BILL ANALYSIS SB 177 Page 1 Date of Hearing: July 12, 1999 ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE Roderick Wright, Chair SB 177 (Peace) - As Amended: July 8, 1999 SENATE VOTE : 32-1 SUBJECT : Public utilities: eminent domain. SUMMARY : Revises eminent domain rights as they pertain to public utilities that offer competitive services and establishes a public hearing process to determine if the public interest would be served through an eminent domain action. Specifically, this bill : 1)Prohibits a telephone corporation from condemning property unless that property is necessary for that telephone corporation to provide telecommunications services as a carrier of last resort for unserved areas. 2)Prohibits a public utility that offers competitive services from condemning property for the purpose of competing with another public utility unless the California Public Utilities Commission (CPUC) finds that the public interest would be served by a condemnation action. A finding that the public interest would be served requires 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, (c) the property is necessary for the project, (d) the hardship to the public utility would outweigh any hardship to the property owners, and (e) the project is located in a manner most compatible with the greatest public good and least amount of private injury. 3)Requires CPUC to provide 45 days notice and conduct a public hearing in the local area that would be affected by the condemnation action hearing. 4)Requires CPUC to provide copies of the hearing notice to the local jurisdiction in time for the local jurisdiction to provide at least 7 days advance notice to interested persons. 5)Requires CPUC to render a decision within 45 days of the conclusion date of the hearing and provides for an additional SB 177 Page 2 30 days if necessary for further briefing. 6)Indicates that time limits described above will be extended, as necessary, to accommodate a decision that requires a California Environmental Quality Act (CEQA) review. 7)Exempts railroad corporations and water corporations. 8)Requires CPUC to develop procedures to facilitate access for affected property owners to eminent domain proceedings. 9)Prohibits a public utility from entering into any exclusive access agreement with any property owner or engaging any act which would limit the right of any other public utility to provide service to that property. EXISTING LAW provides public utilities with the authority to use the power of eminent domain to condemn any property necessary to deliver service. FISCAL EFFECT : Unknown. COMMENTS : 1)The right of eminent domain was initially codified in 1872 for purposes of providing people or the government the right to take property for public use. The right of eminent domain can only be exercised upon payment of just compensation to the private property owner. The right of eminent domain as codified in the Public Utilities Code permits public utilities, including railroads, and electric, gas, water and telephone utilities to exercise the power of eminent domain. These statutes have been unchanged since 1975. The right of eminent domain as it pertains to these public utilities "dates from an era when the numbers of privately owned public utilities were limited, and their operations were superintended by CPUC in a regime of monopoly regulation. " California Law Revision Commission Analysis ." 2)Due to deregulation of the telecommunications industry as well as restructuring of the electric and gas industries, there is increased competition in each of these areas. For example, today hundreds of competitors hold Certificates of Public Convenience and Necessity from CPUC to compete as local telecommunications service providers. The author has introduced this bill to address the changing public utility SB 177 Page 3 and its ability to acquire property through eminent domain. According to the author, eminent domain powers "made sense when the public utilities held monopoly positions and carried the obligation to serve all customers in their service territory." 3)The initial need for this bill was based on the need for greater scrutiny of the hundreds of telecommunications companies seeking to provide services to public and private property owners. However, proponents of this bill indicate and the author believes that additional scrutiny and regulation of the condemnation activities of all privately owned public utilities is warranted at this time. Opponents, however, believe this bill is too broad and should be limited to the telecommunications industry. Competition today, however, is not limited by industry, but is rampant across the gas, electric and telephone industries. The industries are beginning to converge as many non-telephone utilities provide telecommunications services over their facilities and rights of way. Cited as one example is the fact that "Southern California Edison, an electric utility, has authority to offer telecommunications services . . . over its facilities." Additionally, the Williams Company indicates that " it used the rights of way of a gas pipeline corridor in eight states to lay approximately 1,890 miles of fiber to construct a linear telecommunications system from Houston to Washington D.C. . . and that without eminent domain, one landowner could have prevents the system from being built." This bill includes a prohibition against telephone corporations ever having the ability to condemn property, except to provide service as a carrier of last resort in unserved areas. This provision may place the telephone corporation at an extreme disadvantage from a non-telephone utility that can avail itself of the process outlined in this bill to gain the right of eminent domain while it has been precluded from doing so. Thus, in an effort to level the playing field, and to acknowledge the converging competitive industries, it will be important for the author to clarify how the provider of competitive services rights correspond to those of the provider of last resort. 4)This bill includes a clause that pertains solely to telephone corporations and indicates that a telephone corporation may not condemn any property unless the property is necessary to provide services as a carrier of last resort to unserved SB 177 Page 4 areas. While the balance of this bill treats all public utilities covered by this bill uniformly, this clause single essentially removes the rights eminent domain from all telephone corporations in this state. As noted above, the industries are converging and should be treated in similar fashion. Thus, the author should remove this clause which provides disparate treatment of the telephone industry. The type of services provided should not be the determinative factor in whether or not the exercise of eminent domain rights should be granted. 5)This bill also includes a clause intended to restrict the use of or the ability to transfer or sell property that has been acquired by eminent domain until it has been used for public utility purposes for 50 years from the date of condemnation. The potential uses of rights of way are not predictable, as they were when there were a limited number of public utility providers. The industries are constantly going through mergers, as demonstrated in recent months and years. Thus, this clause is unworkable and should be stricken. REGISTERED SUPPORT / OPPOSITION : Support City of Culver City National Association of Industrial and Office Properties San Francisco International Airport Opposition AT&T California Railroad Industry California Cable Television Association Cox Communications Williams Communications Inc. Analysis Prepared by : Carolyn Veal-Hunter / U. & C. / (916) 319-2083