BILL NUMBER: SB 429 AMENDED
BILL TEXT
AMENDED IN SENATE APRIL 30, 2003
INTRODUCED BY Senator Morrow
FEBRUARY 20, 2003
An act to add Section 854.5 to the Public Utilities Code, relating
to public utilities.
LEGISLATIVE COUNSEL'S DIGEST
SB 429, as amended, Morrow. Public utilities: acquisition or
control of electrical corporations and gas corporations
.
(1) The California Constitution establishes the Public Utilities
Commission, with jurisdiction over all public utilities. The
Constitution grants the commission certain general powers over all
public utilities, subject to control by the Legislature, and
authorizes the Legislature, unlimited by the other provisions of the
Constitution, to confer additional authority and jurisdiction upon
the commission, that is cognate and germane to the regulation of
public utilities.
The existing Public Utilities Act, prohibits any person or
corporation from acquiring or controlling, directly or indirectly,
any public utility organized and doing business in this state,
including electrical corporations and gas corporations,
without first securing authorization to do so from the
commission. Existing law requires the commission, before authorizing
the acquisition or control of an electric, gas, or telephone utility
having revenues in excess of a specified amount, to consider, among
other things, that the proposal provides short-term and long-term
economic benefits to ratepayers, and equitably allocates the
short-term and long-term forecasted economic benefits of the proposed
merger, acquisition, or control, as determined by the commission,
between shareholders and ratepayers, where the commission has
ratemaking authority. The act prohibits a public utility from
issuing stocks and stock certificates, or other evidence of interest
or ownership, or bonds, notes, or other evidences of indebtedness
payable at periods of more than 12 months, without first securing
authorization to do so from the commission.
Pursuant to the act, the commission has authorized the formation
of holding companies holding a controlling interest in certain
electrical corporations and gas corporations
public utilities . The commission has conditioned
authorization upon the capital requirements of the
electrical corporation or gas corporation utility
being given first priority by the board of directors of the
parent holding company, as determined by the commission as being
necessary to meet the obligation to serve the electrical
corporation or gas corporation .
This bill would provide that any corporation or person
holding a controlling interest in an electrical corporation or gas
corporation organized and doing business under the laws of this
state, is subject to the continuing jurisdiction and power of the
commission to enforce a condition placed upon any authorization
obtained to acquire or control, directly or indirectly, the public
utility. The bill would require that it be a condition of any
authorization given a corporation or person holding a controlling
interest in an electrical corporation or gas corporation, that the
capital requirements of the utility, as determined by the commission
to be necessary to meet the utility's obligations to serve, be given
first priority. The bill would further require, when the commission
determines it necessary to meet the obligation of the utility to
serve, that the commission order the corporation or person holding a
controlling interest in the utility, to infuse sufficient capital
into the utility subsidiary, of any type deemed necessary by the
commission, to enable the utility to fulfill the obligation to serve.
authorize the commission to enforce any condition
agreed to by a public utility as part of an application to merge,
acquire, or control a public utility or an application to issue
stocks and stock certificates, or other evidence of interest or
ownership, or bonds, notes, or other evidence of indebtedness. The
power to enforce would apply to the utility and the corporation or
person holding a controlling interest in the utility. The bill would
require that whenever the commission authorizes a corporation or
person to hold a controlling interest in an electrical or gas
corporation, that it be a condition that the capital requirements of
the utility necessary to meet the utility's obligation to serve be
given first priority. The bill would declare that these provisions
state existing law.
The bill would require the commission to order the corporation or
person holding a controlling interest to infuse sufficient capital
into the utility to enable it to fulfill its obligation to serve.
The bill would require that whenever the commission authorizes a
corporation or person to hold a controlling interest in an electrical
or gas corporation, that a balanced capital structure be maintained
in the utility and that retained earnings not be transferred to the
controlling corporation or person where doing so would decrease the
utility's net equity below that adopted by the commission in the
utility's last general rate proceeding. The bill would require that
whenever the commission authorizes a corporation or person to hold a
controlling interest in an electrical or gas corporation, that any
dividend policy of the utility be set by the utility's board of
directors as though the utility is a stand-alone electrical or gas
corporation. Because a violation of the Public Utilities Act
or an order of the commission is a crime under existing law, the bill
would impose a state-mandated local program by creating a new crime.
(2) The California Constitution requires the state to reimburse
local agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
This bill would provide that no reimbursement is required by this
act for a specified reason.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: yes.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 854.5 is added to the Public Utilities Code, to
read:
854.5. (a) Any corporation or person holding a controlling
854.5. (a) The commission may enforce any condition agreed to by
a public utility as part of an application to merge, acquire, or
control either directly or indirectly any public utility organized
and doing business in this state, pursuant to Section 854.
(b) The commission may enforce any condition agreed to by a public
utility as part of an application to issue stocks and stock
certificates, or other evidence of interest or ownership, or bonds,
notes, or other evidences of indebtedness, pursuant to Section 818.
(c) The commission's power to enforce under this section applies
to the public utility and any corporation or person holding a
controlling interest in the public utility.
(d) Whenever the commission authorizes a corporation or person to
hold a controlling interest in an electrical corporation or gas
corporation, a condition of that authorization is that the capital
requirements of the electrical corporation or gas corporation, as
determined by the commission to be necessary to meet the public
utility's obligation to serve, shall be given first priority.
(e) The commission shall order a corporation or person holding a
controlling interest in an electrical corporation or gas corporation
to infuse sufficient capital into the public utility, of any type and
quantity deemed necessary by the commission, to enable the public
utility to fulfill its obligation to serve.
(f) Whenever the commission authorizes a corporation or person to
hold a controlling interest in an electrical corporation or gas
corporation, a condition of that authorization is that the
corporation or person maintain a balanced capital structure in the
public utility, as determined to be reasonable by the commission in
the public utility's most recent general rate case. No electrical
corporation or gas corporation shall permit retained earnings to be
transferred to a corporation or person holding a controlling interest
in the public utility where doing so would decrease the public
utility's net equity ratio below that adopted in the public utility's
last general rate proceeding.
(g) Whenever the commission authorizes a corporation or person to
hold a controlling interest in an electrical corporation or gas
corporation, a condition of that authorization is that the dividend
policy of the public utility shall continue to be set by the public
utility's board of directors, as though the public utility were a
comparable stand-alone electrical corporation or gas corporation.
SEC. 2. The addition of subdivisions (a), (b), (c) and (d) to
Section 854.5 of the Public Utilities Code by Section 1 of this act
do not constitute a change in, but are declaratory of, existing law.
interest in an electrical corporation or gas
corporation organized and doing business under the laws of this
state, is subject to the continuing jurisdiction and power of the
commission to enforce a condition placed upon any authorization
obtained pursuant to Section 854.
(b) It is a condition of any authorization given to a corporation
or person holding a controlling interest in an electrical corporation
or gas corporation organized and doing business under the laws of
this state, that the capital requirements of the electrical
corporation or gas corporation, as determined by the commission to be
necessary to meet the corporation's obligations to serve, shall be
given first priority. When determined by the commission to be
necessary to meet the obligation of an electrical corporation or gas
corporation to serve, the commission shall order a corporation or
person holding a controlling interest in the electrical corporation
or gas corporation, to infuse sufficient capital into their
respective utility subsidiaries, of any type deemed necessary by the
commission to enable the electrical corporation or gas corporation to
fulfill the obligation to serve.