7. Assignment of Proceeding

John A. Bohn is the assigned Commissioner and Victor D. Ryerson is the assigned Administrative Law Judge in this proceeding.

Findings of Fact

1. A.06-11-018 is a joint application by Seller and Buyer identified in the summary of this decision. Buyer is a California corporation in good standing. The stock ownership of Buyer is 50 percent that of Richard M. Dewante and 50 percent that of Ann P. Dewante, his wife. Richard M. Dewante is the president of Buyer. Seller was dissolved sometime after April 2, 1996, and is no longer legally in existence.

2. In the transaction for which approval is sought by this joint application, Seller proposes to sell to Buyer, and Buyer proposes to buy from Seller, all right, title and interest in the property comprising the used and useful assets of the water system known as LFWC. This transaction was actually concluded on or about April 3, 1996, without prior Commission approval. Richard M. Dewante has operated and managed LFWC since that date, but the Commission did not approve transfer of the company's ownership following the occurrence of the transaction.

3. The Commission has regulated LFWC as a Class D water utility at all times relevant to this application. Res. No. W-4625, issued on December 14, 2006, authorized LFWC's present rates. This was the first general rate increase for the system in more than 18 years.

4. LFWC has continuously consisted of supply and distribution systems since the 1996 transfer that were inadequate to provide service to a reasonable standard, and are not in compliance with supply requirements of the SWTR that became effective before the 1996 transfer.

5. At least since 1998, Buyer has made reasonable efforts to fund and build improvements to the LFWC system.

6. Buyer has obtained a commitment from DPH for $925,000 in Proposition 50 grant funds to pay for improvements to the supply system, and has sought funding from private lenders and from the State Revolving Fund to make improvements to the distribution system.

7. Buyer proposes supply system improvements that will consist of a new well and a conveyance pipeline (which will also serve as a distribution main) from the well to a connection at an existing storage tank, and will be completed by 2011.

8. Buyer proposes improvements to the distribution system to be made in accordance with one of three alternative improvement plans to be presented to customers for their input, and will be completed by 2011. The first alternative, involving complete replacement of the system, is estimated to require a monthly surcharge of $43.35. The other two alternatives, which involve varying degrees of partial replacement, are respectively estimated to require a monthly surcharge of $27.05 or $13.35.

9. During the period that Buyer has operated and managed LFWC, Buyer's efforts to make system improvements have been slow, and Buyer has not been sufficiently responsive to customer complaints or maintenance problems. This has caused widespread customer dissatisfaction.

10. Buyer's pending plans to improve the LFWC supply system and distribution system are a rational response to the current deficiencies in those systems, and are reasonable. Completion of these plans will improve LFWC's water supply, water quality, water distribution, and fire suppression capacity.

11. No party has presented a specific and detailed alternative plan to address the inadequacies in LFWC's supply and distribution systems that we can implement in an order in this proceeding.

12. Approval of the 1996 transaction will not result in increased rates or reduced service to LFWC customers.

Conclusions of Law

1. LFWC has been owned and operated by Buyer since April 3, 1996. Denial of this application would result in voiding the transaction in which Buyer assumed possession and operation of the system at that time, pursuant to section 854, subdivision (a). Nunc pro tunc ratification of that transaction is therefore necessary to ensure continuity of rates and service for LFWC's customers.

2. As a matter of law, no reasonable option to approval of the application within the meaning of section 854, subdivision (d), has been proposed for Commission consideration by any other party.

3. Transfer of ownership of the water system at issue meets the test of ratepayer indifference, in that customers will be unaffected or better off in terms of service, water quality, water rates and continuity of service if the 1996 transfer is now ratified.

4. Approval of this transaction subject to the terms and conditions set forth in the Order will not adversely affect the public interest by reason of the matters set forth in the Findings of Fact, as is more fully explained in the body of this decision.

5. The application should be approved, subject to appropriate terms and conditions to ensure that improvements to facilities and service are made expeditiously.

6. Our order should be made effective immediately.

ORDER

IT IS ORDERED that:

1. The Motion of the Division of Ratepayer Advocates to withdraw its Protest is granted.

2. Application 06-11-018 filed by David R. Robertson, on behalf of Lake Forest Utility Company, Inc. (Seller) and Richard M. Dewante, on behalf of Tahoe Park Water Company, a California Corporation (Buyer), seeking the Commission's authority, pursuant to Public Utilities Code sections 851 through 854, to consummate the sale and purchase of all of the assets of Seller to Buyer, is granted nunc pro tunc, effective as of April 3, 1996, consistent with the terms and conditions set forth in this Order.

3. Title to all assets conveyed pursuant to this Order shall be held in the name of Buyer, and not in the name of any individual(s).

4. No later than ten (10) days after the effective date of this Order, Buyer shall serve upon the Executive Director, and shall serve copies thereof upon the assigned Commissioner, the assigned Administrative Law Judge, and the Commission's Division of Water and Audits, a written statement setting forth an inventory of the assets conveyed in sufficient detail to enable the Commission to ascertain the identity thereof, the price paid therefor, and the identity and amount of any customer refunds transferred to Buyer at any time on or after April 3, 1996.

5. As a condition of the authority granted herein, Buyer shall assume the public utility obligations of Seller as of the date the purchase and sale were concluded, and liability for refunding all customer deposits.

6. Buyer shall, within 30 days of the effective date of this Order, notify the affected customers of the occurrence of the decision of the Commission authorizing the transaction, and the disposition of customer deposits held by Buyer.

7. Buyer may not increase its rates without the authority of the Commission.

8. Buyer shall retain all records of the construction and operation of the system that is the subject of this Order.

9. Buyer shall, 90 days after the effective date of this order, submit a comprehensive status report of all actions it has taken to improve the supply and distribution facilities of the Lake Forest Water Company system within the preceding 90 days to the Division of Water and Audits of the Commission, and shall serve a copy thereof on every other party to this proceeding, including the Division of Ratepayer Advocates. Buyer shall submit and serve successive status reports every 90 days thereafter, until every improvement identified in the September 2008 Lake Forest Water Supply and Distribution System Improvements Facilities Plan (Facilities Plan) that was furnished as part of its response to the Joint Ruling of Assigned Commissioner and Assigned Administrative Law Judge, dated August 14, 2008, is completed.

10. Each status report submitted by Buyer shall include, without limitation, a detailed explanation of the status of funding of all improvements (including the borrowing and expenditure of funds), the specific work completed during the preceding 90-day period, the purpose of the completed work, and the updated estimate for completion of work identified in, or encompassed by, the Facilities Plan, with an explanation of any delays. Each report shall also provide similar information concerning any significant system improvements accomplished, or anticipated to be accomplished, during the period covered by the respective status report, that is not otherwise reported as required above because it was not encompassed by the September 2008 plan.

11. Application 06-11-018 is closed.

This order is effective today.

Dated March 26, 2009, at San Francisco, California.

Commissioners

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