IV. Scoping Memo
The scope of this proceeding is governed by Pub. Util. Code § 854. Pursuant to § 854(a), no person or corporation, whether or not organized under the laws of this state, shall merge, acquire, or control either directly or indirectly any public utility organized and doing business in this state without first securing authorization to do so from this Commission. The Commission may establish by order or rule the definitions of what constitute merger, acquisition, or control activities that are subject to this section of the statute.
Applicants' position is that pursuant to § 854(a), the primary issue to be determined in this proceeding is whether the proposed transaction would be adverse to the public interest. Applicants argue, however, that § 854(b) does not apply to this proceeding. Moreover, applicants believe that pursuant to its authority under § 853(b), the Commission should exempt this proceeding from the requirements of § 854(c). The Applicants thus propose that the Commission limit its review of the proposed transaction accordingly.
Protests to the application were filed by a variety of parties, either opposing the application, or asking that mitigating conditions be required in the event that the Commission approves the application. Protestants contend that the proposed transaction, at least in the form proposed by the applicants, would be detrimental to the public interest, and raise disputed facts requiring evidentiary hearings.
Protestants also disagree concerning the applicability of 854(b) and exemption under § 854(c). Protestants argue that § 854(b) does apply, and should be required as being within the scope of the proceeding. Moreover, protestants argue that the Commission should not exempt the transaction from the requirements of § 854(c).
For purposes of going forward with this proceeding, parties shall continue to follow the procedure prescribed in my ACR dated March 16, 2005. In that ACR, I directed Applicants to supplement the application to provide all the information they believe necessary and appropriate to demonstrate compliance with all of the provisions of Pub. Util. Code §§ 854(b) and (c) to the extent that they had not already done so in the original application. As previously noted, I made that ruling not to determine the applicability of the statute, but in the interest of ensuring that any potential disagreement over the statute's applicability not be cause for delay in processing the application.
Thus, without prejudging the substantive merits as to the applicability of §§ 854(b) and (c), I hereby direct that the scope of the proceeding shall incorporate the requirements of §§ 854(b) and (c). I reiterate that this ruling does not make any substantive determination on the statutes' applicability. A determination on the substantive merits of whether these statutory provisions apply will be made in the future.
Sections 854(b) and (c) set forth specific requirements that a qualifying transaction must satisfy to warrant Commission approval. Under § 854(b), the Commission is to equitably allocate the economic benefits of the transaction between ratepayers and shareholders. Also, with assistance from the Attorney General, the statue calls for the Commission to consider any potential anti-competitive effects.1 In the schedule below, an advisory opinion is requested from the State of California Attorney General regarding whether competition will be adversely affected and if so, what mitigation measures could be adopted to avoid this result.
Section 854(c) further requires the Commission to evaluate the transaction according to specific criteria.2 The statute prescribes that Applicants have the burden of proving, by a preponderance of evidence, that subdivisions (b) and (c) have been satisfied. (Pub. Util. Code, § 854, subd. (c).)
1 Pub. Util. Code § 854, subd. (b) requires that a transaction: (1) Provides short-term and long-term economic benefits to ratepayers. (2) Equitably allocates, where the commission has ratemaking authority, the
total short-term and long-term forecasted economic benefits, as determined
by the commission, of the proposed merger, acquisition, or control, between
shareholders and ratepayers. Ratepayers shall receive not less than 50%
of those benefits.
(3) Not adversely affect competition. In making this finding, the commission shall request an advisory opinion from the Attorney General regarding whether competition will be adversely affected and what mitigation measures could be adopted to avoid this result.
2 Subdivision (c) requires the Commission to consider eight factors, as follows: (1) The financial condition of the resulting public utility doing business in the state. (2) The quality of management of the resulting public utility doing business in the state. (3) The quality of management of the resulting public doing business in the state. (4) Fairness to affected public utility employees, including both union and nonunion employees. (5) Fairness to the majority of all affected public utility shareholders. (6) Benefits on an overall basis to state and local economies, and to be communities in the area served by the resulting public utility. (7) The preservation of jurisdiction of the commission and the capacity of the commission to effectively regulate and audit public utility operations in the state. (8) Mitigation measures to prevent significant adverse consequences which may result.
