MADRAS – State officials violated Oregon law when they decided to regulate Crooked River Ranch Water Co. in April, company attorneys charged on Tuesday, in a hearing on the company’s request to reverse the state’s decision.

The hearing was held to determine whether the state Public Utilities Commission would take control of the sole water provider on the 4,000-person subdivision in southern Jefferson County. The hearing took place in a room at the Jefferson County Senior Center in Madras packed with about 60 people.

If the utility commission’s decision is upheld, it will have authority to approve rate increases and respond to customer complaints.

Though the PUC claims the company has been under its jurisdiction since April, it has taken no regulatory action since the appeal was filed.

State Administrative Law Judge Michael Grant didn’t issue a decision during the hearing. A decision is likely sometime after the Oct. 3 deadline to file final briefs in the case.

For years, the water company has divided the ranch, which is the largest unincorporated subdivision in Oregon. An informational meeting on the utilities commission’s powers earlier this year drew more than 300 people, state officials said.

The company’s opponents have sought regulation as a way to open the water provider to outside scrutiny. They’ve argued that company board members have changed the company’s charter to keep themselves in power, have mismanaged the company’s finances and are under the sway of General Manager J.R. Rooks.

Clashes between company officials and members have led to numerous complaints to the Jefferson County Sheriff’s Office and a criminal investigation of the company by the state Department of Justice and Jefferson County District Attorney Peter Deuel, which is still ongoing.

Under PUC rules, 20 percent of a private utility’s members must sign a petition for the state to assert regulatory authority, said Mike Dougherty, program manager of corporate analysis and water regulation for the agency.

Although nearly 400 customers signed petitions calling for the utility commission to assert jurisdiction over the water company, those signatures were invalid because they didn’t include phone numbers, as state law requires, said water com-pany attorney Tim Gassner.

”You don’t follow your own rules,” said Rooks to commission staff.

State officials denied the company’s charges. Out of 603 petition signatures the commission received, staff members accepted 397, said utilities commission analyst Kathy Miller.

The rest were duplicates, from people who did not receive water service or otherwise invalid. Opponents needed signatures from 312 of the roughly 1,500 members to trigger state jurisdiction.

Commission staff checked petition signatures against the water company’s billing list and confirmed 100 of the signatures by phone. Only one of the 100 people called didn’t remember signing the petition, Miller said.

The other major issue in Tuesday’s hearing concerned what kind of entity the water company was when opponents filed their petitions in February.

In April, the utilities commission began regulating the com-pany, after opponents collected signatures from more than 20 percent of members. But in July, the water company dissolved and reincorporated as the Crooked River Ranch Water Cooperative.

State officials said the move was illegal because the company was under the utilities commission’s jurisdiction at the time and the change was a ploy to escape state regulation.

”One could suspect that the efforts to form a cooperative may be to avoid the commission regulation petitioned by (the water company’s) customers,” Dougherty testified, in an earlier commission filing.

As a cooperative, state law doesn’t allow the utilities commission to regulate the water com-pany, Dougherty said. As a mutual benefit corporation – a nonprofit company similar to a homeowners’ association – the commission can regulate the company.

In the public utilities commission’s decision on the 2003 request to regulate the water company, the commission found that Crooked River Ranch Water Co. was a ”mutual-benefit corporation.” There are about 300 small water companies in Oregon that operate as homeowners associations and are normally outside the commission’s authority, state officials said.

In testimony Tuesday, Rooks denied that the company changed its status to evade regulation.

”We were going to do it for years, we just finally got around to it,” he said.