BILL ANALYSIS AB 736 Page 1 ASSEMBLY THIRD READING AB 736 (Jerome Horton) As Amended May 23, 2005 Majority vote UTILITIES & COMMERCE 11-0 APPROPRIATIONS 18-0 ----------------------------------------------------------------- |Ayes:|Levine, Bogh, Baca, |Ayes:|Chu, Sharon Runner, Bass, | | |Blakeslee, Jones, De La | |Berg, Calderon, Emmerson, | | |Torre, Jerome Horton, | |Mullin, Haynes, Karnette, | | |Keene, Montanez, | |Klehs, Leno, Nakanishi, | | |Ridley-Thomas, Wyland | |Nation, Oropeza, | | | | |Ridley-Thomas, Saldana, | | | | |Walters, Yee | ----------------------------------------------------------------- SUMMARY : Modifies the California Public Utilities Commission's (PUC's) approval process for public utilities to sell, lease or otherwise transfer a property. Specifically, this bill : 1)Requires any public utility to obtain PUC approval prior to selling, leasing, or disposing of a property in a transaction valued at $5 million or less through an advice letter, rather than through a formal proceeding as currently required. 2)Requires PUC to approve or deny an advice letter submitted pursuant to the above requirements within 120 days of its filing absent a protest or incomplete documentation by the applicant public utility. 3)Requires any public utility to secure an order from PUC prior to selling, leasing, or disposing of a property in a transaction valued at $5 million or more, rather than through a formal proceeding as currently required. 4)Exempts a public utility from having to obtain authorization from PUC before merging or otherwise consolidating with a subsidiary, an affiliate, or a corporation if certain conditions are met. FISCAL EFFECT : According to the Assembly Appropriations Committee, net special fund costs of up to $100,000 annually for AB 736 Page 2 the equivalent of one position to review advice letters. PUC indicates that bill will transfer workload from one division that currently handles proceedings to several divisions, each of which handles advice letters. COMMENTS : According to the author, the purpose of this bill is to help streamline an unduly long process at PUC for non-controversial asset sales, transfers, leases or other encumbrances of utility property. By reducing workload at PUC, the author argues that this bill should reduce administrative costs of both PUC and public utilities and could save ratepayer dollars through reduced utility operating costs. Current law requires public utilities to undergo a full proceeding at PUC before selling, leasing, assigning, mortgaging, other otherwise disposing of any property necessary for performing its duties to the public. These proceedings result in significant costs for the applicant and other parties and can take up to 18 months to complete. This bill modifies the approval process to require public utilities to file an advice letter and obtain an authorizing resolution from PUC rather than undergoing a full proceeding if the value of the transaction is less than $5 million. PUC is currently considering the implementation of an advice letter pilot program with substantially similar components to those included in this bill. The bill also exempts public utilities undergoing mergers, partnerships and other ownership transfers from certain PUC approval requirements if there is no change in the ultimate ownership of the utility. However, the bill does not restrict the ability of PUC to review and approve any sale, merger or transfer of the public utility itself, or any transaction that results in a change in ownership or control of the parent or holding company which is the ultimate owner of the utility. Analysis Prepared by : Adam Hunt / U. & C. / (916) 319-2083 FN: 0010461