VI. CEQA

We must consider whether the Commission's approval of Casmite's application for a CPCN triggers the California Environmental Quality Act (CEQA) and, if so, what steps must be taken to satisfy the statute's requirements. CEQA applies to governmental activity that involves the exercise of discretion, has the potential of causing a direct or reasonably foreseeable indirect physical change in the environment, and satisfies the definition of "project." The issuance of a CPCN is a project since it involves discretionary governmental activity in issuing a "certificate or other entitlement." Cal. Pub. Res. Code §§ 21001.1, 21002 & 21080. A CPCN is an entitlement since it allows an entity to operate as a public utility within a specified service area. The remaining question is whether the issuance of a CPCN in this case will cause a direct or reasonably foreseeable indirect physical change in the environment.

The Commission has previously held that the mere granting of a CPCN involving existing facilities is exempt from CEQA. In D.02-06-005, In re Cypress Ridge Service Co., 2002 Cal. PUC LEXIS 347 (June 6, 2002), we held that CEQA does not apply when the applicant is seeking to provide public utility service using "exactly the same facilities as are now in place and in operation." Id. at 18. In this proceeding, Casmite has been operating the water system as a de facto public utility for ten years and now seeks to do so in conformity with the Public Utilities Code. The Commission's granting of a CPCN will only establish the service area and authorize rates for the existing public water system. The Commission's decision will not authorize any construction or modification of the system. Under these circumstances, the granting of a CPCN presents no possibility of having a significant adverse impact upon the environment. See D.04-05-042, In re Quality Telephone, Inc., 2004 Cal. PUC LEXIS 260, at *4-5 (May 27, 2004). As such, the issuance of a CPCN is exempt from CEQA under Section 15061(b)(3) of the CEQA Guidelines.

The record does indicate that Casmite anticipates replacing 4200 feet of existing water main with larger 4-inch pipes. This construction, which we understand will be completed before the CPCN is granted, does not change our determination that the issuance of a CPCN is exempt from CEQA. So long as Casmite is not yet a public utility, it does not require our approval to replace existing pipe. The Commission's granting of a CPCN provides no authority or approval of the pipe replacement. If the pipe replacement happens to occur after a CPCN is granted, this activity is eligible for a categorical exemption for existing public utility facilities. See CEQA Guidelines §15301(b) ("Existing facilities of both investor and publicly-owned utilities used to provide electric power, natural gas, sewerage, or other public utility services; . . . ."); and D.91-05-037, In re Alpine CA-3, L.P., 1991 Cal. PUC. LEXIS 364 (May 22, 1991) (Issuance of CPCN allowing new antenna at existing antenna farm is eligible for categorical exemption for minor alterations).