Opinion ID: 2548844
Heading Depth: 3
Heading Rank: 1

Heading: The Commission Appropriately Recognized a Distinction Between Real Estate Developers and Individual Utility Customers

Text: ¶ 13 The Commission's holding that the tariff does not apply in this case is based on a distinction between prospective customers who seek water service for their own imminent consumption and real estate developers who seek commitments to serve lots they intend to sell to others. Bradshaw argues that the terms of the tariff recognize no such distinction and therefore he should be considered a customer in the same way as an individual who requests service on his own behalf. ¶ 14 Utah law prohibits public utilities from engaging in disparate treatment of similarly situated customers, Utah Code Ann. § 54-3-8 (2003), [2] and requires that a utility's charges be just and reasonable, id. § 54-3-1. Utah law recognizes, however, that not all customers are similarly situated. The scope [of the] definition of `just and reasonable' may include, but shall not be limited to, the cost of providing service to each category of customer, economic impact of charges on each category of customer, and on the well-being of the state of Utah.... Id. ¶ 15 Bradshaw argues that he is similarly situated to an individual lot owner and that the Commission erred in treating him differently. He points out that the tariff makes no distinction between a prospective customer who seeks water service for his own imminent consumption and a real estate developer who seeks a commitment to serve lots he intends to sell to others at some future time. He reasons that Wilkinson Water would collect the same amount in connection fees whether it were to collect them from Bradshaw for twenty-one lots collectively or from twenty-one individual lot owners. ¶ 16 We disagree. The primary basis for distinguishing between a real estate developer and an individual customer is found in the substantial risk to the utility and its customers presented by a developer's request for a commitment to serve a proposed subdivision when the utility's infrastructure is insufficient to meet the anticipated demand. In such a situation, the utility is asked to construct additional facilities without any assurances that the increased demand will soon materialize in the form of rate-paying customers. ¶ 17 Real estate development is a speculative enterprise. Indeed, Bradshaw previously delayed his development for a period of approximately five years after first approaching Wilkinson Water about a service commitment. Bradshaw's lots may or may not be developed and may or may not be sold. Even if they are sold, a great deal of time may elapse before the lots actually require water service. Wilkinson Water and its existing customers should not be forced to bear the costs of constructing additional facilities that may turn out to be unnecessary. As the Commission pointed out, this would be tantamount to forcing a utility's customers to speculate in real estate development. ¶ 18 Moreover, as the Commission noted in its decision, it is unlikely that simultaneous individual requests for new service would amount to such an increase in demand as to require the utility to construct additional facilities. There is a marked increase in the risk associated with the construction of a multi-unit housing development over the risk associated with construction of a single home. In contrast to a hypothetical simultaneous request for service from twenty-one lot owners, a developer's request for a service commitment does not necessarily represent twenty-one customers ready to move in and immediately begin paying for water service. Therefore, it may be years before Wilkinson Water can begin to recover the costs of its additional construction in the form of payments for service. ¶ 19 The Commission has adopted a policy recognizing that real estate developers are better positioned than local utilities to bear the costs associated with construction of additional infrastructure necessary to supply water to proposed subdivisions. [3] We find nothing in the Commission's policy to be unreasonably discriminatory or otherwise unlawful.