2. Background

Donner was purchased eight years ago and is a wholly owned subsidiary of Del Oro Water Company in Chico. With 1,300 connections, Donner serves 3,450 permanent residents and about 25,000 persons during holiday weekends in areas around Donner Lake, west of Truckee.

In the summer of 1999 and 2000, the Donner water system experienced multiple leaks and depressurization that left many customers without water. On June 22, 2000, Donner was required to notify customers to boil their water before use after a DHS inspection revealed that the leaks caused a low-pressure vacuum that was likely to create backflow of contaminated water. On November 20, 2000, DHS issued a compliance order directing Donner to replace much of its 50-year-old distribution pipelines, as well as portions of its water production and storage systems.

The company on December 11, 2000, filed its application for authority to borrow up to $12 million, later amended to $15.5 million, to replace the water system over a five-year period. It also filed a motion for expedited approval of $4.8 million in borrowing so that it could begin DHS-ordered repairs that are required during this calendar year. The application was protested by the Water Branch of the ORA, and by a group of customer protestants who seek to have the water system acquired by the Utility District, a public entity that provides electricity in Truckee and also provides water service to 7,500 customers not served by Donner.

A prehearing conference was conducted on January 24, 2001. A Scoping Memo was issued by Assigned Commissioner Duque on January 29, 2001, setting dates for submission of written testimony and scheduling hearings in April in Truckee. On March 27, 2001, the Commission issued an interim order (Decision (D.) 01-03-060) authorizing Donner to borrow up to $1.3 million to begin emergency repairs on its system while a final decision in this proceeding was pending.

Two public participation hearings were conducted on April 3, 2001, in Truckee, and evidentiary hearings in Truckee followed on April 4 and 5. At the evidentiary hearings, the Commission heard from ten witnesses and received 53 exhibits into evidence. Briefs were filed on April 27, 2001, at which time this matter was deemed submitted for decision.