Discussion

Pub. Util. Code § 851 requires Commission authorization before a public utility may "sell, lease, assign or otherwise dispose of ...property necessary or useful in the performance of its duties to the public..." Pub. Util. Code § 854 requires Commission authorization before a company may "merge, acquire, or control . . . any public utility organized and doing business in this state . . ." The purpose of this and related sections is to enable the Commission, before any transfer of public utility property is consummated, to review the situation and to take such action, as a condition of the transfer, as the public interest may require. (San Jose Water Co. (1916) 10 CRC 56.)

Where a company that does not possess a CPCN desires to acquire the assets, including the CPCN, of a company that does possess a CPCN, we will apply the same requirements as in the case of an applicant seeking a CPCN to exercise the type of authority held by the company being acquired. Since the VarTec Companies possess CPCNs to operate as limited facilities-based and resale providers of local exchange and resale providers of intraLATA and interexchange telecommunications services within California, we will apply the requirements for such authority to Comtel, as the proposed holder of the CPCN following completion of the transaction.

The Commission has established two major criteria for determining whether a CPCN should be granted. An applicant who desires to operate as a facilities-based and resale provider of local exchange and resale provider of intraLATA and interexchange services must demonstrate that it has a minimum of $100,000 in cash or cash equivalent, reasonably liquid and readily available to meet the firm's start-up costs. In addition, the applicant is required to make a reasonable showing of technical expertise in telecommunications or a related business.

The applicants provided financial statements of Sowood Community Partners Fund III LP that demonstrate that Comtel will have sufficient resources to meet our financial requirements. Comtel will operate using its own managers and some managers of the VarTec Companies. The remaining VarTec managers include Vice Presidents in charge of billing services, network planning, customer service and the Deputy Chief Counsel. Although Comtel is entering the telecommunications business, Comtel's managers include individuals with energy and telecommunications experience. The combined experience of the Comtel and VarTec Companies managers is sufficient to find that our requirement for technical expertise is satisfied.

Comtel and the VarTec Companies request that in addition to approving the asset transfer we should grant a waiver of applicable anti-slamming regulations. Applicants intend to provide any required customer notice and agree to provide customers a description of the transaction that is easy to understand and to inform customers of all their service options going forward. Applicants intend to conform to our notice requirements for the transfer of a customer base from one carrier to another, as adopted in D.97-06-096. We will condition approval of this application on the provision of this customer notice to the VarTec Companies' customers. Because this order approves the customer transfer, our anti-slamming regulations do not apply.

After the transaction is completed, the VarTec Companies' current customers will receive their services from a financially stronger telecommunications company in place of their currently bankrupt service provider. In addition, the transaction will be transparent to the customers with no change in rates or services. Because the proposed transaction provides net benefits to the public, it is in the public interest and we will grant it. We will authorize the transfer of the VarTec Companies' CPCNs to Comtel.