10. Conclusion

As a general rule, the Commission has exclusive and primary jurisdiction over the establishment of rates for water and sewer services provided by private entities. Essentially, the Commission has the authority that the Legislature says it has. To the extent that the courts have interpreted public utility laws, then Commission jurisdiction is governed by controlling case law.

Based on existing statutory and case law, the Commission has no jurisdiction over municipal entities that provide water or sewer service. Neither does the Commission have jurisdiction over entities expressly exempted by statute from CPUC regulatory control. As noted in the OII, we have previously recognized that the Commission has no rent control jurisdiction. (See Rates, Charges, and Practices MHPs 58 CPUC2d at 718.) The absence of rent control jurisdiction, however, does not mean that those with rent control authority or the owners of MHPs or of multi-unit apartments are free to ignore Commission rulings concerning utility rates where our jurisdiction to regulate these rates is clear. (See Rainbow Disposal Co. vs. Escondido Mobilehome Rent Review Board, (1998) 64 Cal.App.4^th 1159, 1167.)

As we look to the future, we emphasize that under existing law, whether an individual MHP or multi-unit apartment is a public utility subject to our regulatory control must be determined on a case by case basis. Incident to our ability to determine what entity is a public utility, we also are authorized to determine whether a MHP or a multi-unit apartment qualifies as legally exempt from CPUC control. Today, we conclude that the statute that exempts MHPs and multi-unit apartments from CPUC jurisdiction when they submeter water services does not apply when the primary utility provider is a municipal entity. Similarly, in most instances the CPUC lacks jurisdiction to regulate the non-submetered water or sewer service that is provided to the MHP or mulit-unit apartment by a municipal entity.

As we review the parameters that determine our jurisdictional reach, it appears that CPUC jurisdiction is decidedly limited when it comes to the protection of tenants from allegedly unfair charges targeted for water or sewer service imposed by landlords whose practices are not presently being scrutinized by any other governmental entity. Similarly, we lack authority to address the alleged plight of landlords who reportedly are unable to recover the rising costs of water and sewer services when they are rolled into rent. The Commission has no intermediate regulatory authority over these circumstances. The Commission only has the jurisdiction to determine whether or not a MHP or multi-unit apartment is a public utility.

It is entirely possible that a private entity, which does not qualify for public utility status, may nonetheless charge tenants water or sewer rates that, in other circumstances, might be considered unfair or unreasonable. By the same token, if a MHP or multi-unit apartment is determined to be a public utility, the regulatory laws that control the development of rates will result in charges that are legally just and reasonable but may be higher than the tenant would pay if the primary utility provider were charging them directly for water or sewer service. ²³

Finally, we are concerned that in deciding that a MHP or multi-unit apartment is a public utility, the Commission would be adding to the number of small water corporations. That practice seems contrary to recent legislative policy which appears to promote the elimination of small utilities through merger or sale to their larger counterparts. (See footnote 8.) There can be no doubt that small utilities do not benefit from the economies of scale that, in larger organizations, could produce just and reasonable charges that are more customer friendly. Furthermore, increased awareness and concern about contamination create additional problems and costs for small water utilities. As we know from the proceeding initiated by our Water Quality OII (I.98-03-013), virtually all MHPs and numerous multi-unit apartments that resell water service qualify as public water systems subject to the panoply of Safe Drinking Water laws and regulations administered by the Department of Health Services. (See Health & Saf. Code § 116275(h).)

Comments on Draft Decision

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. The revised draft decision was also mailed for comment.

Findings of Fact

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 record 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 and complaints about these changes.

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 CPUC 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 6.3 of this decision, make calculation and imposition of a water submeter discount difficult.

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. The Legislature bans the submetering of gas and electricity at future MHPs and multi-unit apartments (i.e. new construction). No comparable ban prohibits submetering of water services at new MHP and multi-unit apartment construction.

16. 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.

17. 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.

18. 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 could be considerable.

19. As a general rule, the "applicable rate" under § 2705.5 is the specific rate or the total of several rate components that can be found in the Commission-authorized tariffs of the water corporation that provides water service to the MHP. However, as discussed in greater detail herein, a water corporation's statement of "prevailing rates" is not a conclusive determination of the "applicable rate".

20. Hearings are unnecessary, since the proceeding can be resolved on the initial pleadings and the parties' briefs.

Conclusions of Law

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, 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 from the water 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 doctrine 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 that cannot be addressed because the CPUC lacks jurisdiction.

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, this order should be effective today.

ORDER

IT IS ORDERED that this proceeding is closed.

This order is effective today.

Dated May 14, 2001, at San Francisco, California.

LORETTA M. LYNCH

President

CARL W. WOOD

GEOFFREY F. BROWN

Commissioners

I dissent.

/s/ Henry M. Duque

Commissioner

I dissent.

/s/ Richard A. Bilas

Commissioner