3. Discussion

3.1 Public Interest and Adoption of Master Agreement

Section 851 provides that no public utility "shall sell, lease, assign, mortgage, or otherwise dispose of or encumber the whole or any part of . . . property necessary or useful in the performance of its duties to the public, . . . without first having secured from the commission an order authorizing it to do so." In reviewing Section 851 applications, the Commission historically looked to public interest as its guiding post. While the minimal standard we consider in our review is that the transaction being proposed in a particular application is "not adverse to the public interest", we do foster and encourage transactions such as the one being proposed by PG&E here where the transaction is also "in the public interest."

Here, the revenue PG&E could receive in site license fees is estimated at approximately $1.3 million for the ten (10) year period with Lamar of this Master Agreement plus renewals depending on how many site licenses are entered and how early in the Master Agreement period they can be finalized.  In turn, PG&E will allocate those financial proceeds in accordance with this decision which will result in direct and immediate positive value for ratepayers in all instances. In addition, there are no changes to PG&E's ratebase as a result of the proposed transaction. The proposed outdoor advertising signboard uses permitted through site licenses under the Master Agreement allow a compatible productive use of utility property without interfering with utility operations or the provision of utility services to the public.

In support of its application, PG&E also filed a valuation analysis to serve as the basis for the estimated revenue which will result from the Master Agreement. The analysis was performed for PG&E by SignValue, Inc., an independent full-service valuation and advisory services firm specializing in valuation of outdoor advertising commonly referred to as billboards. (See Attachment 2 to application.)

Although the analysis represents only five particular signs based on a limited set of site information and assumptions, it does suggest that individual site licenses can be expected to yield license fees at or above-but never below-fair market value for such uses of real property. Accordingly, we believe the Master Agreement sets forth terms and conditions that will ensure the license or rental fees paid to PG&E will yield reasonable future site license proceeds. All such license fees or rents represent a benefit to PG&E's ratepayers.

Based on the foregoing, the Commission finds that PG&E's proposed Master Agreement provides benefits for the PG&E ratepayers and would serve the public interest. The proposed Master Agreement also effectively ensures that Lamar's use of PG&E's properties not interfere with and be compatible with the utility's use of such properties, and will not interfere with service to PG&E customers. We therefore find that PG&E's proposed Master Agreement meet and exceed the minimum legal standard that its proposal not be adverse to the public interest. It is in the public interest.

3.2 Expedited Commission Review Process

PG&E's request for adoption of an expedited review and approval process must be considered in light of existing statutory requirements and procedures as well as the goal of achieving decision-making processes which are efficient, transparent, and simple. Having balanced these considerations, PG&E's request for approval of an expedited Commission review process for its future site-specific Section 851 filings is denied, as discussed below.

Both independently and in response to 2006 statutory amendments to Section 851, the Commission is and has been proactively engaged in efforts to streamline the Section 851 review process.¹⁰ On August 23, 2007, the Commission adopted Resolution ALJ-202 (extending and modifying the Section 851 pilot process previously established in Resolution ALJ-186, adopted August 25, 2005) which sets forth a pilot expedited Section 851 review process. That process designed specifically to "expedite and simplify" the Commission's Section 851 review process, where possible.

Under Section 851, as amended, and Resolution ALJ-202, an advice letter process under Commission's GO 96-B is available to any Section 851 applicant when the proposed transaction involves property valued at or below $5 million and the Commission is neither a responsible nor a lead agency under CEQA. The rationale for the ALJ-202 pilot program was to expedite and simplify the Commission's review and approval of non-controversial Section 851 transactions involving the transfer or conveyance of interests in utility property that did not require environmental review by the Commission under CEQA, and did not warrant more extensive review by the Commission through the formal application process.

In Resolution ALJ-202, we examined the Section 851 proceedings, and we balanced the public interest served by expediency in those proceedings against the Commission's statutory responsibilities when fulfilling its role as lead or responsible agency during the CEQA review process. Specifically, Section 853(d) provides:

...It is the further intent of the Legislature that the commission maintain all of its oversight and review responsibilities subject to the California Environmental Quality Act, and that public utility transactions that jurisdictionally trigger a review under the act should not qualify for expedited advice letter treatment pursuant to this article. [Emphasis added.]

In applying the direction under Section 853(d), Resolution ALJ-202 concluded:

... if a transaction involving the transfer or disposition of utility property requires the Commission to conduct environmental review as either a Lead Agency or a Responsible Agency[ ] under CEQA, the advice letter process does not apply, and the utility must file a formal Section 851 application to seek our approval of the transaction.[]  We believe that a formal application is required when the Commission is acting as either the Lead Agency or as a Responsible Agency, because even as a Responsible Agency, the Commission has significant duties under CEQA to review and address the environmental impacts of the project. [Citations omitted.] [Emphasis added.]

The Commission also determined in Resolution ALJ-202 that, based upon comments received in response to the pilot program and the Commission's "continued experience with the pilot program," the Commission may revisit and further modify that expedited Section 851 review process. That ALJ-202 pilot program is currently under way and the pilot period will not end for at least another year.

Here, PG&E's proposed expedited review and approval is problematic. For example, PG&E's preferred advice letter approach under Category 2 directly conflicts with the procedural requirement for an application under Section 853(d) and Resolution ALJ-202 when the Commission is acting as a responsible agency under CEQA.

In addition, the proposed timelines for advice letter approval under PG&E's Categories 1 and 2 filings would further expedite the existing process under Section 851 and the ALJ-202 pilot program. Under Section 851 and Resolution ALJ-202, the Commission must approve or deny uncontested and complete advice letters within 120 days. PG&E's proposal here would shorten that already expedited review timeframe to 45 days (up to 90 days when protests are filed). Here, PG&E asks the Commission to create yet another subset of expedited review processes which are inconsistent with already expedited pilot processes set forth and being actively carried out by the Commission under ALJ-202 pilot program. Such second subset of expedited processes creates confusion, rather than simplification which is the goal of Section 851 and Resolution ALJ-202.

Finally, because the ALJ-202 pilot program is still underway and the pilot program experiences are yet to be fully examined, we find it premature to set an even more ambitious review timelines at this juncture.

PG&E argues its proposal promotes further efficiency and will allow PG&E to consummate the individual signboard agreements with Lamar in a more timely fashion than PG&E would be able to under the current Commission process. In its application, PG&E explains that the signboard market is fast-paced, time-sensitive and competitive. PG&E therefore contends timely Commission review and finalization of the signboard site licenses are essential for PG&E to stay competitive and profitable in that market where its competitors may have alternative available site, not subject to the Commission's Section 851 review process. Commission staff therefore should remain mindful of these concerns and avoid all undue delays to expedite the Section 851 reviews whenever possible. However, the timeframes we implement must also be practicable and allow sufficient time for a thorough and meaningful review. We are therefore hesitant to adopt an even more ambitious review timeline here because we find that complying with our obligations under CEQA should not be artificially constrained by unrealistic expedited deadlines.

Based on the foregoing, PG&E's request for approval of its proposed further expedited review process for its future site-specific Section 851 filings under the Master Agreement is denied. In instances where an application is not required, PG&E should seek expedited advice letter review consistent with Section 851 and Resolution ALJ-202. Consistent with Section 851, as amended, and Resolution ALJ-202, we direct and expect staff will undertake whatever steps are necessary to avoid undue delays and we encourage all practicable improvements towards efficiency in review process.

¹⁰ After our adoption of Resolution ALJ-186, in August 2005, the Legislature adopted Assembly Bill (AB) 736 (Stats 2005, ch. 370, section 1), effective January 1, 2006, which amended Section 851. These amendments to Section 851 authorize utilities to obtain Commission approval of transactions involving transfers or disposition of property interests that are valued at $5 million or less by filing an advice letter and obtaining a Commission resolution approving the transaction, rather than filing a formal application and seeking a Commission decision. Under AB 736, utilities must continue to file formal Section 851 applications for transactions valued at over $5 million.