Discussion

The Commission grants exemptions under § 853(b) only in extraordinary situations.¹⁵ We have recently granted § 853(b) exemptions in cases unlike this one, and denied such exemption in a case similar to this one. In D.02-10-008, we granted Pacific Gas and Electric Company (PG&E) an exemption from filing a § 851 application every time one of its customers wanted to buy its electric meter on the ground that it would be unduly cumbersome and uneconomic to require individual filings by utilities for each individual meter sale. We found that imposing such a requirement would not serve the public interest.¹⁶

In D.02-01-055, we exempted PG&E from obtaining § 851 approval where it had failed to obtain such approval prior to selling utility assets to individual customers. We found PG&E's situation to be extraordinary because the sales were otherwise in the public interest and because to undo or void the 12-year-old sales would harm customers.¹⁷

However, in a recent case similar to this one, we denied a § 853(b) exemption to enable Metromedia Fiber Network Services to emerge from bankruptcy, and instead approved the application under § 854.¹⁸ There, as here, the company declared that the transaction was integral to a plan of reorganization that would enable it to emerge from bankruptcy. The Commission's Executive Director decided that "given the complexity of the proposed transaction, the public interest [was] best served through Commission review of the details of th[e] application."¹⁹

By the same token, the Commission's Executive Director signed the decision pursuant to delegated authority, and the full Commission did not review and approve the transaction. Because the Executive Director may have lacked delegated authority to invoke § 853(b) and exempt the transaction from § 854, the result was appropriate in that case.

Whatever the limits of the Executive Director's delegated authority, there is no question that § 853(b) grants the full Commission the power to exempt a transaction from the requirements of §§ 851 and 854. For the following reasons, we believe exemption is warranted in this proceeding.

First, and most importantly, the transaction changes no rates or terms of service for existing customers. We retain full authority to review any such changes in the future.

Second, the Company is taking extraordinary steps to change the practices of the past. The "Restoring Trust" report, which will be fully enforceable by the United States District Court, goes well beyond many legal requirements imposed on corporations by the SEC and other regulators. Not only has WorldCom agreed to be bound by the recommendations in the report, but the Court will also retain jurisdiction to enforce those recommendations:

[T]he Court, at the parties' express request, will continue to retain jurisdiction for however long it takes to make certain that these new controls and procedures are fully implemented and secured.²⁰

Despite the fact that it is in bankruptcy proceedings, WorldCom has not disputed the jurisdiction of the District Court to enforce the report's recommendations, and Judge Rakoff retains such jurisdiction.²¹ In order to provide even greater protections for WorldCom's California customers, we will also make the "Restoring Trust" report enforceable at this Commission.

Third, evidence that the transaction is in the public interest is strong. It is appropriate to allow a viable competitor in the California long distance market to emerge from bankruptcy proceedings so long as there are mechanisms in place to prevent the recurrence of the prior misdeeds. We believe the record before us demonstrates that such protections are in place.

Fourth, the Commission and the commissions of several other states have stipulated in the bankruptcy proceeding to use their best efforts to act on WorldCom's state applications no later than November 19, 2003. In return, we and the other commissions received written assurances from WorldCom that WorldCom would not press claims it had earlier raised that the regulatory laws of approximately 31 state public utilities commissions are preempted pursuant to Section 1123 of the Bankruptcy Code, and that state regulatory review of WorldCom's reorganization is preempted by Section 525 of the Bankruptcy Code. While we disagree that any such preemption claims would have had validity,²² WorldCom's voluntary agreement not to raise such claims in the bankruptcy proceeding if we resolved this case quickly ensures that the Commission will not have to fight this jurisdictional issue in the WorldCom bankruptcy.

For the foregoing reasons, so long as the following conditions are met, we find that there is an extraordinary situation that warrants the use of the Commission's authority under § 853(b) to exempt the reorganization plan from §§ 851 and 854 review. WorldCom (or its successor(s) after the reorganization is approved) may not change rates, conditions or terms of service for its California customers. WorldCom and its successors must come to the Commission for such relief. The reorganization of WorldCom proposed here shall not have any impact on the Commission's jurisdiction over WorldCom or its successors.

All this decision does is allow WorldCom to obtain Bankruptcy Court approval of its reorganization Plan and to represent to that Court that this Commission need not approve the reorganization in order for the Bankruptcy Court to do so.