Discussion
Pub. Util. Code § 854 requires a company to obtain Commission authorization before it may "merge, acquire, or control...any public utility organized and doing business in this state..." The purpose of this section is to enable the Commission, before any transfer of control of a public utility is consummated, to review the situation and to take such action, as a condition of the transfer, as the public interest may require. Pub. Util. Code § 853(b) permits an exemption to this approval requirement based on a fact-specific determination of whether the proposed transaction is a transfer of control necessitating Section 854 review and approval.1
In determining whether such a change necessitates Section 854 review and approval, the Commission's fact specific, case-by-case assessment may consider a variety of factors, including: whether the anticipated change in direct control would affect the day-to-day operations or management of the public utility;2 whether the acquiring entity has the ability to direct management and the policies of the utility; and the impact of the change on the public interest.3
Here, the transition from COP to Phillips 66 Company will produce no change in the day-to-day operations or management of CPPL. Existing employees with working control over the utility will continue in their roles after the CP repositioning process is completed. While Phillips 66 Company will be financially robust and fully capable of supporting CPPL's continued operations as Phillips 66 Pipeline LLC, it will play no greater role in the day-to-day affairs of CPPL than has COP. Thus, the substitution of Phillips 66 Company for COP as CPPL's immediate corporate parent represents the type of change in legal control, as opposed to actual control, to which the Commission has declined to apply Section 854, particularly where other jurisdictional bases exist to protect the public interest.4 Nor will the contemplated transfer of CPPL to Phillips 66 Company negatively affect the quality of service provided to the public. Indeed, as shown in the application, the vast majority of the barrels transported by CPPL are owned by its affiliate COP. The CP repositioning process will not change these circumstances; most barrels transported by Phillips 66 Pipeline LLC will be owned by its affiliate, Phillips 66 Company. In addition, CPPL's current terms and conditions of intrastate service will remain in place and the Commission will retain regulatory authority over CPPL. Similarly, no repositioning-related rate changes are anticipated to the rates currently on file with the Commission, and any future intrastate rate changes proposed would remain subject to Commission review and approval. No change, alteration or sale of the CPPL pipeline infrastructure and related physical plant is anticipated. Only ministerial changes to CPPL's tariff are planned to facilitate a change in corporate form to a limited liability company and name change to Phillips 66 Pipeline LLC. Thus, the rates, day-to-day operations and management of CPPL will remain unchanged as a result of the Proposed Transfers, and the public interest will not be affected. The Commission will continue to oversee CPPL's rates, terms and conditions of service in the same manner and to the same extent as it does today. Under these circumstances, the contemplated change in CPPL's immediate corporate parent does not warrant Section 854 review.
A similar analysis applies to the contemplated change in CPPL's ultimate parent. As described earlier, the CP repositioning process will culminate in the public spin-off of a new holding company, Phillips 66, from CP through the distribution of 100% of Phillips 66 common stock to existing CP shareholders. The Commission previously has concluded that this type of corporate reorganization does not warrant Section 854 review.5 Since neither the change of immediate parent nor the change of ultimate parent requires Section 854 approval, we will grant the application for an exemption under Section 853(b) subject to the terms and conditions set out below.
This is an uncontested matter in which the decision grants the relief requested. Accordingly, pursuant to Pub. Util. Code § 311(g)(2), the otherwise applicable 30-day period for public review and comment is waived.
1 Compare PG&E, Decision (D) 96-11-017, 69 CPUC2d 167, 183-84, 1996 Cal. PUC LEXIS 1141 at *13-14 (citing D.95-05-021, 59 CPUC2d 697, 1995 Cal. PUC LEXIS 440, at *2-3 (1995)) (relying on provisions of Section 854(a) to determine that 854 approval not required); D.08-12-021, 2008 Cal. PUC LEXIS 469, at *14-15 (2008) (noting that the Commission has no "bright line" test for determining when a transfer of control subject to Section 854 has occurred).
2 See D.92-05-006, 44 CPUC2d 197, 1992 Cal. PUC LEXIS 487 at *4 (1992) (finding that a public stock offering did not constitute a change in control under Section 854 because operations and senior management remained unchanged).
3 See D.08-12-021, 2008 Cal. PUC LEXIS 469 at *23-24 (2008) (at *16 (citing D.96-02-061, 65 CPUC2d 8 (1996)) (adopting a threshold public interest inquiry to determine if the proposed change in control had any public policy implications regardless of whether the then-existing management remained intact).
4 See D.95-05-021, (SDG&E Interim Decision), 59 CPUC2d 697, 1995 Cal. PUC LEXIS 440 at *4-5(1995)(finding a change in legal control from existing shareholders of a public utility to a newly created immediate parent company does not constitute a change in actual control subject to Section 854 review); D.96-11-017, 69 CPUC2d167, 1996 Cal. PUC LEXIS 1141 (same).
5 See e.g., D.93-11-063, 52 CPUC2d 127, 1993 Cal. PUC LEXIS 794 at *7 (1993) (finding Section 854 inapplicable to the proposed transaction and dismissing the application); D.92-05-006, 44 CPUC2d 197, 1992 Cal.PUC LEXIS 487 (1992) (same); D.93-11-011, 51 CPUC2d 728, 1993 Cal. PUC LEXIS 850 (1993) (Section 854 approval not required for spin-off transaction so long as certain conditions are met).
