C. Discussion

2. Settlement Criteria

The stipulation is properly characterized as an uncontested settlement.¹ In such cases, the Commission applies the standard set forth in Rule 51.1(e) of the Commission's Rules of Practice and Procedure, and applicable to both contested and uncontested settlement agreements, requires that the "settlement is reasonable in light of the whole record, consistent with law, and in the public interest."

The proposed stipulation was primarily negotiated between PAWW and the City, and mediated by the Director of the Commission's Water Division. PAWW was represented by its officers and counsel in the proceeding. On behalf of ratepayers, the City was represented by its Mayor and counsel. Both parties were actively involved in all phases of the proceeding. Thus, the sponsoring parties for the stipulation are fairly representative of the affected interests, and they have been active advocates in this proceeding.

The stipulation sets forth the parties' final agreement on major issues, including Summary of Earnings, Tariff Rate Schedules, Comparison of Rates, and Adopted Quantities and Tax Calculations prepared by Water Division staff to reflect the rate-making provisions of the stipulation.

Pub. Util. Code § 454² provides that no public utility shall change any rate except upon a showing before the Commission and a finding by the Commission that the new rate is justified. In the stipulation and earlier filings, the parties have explained their initial positions and what adjustments have been made to arrive at the summaries of earning and revenue requirements set forth in the stipulation. The resulting rates will produce necessary and sufficient revenues for the test year. We find that the rates and the supporting revenue requirements are justified by the parties' showing and are in the interest of ratepayers and the public. Also, as indicated by the description of the stipulation, the documentation is sufficient for the Commission to discharge its future regulatory obligations with respect to the parties and their interest. (See San Diego & Electric, 46 CPUC 2d 538, 550-55 (1992.)

The stipulation satisfies the Commission's requirements for settlements under Rule 51. The stipulation is reasonable in consideration of the whole record, consistent with the law, and in the public interest. We will therefore approve it.

3. The Overcharge Issue

There is no dispute that PAWW overcharged the 5/8 x 3/4 inch meter customers for approximately 10 years, and refunded the overcharges for only three years. PAWW contends it owes no further refunds, pursuant to the three-year limitation period found in § 736.³ The City argues that this statute of limitations does not apply when customers have not discovered the billing error. We find that PAWW's customers could not reasonably be expected to discover the overcharges through sources available to them and that consequently the statute of limitations was tolled until PAWW discovered the error and informed the Commission of the overcharges in 2000. As a result, the three-year limitations period does not bar any refunds in this proceeding initiated in 2002, and PAWW must provide a full refund of overcharges, plus interest, going back to 1991.

In Res. W-4356, the Commission addressed the overcharge issue as follows:

In its investigation, the staff discovered that upon implementing its newly authorized rates pursuant to Res. W-3594, dated June 19, 1991, PAWW began incorrectly assessing its 5/8 X 3/4-inch metered customers with the ¾ -inch metered service charge rate, an initial overcharge of $3.15 per month per customer ($15.20 versus $12.05). The utility assessed this incorrect rate up until the interim rates authorized by Res. W-4308 were implemented in January 2002. It may be that the incorrect billing was inadvertent on the part of PAWW. However, even though the Staff's audit shows that PAWW has been losing money since 1994 (even with the incorrect billing), the utility still was in violation of Section 532 of the Pub. Util. Code. Therefore, the Division recommends that PAWW be required to refund three years (1999, 2000 and 2001) of the over-collection to each affected customer over a twelve-month period. This is consistent with Section 736 of the Pub. Util. Code that limits the claim for damages resulting from violations of any of the provisions of Section 532 of the Code to three years. The total over-collection from January 1, 1999 through December 31, 2001 was $17,965. The utility agrees with the reasonableness of this refund.

Accordingly, the Commission ordered PAWW to provide overcharge credits for 1999, 2000, and 2001 to the affected customers in installments of $9.57 per month for twelve months commencing with the first billing after the effective date of new rates authorized in the resolution. The Resolution is subject to modification consistent with the final opinion in this application.

In its opening brief, PAWW concurs with the staff report and the Resolution that § 736 limits PAWW's refund obligation to three years. By charging rates other than as set forth in its tariffs, PAWW violated § 532, which provides that "no public utility shall charge or receive a different compensation for any . . . service to be rendered, than the rates, tolls, rentals and charges applicable thereto as specified in its schedules on file and in effect at the time." PAWW concludes that by refunding the last three years of overcharges, it has fully discharged its refund obligation.

The City argues that PAWW's customers are legally entitled to recover refunds from PAWW from the beginning of the period in which these customers were overcharged, approximately seven additional years of refunds. The City contends that the statute of limitations found in § 736 is tolled "until ratepayers become aware, or should become of aware, of their injury" and that the Commission has consistently interpreted § 736 as being subject to this "discovery rule." The City points to TURN v. Pacific Bell, (1994) 54 CPUC2d 122, where the Commission applied the discovery rule and found that the otherwise applicable statute of limitations was not a bar to the refund of late payment fees charged over five years that were caused by Pacific Bell's "wrongdoing" in crediting payments.

The City is correct that the Commission applies the discovery rule in determining the impact of the statutes of limitations applicable to overcharge claims. In TURN, the Commission cited a 1988 California Supreme Court decision to explain that the limitations "clock" does not always begin to "tick" at the time that the injury is suffered:

The discovery rule provides that the accrual date of a cause of action is delayed until the plaintiff is aware of her injury and its negligent cause. A plaintiff is held to her actual knowledge as well as knowledge that could reasonably be discovered through investigation of sources open to her. (54 CPUC at 126, quoting Jolly v. Eli Lily Co. (1988) 44 Cal. 3d 1103).

TURN also explained that, in determining the timing of the onset of the statute of limitations, "[w]here a utility knew or should have known that it was overcharging its customers, the benefit of the doubt must go to customers." (54 CPUC 2d at 125).

Applying the discovery rule to this case, the statute of limitations did not begin to run on claims for refund of overcharges until PAWW's customers were aware of the overcharges or could reasonably discover the overcharges through sources available to them. The sparse record here does not support the position that customers should reasonably have discovered that they were being overcharged prior to 2002. In fact, PAWW's briefs do not even argue that customers should have known they were being overcharged, but rather dwell on the unconvincing argument that the discovery rule should not apply in this case.

The bill itself did not give customers a reason to suspect they were being overcharged. As shown by the attachments to the City's brief, PAWW's bills only showed a total charge "for usage," which apparently was a bundled figure comprising both the fixed service charge based on meter size and the charges for quantity of water consumed. Thus, the bills furnished customers no basis to know or suspect that their bills included a monthly service charge based on meter size. PAWW's pleadings do not provide any information indicating that customers were otherwise informed that meter size affected the amount a customer was billed.

However, even assuming an enterprising customer inspected the tariffs and learned that a larger meter carried a higher monthly service charge, the record still does not show that such a customer could reasonably be expected to have become aware of the overcharge. PAWW does not argue that the meter itself provides any indication of its size. Nor does PAWW provide any reason to believe that a customer who called PAWW between 1991 and 2000 to inquire about the size of their meter would have been given an answer that conflicted with the (erroneous) meter size for which the customer was being billed. In the absence of any information from the company, we give the benefit of the doubt to the customer and conclude that the company's answer would be consistent with the amount being billed.

We note PAWW's statement that the company had been charging excessive rates for nine years before becoming aware of the overcharges. The fact that it took the company nine years to discover the overcharges supports our finding that it was not reasonable to expect a customer to discover the facts exposing the overcharges.

Our decision in Homeowners Assn of Lamplighter v. Lamplighter Mobile Home Park, (1999) 84 CPUC 2d 727, 731 (D.99-02-001), does not dictate a contrary result. In Lamplighter, the mobile home park owners had assessed an illegal surcharge for facilities improvements for over 10 years. The owners provided notice of the surcharge at issue and the detailed factual basis for it in a letter to tenants four months prior to assessing the surcharge, as well as in a community meeting. (84 CPUC 2d at 733, 734). Unlike PAWW's customers, Lamplighter's customers "had all of the critical facts at their disposal." (84 CPUC 2d at 733). They were lacking only an understanding of the law that made such surcharges improper. The Commission held that the discovery rule does not allow the statute of limitations to be tolled based on ignorance of the law, stating: "TURN v. Pacific Bell does not stand for the principle that a statute of limitations is tolled when a party does not understand its legal rights." 84 CPUC 2d at 733.

In contrast to Lamplighter, PAWW's customers lacked the facts necessary to establish that they were being overcharged and could not reasonably have discovered such facts. Accordingly, we find that the statute of limitations was tolled until the company discovered the overcharges and notified the Commission in 2000. Because this proceeding was initiated in 2002, less than three years after the statute of limitations began to run, the statute of limitations does not bar refunds of any of the overcharges.

As noted above, the stipulation sets forth a process by which customers will benefit from any additional refunds we may order:

To the extent that the Commission determines that Applicant is obliged to provide additional refunds, Applicant and Protestant agree and respectfully request that the Commission authorize that said refunds be charged against or deducted from any surcharges authorized for recovery of the Memorandum Account discussed in paragraph 4 above [relating to PAWW's legal expenses in this rate case]. (Stipulation, Paragraph 5).4

In accordance with the stipulation, we direct that the additional refunds ordered by this decision, plus interest on those refunds, be used to offset any surcharge amounts that may be authorized pursuant to paragraph 4 of the stipulation. In the event that the additional refund amount, including interest, exceeds the paragraph 4 surcharge amounts, PAWW shall consult with the Commission's Water Division to prepare a proposal for the refund of those additional amounts and shall file an advice letter seeking approval of such proposal.