2. Background
Southern California Edison Company (SCE) has requested a Commission order, pursuant to Pub. Util. Code § 851, authorizing it to lease to the County of Los Angles (L.A. County) certain optical fibers along existing routes and additional routes being constructed in SCE's service territory.1 L.A. County will use the optical fibers involved in this application as part of its telecommunications network.
The leasing arrangements are set forth in the Fiber Use Agreement Between Southern California Edison Company and L.A. County, dated May 11, 2010 (Agreement).2 Under the terms of the Agreement, SCE will provision certain optical fibers along a cable route within Southern California in a point-to-point configuration. SCE will utilize existing fiber optic cables when excess capacity is available.3 For those portions of the routes that do not have existing capacity, SCE will install new fiber optic cables, perfect land use rights, and construct any necessary facilities at shareholders' expense.4 SCE will own, operate, and maintain the entire fiber optic cable. L.A. County's use of the fibers is contingent upon Commission approval, as is construction of additional fiber optic cable, under the Agreement. Upon completion of the installation and approval of this application, SCE will assign certain fibers along each route to L.A. County, and will grant an exclusive lease for L.A. County's use.
It is unclear if all of the rights-of-way on which the fiber optics will be located include grants of a right to construct or lease facilities for use by a third party.5 SCE and L.A. County will assess the rights and acquire additional rights as necessary. To the extent additional rights are obtained by SCE, they will be shareholder funded. The Agreement does not include the right to enter the property upon which the SCE fibers are located, except at the L.A. County facilities. SCE will be responsible for the construction and maintenance of the cable and its electronics, while L.A. County will be responsible for the construction and maintenance of its equipment.
L.A. County and SCE have negotiated an arrangement in which L.A. County will make an initial, non-refundable payment of $195,000. L.A. County will also make monthly payments of $7,988, beginning after the Commission approves the Agreement and L.A. County has accepted the fiber. L.A. County will be responsible for all taxes resulting from its installation activities, and will keep SCE's facilities free from all liens and encumbrances.
This arrangement will enable SCE to generate additional revenues from the commercial use of its temporarily-available capacity, and will provide a financial benefit to ratepayers.6 SCE will retain title to all of the fiber optic cables installed under the terms of the Agreement, and will be free to find uses for the remaining fibers in the network ring, thereby expanding its ability to utilize temporarily-available utility capacity.7
The Agreement will generate revenues of $674,280 over its initial term, and the lease of these resources will have no impact on SCE's ability to serve its customers. To the extent that use of these facilities becomes necessary to conduct electric utility operations, SCE will either renegotiate with L.A. County regarding the use of the relevant fibers or expand the existing capacity at no cost to ratepayers. All costs associated with the project will be paid by SCE's shareholders, and will not be included in electric utility rates.
1 L.A. County is a political subdivision of the State of California.
2 A complete copy of the Agreement is included as an Attachment to our Order. Certain sensitive information, which we are ordering to be filed under seal, has been redacted in the public copy.
3 The following cities are traversed by the portions of SCE's existing fiber system (where there will be no new construction) subject to lease to L.A. County under the Agreement: Alhambra, Montebello, Monterey Park, Paramount, Rosemead, City of Commerce, Bell Gardens, and Long Beach.
4 Construction of the new fiber optic cables will take place in the following cities, contingent upon Commission approval and all necessary local permitting: Alhambra, Rancho Cucamonga, San Bernardino, Riverside, and Lake Forest.
5 No new rights-of-way and only one new easement is required for this project. The easement is from L.A. County for the property at 9300 Imperial County in the City of Downey.
6 The Application states that this benefit is without risk to ratepayers, and we have identified none.
7 Given more recent concerns about "improving utilization of infrastructure" and maximizing the use of existing "dark fiber," (see, e.g., National Broadband Plan, at § 6.1 and Recommendation 11.16), we are concerned that contractual limitations on the City's use of the leased fiber, such as found in Section 26(c) of the attached agreement, might be inimical to the widespread availability of broadband service and prevent anchor community organizations from using the fiber leased by the County. Thus, our approval of this lease should not be read as approval of such conditions on a general or going-forward basis.
