4. Discussion

Section 851 of the Public Utilities Code specifies that Commission approval is necessary before a utility may dispose of or encumber property necessary or useful in the performance of its duties to the public. At the same time, Section 851 expressly excludes this requirement for the sale of property that is not necessary or useful. In pertinent part, Section 851 states:

"No public utility...shall sell, lease, assign, mortgage, or otherwise dispose of or encumber the whole or any part of its railroad, street railroad, line, plant, system, or other property necessary or useful in the performance of its duties to the public...without first having secured from the commission an order authorizing it so to do. Every such sale, lease, assignment, mortgage, disposition, encumbrance, merger, or consolidation made other than in accordance with the order of the commission authorizing it is void....

"Nothing in this section shall prevent the sale, lease, encumbrance or other disposition by any public utility of property which is not necessary or useful in the performance of its duties to the public, and any disposition of property by a public utility shall be conclusively presumed to be of property which is not useful or necessary in the performance of its duties to the public, as to any purchaser, lessee or encumbrancer dealing with such property in good faith for value...." (Emphasis added.)

Pacific has stated that the 40x140-foot strip of land at issue is not used by Pacific for any purpose and has not been used by Pacific since the time it was acquired as part of a much larger parcel in 1965. Pacific's assertion that it has no plans to use the strip of land in utility operations in the future is uncontested. Pacific therefore maintains that the strip of land is not necessary or useful to Pacific in the performance of its duties to the public, and Commission approval is not required for Pacific to dispose of it. (See, e.g., In re PG&E coal property (1982) 10 CPUC2d 647.)

In response to questions from our Telecommunications Division, Pacific on December 11, 2001, provided additional information regarding the accounting and ratemaking treatment given to the parcel of land and the 40x140-foot strip that is part of that parcel.

According to Pacific, the entire parcel, including the 40x140-foot strip, was included in ratebase, booked to Operating Account 2001, Telephone Plant in Service. On July 11, 2001, internal instructions were issued to remove the 40x140-foot strip from ratebase. On August 13, 2001, an accounting journal entry was made to remove the strip of land from above-the-line ratebase and to place it in below-the-line Non-Operating Account 2006. The quitclaim deed transferring ownership of the strip of land was executed on August 31, 2001, and recorded with the Mendocino County Clerk-Recorder on October 2, 2001.

Pacific states that any gain resulting from the transfer of ownership of the 40-x140-foot strip of land will benefit ratepayers and will be treated in accordance with Commission directions on gain on sale of land as set forth in Decision (D.) 92-05-002, 55 CPUC2d 1, 61 at Ordering Paragraph 7, and 65.

The additional information provided by Pacific demonstrates that the property in question was at one time necessary and useful in the provision of utility service. Pacific's accounting journal entry transferring the 40x140-foot strip of property from the above-the-line land account (2001) to the below-the-line non-operating account (2006) established that the strip of land was no longer necessary and useful for utility operations. Consequently, under Section 851, approval by the Commission of the sale of such property is not required. Further inquiry into the propriety of the contract is a matter for the courts and not for this Commission. (Hanlon v. Eshleman (1915) 169 Cal. 200.) Since the complaint fails to state a cause of action for which relief can be granted by this Commission, the complaint should be, and is, dismissed.

The scope of this proceeding is set forth in the complainant and answer. We confirm Administrative Law judge (ALJ) Walker as the presiding officer, and we find that no hearing is necessary.