BILL ANALYSIS                                                                                                                                                                                                    



                                                             


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|SENATE RULES COMMITTEE            |                   SB 177|
|Office of Senate Floor Analyses   |                         |
|1020 N Street, Suite 524          |                         |
|(916) 445-6614         Fax: (916) |                         |
|327-4478                          |                         |
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                       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  
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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  







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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  







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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.








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  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

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