BILL ANALYSIS
SENATE JUDICIARY COMMITTEE
Adam B. Schiff, Chairman
1999-2000 Regular Session
SB 177 S
Senator Peace B
As Amended April 7, 1999
Hearing Date: April 13, 1999 1
Public Utilities Code 7
JMR:cjt 7
SUBJECT
Public Utilities: Eminent Domain
DESCRIPTION
This bill would prohibit a public utility that offers
competitive services from condemning any property for the
purpose of competing with another entity in the offering of
these competitive services, unless the Public Utilities
Commission finds that such an action would serve the public
interest.
BACKGROUND
Privately owned public utilities are authorized by statute
to exercise the power of eminent domain. (Public Utilities
Code 610-624.) Among others, these include: railroad,
electrical, gas, heat, pipeline and telephone corporations.
The California Law Revision Commission has been reviewing
the authority of these corporations to condemn property and
states the following:
This authority dates from an era when the numbers of
privately owned public utilities were limited, and
their operations were superintended by the Public
Utilities Commission in a regime of monopoly
regulation.
Circumstances have changed. Deregulation has occurred
in a number of public utility industries, with a
corresponding increase in the number of competitors
and decrease in Public Utilities Commission oversight.
(more)
SB 177 (Peace)
Page 2
For example, by mid-1998, hundreds of competitors had
been issued certificates of public convenience and
necessity by the Public Utilities Commission to
compete as local telecommunications service providers.
Deregulation has been accompanied by complaints of
inappropriate exercise or threatened exercise of
condemnation power by competitors. While the number
of complaints to date are limited, the Law Revision
Commission believes that some constraint on unfettered
exercise of eminent domain power by a privately owned
public utility may be appropriate. (Condemnation by
Privately Owned Public Utility, Cal. L. Revision
Comm'n Tentative Recommendation, p. 5 (September
1998).)
CHANGES TO EXISTING LAW
Existing law protects private property rights against
government action under the Fifth Amendment of the U.S.
Constitution by providing that private property shall not
be taken by the government for public use without
compensating the owner of the property.
Existing law provides that the power of eminent domain may
be exercised to acquire property for a particular use only
by a person authorized by statute to exercise the power to
acquire the property for that use. (Code of Civil
Procedure 1240.020.)
Existing law provides that privately owned public utilities
may condemn for utility purposes, including, but not
limited to, gas, heat, electricity, telephone, and water.
(Public Utilities Code 610-624.)
This bill would provide that a public utility that offers
competitive services may not condemn any property for the
purpose of competing with another entity in the offering of
those competitive services, unless the commission finds
that such an action would serve the public interest. The
commission would be able to make such a finding if, in the
determination of the commission, either of the following
conditions is met:
(1) The public utility is providing services as a
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Page 3
provider of last resort that seeks to serve unserved
areas.
(2) The public utility is able to show all of the
following with regard to the proposed condemnation:
(A) The public interest and necessity require the
proposed project.
(B) The property to be condemned is necessary for the
proposed project.
(C) That, if the commission does not permit the
acquisition of the property by eminent domain, the
hardship to the public utility will outweigh any
hardship to the owners of the property.
(D) The proposed project is located in a manner most
compatible with the greatest public good and least
private injury.
The bill also would provide that the commission would be
required to develop procedures to facilitate access for
affected property owners to eminent domain proceedings
pursuant to this bill, and to facilitate the participation
of those owners in those proceedings.
COMMENT
1. Stated need for legislation
According to the supporters of the bill, there are
several reasons that additional scrutiny and regulation
of the condemnation activities of privately owned public
utilities are both necessary and appropriate. For
example, the Building Owners and Managers Association of
California and the Building Owners and Mangers
Association International ("BOMA"), makes the following
arguments focusing on the telecommunications industry:
First, condemnation by such utilities is, in itself,
unique in California. It is the only type of
condemnation that requires neither the approval of a
governing body or officer of the State or of a local
public entity. Privately owned public utilities can
simply initiate eminent domain proceedings whenever
they feel the need. Second, in this era of
deregulation, the condemning power . . . now
potentially lies in the hands of perhaps hundreds of
SB 177 (Peace)
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privately owned public utilities, many of whom could
be competing to acquire and access the same space in
commercial buildings. No parallel exists for public
agency or quasi-public entity condemnations. Third,
the nature of the interests sought to be condemned in
the telecommunications context is very unusual, in
that it is typically not a fee interest or easement,
but rather, the right to enter into privately owned
buildings and install and maintain telecommunications
facilities within shared equipment rooms, and even
beyond into the risers and between the floors.
The combination of these factors renders unfettered
condemnation power by virtually unlimited numbers of
privately owned telecommunications carriers both
unacceptable and unworkable for public and private
property owners. . . Further, in the deregulated
market, much of the justification for this extreme
condemnation right has disappeared. Formerly, a
single provider had the duty to provide service to
all, but competitive carriers under deregulation do
not. They can pick and choose those buildings they
wish to service and locate in, and then try to force
their way in.
The author of the bill believes that the need for
additional scrutiny and regulation of the condemnation
activities of privately owned public utilities is not
limited to the telecommunications industry, but applies
to all privately owned public utilities.
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Page 5
2. Should the bill be limited to telecommunication
companies ?
Many of the opponents of the bill believe that it is too
broad and should be limited to telecommunication
companies since that is the industry where the problems
are being asserted. However, while the only problems
heard to date have been in the telecommunications
industry, the general policy behind the bill of placing
a modest restraint on the unfettered condemnation right
of all privately owned public utilities does not appear
to be excessive.
As stated by the Law Revision Commission: "Although
there does not appear to be an immediate need for broader
legislation of this type, in our opinion it is only a
matter of time before the issues will have to be
confronted. Should we leave that battle for another
day?" (Condemnation by Privately Owned Public Utility:
The Connecticut Approach, California Law Revision
Commission Staff Memorandum 99-19, p. 11 (March 16,
1999).) In light of the fact that these privately owned
public utilities are the only entities with the power of
eminent domain that are not required to satisfy any
pre-condemnation requirement, this modest approach seems
warranted at this time.
3. What would the interaction be between the PUC and the
Superior Court jurisdiction under the bill ?
When the California Law Revision Commission recommended a
similar approach as that set forth in this bill, several
commentators expressed a number of concerns about the
interrelation of the PUC's regulatory authority and the
superior court's judicial authority with respect to
eminent domain.
It would appear that the intent of the bill is to
authorize additional regulatory limitations on the
exercise of eminent domain, not replace existing judicial
limitations. If this is an accurate assumption, the
author may wish to amend the bill to take the following
amendment that was recommended by the Law Revision
Commission:
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"The authority provided in this section supplements,
and does not replace, any other constitutional or
statutory limitation on exercise of the power of
eminent domain, including but not limited to the
provisions of Title 7 (commencing with Section
1230.010) of Part 3 of the Code of Civil Procedure."
SHOULD THE BILL BE AMENDED TO CLARIFY JURISDICTION?
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4. What would be the effect of the PUC's regulation ?
Assuming that the bill were enacted, there is an issue as
to the effect of the PUC's determination of a public
interest under the process set forth in the bill. For
example:
Would the PUC be able to prohibit a public utility
from proceeding in a court action if it failed to
first seek a determination that the condemnation was
in the public interest?
Would the superior court determine the issue of
public use de novo, or would it be required to give
some weight to the PUC's determination?
It would seem prudent to specify these issues in statute
to provide a clear statement of law and tend to minimize
litigation over the issues. According to the Law
Revision Commission's administrative law consultant, a
properly-adopted regulation of an administrative agency
is the law, and as such is enforceable in a civil
proceeding in superior court. (Condemnation by Privately
Owned Public Utility: Examination of Different
Approaches, California Law Revision Commission Staff
Memorandum, p. 6 (January 19, 1999.) The Commission
suggested the following language to clarify the
enforceability of the PUC's decision:
"The decision by the Public Utilities Commission
pursuant to this section is enforceable in an eminent
domain proceeding, in addition to any other means
provided by law for enforcement of a commission
regulation."
As for the court's review of the PUC's decision, in order
to be consistent with other areas of eminent domain law,
the PUC's decision should not be considered conclusive in
the eminent domain proceeding, and the condemnor should
still be required to make a showing of public use and
necessity for the acquisition. (See, Code of Civil
Procedure Section 1245.380, proceedings by "quasi-public
entities.")
ARE AMENDMENTS NEEDED TO CLARIFY EFFECT OF PUC'S
DECISION?
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Page 8
5. Should the bill specify the procedure and standards
that would be followed by the PUC ?
The bill would merely provide that a public utility that
offers competitive services may not condemn any property
for the purpose of competing with another entity in the
offering of those competitive services, unless the
commission finds that such an action would serve the
public interest. However, the bill fails to specify the
procedure or standard that the PUC would have to follow
in making this determination.
Committee staff would recommend that the bill specify
that the PUC would make a finding pursuant to a petition
and hearing under the Administrative Procedures Act and a
determination by the PUC that there is clear and
convincing evidence that one of the conditions is met.
6. Is the PUC the appropriate agency to protect the
interests of property owners ?
Opponents of the bill argue, among other things, that the
PUC is not an appropriate guardian of property owner
interests. The PUC is perceived by some as captive of
the industries it regulates, with a motivation to promote
utility access to private property.
Even assuming that the PUC was not an impartial agency,
since the authority that would be given to the PUC under
this bill would not in any way modify the authority of
the superior court in eminent domain proceedings, a party
dissatisfied with the PUC's decision would always have
the ability to appeal the decision in court. This appeal
process would provide some balance in the PUC's decision
making process.
7. Additional opposition
Opponents argue that SB 177 threatens the growth of
telecommunications competition by making it easier for
parties to impose unreasonable impediments to the
establishment of a right-of-way, and by removing the
incentive to negotiate in good faith.
Opponents also emphasize that currently eminent domain
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proceedings involve a court hearing where it is the
utilities' burden to prove necessity and pay fair
compensation. They also contend that eminent domain is
rarely used. Opponents believe that SB 177 would add an
unnecessary layer of bureaucracy to a process for which
there is already a well developed judicial process and
over one hundred years of established case law dealing
with each test included in the bill.
Support: Building Owners and Managers Association of
California; City Council of the City of La Mirada;
California Apartment Association; League of
California Cities; San Francisco International
Airport; California State Council of Laborers; City
of Culver City; Woodmont Real Estate Services; and
numerous individuals
Opposition: MCI Telecommunications Corporation; California
Cable Television Association; Wild Goose Storage
Inc.; and numerous indivduals
HISTORY
Source: Author
Related Pending Legislation: AB 651 (Wright), would
preclude the Public Utilities
Commission intervention in an
agreement between a
telecommunications company and
property owner. (AB 651 is
currently in the Assembly Utilities
and Commerce Committee.)
Prior Legislation: None Known
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