2. Background
2.1. The Parties
Southern California Edison Company (SCE) is an electric public utility organized under the laws of the State of California, which engages in the business of electric generation, transmission, and distribution. As a public utility, SCE is subject to California Public Utilities Commission (Commission) regulation.
The Flying M Ranch, LLC (Flying M) is a trailer-parking facility operator in Wilmington, California.
2.2. The Project
SCE proposes to lease to the Flying M 13.45 acres on a portion of SCE's Hinson Lighthipe Transmission right of way (Hinson Lighthipe ROW) property in Long Beach, California. SCE owns and operates transmission lines that cross the site. The Hinson Lighthipe ROW is part of SCE's 220 kilovolt (kV) system.
If the lease is approved, the Flying M may construct and operate a trailer-parking facility on the site.
SCE represents that the proposed lease will not interfere with its operation of its transmission lines and other facilities on the property or with its service to customers.
2.3. The Proposed Agreement between SCE and the Flying M
Under the option agreement signed by SCE and the Flying M on July 25, 2007 (the agreement), the Flying M may exercise its option to lease the site upon Commission approval of this application, so long as the Flying M has met certain conditions. The agreement includes the proposed lease terms.
The agreement permits the Flying M to use the property for the construction and operation of a trailer-parking facility or for other uses with SCE's consent. However, SCE must give prior consent to the Flying M's use of the site for any purpose other than as a trailer-parking facility. The agreement does not require Commission approval of any change in use of the site.
The initial term of the proposed lease is 20 years. The lease would generate a base rent of $284,064 per year in the first through third years, $312,468 in the fourth through sixth years, $343,716 in the seventh through ninth years, $378,084 in the tenth through twelfth years, $415,896 in the thirteenth through fifteenth years, $457,488 in the sixteenth through eighteenth years and $503,232 in the nineteenth and twentieth years. The base rent will also be adjusted on the renewal of each of the three renewal options based on the fair rental value of the property at that time, not to exceed a 10% increase or a decrease below the base rent otherwise payable immediately prior to the adjustment. If the Flying M uses the site for any purpose other than a trailer-parking facility, SCE may adjust the base rent to reflect the fair market value of the site for such use.
SCE is responsible for all real property taxes assessed against the site by the State Board of Equalization. The Flying M has agreed to pay all personal property taxes, general and special assessments, and other charges levied or assessed against the site, the Flying M's improvements on the site, or the Flying M's personal property. However, the Flying M is not responsible for payment of any taxes assessed against SCE's equipment or improvements on the site.
The Flying M 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, the Flying M 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. SCE has reserved the right to enter the property as necessary to inspect the property, to maintain and clean its electrical facilities, or to protect the electrical facilities in an emergency.
SCE has also reserved the right to license portions of the property to third parties for cell sites and the placement of billboards.
Under the agreement, SCE must approve the plans and specifications for any improvements that the Flying M wishes to construct on the site. The Flying M shall own any improvements that it constructs on the property during the lease term.
The Flying M must maintain the property and improvements in good condition and use the property safely.
The Flying M may not utilize the area directly under SCE's towers without SCE's written consent. The agreement requires the Flying M to maintain clearances of at least 18 feet between equipment it uses on the site and SCE's overhead electrical conductors that are less than 500 kV and at least 29 feet from all 500 kV overhead electrical conductors. Unless SCE agrees otherwise in writing, the Flying M must also maintain clearances of at least 50 feet from all tower legs and 10 feet from all steel poles, wood poles, and anchors on the site. SCE may require the Flying M to construct 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.
The Flying M also may not use, permit, create, store or allow hazardous substances on the property. Under the agreement, the Flying M 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.
SCE represents in the agreement that except as otherwise disclosed to the Flying M, SCE does not know, or have reasonable cause to believe, that any release of hazardous substances exists on or beneath the site. Under the agreement, the Flying M 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. If the Flying M enters into the lease, the Flying M is deemed to have determined that the property will safely support the type of improvements that the Flying M wishes to construct and is fit for these types of uses, and to have accepted all associated risks.
The Flying M may not use or store gasoline or petroleum products (except for fuel stored in the tank of an operable vehicle) or flammable materials on the property.
In the agreement, the Flying M acknowledges that any structures it constructs on the property will be in close proximity to one or more high voltage (66 kV or higher) electric transmission lines or substation facilities. The Flying M's structures may therefore be susceptible to induced voltages, static voltages or related electric fault conditions (induced voltages) that create a health and safety risk, unless appropriate grounding or other mitigation measures are incorporated into the structures. The Flying M has agreed to assume responsibility for identifying and implementing appropriate mitigation measures to reduce this risk at its own expense.
In addition, the Flying M shall 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 facilities. The Flying M has also specifically agreed to indemnify and defend SCE from any claims arising from or connected to induced voltages on the site. In order to further protect SCE from liability, the Flying M 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, the Flying M 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 would permit the Flying M to assign, transfer, sublease or mortgage the lease, without the prior consent of the Commission, but with SCE's approval.
Any disputes between the parties that cannot be resolved through good faith negotiations will be subject to arbitration.
2.4. Environmental Review
2.4.1. Compliance with the California Environmental Quality Act (CEQA)
CEQA3 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."4 Since the Commission must act on SCE's Section 851 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.
In Section 851 cases, the Lead Agency is generally the public entity with the greatest responsibility for supervising or approving the project as a whole.5 Other public agencies which have discretionary authority for approving or carrying out some aspect of the project that falls under their jurisdiction are Responsible Agencies under CEQA.6 The Commission is usually a Responsible Agency for projects approved pursuant to Section 851, because the local entity in which the project is located has responsibility for supervising or approving the project as a whole, and the Commission exercises narrower jurisdiction by determining whether the transaction meets the requirements of Section 851.
Here, the City of Long Beach (City) has jurisdiction to determine whether the project complies with local land use requirements and to approve or disapprove the project as a whole. If the project required any discretionary approval by City, City would be the Lead Agency under CEQA. However, on December 6, 2005, the City issued a Zoning Confirmation Letter, which states that the project meets all requirements to be located within the IM Zoning District as of right, with no discretionary City permits required. The Zoning Confirmation Letter further states that since the City need not take any discretionary action on the project, no CEQA review by the City is required.7 Therefore, City performed no environmental review of the project and did not act as the Lead Agency under CEQA.
Based on these circumstances, the Commission is the Lead Agency for the project. CEQA requires all governmental agencies to assess potential impacts to the environment whenever they make a discretionary decision on a project. Approval of the Section 851 lease application is a discretionary decision for the Commission. Therefore, the Commission is responsible for conducting environmental review of this project pursuant to CEQA and in doing so, acts as the Lead Agency.8
The Commission has prepared the following environmental documents for this project pursuant to CEQA:
· The Draft Mitigated Negative Declaration (MND), dated September 2009;
· The Final MND, dated January 2010;
· The Notice of Intent to Adopt an MND and the State Clearinghouse acknowledgement letter dated January 12, 2010; and
· The California Department of Fish and Game Certificate of Fee Exemption, dated February 17, 2010.
As required by CEQA,9 the draft MND was made available for public review and comment for 30 days, between December 7, 2009 and January 8, 2010. No comments were received.
The environmental documents are adequate for our decision-making purposes. In evaluating the project, the Final MND concluded that potential environmental impacts in the following areas were less than significant: aesthetics, agricultural resources, air quality, biological resources, hydrology and water quality, land use and planning, mineral resources, noise, population and housing, public services, recreation, transportation/traffic, and utilities and service systems.
The Final MND found potentially significant impacts that could be mitigated to less than significant levels in the following areas: cultural resources (human remains), geology and soils (seismic related ground failure including liquefaction, substantial soil erosion or loss of topsoil), and hazards and hazardous materials (hazards to public or environment through the use or release of hazardous materials).
Mitigation measures to reduce human remains impacts include the suspension of work and coroner notification. Mitigation to reduce geological impacts includes submittal of geotechnical reports to the City and the Commission. Mitigations to reduce soil impacts include submittal to the Commission of adoption of best management practices statements, storm water pollution prevention plan, and Notice of Intent filed with the Los Angeles Regional Water Quality Control Board. With respect to these potentially significant environmental impacts, we find that the required mitigation measures are feasible, and we reasonably conclude that the specified mitigation measures will either eliminate or substantially reduce the impacts to less than significant levels.
Therefore, for purposes of our project approval, we adopt and approve the MND and the mitigation monitoring plan prepared for the project.
2.5. 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 (AL) 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 AL 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 other operating revenues. 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.10
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 the Flying M 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 Public Resources Code Section 21000, et seq.
4 Title 14 of the California Code of Regulations (hereafter, CEQA Guidelines), Section 15002.
5 CEQA Guidelines, Section 15051(b).
6 CEQA Guidelines, Section 15381.
7 CEQA Guideline 15060 states in pertinent part:
(c) Once an application is deemed complete, a lead agency must first determine whether an activity is subject to CEQA before conducting an initial study. An activity is not subject to CEQA if:
(1) The activity does not involve the exercise of discretionary powers by a public agency.
8 See CEQA Guidelines 15050(a) and 15052(a)(1), which state as follows:
§ 15050. Lead Agency Concept
(a) Where a project is to be carried out or approved by more than one public agency, one public agency shall be responsible for preparing an EIR or negative declaration for the project. This agency shall be called the lead agency.
§ 15052. Shift in Lead Agency Designation
(a) Where a responsible agency is called on to grant an approval for a project subject to CEQA for which another public agency was the appropriate lead agency, the responsible agency shall assume the role of the lead agency when any of the following conditions occur:
(1) The lead agency did not prepare any environmental documents for the project, and the statute of limitations has expired for a challenge to the action of the appropriate lead agency.
9 CEQA Guideline 15073(a).
10 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 AL 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 ALs 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 AL.
