8. Public Interest

Pub. Util. Code § 851 requires that a public utility obtain Commission approval before it may sell or otherwise dispose of property necessary or useful in the performance of its duties to the public. Pub. Util. Code § 854 requires approval for a change of control of the utility. The purpose of these sections is to enable the Commission, before any sale of a public utility or its property is consummated, to review the transaction and to take such action as a condition of transfer, as the public interest may require.²⁷

8.1. SEC's and Pacific Terminals' Position

The Applicants listed multiple benefits as a result of the proposed sale. They are as follows:

· SCE's creditworthiness will be improved by selling a valuable asset no longer needed for core electric utility functions.

· SCE's ratepayers will have decommissioning funds returned to them.

· The gain-on-sale from the Station Facilities will be allocated to the ratepayers.

· Further collection of operating costs and depreciation expense from the ratepayers will terminate.

· SCE's ratepayers will be relieved from environmental responsibilities associated with the ownership of the Fuel Oil Pipeline Facilities.

· The new owner, Pacific Terminals, is an affiliate of a recognized and qualified pipeline operator. In addition, Pacific Terminals states that as a part of Pacific Energy Group, which owns a number of profitable midstream crude oil companies, including PPS LLC, a pipeline company that is subject to the Commission's jurisdiction, it has considerable experience in managing midstream crude oil assets.

· Pacific Terminals states that it has the financial ability that SCE doesn't to make necessary improvements to the system. Due to financial constraints experienced over the past two years and which continue, SCE has suspended and deferred certain improvements to the FOP Facilities, which customers have requested and which would improve safety. Pacific Terminals claims that it is committed to undertake these modifications.

8.2. CUE's Position

Cue states that the public interest would best be served in this instance if the Commission denied the application. CUE believes that the Applicants have not demonstrated that the proposed sale would meet any of the following public interest factors:

· the proposed sale will preserve or enhance competition;

· the proposed sale will maintain or improve the quality of management of the resulting utility;

· the proposed sale will be fair and reasonable to affected employees;

· the proposed sale will preserve or enhance the environment; and

· the proposed sale provides for mitigation measures to prevent significant adverse consequences that may result.

CUE believes that approving the sale will not preserve or enhance competition, just the opposite. (See Section 9 Discussion on Market Power).

CUE does not believe the proposed sale would maintain or improve the quality of management with the new owner, Pacific Terminals. CUE cites from its exhibit, Ex 302, a EPTC presentation to Commissioner Wood in July 2001, and notes SCE has invested millions of dollars in transforming the system from a fuel oil backup service for generating stations to a third-party black oil storage and transport service, that as a result of SCE's management, EPTC "is a strategically positioned oil and storage and transportation asset in Southern California for meeting oil refinery needs," a "state-of-the-art dispatch system," an "exceptionally well-maintained pipeline," a "highly experienced work force," and steadily is increasing revenues. CUE cites other statistics from Ex. 302 in support of its position.

In support of its position that the quality of "new" management of the pipeline facilities will not be of the quality of SCE, CUE cites a newspaper article in the New York Times, which was submitted as a late-filed exhibit. This article, while not addressing Pacific Terminals or its energy affiliates, was critical of the energy affiliates' majority owner, the Anschutz Corporation, relative to its telecommunications dealings. CUE states that it is not citing the article for the truth of its statements but rather to show the Commission that significant questions remain regarding the Anschutz companies that have not been addressed by the Applicants.

CUE also notes that one of the affiliate telecommunications companies, was fined in 2001 for proceeding with construction of a right-of-way without receiving the proper authorization or conducting the required environmental review. CUE believes the record should be re-opened to ask the Applicants to provide witnesses to address CUE's concerns.

CUE does not believe that the sale would be fair and reasonable to affected employees. (See Section 9 Discussion.) CUE also does not believe that the sale will preserve or enhance the environment and provide for mitigation measures to prevent significant adverse consequences. (See Section 6 Discussion.)

Finally, CUE believes that SCE's ratemaking proposals are not in the public interest. (See Section 7 Discussion.) In conclusion, CUE believes that sale would not preserve or enhance competition, improve the management of the resulting utility, be fair or reasonable to affected employees, or protect the environment, and therefore, the sale is adverse to the public interest.

8.3. Discussion

We conclude that this sale is in the public interest. We agree with the Applicants that the creditworthliness of SCE can only be enhanced with the sale of the FOP Facilities, whether it receives all of the gain-on-sale or shares some benefits with the ratepayers. Ratepayers will benefit through the return of the decommissioning costs of some $28.7 million as well as all the gain-on-sale from the sale of the Station Facilities; ratepayers will be relieved of the operating and maintenance, depreciation and administrative costs associated the FOP Facilities, as well as the necessity of any future environmental concerns, as that will become the responsibility of Pacific Terminals.

We note that the Applicants responded in their briefs to the CUE attempt to argue that the proposed sale should be rejected because it will not maintain or improve the quality of management of the EPTC system. CUE seems to base this conclusion on a single newspaper article purporting to discuss financial misdealings among the executives of telecommunications firms including Qwest Communications (Qwest). We are not allowing this article into the record and we place little or no value to it. As Applicants note, the article is unsubstantiated and inadmissible hearsay. The article bears no relevance to any material issue in the case now before us.

As to the quality of management, Pacific Terminals notes that the President of the company, Irvin Toole, Jr. has over 35 years of experience in the oil pipeline industry. (Exhibit No. 100, pp. 1-2.) Pacific Terminals has a management team that averages over 20 years of experience in pipelines and terminals, with several of its senior managers having considerably more that 20 years of operating experience in the black oil terminating sector. We are satisfied that Pacific Terminals will provide much more than capable management for its customers. We have addressed environmental issues and the impact on EPTC employees in Sections 6 and 10 respectively.