9. Other Matters
Rule 19, entitled "Service to Separate Premises and Multiple Units, and Resale of Water," is included in the tariffs of public utility water corporations regulated by the CPUC. Section B.2.b. of Rule 19 recognizes that submetering water at MHPs and multi-unit apartments in accordance with § 2705.5 is a lawful activity. Section C. of Rule 19 prohibits the resale of water by utility customers except in limited situations not relevant to the MHP and multi-unit apartment issues explored in this proceeding. After considering the positions of all parties, including the public utility water corporations, and reviewing relevant jurisdictional law, we conclude that amendment of Rule 19 will not provide solutions to the problems identified. Should the Legislature amend the Public Utilities Code, we will re-examine the need to amend Rule 19.
The draft decision was mailed to the parties in accordance with Pub. Util. Code § 311(g)(1) and Rule 77.7 of the Rules of Practice and Procedure.
1. The facts and the arguments about applicable law focus on three basic situations:
a. charges for water service at submetered MHPs;
b. charges for water service - and particularly, the method for allocating charges -- at multi-unit apartments which are not submetered; and
c. charges for sewer service.
In each of these scenarios, the owner/operator of the MHP or multi-unit apartment is the customer of the water or sewer provider and the tenant (the end use residential consumer) is not.
2. The recent interest in these water and sewer issues has been stimulated by changes in billing practices at some MHPs and multi-unit apartments.
3. The history at De Anza, which is subject to local rent control, illustrates the major controversy surrounding MHPs: whether water and sewer charges may be billed at the "prevailing rate" of the utility provider (i.e. what the provider would charge a directly served end use customer, including volumetric rate, customer charge, and any tax) or only on a "pass through" basis (i.e. a pro rata allocation of the actual charges billed by the provider).
4. By comparison to MHPs, few multi-unit apartments are submetered and water charges (like sewer charges) typically have been subsumed in rent.
5. Owners/operators of some unsubmetered multi-unit apartments, or their billing agents, have begun charging tenants directly for water or sewer service using a proxy for metered usage known as "RUBS", or Ratio Utility Billing Systems. Typical RUBS methodologies employ apartment square footage or number of tenants per unit as the basis for computing water and sewer charges.
6. The CPUC regulates about 150 water corporations as public utilities; these water corporations provide only 20% of the potable water supply delivered to end use customers in California. The remaining 80% come from other water providers, such as municipal public utilities, municipal utility districts, public utility districts, and a limited number of private water sources, none of which the regulates.
7. The CPUC regulates about nine sewer system corporations as public utilities; these sewer system corporations provide approximately 2,000 service connections in California.
8. Unlike § 739.5 which governs the submetering of gas and electricity at MHPs, § 2705.5 does not provide for a MHP discount for submetering water. Neither does § 2705.5 provide any other explicit means or method for the MHP owner/operator to recover the costs of installation of the water submeter system, operation, or maintenance.
9. As enacted in 1983, § 2705.5 codified an exemption from public utility status for MHPs that charge the same rate as the user would receive from the "serving public utility water company."
10. Several factors, enumerated in section 6.2.2 of this decision, make calculation and imposition of a water submeter discount impractical, if not infeasible.
11. Recovering water and sewer costs from MHP tenants on a "prevailing rate" basis provides the MHP owner/operator with a surplus over the master meter bill. The differential is primarily attributable to imposition of a customer charge on a per space basis, plus applicable tax.
12. Though MHP water and sewer charges have been removed from rent in accordance with the formula in Civ. Code § 798.4 (part of the Mobilehome Residency Law), costs of installation, operation and maintenance of submeter water systems may be imbedded in rent.
13. Charging MHP tenants a pro rata allocation of the master meter water and sewer charges may result in a subsidy to them, because their total bills are less than those paid by other residential customers (whether resident of MHPs or not) who receive water directly from a water corporation.
14. The record does not establish that the prevailing rate is a fair proxy for the average costs of in-park submeter water systems since far too little is known about the actual basis for the rent levels charged at individual MHPs, whether subject to rent control or not.
15. There is a legislative solution that appears to be fairer, more direct and less complex than any of the parties' proposals: amendment of both Civ. Code § 798.41 and § 2705.5 of the Public Utilities Code to provide the MHP owner/operator with an alternative. If the MHP removes from base rents all imbedded capital and operational costs associated with the submeter water system, the MHP may bill each tenant at the prevailing rate of the water corporation (or other water provider) which serves the master meter. If the MHP chooses not to remove those costs from rent, the MHP may only recover volumetric submeter charges plus a pro rata allocation of any other charges billed to the master meter.
16. Consistent with its policy banning the submetering of gas and electricity at future MHPs and multi-unit apartments (i.e. new construction), the Legislature should prohibit submetering of water services at all new MHP and multi-unit apartment construction. All new construction should be required to have individual water meters for all spaces and units and be served directly by the water corporation (or other water provider).
17. Though water conservation is an important state policy, the anecdotal information in the record does not allow us to conclude that any of the "RUBS" methodologies proposed are fair or that they result actually result in water conservation.
18. New, electronic metering technologies are being developed which may provide an economic means of submetering - or directly metering - water service to individual units in existing multi-unit apartments and the Legislature may wish to study this subject.
19. Amendment of Civ. Code § 798.41 of the Mobilehome Residency Law may be helpful to resolve disputes over what sewer charges can lawfully be billed under the terms of that statute - the prevailing rate or a pro rata allocation of the amount the MHP or multi-unit apartment owner/operator actually pays.
20. Case by case examination of dedication of water or sewer facilities at MHPs and multi-unit apartments is not a feasible governmental solution to the generic problems identified in this proceeding. Moreover, should the still relatively small number of formal complaints filed at the Commission become a steady stream, the fiscal consequences upon the Commission would be considerable.
21. Hearings are unnecessary, since the application and amendment can be resolved on the initial pleadings and the parties' briefs.
1. Existing statutes which define water and sewer public utilities must be interpreted in light of the common law doctrine of dedication.
2. The language governing public utility water corporations (§ 216, § 241, and § 2701 of the Public Utilities Code), construed in light of the dedication doctrine, does not confer broad Commission jurisdiction over the delivery of water by landlords to tenants for compensation.
3. Legislative history establishes that the 1984 amendment of § 2705.5 to replace "serving public utility water company" with "water corporation" was a nonsubstantive code maintenance amendment made to conform the language with the definition in § 241.
4. Section § 2705.5 exempts from regulation by the CPUC, as public utilities, certain MHPs which obtain water from § 241 water corporations.
5. The Public Utilities Code does not grant the Commission discretion to routinely assume oversight of the rates charged at all MHPs served by water providers which are not § 241 water corporations.
6. Where a MHP receives water service from a provider the CPUC does not regulate, disputes about submetering rates are within the purview of the municipal or district board which governs that provider, local rent control authorities, or the civil courts - unless the MHP has dedicated its property to public service. Such MHP would be required to obtain a CPCN from this Commission for authority to operate as a public utility, or cease and desist.
7. Section § 2705.5 does not apply to multi-unit apartments which are not submetered.
8. No statute in the Public Utilities Code establishes nonpublic utility status for multi-unit apartment landlords who do not submeter but do bill tenants for water.
9. No statute in the Public Utilities Code establishes nonpublic utility status for apartment landlords who separately bill tenants for hot water or filtered water (that is, water that is in someway different than the commodity supplied to the landlord by the water corporation).
10. Where a multi-unit apartment water system has been dedicated to public service, the landlord must obtain a CPCN from this Commission for authority to operate as a public utility, or cease and desist. If no dedication has occurred, then water service disputes are landlord/tenant issues subject to local rent control authorities if a rent control ordinance applies, or to the jurisdiction of the civil courts.
11. Under § 230.5, which defines "sewer system", where a MHP or multi-unit apartment is owned by a single owner, the sewer facilities are not subject to regulation by the CPUC.
12. Where the MHP or multi-unit apartment legally is owned by more than one person or entity, the application of the dedication provides two possible results. Where dedication has occurred, the MHP or multi-unit apartment must obtain a CPCN, or cease and desist. Absent dedication, sewer service disputes are landlord/tenant matters, subject to the jurisdiction of local rent control boards, in some cases, or the civil courts.
13. Amendment of Rule 19 in the tariffs of CPUC-regulated water corporations will not provide solutions to the problems identified in this proceeding. If the Legislature amends the Public Utilities Code, the Commission should re-examine the need to amend Rule 19.
14. The Commission should confirm the preliminary quasi-legislative categorization in Resolution ALJ 176-3010 and confirm that no hearings are necessary.
15. In order to provide guidance to the parties and a timely recommendation to the Legislature, this order should be effective today.
IT IS ORDERED that:
1. The Executive Director of California Public Utilities Commission shall submit this decision to the California Legislature.
2. This proceeding is closed.
This order is effective today.
Dated , at San Francisco, California.
