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        
           
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          |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


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