BILL ANALYSIS                                                                                                                                                                                                    1
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   SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
                  DEBRA BOWEN, CHAIRWOMAN


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|SB 177 - Peace                |Hearing Date:May 11, 1999 | S|
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|As Amended:April 21, 1999     |                          | B|
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                         DESCRIPTION
  
  Current law  provides utilities with the authority to use  
the power of eminent domain to condemn any property  
necessary to deliver service.  

  This bill  bars telephone corporations from condemning  
property unless that telephone corporation is a carrier of  
last resort to provide telecommunications services to  
unserved areas.

  This bill  establishes a process by which a public utility  
may condemn property for the purpose of competing with  
another public utility.  This process requires a finding by  
the California Public Utilities Commission (CPUC) that  
either a) the public utility is providing services as a  
provider of last resort to unserved areas, or b) the public  
interest requires the project, the property is necessary  
for the project, if the property is not acquired the  
hardship to the public utility outweighs any hardship to  
the property owners, and the project is located in a manner  
most compatible with the greatest public good and least  











amount of private injury.

  This bill  bars a public utility from entering into any  
exclusive access agreement with any property owner.

                        KEY QUESTIONS

  1.Given deregulation and competition, should utilities  
  continue to enjoy the privilege of condemnation?  

2.Should the privilege of condemnation be limited in the  
  manner proposed by this bill?

                          BACKGROUND
  
The right of eminent domain was originally codified in 1872  
and is defined as the right of the people or government to  
take private property for public use.  This right may only  
be exercised upon payment of "just compensation" to the  
private property owner.  The right of eminent domain was  
only permitted to be exercised for specified public uses,  
including construction of aqueducts, bridges, railroads,  
pipes, and public transportation, the predecessors of  
modern utility services.  Current law explicitly permits  
public utilities, including railroads, and electric, gas,  
water, and telephone utilities (but not cable television  
corporations) to exercise the power of eminent domain.   
These statutes have been unchanged since 1975.

  Analysis by the California Law Revision Commission  -- The  
California Law Revision Commission has been reviewing the  
authority of public utilities to condemn property and  
stated the following in a September 1998 recommendation:

     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.  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, California Law Revision  
     Commission Tentative Recommendation, p. 5  
     (September 1998).)

The Law Revision Commission has issued a tentative  
recommendation that gives the CPUC the ability to regulate  
the exercise of condemnation authority as it deems  
appropriate.

  Right to condemn is limited and subject to public review,  
except when condemnation is by utilities  -- The right to  
condemn, or take private property, is one of a number of  
privileges that utilities enjoy in exchange for assuming  
certain burdens, such as rate regulation and providing  
service to all.  Other than public entities, the right to  
take private property is generally limited to utilities and  
certain quasi-public entities, such as nonprofit  
educational institutions of collegiate grade and nonprofit  
hospitals.  Before the quasi-public entity can condemn the  
property, the consent of the local public entity is  
required.  Before the local public entity may authorize the  
acquisition, it must first find that:

     1.     The public interest and necessity require  
       the proposed project.
     2.     The proposed project is planned or located  
       in the manner that will be most compatible with  
       the greatest good and least private injury.
     3.     The property to be taken is necessary for  
       the proposed project.










     4.     The hardship to the quasi-public entity if  
       the taking is not permitted outweighs the  
       hardship to the owners of the property.

Under current law, when utilities condemn property  no  
public review  is required.  Despite the relative ease with  
which utilities may condemn property, the incidence of  
exercise of condemnation power by utilities has been low,  
according to the Law Revision Commission.  However, the  
real value in condemnation authority lies as much with its  
threat as its actual implementation.

The transformation of utility service from a tightly  
controlled monopoly to a much less controlled competitive  
market argues for a comparable transformation of the  
historical privileges granted to utilities.  Some would  
argue that because electricity, natural gas, railroad, and  
telecommunications services remain essential, the  
unfettered power of condemnation should be retained.   
However, society considers dozens of other services  
essential, such as gasoline supply and food, yet  
privately-owned, for-profit oil companies and farmers have  
no condemnation powers.

  Should networks be treated differently?  -- There may be a  
distinction to be made between the part of utility service  
that requires a continuous physical connection, such as  
networks of pipelines, electrical wires, and telephone  
lines, and that which doesn't, such as the siting of a  
powerplant or a microwave tower.  The continuous,  
physically connected networks are greatly restricted in  
their flexibility to relocate.  However, there are more  
alternatives in the siting of powerplants or microwave  
towers.  Perhaps this distinction should be recognized in a  
review of condemnation authority.

  Public review appropriate?  -- Qualifying the right of  
utilities to exercise eminent domain may also be  
appropriate, particularly when the utility service is  
competitive, giving rise to a proliferation of utility  
companies.  While the bill provides the CPUC with the  
initial authority to approve a condemnation, can the CPUC  
be a fair arbiter, given that the utilities practice  
regularly at the CPUC while the owner of the subject  










property will not have the benefit of that familiarity?   
The CPUC is also focussed on utility rates, service  
availability and quality, and spends very little time  
considering private property owner rights.  Given the  
diminished rationale for utilities in competitive,  
deregulated businesses to enjoy the condemnation privilege,  
it might be fairer to have the local public entity  
authorize the acquisition.  Given the relatively few times  
that utilities exercise their condemnation privilege, this  
should pose them little hardship.

  How much?  - An owner of condemned property is entitled to  
compensation based on "fair market value", defined as the  
value of the highest price that would be agreed to by a  
willing seller and buyer.  When there is no relevant,  
comparable market, the fair market value is determined by  
any "just and equitable" method of valuation.





































                           COMMENTS  

1)This bill was heard in the Senate Judiciary Committee on  
  April 13, 1999 and was approved by a vote of 8-1.  That  
  committee analysis is attached.

2)The first part of the bill bars telecommunications  
  companies from condemning property unless it is a carrier  
  of last resort to serve currently unserved areas.   
  Therefore, any company who is a carrier of last resort  
  (i.e. Pacific Bell, GTE) retains the right of  
  condemnation, which can be used in any circumstance. This  
  effectively thwarts the intent of the bill because it  
  continues the right of condemnation for the incumbent  
  local telephone companies (i.e. Pacific Bell, GTE), but  
  eliminates the right of condemnation for competitors  
  (i.e. MediaOne) and long-distance telephone companies  
  (i.e. AT&T, MCIWorldcom).   The author and committee may  
  wish to consider making this provision more competitively  
  equitable by authorizing the power to condemn only in the  
   specific projects  where a telecommunications company  
  needs to condemn property to provide service as a carrier  
  of last resort to serve currently unserved areas. 

3)The second part of the bill establishes a process for  
  evaluating whether a proposed utility condemnation is in  
  the public interest.  This bill requires the CPUC to  
  evaluate utility condemnation requests, which may tilt  
  the balance in favor of the utilities, given the  
  utilities familiarity with the CPUC, its statutory  
  direction to ensure the widespread availability of  
  utility services, and its unfamiliarity with local land  
  use planning issues.  The criteria for the CPUC to  
  evaluate the utility request is virtually identical to  
  what local entities currently use in evaluating other  
  condemnation requests.   The Committee may wish to  
  consider  amending the bill to permit local government  
  entities to evaluate the condemnation request, rather  
  than the CPUC, as a way of striking a better balance.   
  This is the process used by all other entities in their  
  condemnation actions.    

4)A coalition of telecommunications utilities and cable  
  television companies has offered amendments which delete  










  the bar on the exercise of eminent domain authority by  
  telecommunications companies and streamline the process  
  by which the CPUC would exercise initial review of a  
  utility condemnation proposal.  This proposal is not  
  unreasonable, but it's weakness is that it provides  
  inadequate weight to private property interests by making  
  the CPUC the venue for considering whether the  
  condemnation is in the public interest.


Section 4 of the bill, commencing on page 4, line 9, deals  
with telecommunications companies and their efforts to  
provide exclusive service to all tenants of multi-tenant  
buildings.  While this section bars any future exclusive  
contracts, it does not bar the enforcement of any existing  
exclusive contracts.  AB 651 (Wright) contains a similar  
provision and deals with access to multi-tenant buildings  
by telecommunications service providers in a comprehensive  
way.



































                          POSITIONS
 
  Support:
  City of Benicia
Building Owners and Managers Association of California
CPUC (Support, if amended)
City of Culver City 
City of Cupertino
City of Lakewood
City of La Mirada
City of Malibu
City of  Merced 
City of  Oceanside 
City of  Poway 
San Francisco International Airport
City of Thousand Oaks 

  Oppose:  
California Railroad Industry
GTE
Office of Ratepayer Advocates (unless amended)
Williams Companies, Inc.


Randy Chinn                         
SB 177 Analysis
Hearing Date:  May 11, 1999