5. Basis of CPUC Jurisdiction

Where a MHP or a multi-unit apartment obtains water or sewer service from a Commission-regulated public utility, and then separately bills for that service, many consumers and some of the parties to this proceeding presume the Commission has jurisdictional oversight of that activity, without limitation. Many consumers, as well as some parties, also assume CPUC jurisdiction where the water provider to the MHP or multi-unit apartment is part of that non-jurisdictional group that supplies 80% of California's potable water. They reason, under both scenarios, that in reselling the utility service to an end use consumer, the MHP or multi-unit apartment owner/operator is performing a public utility function as a de facto public utility. As explained more fully below, many of these assumptions are not supported by our analysis of applicable law. Instead, CPUC jurisdiction over landlord-tenant disputes regarding water and sewer billing practices is quite limited.

To provide a context for our discussion of the positions of the parties on the application of CPUC jurisdiction, in the next two subsections we identify the relevant statutes and court interpretations of public utilities law that together comprise the controlling law on CPUC jurisdiction. Later in this decision we examine the application of these laws to submetered water service at MHPs, water allocation methodologies at non-submetered multi-unit apartments, and to sewer service charges at both.

5.1. The Statutes - CPUC Jurisdiction

The CPUC's power to regulate water and sewer corporations as public utilities relies on legislative grants, pursuant to sections 3 and 5 of Article XII of the California Constitution, which expand upon direct constitutional grants conferred by other provisions of Article XII.¹⁰

Section 216 of the Public Utilities Code is the general definitional statute that describes categories of pubic utilities. With respect to water, it provides, in relevant part:

(a) "Public utility" includes 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. (§ 216, emphasis added.)

Pursuant to § 241, water corporation means "every corporation or person owning, controlling, operating, or managing any water system for compensation" within California. Section 204 defines corporation as "a corporation, a company, an association, and a joint stock association" but, notably, does not include a municipal corporation.

Section § 2701 contains the most detailed definition of a CPUC-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. (§ 2701, emphasis added.)

A statutory exception to CPUC jurisdiction, suggested in §2701 above, that is directly applicable to MHPs and multi-unit apartments is § 2705.5, which provides in relevant part:

Any person or corporation ... that maintains a mobilehome park or a multiple unit residential complex and provides ... water service to users through a submeter service system is not a public utility and is not subject to the jurisdiction, control, or regulation of the commission if each user of the submeter service system is charged at the rate which would be applicable if the user were receiving the water directly from the water corporation. (§ 2705.5, emphasis added.)

As such, § 2705.5 provides a "safe harbor" from public utility status and attendant regulation by the CPUC to qualifying MHPs and multi-unit apartments.¹¹ Legislative history, cited by GSMOL, shows that § 2705.5 was enacted in 1983 in response to questions about whether MHPs that were submetering water to their tenants could do so without obtaining a CPCN and submitting to regulation by the CPUC as public utilities. (See GSMOL initial brief, Ex. B-D.) As enacted, the statute codified an exemption or safe harbor - in other words, nonpublic utility status -- for MHPs that charged the same rate as the user would receive from the "serving public utility water company." (Stats. 1983, ch. 339.) On the advice of Legislative Counsel in the 24^th Report on Legislation Necessary to Maintain the Codes (March 1, 1984), the term "water company" was deleted and replaced by the term "water corporation," which appears in the current statute. (Stats. 1984, ch 144, sec. 169.)¹²

Section 2705.6 addresses the practices of MHPs that own the water supplies and facilities used to serve their tenants. Although it provides such MHPs with an exemption from public utility status, it authorizes the Commission to exercise jurisdiction over the MHP's water rates and services "if a tenant complains." Section 2705.6 provides in relevant part:

A mobilehome park that provides water service only to its tenants from water supplies and facilities that it owns, not otherwise dedicated to public service, is not a water corporation. However, that mobilehome park is subject to the jurisdiction of the commission to the extent that, if a tenant complains about the water rates charged or service provided by the mobilehome park, the commission shall determine, based on all the facts and circumstances, whether the rates charged are just and reasonable and whether the service provided is adequate. (§ 2705.6)

Questions about the charges and services provided by an MHP that owns its water supplies and facilities were not raised in this proceeding.¹³ Although we have no statistics on MHPs that own their water sources, we suspect that they are few in number.

5.2. Case Law - CPUC Jurisdiction

When considering the Commission's jurisdiction over the charges of MHPs or multi-unit apartments for water and sewer service, one cannot rely solely on the words of the controlling statutes. The following two subsections on dedication of property to public use and on municipal utilities demonstrate how the courts have clarified, and in some instances, expressed the implicit limitations in the Commission's governing authority.

5.2.1. No Public Utility Status Without Dedication of Property to Public Use

Were we to construe Public Utilities Code § 216, § 241, and § 2701 in isolation, the narrow language of these statutes would appear to confer broad Commission jurisdiction over the delivery of water by landlords to tenants for compensation. However, in 1912, the California Supreme Court enunciated a requirement of common law, not express 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.) The Court later explained that the act of dedication occurs if an entity:

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.).

By 1960, in Richfield Oil Corp. v Public Utilities Commission, the Court expressed doubts about the applicability of the dedication doctrine to modern public utility status. However, the Court left the 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." (Richfield Oil Corp (1960) 54 Cal.2d 419, 430.)

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 Util. Com. (1959) 51 Cal.2d 476, 494; see also Yucaipa Water Co. No. 1 v. Public Utilities Com. (1960) 54 Cal.2d 823.) The California Supreme Court's 1921 decision in Story v. Richardson remains the preeminent authority on application of the dedication requirement in the context of a landlord-tenant relationship. (Story v. Richardson (1921) 186 Cal. 162.) In that case, the Supreme Court held that an office building owner was not acting as a public utility though he maintained boilers, pumping engines, hot water heaters, and other equipment in the office building basement for the purpose of supplying tenants with light, heat, and hot water service. (Id. at 166.) The owner was "not engaged in the sale and distribution of electricity to the public at large or any portions thereof" the Supreme Court said, emphasizing that the equipment within the building was designed "primarily and pre-eminently for supplying service to the tenants of the building" and that the owner used his property "solely in a private enterprise." (Id. at 166, 167, 168.)¹⁴

Over the years as the Commission examined the issue of implied dedication in the landlord-tenant setting, it has scrupulously followed the Supreme Court's Story v. Richardson decision. In Barnes v. Skinner, the Commission held that owners of a tract of land containing rental homes had not dedicated their facilities to public use by providing water and sewage services, for a fee, only to their tenants. (D. 85492 slip op. at 8-9; (1976) 79 CPUC 503.) Shortly thereafter, in a commercial context, the Commission held that owners of a regional shopping center who resold electricity to their tenants had not dedicated their property to public use. (Bressler v. Bayshore Properties, Inc. (1977) 81 CPUC 746, 748.) Subsequently (and prior to the enactment of § 2705.6 which creates a statutory exemption), the Commission held that owners of a MHP who used a well that they owned to provide water to park tenants had not dedicated their facilities to public use. (Fowler v. Guenther (1988) 27 CPUC 2d 591, 594.) The Commission declined to address "whether the existence of a landlord-tenant relationship will be sufficient in all situations to prevent the Commission from asserting jurisdiction." (Id. at 595.) Most recently, the Commission concluded that it had not erred in failing to assert jurisdiction over commercial building owners who had installed certain telecommunications facilities for use by their tenants. (OIR into Competition for Local Exchange, D.00-03-055, slip op. at 11 [modifying D.98-10-058 and denying rehearing].)

While it is not the task of this proceeding to definitely determine, based on the unique facts of water or sewer service at any given MHP or multi-unit apartment, whether that service is legal, one guideline is clear: existing statutes which define public water and sewer utilities must be interpreted in light of the common law doctrine of dedication.

As determined in the Commission decision on the Application of MHC, discussed in section 4.1, express dedication of property to public use meets the dedication requirement for public utility status. In this proceeding, with the single exception of MHC, no MHP or multi-unit apartment owner (or owner's representative) has expressly dedicated water or sewer facilities to public service. In fact, the apartment lobby and others vigorously argue that the dedication requirement cannot be implied or inferred from the landlord's simple acts of providing tenants with water and sewer service, and subsequently billing for those services. Therefore, they contend they are not public utilities and cannot be subjected to CPUC jurisdiction.

5.2.2. Municipal Utilities Are Not Public Utilities Subject To CPUC Jurisdiction

In his jurisdictional analysis of public utility law, Witkin succinctly opines: "[t]he Commission's jurisdiction extends only to regulation of privately owned utilities; in the absence of express statutory provision, it has no jurisdiction over municipally owned utilities." (Witkin, 8 Summary of California Law, 9^th Edition, Constitutional Law § 892, p. 436, emphasis in original.)

In a case brought by Inyo County (Inyo), the California Supreme Court held that absent an authorizing statute, the CPUC lacked jurisdiction to regulate the rates the Los Angeles Department of Water and Power (LADWP), a municipally owned public utility, charged for water service outside the corporate border in Inyo. Inyo had argued that, in making sales outside its municipal border, LADWP was acting as a private corporation and therefore, the rates established for Inyo residents were subject to CPUC jurisdiction and control. The Supreme Court noted that § 10005 expressly permits a municipal corporation to sell outside the corporate limits, and no statute grants the CPUC authority to regulate the rates for such sales. (County of Inyo v. Pub. Util Comm., (1980) 26 Cal.3d 154, 166 [Inyo County].) The Supreme Court opined, however:

Possible legislation conferring PUC jurisdiction over municipally owned water corporations, selling beyond municipal borders or even within such borders, would fall clearly within the scope of present article XII, section 5. (Id. at 164, emphasis added.)

The Legislature has not conferred upon the Commission authority over municipal utility water or sewer sales; neither has is it conferred such authority over sales by municipal utility districts or public utility districts.¹⁵ Since municipal entities are not Commission-regulated public utilities, one must consider whether MHPs or multi-unit apartments that do not dedicate their facilities to public use but do resell the water or sewer services provided to them by a municipal utility can be public utilities subject to CPUC jurisdiction. The Commission has not previously considered this question.

"Private corporations and persons that own operate, control or manage a ... system for ... furnishing water ... to or for the public ... are public utilities subject to the control by the Legislature. The Legislature may prescribe that additional classes of private corporations or other person are public utilities." (Cal. Const., art. XII, § 3, emphasis added.)

"The Legislature has plenary power, unlimited by the other provisions of this constitution but consistent with this article, to confer additional authority and jurisdiction upon the commission ..." (Cal. Const., art. XII, § 5.)