ORDER NO. 98-529

ENTERED DEC 17 1998

OF OREGON

UW 58

 DISPOSITION: JURISDICTION ASSERTED; RATES TO BE DETERMINED

On April 7, 1998, at our Public Meeting, we determined that it appeared that Juniper Utility Company (JUC) is a public utility under ORS 757.005, and opened an investigation. See Order No. 98-177. The investigation was occasioned by complaints voiced by individuals representing over 400 JUC customers. We are investigating to ascertain the Commission’s jurisdiction over JUC and its related companies and to determine whether the rates charged by JUC are unreasonable or unjustly discriminatory.

ORS 757.515(1) provides that whenever the Commission believes "that an investigation of any matter relating to any public utility or telecommunications utility or other person should be made … to determine if such person is subject to the Commission’s regulatory jurisdiction, the Commission may on motion summarily investigate any such matter, with or without notice." Subsection (4) provides that the Commission "may, after making an investigation on the Commission’s motion, but without notice or hearing, make such findings and orders as the Commission deems justified or required by the results of such investigation."

Our Staff investigated JUC's operations and those of companies with which it is affiliated. On December 2, 1998, Staff reported the results of its investigation to the Commissioners and filed its report in this docket. We considered the investigation report, applicable statutes and rules, our file in this docket, and relevant previous decisions of the Commission before issuing this order.

ORS 757.005(1)(a) includes in the definition of a public utility a company or individual who owns or operates equipment for the furnishing of water for the public, and any affiliated company or individual which contracts with a public utility for managerial, engineering, financing, or other services. Subsection (1)(b) states that a public utility does not include a "water utility serving less than 300 customers at an average annual residential rate of $18 per month or less, which provides adequate and nondiscriminatory service." ORS 757.061 exempts a water utility from certain financial regulation if it serves fewer than 500 customers, unless 20 percent or more of its customers request that it not be exempt, and the water utility’s rates exceed a rate established by a Commission rule. Commission Rule 860-036-0030 sets the maximum rate for exemption from certain financial requirements at $24 annual average monthly residential rate or $300 for a standard service connection. Commission Rule 860-036-0415 defines a customer to mean an individual residential dwelling or commercial unit. The rule provides that multiple user units are to be counted by the number of individual units in the building, and that those who use recreational vehicle parks as their primary residence are to be counted individually.

The statutes and rule referred to above direct us to focus our attention in this investigation on the number of customers JUC serves and the rates it charges its customers.

FINDINGS

Juniper Utility Company

JUC was created in March 1972 to provide water, sewage, garbage, road and park maintenance, and similar services to persons using property owned or developed by JUC or others associated with it. The water distribution system was originally owned by Jan Ward, a land developer, his brother Kim Ward, their mother Iris Ward, and two corporations. In 1975 the water and sewer assets were transferred to JUC. Jan Ward manages and controls the business and property of JUC, including utility systems operations, accounting, and rate-setting.

Juniper Water Company

Juniper Water Company (JWC) was created in April 1975 to own a water source and distribution system to supply domestic and irrigation water to several neighborhood associations and subdivisions. In June 1977 JUC transferred all its interest in water source, distribution, and storage facilities to JWC. JUC and JWC agreed in May 1977 that JUC would have sole responsibility for the operation and maintenance of JWC's water system. The term of the agreement is 75 years. Jan Ward is the president of JWC. JWC has a board of directors, but their function is to maintain the non-profit status of JWC, and they do not participate in business decisions.

J. L. Ward Construction Company

J. L. Ward Construction Company (JLWCC) was created in 1974 to engage in property development and residential construction as well as other lawful activities. Jan Ward owns and operates JLWCC. JLWCC has been the source of manpower, equipment, and management of companies owned or controlled by Jan Ward. JLWCC owns two pump houses and the distribution system that delivers water for irrigation to a golf course it owns, five homeowner associations, and other areas. JLWCC provides that service to approximately 427 customers. JUC provides the domestic water to those customers and irrigation water to certain customers in those developments not served by JLWCC.

Customers, Service Agreements, and Rates

JUC has approximately 963 customers, comprised of 644 residents of areas served by homeowner associations, 304 customers in mobile home and recreational vehicle parks, and 15 miscellaneous customers. However, it sends out only 11 monthly and 14 annual bills to homeowner associations and mobile home and recreational vehicle parks, which in turn bill individuals who live in their areas. Some of the bills are for both water and sewer service. The associations and parks act as intermediaries in collecting funds for JUC, but have no role in setting the rates.

JUC does not use individual customer meters, so it has a flat per-period rate that does not vary with usage. A look at the rate history of JUC reveals that rates in January 1981 were $25 per single family house and $19.30 per mobile home park unit per month. The rates increased through the years, so that since August 1, 1996, they have been $44 per single family house and $31.30 per mobile home park unit per month. On December 16, 1997, JUC sent a letter to its homeowner association customers stating that the rate would increase to $51 per month effective January 1, 1998. On December 29, 1997, JUC sent a letter to its mobile home and recreational vehicle park customers stating that the rate would increase to $42.50 per month per occupied space and to $21.15 per unoccupied space, effective January 1, 1998.

JUC has written service agreements with five homeowner associations, mobile home parks, and recreational vehicle parks. Three of the agreements are with homeowner associations; at the time the agreements were executed, Jan Ward was the president of both JUC and the homeowner associations. He signed the agreement for both contracting parties. The two remaining service agreements were signed by Jan Ward for JUC and Kim Ward for the mobile and recreational vehicle parks. JUC provides water service without a service agreement to 295 residents of homeowner associations, a mobile home park, and nine individuals.

DISCUSSION

JUC provides utility water service to a variety of customers, including residents of homeowner associations, recreational vehicle and mobile home parks, and other individuals. Service is provided to both members and non-members of associations and parks. In essence, JUC provides water service to the public.

JUC provides water service to more than 900 people. The fact that it deals with intermediaries who bill individuals in their areas does not change the nature of the service provided by JUC. JUC provides water service to members and non-members of the intermediaries. It obviously provides service to the public in the areas it serves. Having more than 900 customers means that JUC is a public utility under the definition of ORS 757.005 that excludes certain water companies serving fewer than 300 customers. It also means that JUC does not qualify for the exemption from certain regulatory duties established in ORS 757.061 and related Rule 860-036-0030.

Some bills sent by JUC to its customers include sewer service as well as water service, without designating the amounts allocated to each service. It therefore is difficult to determine rates for water service. However, it appears that rates for water service are above those specified by statute and rule for exemption from some or all Commission regulation. Its current rate of $44 per month per residence is substantially higher than the $18 per month established in ORS 757.005 for exclusion from the definition of a public utility. So even if JUC had fewer than 300 customers, it probably would still be a public utility.

Over the years the Commission has looked at numerous other water companies developed in concert with property developments to determine if the companies qualified as public utilities. One decision of particular interest involved Docket No. UF 3204, which looked at the developments of Brooks Resources Corporation. In Order No. 78-149, the Commission determined that Brooks Resources was not a utility company. There are both similarities and differences between the activities of Brooks and JUC.

Both companies were created to provide utility service to properties developed by them or those affiliated with them. Both operate water companies they developed and then sold. However, there are major differences, including the following:

Brooks sold its water system lines and storage facilities to the homeowner associations to whom it provided service, while JUC has not sold its water system to the homeowner associations and parks to whom it provides service;

The homeowner associations Brooks served agreed to restrict water service to their members. The agreements also provided that membership would be appurtenant to (go with) the land in each development, making service available only to members rather than the public. JUC provides service to members and non-members of associations and parks;

Members of the homeowner associations Brooks served had an equal voice in the operation of the water systems and set the rates they would pay. In essence they regulated themselves in their own interest. JUC unilaterally sets rates for its customers, without meaningful input from them.

We conclude that our decision here that JUC is a public utility is not inconsistent with the Commission’s decision in Order No. 78-149.

As pertinent here, ORS 757.005 defines a public utility to include those who operate and those who own facilities providing water service to the public. That is, both those who operate and those who own the utility facilities are public utilities. Therefore, our comments and conclusions about whether JUC is a public utility also apply to JWC and JLWCC. JWC and JLWCC own water facilities operated by JUC. All three are controlled by Jan Ward. It appears that JLWCC is exempt from certain financial requirements pursuant to ORS 757.061 and OAR 860-036-0030. JLWCC's equipment serves fewer than 500 customers at rates less than the maximum established by the rule.

CONCLUSIONS

• JUC, JWC, and JLWCC are public utilities under the definition of ORS 757.005;
• The Commission has rate and service jurisdiction over JUC and JWC;
• JUC should file tariffs showing rates and regulations applicable to its water service;
• The Commission should investigate the rates and service practices of JUC and JWC;
• The current rates charged by JUC are deemed to be authorized until the Commission establishes just and reasonable rates.

ORDER

IT IS ORDERED that:

1.  JUC file tariffs showing rate schedules and rules and regulations for its water service in Oregon. The tariffs shall be filed with the Commission within 60 days of the effective date of this order.

2.  JUC shall not increase the rates it charges its water customers until the Commission determines what rates are just and reasonable.

Made, entered, and effective ____________________________.

 A party may request rehearing or reconsideration of this order pursuant to ORS 756.561. A request for rehearing or reconsideration must be filed with the Commission within 60 days of the date of service of this order. The request must comply with the requirements of OAR 860-014-0095. A copy of any such request must also be served on each party to the proceeding as provided by OAR 860-013-0070. A party may appeal this order to a court pursuant to ORS 756.580. In addition, a party aggrieved by this order may request that the Commission hold a hearing to determine if the order should continue in effect, pursuant to ORS 756.515(5).