III. Discussion
Section 851 provides that no public utility shall sell, lease, mortgage, or otherwise encumber the whole or any part of property necessary or useful in the performance of its duties to the public, without first having obtained Commission approval.7
The primary question for the Commission in Section 851 proceedings is whether the proposed transaction is in the public interest. The public interest is served when utility property is used for other productive purposes without interfering with the utility's operation or affecting service to utility customers.8 In reviewing a Section 851 application, the Commission may "take such action, as a condition to the transfer, as the public interest may require."9
We find that SCE's proposed lease with RHC is in the public interest. SCE's entry into the lease with RHC will generate substantial OOR for the benefit of ratepayers and will permit the productive use of the site, without interfering with SCE's existing transmission and substation facilities. The terms of the agreement between SCE and RHC are reasonable and do not subject SCE to an undue risk of liability that could affect SCE's ability to provide utility service to the public. The proposed lease will not interfere with SCE's use of the property or with service to SCE customers, and the property will be utilized safely and in a manner consistent with legal and regulatory requirements.
We are concerned that the agreement would permit RHC to assign, transfer, sublease or mortgage the lease, without prior Commission approval. However, the agreement does require RHC to notify SCE in advance before taking any of these actions. We will therefore address these concerns by requiring SCE to apply for Commission authorization pursuant to Section 851 for any proposed assignment, transfer, sublease or mortgage of the lease by RHC that would alter the terms of the existing agreement.
We also note that in addition to use of the site for a self-storage facility, the proposed lease would permit RHC to utilize the property for vehicle and boat storage or retail facilities or, with SCE's approval, for any other use permitted by law that would not interfere with SCE's facilities, without prior Commission approval of the change in use. However, the conditional use permit granted to RHC by the City only authorizes use of part of the property for a self-storage facility. The environmental analysis conducted by the City and the Commission addressed only the proposed use of the site for this purpose.
Therefore, in order to comply with CEQA and Section 851, if RHC wishes to utilize the property for any use other than the self-storage facility as authorized by the City in the February 11, 2005 letter from the zoning administrator in Case No. ZA 2004-5052 (ZV) (YV) (ZAA) (SPR), SCE must first apply for authorization pursuant to Section 851 and undergo any additional required environmental review. RHC must also obtain any necessary local approvals required for use of the property other than as the site for a self-storage facility.
We approve of the proposed ratemaking treatment for the compensation that RHC will pay to SCE under the lease. The treatment of this compensation as OOR and of the lease as a "passive" source of revenue for the purposes of allocation between shareholders and ratepayers is consistent with prior Commission decisions and our current policy.
7 Section 851 states in pertinent part:
No public utility...shall sell, lease, assign, mortgage, or otherwise dispose of or encumber the whole or any part of its ...property necessary or useful in the performance of its duties to the public...without first having either secured an order from the commission authorizing it to do so for qualified transactions valued above five million dollars ($5,000,000) or for qualified transactions valued at five million dollars ($5,000,000 or less, filed an advice letter and obtained a resolution from the commission authorizing it do to so. ...
8 D.00-07-010 at p. 6.
9 D.3320, 10 CRRC 56, 63.
