VII. Discussion

Before we decide whether a dedication of property to public use has occurred, we note the impact our decision will have on the local community. The record reflects that most of the housing in Keene was built by the railroad for its employees. The railroad subsequently sold those houses to non-employees. Nothing provided prospective house buyers with constructive notice of the railroad's intention to provide the water strictly on a surplus basis and as an accommodation. Most current homeowners purchased their homes believing the railroad would continue to provide water for the community. Currently, the community is highly dependent on the Keene Water System for its water needs since every resident of Keene and Woodford except the U.S. Postal Services uses water from the Keene Water System.

The key issue is whether the Keene Water System is a "public utility" under the Public Utilities Code. If it is, the system comes under our jurisdiction. The Commission's power to regulate corporations operating water systems relies chiefly on Sections 216 and 2701. Sections 216 lists the different types of public utilities and includes, in relevant part:

"(a) . . . every . . water corporation . . . where the service is performed for, or the commodity is delivered to, the public or any portion thereof.

(b) Whenever any . . . water corporation . . . performs a service for, or delivers a commodity to, the public or any portion thereof for which any compensation or payment whatsoever is received, that . . . water corporation . . . is a public utility subject to the jurisdiction, control, and regulation of the commission and the provisions of this part."

Section 2701 defines a Commission-regulated water utility:

"Any person, firm, or corporation ... owning, controlling, operating, or managing any water system within this State, who sells, leases, rents, or delivers water to any person, firm, corporation, municipality, or any other political subdivision of the State, whether under contract or otherwise, is a public utility, and is subject to the provisions of Part 1 of Division 1 and to the jurisdiction, control, and regulation of the commission, except as otherwise provided in this chapter."

Sections 216 and 2701 must be read in conjunction with Section 2704, which contains exceptions to Commission jurisdiction, for situations where the owner of a water supply provides surplus water or water as an "accommodation":

"Any owner of a water supply not otherwise dedicated to public use and primarily used for domestic or industrial purposes by him or for the irrigation of his lands, who (a) sells or delivers the surplus of such water . . . or (c) sells or delivers a portion of such water supply as a matter of accommodation to neighbors to whom no other supply of water . . . is equally available, is not subject to the jurisdiction, control, and regulation of the commission."

Another exception to Commission jurisdiction results from judicial decisions. Specifically, in 1912, the California Supreme Court applied a requirement of common law, not expressed in these statutes today or as previously codified, that conditions public utility status on the "dedication" of utility property to the public use. (See Thayer v California Development Co. (1912) 164 Cal. 117.) Later, in Allen v. Railroad Commission (1918) 179 Cal. 68, 85, the Court wrote that "to hold property has been dedicated to public use is not trivial thing . . . and such dedication is never presumed without evidence of unequivocal intention." The Court later explained that the act of dedication occurs if someone had:

"held himself out, expressly or impliedly, as engaged in the business of supplying [a service or commodity] to the public as a class, not necessarily to all of the public, but to any limited portion of it, such portion, for example, as could be served by his own system, as counterdistinguished from his holding himself out as serving or ready to serve only particular individuals, either as a matter of accommodation or for other reasons peculiar and particular to them." (Van Hoosear v Railroad Commission (1920) 184 Cal. 553, 554.)

In Richfield Oil Corp. v Public Utilities Commission (1960) 54 Cal.2d 419, the Court reviewed the case law and left the dedication doctrine intact. The Court concluded that "the Legislature by its repeated reenactment of the definitions of the public utilities without change has accepted and adopted dedication as an implicit limitation on their terms." (Id. at 430.)

While we acknowledge that dedication is a prerequisite to declaring a water system to be a public utility, dedication can be manifested in many different ways. Whether or not dedication has occurred is a factual question. (Haynes v. MacFarlane (1929) 207 Cal. 529, 532.) Where dedication has occurred, it may be either express or implied, and in the latter case, "it may be inferred from the acts of the owner and his dealings and relations to the property." (Cal. Water & Tel. Co. v. Public Utilities Commission (1959) 51 Cal.2d 478, 494; see also Yucaipa Water Co. No. 1 v. Public Utilities Commission (1960) 54 Cal.2d 823.)

Neither Union Pacific nor its predecessor has manifested an express intent to dedicate the Keene Water System to public use. To the contrary, the agreements contained in Appendix A reflect a written intent on the part of Union Pacific and its predecessor to provide water only as an accommodation. Therefore, if we are to find that a dedication has occurred, it must be implied from the acts of Union Pacific or its predecessor. Here, there is a long course of conduct by Union Pacific and SP from which implied dedication arises. For example:

· since the 1960s, water has been sold for the primary use of the community and not the railroad;

· in 1994, existing plant was removed and replaced with a new well for the primary benefit of the community and not the railroad; and

· in 1996, SP applied for a non-exclusive franchise agreement to construct a pipeline on county roadway to furnish water for railroad and community use.

In this instance and many others, the Commission and the courts have found dedication implied by conduct. For instance, in Producers Transp. Co. v. Railroad Commission (1917) 176 Cal. 499, the dedication of an oil pipeline to a public use was implied from the corporation installing the pipeline via eminent domain. This case parallels Producers Transportation. There, the Court stated that a "potent reason" for upholding the finding of implied dedication was the fact that petitioner availed itself of the right of eminent domain in condemning property for the right of way over which it constructed its pipeline. The Court stated such action:

must be deemed conclusive evidence of a dedication of such property to public use, since it could not have exercised such right other than in "behalf of a public use" (Code Civ. Proc., sec. 1238), as "an agent of the state or person in charge of such use." (Civ. Code, sec. 1001.)

A similar rationale applies to franchises. Municipalities grant franchises for the purpose of furnishing a service or commodity for the public use. (See Cal. Gov. Code Section 26001.)⁴ Public use is defined as "a use which concerns the whole community or promotes the general interest in its relation to any legitimate object of government." (Bauer v. County of Ventura (1955) 45 Cal.2d 276, 284.) Thus, the exercise of a franchise right to install a water line is tantamount to a declaration that such property is for public use. By requesting a franchise from Kern County to build a water pipeline to furnish water for community use, Union Pacific's predecessors implicitly dedicated the water pipeline to public use.⁵

Having found that a dedication has occurred, we conclude that the Keene Water System falls under the jurisdiction of this Commission as a water utility. Further, we agree with Beard that Section 2704 does not exempt Union Pacific. Section 2704 only exempts an owner of a water supply from Commission jurisdiction if such water supply is "primarily used for domestic or industrial purposes" by the owner of the water supply or for the irrigation of the owner's lands. Union Pacific, as operator of the Keene Water System, and its predecessor cannot claim an exemption under Section 2704 since they have not been the primary user of the water supply for almost four decades.

We therefore hold that the Keene Water System is a water utility subject to our jurisdiction.

⁴ Cal. Gov. Code § 26001 says in relevant part,

"Any general law applicable to the granting of franchises by municipal corporations and counties throughout the State for purposes involving the furnishing of any service or commodity to the public or any portion thereof shall be complied with in the granting of any franchises by the board of supervisors."