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