3. The Proposed Transaction
Toro is a Class D public utility that is wholly-owned by Alisal Water Corporation (Alisal) and regulated by the Commission. In 2002, the U.S. District Court for the Northern District of California found that Alisal had continuously failed to provide its customers with healthful drinking water in compliance with the Safe Drinking Water Act and that there was an imminent potential of future violations. Consequently, the District Court appointed John Richardson as Receiver to assume management of Alisal's small water systems, including Toro, and to assess the feasibility of selling the water systems to one or more water purveyors. In an order issued on April 13, 2004, the Receiver was directed to sell Toro to CalAm Water for $408,000.
The Asset Acquisition Agreement (Agreement) between CalAm Water and Receiver involves the sale and conveyance of approximately 2.58 acres of land, along with all easements and other real property rights, and water system assets of Toro. CalAm Water would be acquiring Toro "as is" and will not assume any of the Receiver's or Toro's liabilities, debts, or obligations that exist prior to the closing date of the transaction.
Pub. Util. Code § 851 provides that no public utility "shall . . . sell ... the whole or any part of . . . property necessary or useful in the performance of its duties to the public, . . . without first having secured from the Commission an order authorizing it to do so." In determining whether to approve an application filed under § 851, the Commission's primary consideration is whether the proposed transaction is in the public interest.
In reviewing a Section 851 application, the Commission may "take such action, as a condition to the transfer, as the public interest may require."1 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.2
In its application, CalAm Water states that the proposed acquisition would benefit Toro customers in numerous ways. First, CalAm Water commits to make the necessary capital expenditures to bring the Toro system into full compliance with all DHS water quality standards, including construction of an arsenic treatment facility. Further, by combining Toro with the Monterey District, ratepayers would benefit from reduced operating and maintenance costs, operational efficiencies and economies of scale. Finally, CalAm Water indicated that Toro customers would have access to CalAm Water's resources in the existing Monterey District, including a bacteriological laboratory.
CalAm Water states that the proposed purchase of Toro is not an activity subject to the California Environmental Quality Act (CEQA), as it will not result in a direct or reasonably foreseeable indirect physical change in the environment. We agree. CEQA Guidelines Section 15060(c)2) notes that "[a]n activity is not subject to CEQA if . . . [t]he activity will not result in a direct or reasonably foreseeable indirect physical change in the environment."3 CalAm Water is not seeking to change the existing uses of the property, but rather to transfer ownership of the property and to continue operating Toro as a water company.
During the October 10th PHC, CalAm Water confirmed that Toro would have its own separate rate schedule and that any request to consolidate Toro with the rest of the Monterey District will be made in a subsequent application. CalAm Water also indicated that the issues concerning transfer of property by Alisal Water Corporation identified in its application have been resolved. Finally, the Receiver informed the assigned ALJ that the receivership shall be concluding shortly, and requests that the Commission act expeditiously to resolve this matter.
1 D.3320, 10 CRRC 56, 63.
2 D.00-07-010, 7 Cal. P.U.C. 3d 148, 151.
3 14 Cal. Code Regs. § 15060, subd. (c)(2).
