3. Order to Show Cause

Section 854(a) of the Code states in pertinent part:

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 the commission. The commission may establish by order or rule the definitions of what constitute merger, acquisition, or control activities which are subject to this section. Any merger, acquisition, or control without that prior authorization shall be void and of no effect. No public utility organized and doing business under the laws of this state, and no subsidiary or affiliate of, or corporation holding a controlling interest in a public utility, shall aid or abet any violation of this section. (Emphasis added.)

Similarly, Section 852 renders void any purported transfer of capital stock of a public utility corporation without prior approval of the Commission.

The purpose of these 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 to the transfer, as the public interest may require." (San Jose Water Co. (1916) 10 CRC 56; see also, In re E. B. Hicks Water Company (1990) 37 CPUC2d 13.)

In a ruling dated April 24, 2000, the administrative law judge directed applicants to show cause why the application should not be denied. The ruling stated:

"Applicants here offer no explanation for their failure to seek prior Commission approval of the purported transfer of control of a California telecommunications utility. Under Section 854, the transfer is void. Moreover, both the utility and ATC are subject to penalties of up to $20,000 each for failure to comply with the Public Utilities Code. (See Pub. Util. Code §§ 2107, 2111.) Neither company is a stranger to the telecommunications industry, and each knew or should have known that prior approval of a transfer of control of a California utility is required."

The ruling directed applicants within 30 days to file a brief, with supporting affidavits as necessary, showing (1) why the purported transfer of control should not be declared void and of no effect, (2) why the operating authorities of the telecommunications carrier should not be revoked pending application for new authority, and (3) why penalties should not be imposed on the applicants pursuant to Pub. Util. Code §§ 2107 and 2111.