IV. OII Allegations

A. Principal Allegations

The OII sets forth a mixed set of factual and legal allegations that are based on two Water Division reports appended to the OII. The scoping memo, however, organized these various allegations into two main categories: (1) alleged violations of Section 855; and (2) violations of other legal requirements. After the evidentiary hearing and briefing, it is apparent that most of the allegations are subsumed under one or more of the three subparts of Section 855:

1. The utility's inability or unwillingness to serve ratepayers;

2. Actual or effective abandonment; and

3. Unresponsiveness to the Commission's orders or rules.

I have organized my discussion of the allegations and proof according to these three subparts. Violations of Section 855, if proven, may also constitute other violations of law. Where I have found other violations of law, I have so indicated.

B. Defenses/Mitigation

Respondents indicated they would offer certain defenses and mitigation to the violations claimed by the Water Division, and these were included within the scope of the proceeding:

1. Do the allegations in the staff report, set forth in Exhibits 1 and 2 to the OII, reflect current conditions?

2. To what extent is the financial condition of Conlin-Strawberry due to the failure to receive timely rate relief from the Commission?

C. Remedies

The parties also sought to litigate the appropriate remedies in the event I found violations of statute or Commission rules or orders. These are the remedy issues upon which they sought to be heard:

1. Have the respondents, after notice and hearing, shown cause why the Commission should not petition the Tuolumne County Superior Court for appointment of a receiver to assume possession and operation of Conlin-Strawberry and its water system?

2. Legislative intent

a. Did the California Legislature, in enacting Public Utilities Code Section 855, intend that a receiver be appointed under the facts before the Commission in this manner?




b. Does the action proposed in the OII, the appointment of a receiver, comport with the legislative history of enacting Public Utilities Code Section 855?

3. Does the action proposed in the OII, the appointment of a receiver, comport with past Commission precedent?

4. How will ratepayers be affected financially if a receiver is appointed?

5. If sustained at hearing, do any of the violations alleged in the OII, or Exhibit 1 or 2 thereto, warrant fines, penalties, or other remedies?

One problem was the relevant time period for this investigation. Some of the allegations and prepared testimony referred to events that are many years old. Many of the alleged events preceded earlier Commission proceedings. I ruled that evidence could be offered as follows: (1) reports of Commission-ordered investigations, not previously completed (this included the financial audit mandated by D.96-09-043); (2) evidence of non-compliance with previous Commission orders; and (3) evidence concerning incidents occurring after September 4, 1996 that tends to support the allegations contained in the OII. September 4, 1996, is the date of the Commission's interim decision on the complaint brought by the Association. I deemed pre-September 1996 conduct to have been addressed in that proceeding unless the evidence demonstrated that respondents were no longer in compliance with the Commission's orders in the Association's complaint proceeding (C.95-01-038).

Another problem was presented by respondents' failure to respond to certain of my discovery orders during the proceeding. Based on a motion for sanctions brought by the Water Division, I imposed certain sanctions that limit respondents' ability to contest some of the above-stated issues. Respondents have asked me to reconsider my ruling. I discuss their request in Part VI(C) of this decision.