The draft decision of Commissioner Chong in this matter was mailed to the parties in accordance with Pub. Util. Code § 311(g)(1) and Rule 77.7 of the Commission's Rules of Practice and Procedure. Comments were filed on March 2, 2006 by CCTA, CARE, Coalition of California Utility Employees (CUE), Current, DisabRA, DRA and TURN (jointly), Greenlining, PG&E, SDG&E, SCE, Time Warner Telecom, and UCAN. Reply comments were filed on March 7, 2006 by AT&T; Current; DRA, TURN and DisabRA (jointly); Greenlining; PG&E; SDG&E, and TURN (individually). SCE filed a joinder in the reply comments of PG&E.
In response to the comments, we have made several clarifications, corrections and changes to the draft decision. SCE points out that the Draft Decision failed to recognize its small BPL pilot program. (SCE Opening Comments on Draft Decision, p. 2.) We corrected the decision accordingly.
Multiple parties commented on our choice of affiliate transaction rules. DRA and Time Warner Telecom argue that the Energy Affiliate Transaction Rules are more appropriate than the Affiliate Reporting Requirements, because BPL can support energy-related functions. (DRA Opening Comments on Draft Decision, pp. 10-11; Time Warner Telecom Opening Comments on Draft Decision, pp. 2-4.) PG&E also repeats its argument that the Energy Affiliate Transaction Rules are easier to implement than the Affiliate Reporting Requirements. (PG&E Opening Comments on Draft Decision, pp. 2-3.) AT&T disagrees with DRA, PG&E, and Time Warner and supports the conclusion reached in the Draft Decision. (AT&T Reply Comments on Draft Decision, p. 3.) SDG&E notes that in the past the Commission has found that the Affiliate Reporting Requirements effectively protect against improper transactions. (SDG&E Opening Comments on Draft Decision, pp. 9-14.) We do not change our conclusion regarding affiliate transaction rules, but have revised the discussion to clarify our reasoning.
TURN expresses a concern that SDG&E will use its advanced metering proposal to subsidize BPL for the benefit of a BPL affiliate. (TURN Reply Comments on Draft Decision, pp. 4-5.) We clarify in this decision that a utility shall not make rate base investments in BPL if the BPL will be used for commercial broadband deployment. However, a utility may invest in assets that make use of a BPL system provided that the investments can be justified on the basis of utility benefits. Furthermore, any utility proposal to invest in assets that make use of a BPL system for the purposes of advanced metering must receive the necessary approvals through the appropriate advanced metering proceeding.
Multiple parties commented on access fees too. Current and SDG&E argue that utilities should not be permitted to charge access fees beyond the cost-based pole attachment fees. Current contends that such fees disadvantage BPL companies relative to their competitors and points out that the electric utilities have already recovered the cost of their wires through rates. (Current Opening Comments on Draft Decision, pp. 2-5.) SDG&E highlights the danger that such fees could be subject to prudence review by the Commission, and that this regulatory risk would discourage a utility from negotiating terms that a BPL company finds reasonable. (SDG&E Opening Comments on Draft Decision, pp. 6-7.) AT&T disagrees with SDG&E and Current. It argues that allowing for negotiated access fees will best support BPL deployment. (AT&T Reply Comments on Draft Decision, pp. 1-3.) We have changed our discussion of access fees based on the comments.
CUE requests that we clarify that the Commission does not intend to preempt State law regarding electrical safety. (CUE Opening Comments on Draft Decision, p. 5.) We provide that clarification in the decision.
CCTA repeats its prior argument that the ROW Order must be amended so that electric utilities follow the same requirements as telephone utilities. (CCTA Opening Comments on Draft Decision, pp. 2-4.) We have clarified the language in the decision to make it clear that the issue raised by CCTA concerns us, but modifying the ROW Order falls outside the scope of this proceeding.
Current requests that the decision not require all utilities to adopt SDG&E's methodology for calculating underground attachments fees. (Current Opening Comments on Draft Decision, p. 6.) We find Current's request to be reasonable and modify the decision accordingly.
CCTA argues that the Draft Decision errs, because it grants utility transactions with BPL providers an exemption from the requirements of § 851 under § 853(b). According to CCTA, all broadband providers must be given identical treatment. It reasons that if BPL providers get a § 853(b) exemption from § 851 for the use of electric utility property, so must cable and telecommunications providers. (CCTA Opening Comments on Draft Decision, pp. 4-7.)
CCTA conflates non-discriminatory treatment with identical treatment. BPL differs significantly from other broadband systems in a number of ways, including its uses existing power lines. BPL's use of power lines means that installation of BPL generally will have a significantly lower environmental impact than installation of new fiber optic cables.
CCTA's claim that: "the Commission has found that the construction of wireline facilities, like BPL, attaching to utility poles are exempt from CEQA" (Id., p. 7) is misleading.52 New wireline facilities, such as fiber optic cables, are frequently installed underground in existing utility rights-of-way. Trenching for fiber optic installation in existing utility rights-of-way can result in disturbance of cultural heritage sites, and boring or directional drilling can result in pollution of waterways due to "frac-outs" of drilling fluid.53 BPL, however, does not appear to have the potential to have these types of impacts.
Even in the case of above-ground poles, BPL has less environmental impact than other wireline forms of broadband service. Fiber optic cables must be physically strung-requiring trucks, equipment, supplies, and workers to follow the existing power lines, which may cross waterways, wetlands, and other sensitive habitats. This level of intrusion is not required for BPL. Thus, with respect to environmental issues, it is reasonable to provide a reduced level of scrutiny for installation of BPL compared to installation of new wireline facilities.
SDG&E, in its Reply Comments, points out additional differences between BPL and existing technologies. The manner in which equipment is installed and operated on utility facilities is a particularly important difference. (Id., p. 2, fn. 3.)
DRA and TURN, filing joint Comments, object to the granting of an exemption to a § 851 review. They argue, among other things, that the § 853(b) is unjustified and inconsistent with past precedent. In particular, they argue that alternative advice letter processes would be timely, and such review would not discourage investment. They also maintain that the opportunity offered by BPL is not "extraordinary" and that the grant of exemption from § 851 should not be made so "categorically." (Id., pp. 4-5.)
We do not find the arguments of DRA and TURN to be compelling. The Commission is more familiar with the operations of our regulatory processes than parties, and we know well the uncertainties that it can impose. With respect to the argument of DRA and TURN concerning the use of "extraordinary," they themselves admit that the Commission need not make a finding of extraordinary to invoke § 853(b). Finally, we note that § 853(b) permits the Commission to grant an exemption to "any public utility or class of public utility from this article." Thus, our exemption is explicitly permitted under the statutory language, for we are exempting this class of utility from one particular type of § 851 review.
PG&E notes that the Draft Decision's discussion of CEQA is unnecessarily restrictive. (PG&E Opening Comments on Draft Decision, p. 2.) We have made changes to the decision in this regard.
DisabRA requested further clarifications related to a utility or BPL company's obligations to ensure right-of-way accessibility. (DisabRA Opening Comments on Draft Decision, pp. 2-3.) We believe this issue was already adequately addressed in the Draft Decision.
CARE requests that the Commission require CEQA review for individual BPL projects to investigate whether BPL would have detrimental health effects. We believe that the Draft Decision sufficiently addresses this issue by noting that the FCC and related federal health agencies exercise jurisdiction in this area.
In addition to revisions made in response to comments, we have made other minor corrections and clarifications to the draft decision.
Findings of Fact
1. BPL systems use electric power lines to carry high-speed data signals to neighborhoods.
2. BPL data transmit at a much higher frequency than electricity, so the BPL signal can occupy the electric wires without interfering with electric transmission.
3. A variety of BPL technologies have developed to avoid the potential for the power delivery system interfering with the BPL signal.
4. BPL has the potential to provide many benefits, including increased broadband competition, additional access to broadband, and cost savings to electric customers through "smart grid" applications.
5. The FCC October 14, 2004 Report and Order on BPL encouraged "rapid development of all broadband technologies, including BPL."
6. The NARUC BPL Task Force in a February 2005 report encouraged states to tailor appropriate regulatory roadmaps for the implementation of BPL.
7. An EPRI BPL White Paper notes regulatory action or inaction could have a significant impact on the business case of BPL.
8. Three small BPL pilot projects are ongoing in California.
9. In a landlord-tenant model for BPL, an energy utility acts as the landlord by allowing a third party to install and operate a BPL system on the utility's facilities.
10. Under the landlord-tenant model, a utility and a third-party BPL provider negotiate a contractual arrangement in which the BPL provider obtains access to the utility infrastructure.
11. The Commission has chosen to allow regulated utilities to have unregulated affiliates subject to affiliate transaction rules.
12. The Commission will have the opportunity to review utility investments in assets that make use of a BPL system in General Rate Cases and in relevant proceedings
13. The rules adopted by the Commission in D.93-02-019 are rules governing the reporting of transactions between electric, gas, and telephone utilities and their affiliates.
14. The Commission found in D.94-02-046 that application of the affiliate reporting requirements in D.93-02-019 will enable the Commission to exercise significant oversight over transactions between a utility and BPL affiliate.
15. The safety and reliability of the electric delivery system is a principal concern of the Commission.
16. BPL poses unique safety issues since it is attached directly to energized electric wires.
17. Utilities must determine whether BPL equipment can be installed on their system and the manner in which it will be installed and operated.
18. Electric utilities are required to comply with the rules, requirements, and standards promulgated by the Commission's General Order (GO) 95, which applies to the construction of overhead lines, and GO 128, which applies to the construction of underground electric supply and communication systems.
19. In D.98-10-058, Appendix A, the Commission has established rules governing access to public utility rights of way and support structures by telecommunications carriers and cable TV companies.
20. The ROW Order describes the methodology for determining fees for pole attachments.
21. An essential element of the ROW Order is the requirement that a utility not discriminate in its fees for pole attachments.
22. Shareholders and third parties will not assume the risks of pursuing BPL deployment without some expectation of rewards.
23. Electrical equipment problems, unrelated to BPL, may be identified in the process of installing a BPL system.
24. Pub. Util. Code § 851 protects the quality of utility service provided to ratepayers and protects ratepayers' investment in utility assets.
25. A lengthy § 851 proceeding would be inconsistent with our stated policy goal of not impeding in the rapid deployment of BPL technology.
26. A § 851 review is not necessary in the public interest.
27. The plain language of § 853(b) does not limit its application to extraordinary circumstances.
28. The Commission has granted a number of § 853(b) exemptions without any finding of extraordinary circumstances. In the following cases, the granting of an § 853(b) exemption results from a policy determination from this Commission: D.05-07-039, D.05-06-016, D.04-03-020, D.02-10-008, D.05-10-013, D.02-01-055, and D.04-07-021.
29. The public interest is best served by rapid deployment of BPL technologies, rather than by a lengthy review process of individual BPL-related transactions
30. Section 853(b) provides that in granting an exemption from § 851 the Commission may prescribe terms and conditions and establish rules or impose requirements on that exemption.
31. CEQA Guidelines 15301 grants a categorical exemption for the minor alteration of and additions to existing facilities of utilities and additions to exiting structures, the exact situation that we will have as California deploys broadband over power lines.
32. If appropriate alternatives are present, there is no need to require filing of an advice letter for approval of utility/BPL contracts.
33. The FCC, as the agency that authorizes and licenses transmitters and facilities that generate radio frequency radiation, has addressed the potential biological effects of radiofrequency electromagnetic fields through technical bulletins.
Conclusions of Law
1. It is reasonable to authorize an electric utility to allow an unaffiliated third party to own and operate a BPL system on its electric delivery system.
2. It is reasonable to authorize an electric utility to allow a utility affiliate to own and operate a BPL system on its electric delivery system.
3. A utility should not make rate base investments in BPL if the BPL will be used for commercial broadband deployment.
4. A utility may invest in assets that make use of a BPL system provided that the investments can be justified on the basis of utility benefits.
5. A utility may purchase services from a BPL company provided that the costs can be justified by utility benefits.
6. Any purchases of services from a BPL affiliate would be subject to affiliate transaction rules.
7. The affiliate reporting requirements adopted by the Commission in D.93-02-019 should be applied to transactions between an electric utility and BPL affiliate.
8. Transactions between an electric utility and BPL affiliate should not be subject to the Commission's existing Energy Affiliate Transaction Rules adopted in D.97-12-088, modified by D.98-08-035, and further clarified by D.98-11-027.
9. We do not intend to preempt any State law regarding electrical safety.
10. A BPL company attaching equipment to an electric utility's pole should pay the established pole attachment fee.
11. It is reasonable to allow utilities the option of assessing 1) only pole attachment fees on BPL companies, or 2) access or lease fees in addition to pole attachment fees, on BPL companies, under the terms discussed in this decision.
12. A revenue-sharing mechanism for allocation of revenues received by a utility from a BPL provider should provide shareholders a strong incentive to pursue BPL projects while also providing direct financial benefits to ratepayers.
13. It is reasonable to apply the revenue-sharing mechanism for new non-tariffed products and services adopted in D.99-04-021.
14. The Commission should not at this time adopt rules requiring entities that acquire BPL rights on a utility system to begin implementing BPL service within a certain period of time. However, if it is clear that a utility has entered into a contract with a BPL provider with the intent to prevent BPL deployment we will take appropriate action. Furthermore, if a utility has entered into a contract with a BPL company to deploy a BPL system and no deployment has commenced within seven years, we will entertain a proceeding to examine the underlying circumstances of the deployment failure and take corrective action, if necessary.
15. Pursuant to Pub. Util. Code § 853(b), it is reasonable to exempt BPL projects and transactions from Pub. Util. Code § 851 because a § 851 review is not necessary in the public interest.
16. Under Pub. Util. Code § 853(b), it is lawful for the Commission to subject BPL projects to specific conditions, even when exempted from Pub. Util. Code § 851.
17. As a result of the use of § 853(b) exemption, this Commission will not be reviewing individual BPL transactions and the Commission's requirement of a CEQA review is not triggered.
18. CEQA guideline 15301 grants a categorical exemption to those limited BPL transactions where equipment is installed in or on existing utility structures as long as all the BPL-related construction and installation is performed consistently with any and all applicable existing environmental mitigation measures, particularly those measures applicable to the utility infrastructure on which it is constructed or installed.
19. It is reasonable to require parties to file an application seeking Commission approval of any transaction that does not qualify for a categorical exemption from CEQA.
20. No sale of utility assets with respect to a BPL transaction should be permitted under this § 853(b) exception.
21. Since it is important for this Commission to have notice of the existence of a BPL contract and its general terms, we will require utilities to provide the Telecommunications Division Director and Energy Division Director, notice of any lease or other financial arrangement with a BPL company, including the name of that company, the nature of the services to be provided, the date entered, and the applicable categorical exemption citation.
22. To the extent that a utility or BPL provider needs to access existing facilities, the responsible companies should be required to maintain rights of way or alternative paths of travel that are accessible for people with disabilities.
23. This Commission may not regulate the placement, construction, and modification of personal wireless service facilities on the basis of the environmental effects of radio frequency emissions to the extent that such facilities comply with the FCC's regulations concerning such emissions.
IT IS ORDERED that:
1. It is the policy of this Commission to encourage development and competition in the broadband market by providing regulatory certainty to companies seeking to provide broadband over power lines (BPL) in California.
2. Any electric utility regulated by the California Public Utilities Commission (CPUC) is authorized to enter into contracts that would allow an unaffiliated third party to own and operate a BPL system on its electric delivery system.
3. Any electric utility regulated by the CPUC is authorized to enter into contracts that would allow an affiliated company to own and operate a BPL system on its electric delivery system.
4. Electric utilities are prohibited from making rate base investments in BPL if the BPL will be used for commercial broadband deployment. A utility may invest in assets that make use of a BPL system provided that the investments can be justified on the basis of utility benefits. A utility may purchase services from a BPL company provided that the costs can be justified by utility benefits.
5. Transactions between an electric utility and BPL affiliate shall at all times be subject to the Commission's affiliate reporting requirements in Decision (D.) 93-02-019 as modified by any subsequent Commission decisions. Transactions between an electric utility and BPL affiliate, other than a BPL affiliate's payment of pole attachment fees, are subject to a standard of fair market value. When reporting affiliate transactions pursuant to D.93-02-019, utilities shall report the methodology used to calculate fair market value.
6. Utilities shall ensure that their compliance with the Commission's General Order (GO) 95 and GO 128 and their setting and application of additional safeguards and conditions is performed in a competitively neutral manner with respect to other communications and information providers who seek similar access. If in the course of implementing BPL projects utilities identify a need to revise applicable Commission rules or General Orders, the utilities are encouraged to request appropriate relief from the Commission.
7. An electric utility may opt to charge a BPL company the established pole attachment fee, or assess lease or access fees in addition to the established pole attachment fee, under the conditions discussed in this decision.
8. Any access or lease fees that an electric utility receives from a BPL company are subject to a 50/50 shareholder/ratepayer after-tax net revenue sharing mechanism, as adopted in D.99-04-021.
9. A BPL company attaching equipment to a surface transformer enclosure owned by San Diego Gas & Electric Company (SDG&E) is required to pay an attachment fee of $11.20 per year per attachment. Other utilities requiring such a rate should submit an advice letter using a cost-based methodology consistent with D.98-10-058, Appendix A and similar to that described in SDG&E's Opening Comments, Appendix A.
10. Costs directly related to the repair and maintenance of existing electrical equipment for the purposes of electric service reliability shall be allocated to electricity operations, while costs directly related to BPL installation or operation shall be allocated to the BPL operator.
11. Pursuant to Pub. Util. Code § 853(b), we exempt from the requirements of Pub. Util. Code § 851 all BPL transactions except for transactions involving the sale of utility assets. Transactions subject to this exemption may only be accomplished by the use or modification of "existing facilities," such as the use of existing electrical underground or overhead lines, or the placement of couplers, load monitoring devices, and equipment on existing poles or in existing buildings. BPL equipment must be installed consistent with any and all applicable existing environmental mitigation measures, particularly those measures applicable to the utility infrastructure on which the BPL equipment is constructed or installed. Parties are required to file an application seeking Commission approval of any transaction that does not qualify for a categorical exemption from California Environmental Quality Act (CEQA). The Commission will conduct a CEQA review, and based on that review and a public interest finding, will either approve or reject the proposed transaction.
12. Utilities shall provide the Telecommunications Division Director and Energy Division Director notice of any lease or other financial arrangement with a BPL company, including the name of that company, the nature of the services to be provided, the date entered, and the applicable categorical exemption citation.
13. To the extent that a utility or a BPL company needs to access existing facilities, whether underground or above ground, the responsible companies are directed to maintain rights of way or alternative paths of travel that are accessible for people with disabilities.
14. Californians for Renewable Energy's March 6, 2006 motion is denied in accordance with the previous discussion.
15. All rulings issued in this proceeding are hereby affirmed.
16. Rulemaking 05-09-006 is closed.
This order is effective today.
Dated April 27, 2006, at San Francisco, California.
MICHAEL R. PEEVEY
DIAN M. GRUENEICH
JOHN A. BOHN
RACHELLE B. CHONG
I reserve the right to file a dissent.
/s/ GEOFREY B. BROWN
Dissent of Commissioner Geoffrey F. Brown
On BPL OIR
Our decision makes a determination that should have been left to the legislature. In our haste to encourage a new technology, this Commission has overstepped its authority and created a permanent market imbalance in the broadband market. By today's decision, we subsidize in perpetuity Broadband Over Powerlines (BPL) technology over all other modes of broadband in the competitive market.
It is the market that should be deciding the winners and losers in broadband technology, not regulators. Our decision effectively picks a winner by creating the mechanism by which parent company shareholders maximize profits by getting the regulated utility to subsidize the unregulated BPL venture.
Moreover, by abusing the Public Utilities Code § 853 exemption to avoid our legally-mandated § 851 review of asset transfer, this Commission has prevented a proper calculation of the value of the affiliate's permanent free ride on top of a subsidized network that we have enabled.
This subsidized entity, the BPL affiliate, will be competing against a cable industry that is not rate-regulated, a wireless industry that is not rate-regulated, and a telecommunications industry that is rapidly moving away from rate regulation.
Finally, whatever concerns this Commission may have about preventing anti-competitive action in the broadband market are effectively mooted, given that this decision authorized the permanent transfer of Investor Owned Utility assets to an unregulated affiliate at a non-Commission approved price. What is particularly galling is that if the assets turns out to be worth the billions of dollars that many predict, the utility ratepayers can never get it (or even a part of it) back.
This Commission, in overstepping its bounds and acting as if we were the legislature, has injured both electricity market ratepayers and the broadband market.
Certainty of expectations in the marketplace is a desirable thing, except where the only certainty is permanently distorted market. This decision creates just that.
Dated April 27, 2006, at San Francisco, California.
/s/GEOFFREY F. BROWN
Geoffrey F. Brown
52 CCTA also provides no citation for this claim.
53 See D.02-08-063.