3. Discussion

Section 851 provides that no public utility "shall . . . encumber 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." Since the proposed easement would be an encumbrance on PG&E property, we must apply Section 851 in considering this application.⁷

The primary question for the Commission in Section 851 proceedings is whether the proposed transaction is adverse to 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."⁸ 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.⁹

We find that PG&E's conveyance of the proposed easements to CPN will serve the public interest. PG&E's conveyance of the easements to CPN will facilitate CPN's inspection and cleaning of its pipeline and will provide an additional interconnection to the SRGS pipeline, thereby improving gas service reliability for DEC and Los Medanos. The terms of the proposed easement agreement between PG&E and CPN are reasonable and appear not to subject PG&E to undue potential liability that could affect PGE's ability to provide utility service to the public. Moreover, the proposed easements will not interfere with PG&E's use of the property or with service to PG&E customers, and will be utilized in a manner consistent with Commission requirements.

We are concerned that the proposed easement agreement would permit CPN to assign, transfer, convey or mortgage the easement without Commission approval. However, we will address this concern by requiring CPN to give advance notice to PG&E of any such action and will require PG&E to apply for Commission authorization pursuant to Section 851 for any proposed assignment, transfer, conveyance or mortgage of the easement by CPN that would alter the terms of the existing easement.

We also approve of the proposed ratemaking treatment for the compensation that CPN will pay to PG&E for the easement. Since this land is part of PG&E's electric transmission property, it is appropriate for revenues from the easement to be credited according to applicable FERC orders and requirements.