VII. Other Matters
A. Environmental Review
The Commission's staff has determined that the transfer of control proposed by applicants constitutes "a project" under the California Environmental Quality Act (CEQA), Pub. Resources Code § 21000 et seq. However, since it can be seen with certainty that no significant effect on the environment could result from our granting the authorization, the proposed project itself qualifies for an exemption from CEQA pursuant to § 15061(b)(3) of the CEQA guidelines. Therefore, no further Commission environmental review is required.
B. Pub. Util. Code § 704 Does Not Bar This Transaction
At the first prehearing conference, the ALJ requested that the applicants and any other interested parties address how Pub. Util. Code § 704 applies to this transaction.27 Applicants do not believe § 704 bars this transaction, whereas Thousand Oaks does. The other parties are silent on this issue.
Section 171 of the California Corporations Code defines a "foreign corporation" as "any corporation other than a domestic corporation," and § 167 of that same code defines a "domestic corporation" as a "corporation formed under the laws of this State." Within the meaning of these statutes, Cal-Am is a domestic corporation, while its parent American, as well as Thames and RWE, are foreign corporations that are not qualified to conduct business in California. RWE, Thames, and American do not propose to conduct any utility business in California as a result of this transaction.28
In D.99-06-049, 1999 Cal. PUC LEXIS 421, the Commission approved a transaction where Scottish Power, a company incorporated in Scotland, acquired ownership of PacifiCorp. The transaction in PacifiCorp, similar to the one at issue in this proceeding, involved a change in control of the utility at the holding company level. The Scottish Power/PacifiCorp transaction did not involve a transfer of a certificate or utility property, and PacifiCorp, a corporation providing electric utility service in five states, including California, would continue to operate its electric utility property in California. In D.99-06-049, the Commission considered § 704 and found that the statute was not a bar to the Commission approving the transaction.
The transaction at issue in this application also involves a change of control at the holding company level, and Cal-Am will continue to provide water utility service in parts of California. No certificate or utility property is being transferred. Similar to our conclusion in the PacifiCorp matter, we find § 704 does not bar this transaction.29
27 Pub. Util. Code § 704 states: "Except as otherwise provided in this section, no foreign corporation, other than those which by compliance with the laws of this State are entitled to transact a public utility business within this State, shall henceforth transact within this State any public utility business, nor shall any foreign corporation which is at present lawfully transacting business within this State henceforth transact within this State any public utility business of a character different from that which it is at present authorized by its charter or articles of incorporation to transact. No license, permit, or franchise to own, control, operate, or manage any public utility business or any part or incident thereof shall be henceforth granted or transferred, directly or indirectly, to any foreign corporation which is not at present lawfully transacting within this State a public utility business of like character. "Foreign corporations engaging in commerce with foreign nations or commerce among the several states may transact within this State such commerce and intrastate commerce of a like character; provided, however, that no such foreign corporation shall be permitted to engage in interstate commerce within this State until it shall have first complied with the laws of this State respecting foreign corporations. Any foreign corporation which complies with the laws of this State respecting foreign corporations, and which owns at least 90 percent of the outstanding capital stock of any other foreign corporation transacting a public utility business in this State, may succeed to the public utility business, franchises, and rights of such latter corporation and, thereafter continue and carry on such public utility business." 28 A subsidiary of American, the Service Company, is a Delaware Corporation qualified to conduct business in California. 29 The Commission has also held that the fact that the capital stock of a domestic corporation is wholly owned by a foreign corporation does not prevent the Commission from authorizing the domestic corporation to engage in public utility business. (See Application of Southern Pacific Motor Transport Co. for a Certificate of Public Convenience and Necessity (1928) 32 CRC 331, 335-336.) American has owned Cal-Am for a number of years, and American is a foreign corporation within the meaning of § 704, and is not qualified to conduct business in California. RWE and Thames Holdings are no different than American in this respect.
