BILL ANALYSIS ------------------------------------------------------------ |SENATE RULES COMMITTEE | SB 177| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 445-6614 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ THIRD READING Bill No: SB 177 Author: Peace (D) and Burton (D) Amended: 5/19/99 Vote: 21 SENATE JUDICIARY COMMITTEE : 8-1, 4/13/99 AYES: Burton, Escutia, Haynes, Morrow, O'Connell, Peace, Sher, Schiff NOES: Wright SENATE ENERGY, U.&C. COMMITTEE : 6-0, 5/11/99 AYES: Bowen, Hughes, Kelley, Peace, Solis, Speier NOT VOTING: Alarcon, Baca, Brulte, Mountjoy, Vasconcellos SENATE APPROPRIATIONS COMMITTEE : 12-0, 5/24/99 AYES: Johnston, Alpert, Bowen, Burton, Escutia, Johnson, Karnette, Kelley, Leslie, McPherson, Mountjoy, Vasconcellos NOT VOTING: Perata SUBJECT : Public utilities: eminent domain SOURCE : Author DIGEST : This bill pertains to eminent domain powers for privately owned public utilities. The bill, among other things, limits the privilege of condemnation when used for the purpose of competing with another entity, as specified. ANALYSIS : Current law provides utilities with the authority to use the power of eminent domain to condemn any CONTINUED SB 177 Page 2 property necessary to deliver service. This bill bars telephone corporations from condemning property unless that property is necessary for that telephone corporation to provide telecommunications services to unserved areas. This bill establishes a process by which specified public utilities 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. Before making such a finding, the CPUC shall conduct a public hearing, as specified. The bill provides that the above provision does not apply to a railroad corporation or a water corporation. This bill requires the CPUC to develop procedures to facilitate access for affected property owners to eminent domain proceedings. This bill bars a public utility from entering into any exclusive access agreement with any property owner. 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 SB 177 Page 3 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 (CLRC) 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 SB 177 Page 4 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 CLRC. 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. SB 177 Page 5 FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes Local: Yes An accurate estimate of the number of eminent domain proceedings and the notice costs that may result from this bill is difficult to determine. SUPPORT : (Verified 5/26/99) Building Owners and Managers Association of California Cities of Benicia, Culver City, Cupertino, Lakewood, La Mirada, Malibu, Merced, Oceanside, Poway, Stockton, and Thousand Oaks League of California Cities San Francisco International Airport John Burnham Real Estate Services and Company California Apartment Association California State Council of Laborers OPPOSITION : (Verified 5/26/99) GTE Williams Companies, Inc. NC:cm 5/26/99 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END ****