Dated April 24, 2008, at San Francisco, California

9 Id. at sec. II, subsec. 2(d) ("Reports to Commission")

10 Supra note 9 above.

11 In general, Secs. 2107 and 2108 imposes fines in the range of $500 to $20,000 per violation and for each day that the violation continues.

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