7. Discussion
7.1. Do the Leases and Licenses Serve the
Public Interest?
Section 851 requires a utility to obtain approval from the Commission before selling, leasing or encumbering utility property that is "necessary or useful in the performance of its duties to the public...." The Commission applies the following standard in reviewing applications filed under Section 851:
The Commission reviews these transactions to ensure that the transactions will not impair the utility's ability to provide service to the public. The Commission must also ascertain whether the transactions are accounted for properly. This requires ensuring that any revenue from the transactions are accounted for correctly, and that the utility's rate base, depreciation, and other accounts accurately reflect the transactions. The Commission will also consider benefits to the utility's customers and the public from the proposed lease. (In re Pacific Bell (1997) D.97-03-003); see also, Application of PG&E for Approval of Conveyance of Easement to CPN Pipeline for Two Underground Pipes (2002) D.02-01-058 ("The primary question for the Commission in 851 proceedings is whether the proposed transaction is adverse to the public interest.")).
The transactions included in this application do not impair PG&E's ability to serve its customers, and a review of the transactions in Attachment A (along with the supporting lease and license data contained in Exhibit B) makes it clear that the transactions are not adverse to the public interest. Indeed, most of the transactions either clearly benefit the public (children's camp sites, walking paths, boat docks, parking space, a fire station) or allow for benefits to existing uses (septic tank improvements, new or renovated recreation cottages).
A review of Exhibit B shows that, in all cases, the transactions reserve to PG&E the rights necessary for PG&E to fulfill its public utility functions. The numerous recreational use agreements expressly state that the licensee "shall not in any way interfere with PG&E's use of the premises for its public utility purposes." A significant number of the transaction documents expressly state that PG&E may revoke the transaction whenever it appears necessary or desirable for PG&E to resume the use of the property to fulfill its public utility purposes.
In addition to providing revenue that benefits ratepayers, the transactions serve the public interest in several ways. First, the Commission has consistently recognized that it is in the public interest to permit compatible uses of utility property. (See, D.02-01-058, supra ("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.")); In re Southern California Edison Co. (1993) D.93-04-019 (same); In re Southern California Edison Co. (1994) D.94-06-017 (same); In re Pacific Gas and Electric Company (1992) D.92-07-007 (same).) The transactions at issue here maintain the use of the property for PG&E while making the property available for other productive uses.
Second, the licenses to various telecommunications companies allow those companies to improve the telecommunication infrastructure of the state. The Commission has held that it is in the public interest to use existing utility property for the siting of telecommunications equipment. (See, In re Pacific Gas and Electric Company (2002) D.02-12-026; Investigation on the Commission's Own Motion for Local Exchange Service (1998) D.98-10-058, as modified by D.00-03-055 (regarding access to poles, ducts, conduits, and rights-of-way).)
Third, the transactions provide an indirect benefit to ratepayers because they shift burdens of property ownership from the company to the lessee or licensee. The transactions often shift the burden of maintaining the property, require the lessee or licensee to maintain insurance, and require the lessee or licensee to indemnify PG&E for any claims that arise from use of the property. By shifting the management burden, PG&E is able to avoid expenses usually associated with property ownership.
Fourth, many of the licenses provide valuable recreational opportunities to the public. One agreement permits the operation of a horse corral that provides riding opportunities to handicapped children. (Transaction 217.) There are also agreements with the Girl Scouts and Boy Scouts for use of utility property as campgrounds (Transactions 138 and 177). A license agreement with the East Bay Regional Park District permits the District to maintain a hiking trail on PG&E property. (Transaction 240.)
Finally, several of the transactions provide public services to the community. Two leases permit the use of PG&E property for fire stations. (Transactions 224 and 231.) Another agreement allows the operation of a public library in a PG&E building. (Transaction 237.) Another agreement permits the California Department of Fish & Game to operate a fish hatchery on utility property. (Transaction 218.)
In approving leases and licenses of utility property under Section 851, the Commission traditionally has looked to whether the transactions are adverse to the public interest.8 While the Commission frequently requires some evidence of public benefit, the traditional threshold standard for approval is moderate, allowing the Commission flexibility in its determination of whether to authorize a requested transaction. The Commission also has interpreted the standard to mean that the proposed transaction must not interfere with a utility's ability to provide adequate service to the public at reasonable rates.9
In this application, we deal with relatively modest leases and licenses of utility land and facilities, and PG&E has demonstrated that the transactions are not adverse to the public interest. Indeed, the majority of transactions show positive benefit to the public through new or improved use of the property. In summary, PG&E has met its burden of showing that the transactions at issue serve the public interest.
7.2. Applicability of GO 69-C Requirements
License agreements are generally governed by GO 69-C. The GO provides an exception to the § 851 requirement for prior Commission approval of an encumbrance of utility property. The GO provides that a utility may convey licenses, easements, permits or other limited uses of land to third parties without prior Commission approval. The GO establishes three key criteria for permitting a utility to grant minor interests in utility property. These are:
(1) The interest granted must not interfere with the utility's operations, practices, and service to its customers;
(2) The interest granted must be revocable either upon the order of the Commission or upon the utility's determination that revocation is desirable or necessary to serve its patrons or consumer; and
(3) The interest granted must be for a "limited use" of utility property.10
In several instances throughout the application, PG&E briefly states that agreements for certain uses of its property have not been included for review and approval because PG&E considers them to properly fall under GO 69-C. We are unable to agree or disagree with the applicability of the GO based solely on brief statements and cursory characterization representing that any particular agreement in fact meets the GO's criteria. For purposes of this decision we simply note PG&E's view of the transactions that have not been submitted. This decision also does not assess whether any individual license agreement may have been outside the Commission's recent more clearly articulated expectations for license and GO 69-C treatment. PG&E has requested Section 851 approval as to all the transactions and that approval is granted in this decision, prospectively.
8 See, e.g., Koch Pipeline Company (1999) D.99-08-007; Americatel Corporation (2001) D.01-02-081; California Water Service Company (2000) D.00-05-047; Universal Marine Corporation (2000) D.84-04-102. 9 See, e.g., North American Telephone Network (1996) D.96-04-045; Southern California Edison Company (2003) D.03-01-039. It should be noted that the test is more stringent for the proposed sale and transfer of water utility systems or proposed utility mergers. In these cases, the Commission requires an affirmative showing that the transaction will in fact benefit the affected ratepayers. (See, e.g., Country Water Estates Water Co. (2000) D.00-05-027.) This is because water system transfers are reviewed both on the basis of § 851 and § 2718. Section 2718 requires application of an affirmative "public benefit" standard and enumerates a number of factors to be considered. Utility mergers are reviewed on the basis of § 851 and § 854. Section 854 sets forth explicit affirmative public interest requirements for mergers in excess of $500 million and provides guidance for mergers of less than that amount. (See Wild Goose Storage, Inc. (2003) D.03-06-069.) 10 See, e.g., Pacific Gas and Electric Company (2003) D.03-04-010; Pacific Gas and Electric Company (2003) D.03-01-030; Pacific Gas and Electric Company (2002) D.02-10-047; Pacific Gas and Electric Company (2002) D.02-12-018.
