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             California Public Utilities Commission
505 Van Ness Avenue, Room 5301            San Francisco, CA 94102
CONTACT: Dianne Dienstein            November 8, 1995  CPUC - 95
         415-703-2423                   (Res. W-3947 and W-3945)

       CITIES COLLECT FRANCHISE FEES THROUGH UTILITY BILLS

    The California Public Utilities Commission today approved San
Jose Water Company's request to track in a special account a two
percent franchise fee it must collect for the City of San Jose,
and authorized Great Oaks Water Company to add a two percent
surcharge to its San Jose customers' bills, also to be forwarded
to the City of San Jose.
    Some cities charge utilities a franchise fee for installing
water facilities in public streets.  In this case, San Jose's two
percent franchise fee on water revenues is not money which will
go to either San Jose Water or Great Oaks Water.  The utilities
simply collect the fee from customers monthly as part of their
bills and forward the money to the City.  Any change in rates or
services must be approved by the Commission, and because state
law authorizes cities to levy franchise fees, the Commission must
approve utility collection of the fees for the City.
    San Jose Water is preparing to file a suit to overturn the
City's ability to levy the fee.  San Jose Water claims it has a
constitutional franchise dating from 1891 and that the City of
San Jose can not legally impose any new franchise or new
franchise fees. In the interim, with Commission approval, it will
not collect the fee from customers but will instead record the
amount in a special account pending the outcome of litigation.
    Because Great Oaks Water began operating after the City of
San Jose was incorporated, it cannot claim constitutional
franchise protection from this fee.  It, therefore, will collect
the fee from its 18,600 San Jose customers for the City.  The
monthly bill for an average customer with a 3/4-inch meter will
increase 57 cents from $28.69 to 29.26.
                               ###