Background

SCE filed Application (A.) 04-09-017 on September 15, 2004. Notice of the Application appeared in the Commission's Daily Calendar on September 23, 2004. There were no protests or other responses to the Application.

In A.04-09-017, SCE requests authority under Section 851 to lease the Site to Anaheim RV in accordance with an Option Agreement between SCE and Anaheim RV.² Edison has electric transmission facilities located on the Site. The Site is not currently used for any other secondary purposes.

The Option Agreement gives Anaheim RV the right, subject to Commission approval, to lease the Site for the purpose of constructing and operating an RV storage facility beginning on the date that Anaheim RV exercises an option to enter into the lease. The initial term of the lease is 40 years, and Anaheim RV may renew the lease for two additional ten-year terms.

Anaheim RV will pay annual rent of $32,422 in Year 1; $64,848 in Year 2; $97,260 in Years 3-5; $103,092 in Years 6-8; $109,248 in Years 9-11; $115,836 in Years 12-14; $122,748 in Years 15-17; and $130,152 in Years 18-20. Rent will be adjusted to fair market value at the end of the twentieth and thirtieth years of the lease, and upon the exercise of each renewal option. However, in no event will there be (1) a reduction in rent, or (2) an increase in rent of more than 5% per year compounded annually for 15 years. SCE believes that the rent it will receive falls within the acceptable market range and is in line with revenues it receives from similar Commission-approved transactions.

The Option Agreement provides that Anaheim RV's activities must not interfere with the operation of SCE's facilities located at the Site. To that end, the Agreement forbids the use or storage of hazardous substances, explosives, or flammable materials on the Site. Any equipment used by Anaheim RV must maintain at all times a clearance of at least 18 feet from all overhead electrical conductors. In addition, Anaheim RV must maintain a minimum radius of 25 feet around all tower legs and 10 feet around all poles and anchors, and must provide access roads to the Site that are at least 16 feet wide.

Anaheim RV is also required to:

· Pay all personal property taxes, general or special assessments, or other fees levied against the Site or the improvements to the Site;

· Obtain all permits and approvals for the construction and operation of its business on the Site;

· Maintain appropriate comprehensive general liability, auto liability, and worker's compensation insurance; and

· Indemnify SCE against all liability for damages or injury to persons on the Site except to the extent caused by SCE's negligent or willful misconduct.

SCE retains various rights under the Option Agreement, including the right to:

· Enter the Site at any reasonable time to inspect the property;

· Impose temporary restrictions on Anaheim RV's right to enter, occupy, and use the Site in order to perform necessary work on the electrical facilities located on the Site; and

· Take back all or part of the leasehold by eminent domain or inverse condemnation.

The Option Agreement permits Anaheim RV to use the Site for any purpose permitted by law, consistent with SCE's use of the Site for its power lines and equipment. Although Anaheim RV must obtain SCE's consent prior to using the Site for purposes other than as an RV storage facility, the Option Agreement stipulates that SCE's consent shall not be unreasonably withheld. If the Site is used for other purposes, the Option Agreement requires a rent adjustment to reflect the fair rental value of the Site for the other purposes.³

On February 9, 2004, the Anaheim Planning Commission granted Conditional Use Permit No. 2003-04816 for an RV storage facility at the Site. The permit expires on February 9, 2007.

All revenues from the Option Agreement will be treated as Other Operating Revenue (OOR). In Decision (D.) 99-09-070, the Commission adopted a gross revenue sharing mechanism for OOR, except for revenues that (1) derive from tariffs, fees or charges established by the Commission or by the Federal Energy Regulatory Commission; (2) are subject to other established ratemaking procedures or mechanisms; or (3) are subject to the Demand-Side Management Balancing Account. Under the sharing mechanism, applicable gross revenues from non-tariffed products and services like the proposed Option Agreement are split between shareholders and ratepayers after the Commission-adopted annual threshold level of OOR has been met. All incremental costs are borne by SCE's shareholders. For those non-tariffed products and services deemed "passive" by the Commission, the revenues in excess of the annual threshold are split between shareholders and ratepayers on a 70/30 basis. OOR from the Option Agreement are "passive" for sharing purposes.