3. Section 854 Authority

The application seeks approval of the transfer of control to Steven R. Bryan pursuant to Pub. Util. Code § 854. Section 854 provides in pertinent part:

No person or corporation, whether or not organized under the laws of this state, shall merge, acquire, or control either directly or indirectly any public utility organized and doing business in this state without first securing authorization to do so from the commission. The commission may establish by order or rule the definitions of what constitute merger, acquisition, or control activities which are subject to the section. Any merger, acquisition, or control without that prior authorization shall be void and of no effect. No public utility organized and doing business under the laws of this state, and no subsidiary or affiliate of, or corporation holding a controlling interest in a public utility, shall aid or abet any violation of this section.

The meaning of Section 854 is clear. It was added to ensure that no acquisition or transfer can be effected without this Commission first having opportunity to consider whether the acquisition or transfer is consistent with and promotes the public interest. But equally clear is the fact that its provisions cannot be applied literally to acquisitions through inheritance.

The Legislature has recognized this conflict. After the Commission on similar reasoning approved a testamentary transfer of a small water company in 1982 (Application of Bianca Gambi (1981) 7 CPUC2d 52), the Legislature amended Section 853 of the Code to provide that the provisions of Section 854 would not apply to a transfer of ownership of a small water company from a decedent to a member of the decedent's family under the Probate Code or by will, trust, or other instrument. (See Pub. Util. Code § 853(c).)

A certificate of public convenience and necessity to operate a public utility is a right that has value. It has sufficient independent existence to be made the subject of a bequest in case of death. But the estate of an heir vests in the heir at the time of the testator's death. (Probate Code § 240.) It would be impossible for the Commission to consider in advance the bequest clauses in each certificate holder's will or trust setting up a potential bequest of an interest in a public utility, or to predict the circumstances that might exist at the time of the testator's death.

Nonetheless, the rights of inheritance and testamentary disposition are statutory and subject to legislative control, and the Legislature, in exercising its plenary power, had adopted provisions governing the descent of property in this state as set forth in the Probate Code. Here, voting control of the utility was passed to Steven R. Bryan upon the death of his father pursuant to a valid testamentary instrument. As we see it, absent evidence that any given devolution results in or creates a situation inconsistent with or adverse to the public interest, our role should be a ministerial one in passing to and affording the beneficiary substantially the same rights and privileges as were held by the predecessor. (See, Application of Bianca Gambi (1981) 7 CPUC2d 52.) Should the successor's interest appear to the Commission inconsistent with or prove adverse to the public interest, this Commission always can, after notice and hearing, cancel, revoke, or suspend the inherited interest. Of course, it is always necessary that a beneficiary make application to this Commission to obtain authorization.

Based on exhibits filed with the application, it is apparent that Steven R. Bryan is qualified to assume control of Pinnacles. He has been responsible for maintaining and upgrading the company's network since 1992. Rates, terms, and conditions of service will be unaffected. There is no indication that the transfer in any way would be inconsistent with or adverse to the public interest.

Accordingly, that part of the application pertaining to the transfer of Rex Bryan's interest in the authority to operate to Steven R. Bryan should be granted.

We also grant approval, prospectively, of the transfer of control from Steven R. Bryan to Bryan Family, Inc., a newly organized holding company with the same officers and directors that now serve Pinnacles. The transfer is not adverse to the public interest, and no rates, terms and conditions of service will be affected. Steven R. Bryan will continue to serve as president of the utility.

In Resolution ALJ 176-3039, dated May 18, 2000, the Commission preliminarily categorized this proceeding as ratesetting and preliminarily determined that hearings were not necessary. Based on the record, we conclude that a public hearing is not necessary, nor is it necessary to alter the preliminary determinations in Resolution ALJ 176-3039.

The application seeking transfer to Steven R. Bryan was filed on April 28, 2000. An amended application seeking both that transfer and the transfer to Bryan Family, Inc., was filed on August 4, 2000. No protests have been filed. Because the application is unopposed, and because our decision today grants the relief requested, the requirement for 30-day public review and comments is waived pursuant to Pub. Util. Code § 311(g)(2).