ALJ/VDR/avs Date of Issuance 3/27/2009

Decision 09-03-032 March 26, 2009

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Application of David R. Robertson Requesting to Sell the Assets of the Lake Forest Utility Company, Inc., and Richard M. Dewante, Tahoe Park Water Company Requesting to Buy All Assets in this Water System Located Near Tahoe City in the Unincorporated Area of Placer County, California.

Application 06-11-018
(Filed November 28, 2006)

DECISION APPROVING SALE AND PURCHASE OF
ASSETS OF LAKE FOREST UTILITY COMPANY, INC.

TABLE OF CONTENTS

Title Page

DECISION APPROVING SALE AND PURCHASE OF ASSETS OF LAKE FOREST UTILITY COMPANY, INC. 2 2

Summary 2 2

1. Background and Procedural History 3 3

2. Operation and Management of the System by Buyer 8 8

2.1. Description of the System 8 8

2.2. Post-sale Improvement Efforts 10 10

2.3. Buyer's Proposed Improvement Plan 14 14

2.4. Response to Buyer's Improvement Plan 16 16

3. Discussion 17 17

3.1. Ratepayer Indifference 22 22

4. Conclusion 22 22

5. Categorization and Need for Hearing 23 23

6. Comments on Proposed Decision 23 23

7. Assignment of Proceeding 26 26

Findings of Fact 26 26

Conclusions of Law 28 28

ORDER 29 29

DECISION APPROVING SALE AND PURCHASE OF
ASSETS OF LAKE FOREST UTILITY COMPANY, INC.

Summary

We grant, nunc pro tunc, the joint application requesting approval of the April 3, 1996 sale of assets of Lake Forest Utility Company, Inc. (Seller) to Tahoe Park Water Company, a California Corporation (Buyer), subject to conditions to encourage the prompt completion of system improvements. The underlying sale and purchase were consummated without Commission approval more than 12 years ago, and Buyer's president has been operating the system since that time despite the absence of Commission approval. This decision brings the regulatory status of the system into conformity with its putative ownership, in pragmatic recognition of the realities and the need to clarify its ownership in order to accomplish urgently needed improvements now.

Although we do not condone the fact that the sale and purchase were concluded without our prior approval, we cannot overlook the fact that the system has been continuously operated by Buyer since it changed hands in 1996. The circumstance that it remains in a state of regulatory limbo does not serve the interests of its customers or the public, and the question of ownership must be settled before vital improvements can be made to the system, whether by its current owner and operator, or by another entity if it changes hands in the future. Ratification of the 1996 transaction will accomplish this first step, and will not materially affect the present management or operation of the system at this time.

The system suffers from many inadequacies that predate the 1996 transaction, and that have not been satisfactorily addressed in the intervening 12 years. However, Buyer has developed a service improvement plan, obtained a rate increase, and is in the process of securing funds from the California Department of Public Health (DPH) to improve supply and comply with water quality standards, so these problems are being addressed. Nevertheless, we perceive the need for greater accountability on Buyer's part to ascertain that these improvements are being accomplished in a timely manner. Accordingly, we impose periodic reporting requirements on Buyer to enable this Commission to exercise greater oversight. If Buyer fails to satisfy these requirements, the Commission can take action in accordance with its regular procedures for correcting such failures.

We conclude that the public interest will not be adversely affected by ratifying the transfer that the applicants concluded more than 12 years ago, and we approve the application in order to remove the cloud over Buyer's ownership status. Application 06-11-018 is closed.