3. Discussion
Section 851 provides that no public utility shall sell, lease, mortgage, or otherwise encumber the whole or any part of property necessary or useful in the performance of its duties to the public, without first having obtained Commission approval.9
The primary question for the Commission in Section 851 proceedings is whether the proposed transaction is in the public interest. The public interest is served when utility property is used for other productive purposes without interfering with the utility's operations or affecting service to utility customers.10 In reviewing a Section 851 application, the Commission may "take such action, as a condition to the transfer, as the public interest may require."11
We find that SCE's proposed lease with Dillon is in the public interest. The proposed lease will not interfere with SCE's use of the property or with service to SCE customers, and the property will be utilized safely and in a manner consistent with legal and regulatory requirements. The terms of the agreement between SCE and Dillon are reasonable and do not subject SCE to an undue risk of liability that could affect SCE's ability to provide utility service to the public. SCE's entry into the lease with Dillon will generate substantial OOR for the benefit of ratepayers and will permit the productive use of the site, without interfering with SCE's existing transmission facilities.
In addition, the lease of SCE's ROW property to Dillon will promote the interconnection of the Wind Energy Facilities with SCE's high voltage transmission system, which facilitates the delivery of energy generated by wind from the project to SCE. Therefore, since Dillon has agreed to sell all of the energy produced by the Wind Energy Facilities to SCE, and Dillon's Wind Generation Facilities may potentially qualify as an "eligible renewable energy resource" electric generating facility, as defined in Section 399.12, the proposed lease will advance the state's goal of serving 20% of retail load with electricity generated by eligible renewable resources by 2010.12
However, we are concerned that the agreement would permit Dillon to assign, transfer, sublease or mortgage the lease, without prior Commission approval. We therefore require SCE to apply for Commission authorization pursuant to Section 851 for any proposed assignment, transfer, sublease or mortgage of the lease by Dillon that would alter the terms of the existing agreement.
We are also concerned that in addition to use of the site for the ROW Facilities, the proposed lease would permit Dillon to utilize the property for other purposes, with SCE's approval, but without prior Commission approval of the change in use of the property.
Therefore, in order to comply with CEQA and Section 851, if Dillon wishes to utilize the property for any use other than the ROW Facilities, and SCE wishes to permit such use of the property, SCE must first apply for authorization pursuant to Section 851 and undergo any additional required environmental review. Dillon must also obtain any necessary local approvals required for use of the property other than as the site for the ROW facilities.
We approve of the proposed ratemaking treatment for the compensation that Dillon will pay to SCE under the lease. The treatment of this compensation as OOR and of the lease as a "passive" source of revenue for the purposes of allocation between shareholders and ratepayers is consistent with prior Commission decisions and our current policy.
9 Section 851 states in pertinent part:
No public utility...shall sell, lease, assign, mortgage, or otherwise dispose of or encumber the whole or any part of its ... property necessary or useful in the performance of its duties to the public ... without first having either secured an order from the commission authorizing it to do so for qualified transactions valued above five million dollars ($5,000,000) or for qualified transactions valued at five million dollars ($5,000,000 or less, filed an advice letter and obtained a resolution from the commission authorizing it do to so. ...
10 D.00-07-010 at p. 6.
11 D.3320, 10 CRRC 56, 63.
12 See D.06-05-039, at p. 29.
