KLAJIC

Introduction

Petitioners, water users in the Santa Clarita Valley area, appeal from the judgment of the trial court denying their petition for writ of mandate. Petitioners sought to compel respondent Castaic Lake Water Agency (the Agency) to divest itself of its ownership of all of the stock of respondent Santa Clarita Water Company (the Water Company), and to comply with its own enabling statute, which limits the Agency to the wholesale distribution of water.

At issue in this appeal is the interpretation and application of Water Code section 12944.7. That section allows a wholesale water agency to. sell water at retail “only pursuant to written contract with ... a water corporation . . . subject to regulation by the Public Utilities Commission. . . .” The Agency contends that the retail sales contract it executed in connection with its purchase of the Water Company complies with section 12944.7. Petitioners contend, as the result of the Agency’s purchase of the Water Company, that the latter has become the alter ego of the Agency. Thus, they argue, the contract does not satisfy the requirements of the statute and so the Agency remains limited to selling water at…