The Proposed Agreement Between SCE and RVSA
Under the Agreement, RVSA may exercise its option to lease the site upon Commission approval of this application, so long as the following conditions are met: 1) RVSA has obtained SCE's approval of the plans and working drawings for the site, 2) RVSA has provided SCE with evidence of adequate insurance coverage, and 3) RVSA has obtained all necessary permits and authorizations from other governmental agencies having jurisdiction over the project. The Agreement includes the proposed lease terms.
The Agreement permits RVSA to use the property for the construction, development, and operation of the boat and recreational vehicle storage facility, or, with SCE's written consent, for any other lawful purpose consistent with SCE's operation of its power lines and other facilities. SCE may not unreasonably withhold its consent to the use of the site for other than a boat and recreational vehicle facility. Under the Agreement, SCE may also lease parts of the site to third parties for the placement of billboards and for cell sites, in locations to be mutually agreed upon by SCE and RVSA. RVSA may not unreasonably withhold its approval of proposed locations for billboards and cell sites.
The initial term of the proposed lease is 20 years, and the lease may be renewed for one additional 10-year term. For the first 20 years of the lease, RVSA is required to pay an annual total of the following amounts to SCE as base rent:
Year 1 of the Lease Term $ 76,596.00
Year 2 of the Lease Term $ 153,180.00
Years 3-7 of the Lease Term $ 229,776.00
Years 8-12 of the Lease Term $ 252,756.00
Years 13-17 of the Lease Term $ 278,028.00
Years 18-20 of the Lease Term $ 305,832.00
The rent may be adjusted if RVSA chooses to exercise its right to extend the lease for an additional ten years. SCE may also adjust the base rent as a condition of permitting RVSA to sublet the property to a third party.
SCE is responsible for all real property taxes assessed against the site by the State Board of Equalization. RVSA has agreed to pay all personal property taxes, general and special assessments, and other charges levied or assessed against the site, RVSA's improvements on the site, the leasehold or subleasehold estate, or RVSA's personal property. However, RVSA is not responsible for payment of any taxes assessed against SCE's equipment or improvements on the site.
RVSA acknowledges that SCE has the power of eminent domain and may at any time condemn the property if it is needed for utility purposes.
Under the Agreement, RVSA must use the property in a manner that does not interfere with SCE's use of its power lines and equipment and that complies with legal and regulatory requirements. RVSA must also maintain the property and improvements in good condition and use the property safely. SCE has reserved the right to enter the property as necessary to inspect, maintain, and clean its electrical facilities, or to protect the electrical facilities in an emergency.
SCE must approve the plans and specifications for any facilities that RVSA wishes to construct on the site. RVSA shall own any improvements that it constructs on the property during the lease term, but RVSA's interest in the improvements shall end upon the expiration or termination of the lease. SCE may require RVSA to remove its facilities from the site upon the expiration or earlier termination of the lease. During the lease term, RVSA may not remove any improvements from the site or waste, destroy, or modify any improvements, except as permitted by the lease.
Unless otherwise approved by SCE in writing, RVSA may not use the area directly under SCE's towers and must maintain the following minimum clearances between its equipment and facilities and SCE's facilities on the site:
a) 50 feet from all tower legs, and b) 10 feet from all steel poles, wood poles, and anchors. RVSA, its employees, agents, and contractors must also maintain a minimum clearance of 27 feet between any of their equipment used on or adjacent to the site and SCE's overhead electrical conductors.
RVSA will give SCE access to all of SCE's facilities on the site and will not interfere with the free movement of SCE's equipment and property over the property. RVSA must provide and maintain access roads that are at least 16 feet wide and are capable of supporting a gross load of 40 tons on a three-axle vehicle.
RVSA may not use the property for any purpose which SCE deems to be a fire or other safety hazard. Further, RVSA may not use or store gasoline or petroleum products (except for fuel stored in the tank of an operable vehicle), or manufacture or store flammable materials or explosives on the property.
RVSA also may not use, permit, create, store or allow hazardous substances on the property. Under the Agreement, RVSA is responsible for the entire cost of removal of any hazardous substances placed on the site during the lease term, but not for any hazardous materials placed on the site before the lease term.
The Agreement states that, except as otherwise disclosed by SCE to RVSA, SCE does not know, or have reasonable cause to believe, that any release of hazardous substances exists on or beneath the site. RVSA has the right to inspect the property, review relevant SCE documents, and analyze the soil and ground water to determine if hazardous materials exist on the site before exercising its option to lease.
Similarly, SCE has advised RVSA that high frequency electric and magnetic fields may possibly cause health hazards.
In the Agreement, RVSA acknowledges that any structures it constructs on the property will be in close proximity to one or more high voltage (66 kilovolt or higher) electric transmission lines or substation facilities. RVSA's structures may therefore be susceptible to induced voltages, static voltages or related electrical fault conditions (induced voltages) that create a health and safety risk, unless appropriate grounding or other mitigation measures are incorporated into the structures. RVSA has agreed to assume responsibility for identifying what, if any, mitigation measures are needed to reduce this risk and for implementing these measures at its own expense.
RVSA has agreed to indemnify and defend SCE from any claims or liability connected with or arising from any cause in, on, or about the site, except for claims which are caused by SCE's negligence or willful misconduct, or which arise from SCE's entry onto the property in connection with the use and operation of SCE's facilities. RVSA has also specifically agreed to indemnify and defend SCE from any claims arising from or connected to induced voltages on the site and from any claims arising from or connected with the use, storage, release, disposal or other presence of hazardous materials on, under, in, or about the site, unless these actions have been caused by SCE. In order to further protect SCE from liability, RVSA is required to provide SCE with evidence of adequate insurance coverage before executing the Agreement or entering the property.
By entering into the lease and occupying the site, RVSA is deemed to have acknowledged that the site is in good and leasable condition and to have accepted the property on an "as is" basis.
The Agreement generally permits RVSA to assign, transfer, encumber, or sublease the lease, without the prior consent of the Commission, but with SCE's approval, which may not be unreasonably withheld. However, under
Section 10.1 of the Agreement, RVSA has an absolute right to transfer, convey, encumber or sublease the lease to a "permitted transferee," without obtaining SCE's consent.
A "permitted transferee" is defined as either:
a. A person or entity whose net worth on the date of the transfer is, in the reasonable judgment of SCE, adequate to permit the transferee to perform all of the obligations under the lease or sublease; or
b. An affiliate transferee, which may be either:
1) any individual that controls, is controlled by, or is under common control with RVSA;
2) another entity resulting from the merger or consolidation of RVSA; or
3) any successor to all or substantially all of RVSA's business or assets, unless the assignment would otherwise be prohibited by the provisions of the Agreement related to bankruptcy.3
Under the Agreement, RVSA must give SCE reasonable notice of the proposed transfer, conveyance, encumbrance, or sublease and must pay SCE $500 as compensation for SCE's costs in investigating the proposed transferee. The transfer or other proposed action becomes effective within 30 days after RVSA gives notice to SCE, unless, within this time, SCE has notified RVSA of a valid objection that the proposed transferee is not a "permitted transferee."
After the transfer, conveyance, encumbrance, or sublease has been implemented, RVSA has no further obligations to SCE under the lease.
RVSA also has the right to mortgage its interest in the lease, provided that the mortgagee is subject all of the covenants, conditions, and restrictions stated in the Agreement and is required to honor them. RVSA must give SCE prior notice of the mortgage. SCE and RVSA may not amend the Agreement without the written consent of any existing mortgagee.
Any disputes between the parties that cannot be resolved through good faith negotiations will be subject to arbitration.
2.2. Environmental Review
The California Environmental Quality Act (CEQA)4 applies to discretionary projects to be carried out or approved by public agencies. A basic purpose of CEQA is to "inform governmental decision-makers and the public about the potential significant environmental effects of the proposed activities."5 Since the Commission must act on this application and issue a discretionary decision without which the project cannot proceed, the Commission must act as either a Lead Agency or Responsible Agency under CEQA.
The City is the Lead Agency for CEQA review of RVSA's proposed construction and operation of a recreational vehicle and boat storage facility on the site (the project). The Commission is a Responsible Agency for the project. CEQA requires the Commission to consider the Lead Agency's environmental documents and findings before acting upon or approving the project.6 SCE's application includes the following environmental documents prepared by City for the project:
· Notice of Determination for the project, dated October 28, 2008;
· Mitigated Negative Declaration for the project, with environmental checklist and Mitigation Monitoring and Reporting Plan, dated October 28, 2008;
· City Planning Commission Resolution No. PC-08-066, dated October 28, 2008, in which the Planning Commission: 1) Approved and adopted the Mitigated Negative Declaration and Mitigation Monitoring and Reporting Program for the project, and 2) Approved the application for a determination of use for the project;
· City Planning Commission Resolution No. PC-08-067, dated October 28, 2008, in which the Planning Commission: 1) Approved and adopted the Mitigated Negative Declaration and Mitigation Monitoring and Reporting Program for the project; and 2) Approved a development plan for the project;
· City Planning Commission Resolution No. PC-08-068, in which the Planning Commission: 1) Approved and adopted the Mitigated Negative Declaration and Mitigation Monitoring and Reporting Program prepared for the project; and 2) granted a conditional use permit for the project.
The City's Mitigated Negative Declaration found that, without appropriate mitigation, the project could cause the following adverse environmental impacts:
· Short-term air quality impacts resulting from construction-related activities, such as excavation and paving, machinery and equipment emissions, and vehicle emissions from construction employees;
· Impacts on soil and geological resources;
· Potential impacts on the western burrowing owl, which has been designated as a species of special concern by the California Department of Fish and Game.
The Mitigated Negative Declaration noted that the project is located within a soil erosion control area, as described in the City's General Plan Final Environmental Impact Report, because, from September to April, the area is subject to strong winds, which blow sand and dust and create erosion problems.
In addition, according to the Mitigated Negative Declaration, the site provides potential habitat for the western burrowing owl. As part of the
Lead Agency's environmental review, a survey of the site was conducted, and no burrowing owls were found. However, since the burrowing owl is a transient species, mitigation measures are needed to prevent potentially significant adverse impacts on the owl.
City's Mitigation Monitoring and Reporting Plan for the project designates and requires mitigation measures which reduce these impacts to less than significant.7
We have reviewed the City's environmental documents and find them adequate for our decision-making purposes. We also find that the City reasonably concluded that the project, as mitigated, will not have significant adverse impacts on the environment and that the mitigation measures required by City are reasonable.
Accordingly, we adopt the City's environmental documents, including the Mitigated Negative Declaration and Mitigation Monitoring and Reporting Plan, for the purposes of our approval of the project.
2.3. Ratemaking Considerations
SCE proposes to treat revenue from the proposed lease as Other Operating Revenue (OOR). This treatment of lease revenues easement is unopposed.
On January 30, 1998, SCE filed Advice Letter 1286-E, which sets forth categories of non-tariffed products and services offered for sale by SCE and describes the products and services within each category. This advice filing was made pursuant to Rule VII.F of the Affiliate Transaction Rules contained in Appendix A of Decision (D.) 97-12-088. Attachment B to Advice Letter 1286-E identified the Secondary Use of Transmission Right of Ways and Land and the Secondary Use of Distribution Right of Ways, Land, Facilities and Substations as categories of existing non-tariffed products and services.
In D.99-09-070, the Commission adopted a gross revenue sharing mechanism for certain of SCE's OORs. The adopted gross revenue sharing mechanism applies to OOR, except for revenues that: (1) derive from tariffs, fees or charges established by the Commission or Federal Energy Regulatory Commission, (2) are subject to other established ratemaking procedures or mechanisms, or (3) are subject to the Demand-Side Management Balancing Account. Under the gross revenue sharing mechanism, all applicable gross revenues recorded from non-tariffed products and services subject to the mechanism will be split between shareholders and ratepayers after the Commission-adopted annual threshold level of OOR has been set. For those
non-tariffed products and services deemed "active" by the Commission, revenues in excess of the annual threshold will be split between shareholders and ratepayers on a 90%/10% basis. For those non-tariffed products and services deemed "passive" by the Commission, the revenues in excess of the annual threshold will be split between shareholders and ratepayers on a 70%/30% basis.8
SCE products or services offered under the Secondary Use of Transmission Right of Ways and Land and the Secondary Use of Distribution Right of Ways, Land, Facilities and Substations have been deemed "passive" for revenue sharing purposes. Therefore, here, the proposed lease with RVSA would be treated as "passive," so that any lease revenues which exceed the annual threshold would be allocated between shareholders and ratepayers on a 70%/30% basis.
3 Under Article XIV of the Agreement, the filing of a voluntary or involuntary bankruptcy petition by or against RVSA, or a petition for reorganization or dissolution on account of or to prevent bankruptcy is a default by RVSA, unless the action is permanently stayed, dismissed, vacated, or terminated within 60 days after the filing or initial event. In the event of a default, SCE may take any of the following actions:
1) terminate the lease; 2) reoccupy the site and lease the property and improvements to another party; 3) use RVSA's personal property and fixtures for its own purposes without compensating RVSA; 4) keep the lease in effect and bring legal actions against RVSA for the payment of rent; 5) collect damages from RVSA.
4 Public Resources Code Sections 21000, et seq.
5 Title 14 of the California Code of Regulations (hereafter, CEQA Guidelines),
Section 15002.
6 CEQA Guidelines Section 15050(b). The specific activities that must be conducted by a Responsible Agency are contained in CEQA Guidelines Section 15096.
7 The Mitigation Monitoring Program includes the following mitigation measures to address the following impacts:
A. Air Quality
1) Use of dust control techniques during clearing, grading, and construction.
2) Minimization of construction interference with regional non-project traffic movement.
3) Other measures to reduce dust after clearing, grading, or earth moving.
4) Emissions control from on-site equipment through a routine, mandatory program of low-emission tune-ups.
B. Geology and Soils
1) RVSA shall develop and submit an erosion control plan to reduce wind erosion impacts.
2) Fugitive dust shall be controlled by regular watering, paving of construction roads, and other dust-preventive measures.
3) Dust control measures shall be utilized after clearing, grading, or earth moving.
4) RVSA shall obtain a National Pollutant Discharge Elimination System permit authorizing the discharge of storm water.
C. Biological Resources (Burrowing Owls)
1) Thirty to ninety days before any ground-disturbing construction activities occur, a qualified biologist shall conduct a focused survey for the burrowing owl on the site.
2) If the burrowing owl is present, occupied burrows shall not be disturbed during nesting season unless a qualified biologist verifies through non-invasive methods that either: a) the birds have not begun egg-laying and incubation or b) young birds from the occupied burrows are foraging independently and are capable of independent survival.
3) If the owls must be removed from the area, passive relocation techniques shall be utilized.
8 Under the settlement approved in D.99-09-070, an existing product or service is classified as "active" if it involves a total incremental shareholder investment of $225,000 or more, either on a one-time basis or within a 12-month period. An existing product or service is classified as "passive" if it involves a total incremental shareholder investment of less than $225,000. "Incremental shareholder investment" includes capital-related costs and expenses. Capital-related costs, labor and other expenses properly charged to the utility shall not be included in calculating the
$225,000 threshold.
Each new category of products or services is presumed to be "passive." To reclassify an existing product or service as "active," or a new product or service as "active," SCE must file an advice letter which shows that the product or service involves incremental shareholder investment of at least $225,000 either on a one-time basis or within a
12-month period. SCE may file only up to four advice letters per year for this purpose. If no protests to the advice letter are filed, the change in classification becomes effective on the 31st day after the filing of the advice letter.
