2. 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 easements proposed to be conveyed to the County would be encumbrances on PG&E property, we apply § 851 in considering this application.⁴

The primary question for the Commission in § 851 proceedings is whether the proposed transaction is in the public interest. In reviewing a § 851 application, the Commission may "take such action, as a condition to the transfer, as the public interest may require."⁵ 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.⁶

We find that PG&E's conveyance of the proposed easement to Triad would serve the public interest. The proposed easement 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 and legal requirements. PG&E's conveyance of the easement to Triad will also serve the public interest by allowing Triad to maintain slope improvements in order to avoid safety hazards and/or serious damage to PG&E property that could result otherwise result from erosion, earth slides, or earth subsidences onto the easement area.

We also approve the proposed ratemaking treatment for the compensation that the County will pay to PG&E for the easements. Since the property is not used for utility purposes and is not in PG&E's ratebase, it is appropriate for the easement fee to be recorded as a gain to shareholders.

We note that the Commission generally does not approve transactions in which a public utility enters into a license under G.O. 69-C for the purpose of conveying an interest in property if the transaction would otherwise be subject to our approval under § 851, particularly when the intent of such transactions is to circumvent Commission review under CEQA and § 851.⁷ However, here, it appears that the license entered into by PG&E and Triad may have qualified for an exemption from § 851 under G.O. 69-C.⁸ Moreover, even if PG&E could not properly enter into the license pursuant to G.O. 69-C because Triad constructed slope stabilization improvements on PG&E's property that were significant or could not be easily removed,⁹ PG&E needed to permit Triad to complete this work without delay in order to avoid safety hazards and the risk of serious property damage. The CEQA review performed by the City of Vallejo also addressed the slope stabilization improvements. Under these unique circumstances, we would not penalize PG&E for entry into the revocable license without first seeking our approval under Section 851 even if Triad's activities under the license are not a "limited" of utility property under G.O. 69-C.¹⁰

However, PG&E is advised to promptly apply for § 851 approval if future situations arise which require PG&E to convey more than a "limited" interest in utility property or to permit the construction of improvements or structures that are significant or cannot be easily removed from utility property. In emergency situations, PG&E may also apply for exemption from the requirements of § 851 pursuant to § 853(b).^{11 12}

For all of the foregoing reasons, we grant the application of PG&E pursuant to § 851, effective immediately.

⁸ G.O. 69-C permits public utilities to convey limited interests in their property, such as revocable licenses, under narrowly defined circumstances as an exception to § 851. However, under G.O. 69-C, a transfer of an interest in utility property must meet three key criteria in order to be exempt from the requirements of § 851:

(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 is desirable to serve its patrons or consumers; and

(3) The interest must be granted for only "limited" uses of utility property. Id.

Here, PG&E license granted to Triad for completion of the slope stabilization improvements clearly met the above two criteria, because the license required Triad to carry out its activities in a way that did not interfere with PG&E's operations or use of its property and PG&E retained the right to terminate the license upon notice to Triad. However, it is uncertain whether the license conveyed only a limited use of PG&E's property. The license permitted Triad to perform grading and erosion control activities, but the record contains no evidence regarding the specific work, including any construction, that Triad performed on PG&E's land. Under G.O. 69-C, the construction of facilities or improvements that are significant or cannot be easily removed does not qualify as a "limited" use of utility property, and the utility must generally seek § 851 approval and undergo CEQA review before permitting this type of construction. Id.