Overview: Factual Background and Controlling Law

As relevant here, § 739.5 requires a master-meter customer, such as Hillsboro, to charge mobilehome park tenants "the same rate" the utility would charge those tenants if it provided them natural gas and electric service directly.³ The master-meter rates are discounted to cover the "reasonable average costs" of providing the submeter service, based on the costs the utility avoids. The Commission has exclusive jurisdiction to administer § 739.5 and to set the rates the statute authorizes.

In 1995, the Commission extensively reviewed the application of § 739.5 and the calculation of the master-meter discount. In Ordering Paragraph 1 of its decision, the Commission held that "§ 739.5 expressly limits master-meter mobile home park owners [sic] recovery of costs of owning, operating, and maintaining a submetered system to the reimbursement provided by the submeter discount." (See Re: Rates, Charges, and Practices of Electric and Gas Utilities Providing Services to Master-metered Mobile Home Parks [Rates, Charges, and Practices], D.95-02-090, (1995) 58 CPUC2d 709; rehrg. denied D.95-08-056, 61 CPUC 2d 225.) In other words, the park owner may not recover any actual or perceived shortfall through surcharges or rent increases.⁴ In its decision denying rehearing, the Commission focussed on the "key ... that submetered customers are to be treated the same as directly metered customers." (Rates, Charges, and Practices, rehrg. denied, 61 CPUC2d 225, 231.) Theoretically, the Commission opined, those costs, if any, which are not statutorily required to be considered in the discount - and which directly metered tenants pay in rents -may be recovered from submetered tenants in rents. However, the Commission was unable to ascertain, based on the record before it in 1995, whether or not there are any such costs and directed park owners to raise this issue "in the next GRCs [utility general rate cases], so that all parties have an opportunity to litigate the matter."⁵ (Ibid.)

Mobilehome parks in Novato are subject to a municipal rent control law, the Mobilehome Rent Control Ordinance, which is Chapter XX of the Novato Municipal Code. Section 20-5 of the rent control ordinance provides for an automatic, annual rent adjustment by an amount equal to 75% of the annual change in the consumer price index (CPI) over the base year. Park owners who conclude this adjustment does not provide a fair return on investment may petition, annually, for an individualized rent adjustment - good for one year -- equal to 100% of the change in the CPI. Such a petition, brought under § 20-9 of the ordinance, must be based on various approved formulae, including the maintenance of net operating income (NOI) formula. Section 20-12 of the ordinance, appended to this decision as Attachment A, defines NOI as gross income less operating expenses (which include utility costs the tenants do not pay but exclude utility costs covered by the master-meter discount). Under the maintenance of NOI formula, a park owner's rent increase petition is based on the park's NOI in the base year, 1995, which is the last full calendar year before Novato's rent control law took effect. The base year NOI is presumed to provide a fair return on the property.

Beginning in 1996, Hillsboro has filed an annual petition for a rent increase using the NOI formula. Hambly filed this complaint on behalf of himself and the other tenants at Los Robles, a 213-space mobilehome park in Novato, within the service territory of Pacific Gas and Electric Company (PG&E). Hambly seeks refunds for utility expenses which he claims have been wrongfully included in rent and urges the Commission to suggest certain revisions of Novato's rent control ordinance.

The Commission has acknowledged it has no rent control authority. (See Rates, Charges, and Practices, at 58 CPUC2d 709, 718.) However, lack of rent control jurisdiction does not limit the CPUC's utility-rate control jurisdiction.

That the PUC lacks rent control jurisdiction does not mean rent control boards are free to ignore its rulings concerning utility rates. The rationale of Rates, Charges, and Practices applies to rent-controlled parks as much as to parks that are not subject to rent control." (Rainbow Disposal (1998) 64 Cal. App 4^th 1159, 1167.)

Clearly the Commission has subject matter jurisdiction over the issues in contention between the parties, and following the PHC, Hillsboro abandoned its claim that the Commission does not.

The commission shall require that, whenever gas or electric service, or both, is provided by a master-meter customer to users who are tenants of a mobilehome park, apartment building, or similar residential complex, the master-meter customer shall charge each user of the service at the same rate which would be applicable if the user were receiving gas or electricity, or both, directly from the gas or electrical corporation. The commission shall require the corporation furnishing service to the master-meter customer to establish uniform rates for master-meter service at a level which will provide a sufficient differential to cover the reasonable average costs to master-meter customers of providing submeter service, except that these costs shall not exceed the average cost that the corporation would have incurred in providing comparable services directly to the users of the service.