VI. Are there Fair and Reasonable Ways to Mitigate
the Cost to MHP Owners of Converting Existing
Submetered Systems to Directly-Metered Service?

In considering whether there are fair and reasonable ways to mitigate the cost to MHP owners of converting existing submetered systems to directly-metered service, the adequacy of past discounts is relevant. However, due to the inadequacy of MHP owners' records, we cannot determine the MHP owners' costs of owning and operating the submetering system. Therefore, we cannot directly compare the costs incurred to the discounts paid in order to determine whether the MHP owners have been adequately reimbursed.

There is sufficient evidence to show that conversion of submetered systems to directly-metered systems is likely to be costly. This is due to the fact that submetered systems may not have been built to the same standards used by the utilities. In addition, they may lack sufficient construction or maintenance records to determine their condition, or may need significant repair, replacement, or upgrading to make them acceptable for transfer as specified in § 2794. If a submetered system is acceptable for transfer, it is not likely that it would be costly for the MHP owner to transfer it to the utility, and there is no issue. However, if costly repairs, replacements, or upgrades are necessary, then the issue is who should pay. Arguably the MHP owner should pay because the MHP owner would benefit from being relieved of responsibility for the operation, maintenance and replacement of the submetered system. In addition, the MHP owner has received the discount to cover such costs. If the utility were to take over the system, and bear such conversion costs, the costs would have to be borne by the ratepayers or the stockholders.

The submetered system was not previously owned or maintained by the utility. There is no significant potential for increased revenues because of such a transfer because the utility already provides the same amount of electricity or natural gas to the MHP owner at the master-meter as would subsequently be provided directly as a result of the transfer. The fact that the utility would no longer have to pay the discount is offset by the costs, related to providing service directly, that were previously provided by the MHP owner. As a result, there is no apparent benefit to the stockholders resulting from the transfer; thus there is no apparent reason they should bear any of the costs. That leaves the ratepayers. There is nothing in the record that indicates that the general body of ratepayers would benefit from such transfers.

Notwithstanding the above discussion, transfers of master-metered MHP systems to the utility are governed by §§ 2791-2799. The following portions of those sections are relevant to this issue.

Section 2791(b) provides that "Costs, including both costs related to transfer procedures and costs related to construction, related to the transfer of ownership process, whether or not resulting in a transfer of ownership to the serving gas or electric corporation, shall not be passed through to the park or community residents." It also provides that "Costs related to the transfer of ownership process, whether or not resulting in a transfer of ownership to the serving gas or electric corporation, shall not be passed through to the gas or electric corporation, except as otherwise provided in this chapter." In other words, costs related to a transfer of ownership of the master-metered system to the utility cannot be charged to the MHP tenants. Costs may not be charged to the utility except as otherwise specified.

Section 2794(a) provides that:


" (a) A gas or electric system shall be considered acceptable for transfer if it is in compliance with the following criteria:"

(1) It is capable of providing the end users a safe and reliable source of gas or electric service."

(2) It meets the commission's general orders, is compatible, and, in the case of new construction, meets the gas or electric corporation's design and construction standards insofar as they are related to safety and reliability. The parties may waive these requirements by mutual agreement and, where necessary, with commission approval. The deviations as are agreed upon may be reflected in the purchase price."

(3) It is capable of serving the customary expected load in the park or community determined in accordance with a site-specific study, studies of comparable parks or communities, industry standards, and the gas or electric corporation's rules as approved by the commission."

(b) As used in this section, "customary expected load" means the anticipated level of service demanded by the dwelling units in the park or community. The park or community owner shall not be responsible for betterments or improvements to the gas or electric corporation's distribution system facilities or operations that do not benefit the park or community."

(c) Satisfaction of the criteria shall not require any particular system architecture or replacement of used and useful equipment, plant, or facilities, except as needed to comply with subdivision (a). Equipment, facilities, or plant that are part of the existing gas or electric system shall be considered compatible unless their presence in the system would cause substantial increase in the frequency or duration of outages in the case of failure or emergency, or they have no remaining useful life. Pursuant to subdivision (c) of Section 2793, equipment, facilities, or plant that require special training for the gas or electric corporation's employees, or require the gas or electric corporation to maintain inventories of nonstandard equipment may be considered compatible, but their presence may be reflected in the appraised value or the cost imposed on the park or community owner."

This section provides specific requirements that the MHP distribution system must meet in order to complete the transfer.

Section 2795 provides that "The park or community owner and the gas or electric corporation shall develop a cost for the transfer of the gas or electric system that reflects the factors in Section 2793, indemnity and liability issues, and any other factors as the parties may mutually agree upon, and to which the gas or electric corporation's ratepayers are indifferent. The parties may agree on a schedule for phasing in facilities to meet expected load increases and betterments, and the costs associated with those activities." This section requires ratepayer indifference to the transfer. In other words, costs related to the transfer should not be borne by ratepayers, unless there is an equal offsetting benefit such that there is no net cost to ratepayers.

Section 2797 provides that "The commission shall permit the gas or electric corporation to recover in its revenue requirement and rates all costs to acquire, improve, upgrade, operate, and maintain transferred mobilehome park or manufactured housing community gas or electric systems." This section allows costs incurred by the utility subsequent to the transfer to be included in rates.

The net effect of the above sections is that the costs incurred to make a MHP distribution system acceptable for transfer to the utility must not be borne by the utility or the MHP tenants, and the general body of ratepayers must be rendered indifferent. Therefore, the costs may only be charged to ratepayers if there is an offsetting benefit such that they are indifferent. Otherwise, the costs must be borne by the MHP owner.

We note however, that this issue was not fully developed in this proceeding, and the parties have requested that it be further developed in a separate proceeding as discussed below.

On January 16, 2004, the active parties filed a motion seeking to establish a separate proceeding to address the issue of whether there are fair and reasonable ways to mitigate the cost to MHP owners of converting existing submetered systems to directly-metered service. The parties contend that the issue would be complex and wide-ranging, and involve questions that would require significant discovery, hearings and briefing. Therefore, they recommend that, in order to complete this proceeding in a timely manner, a separate proceeding be established. Addressing this matter further at this time would extend this proceeding substantially. As a result, we will not consider this issue further in this proceeding, and we deny the motion at this time. We will consider a new proceeding to address this issue only as staffing and resources allow.

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