BILL ANALYSIS Ó ------------------------------------------------------------ |SENATE RULES COMMITTEE | AB 1027| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ THIRD READING Bill No: AB 1027 Author: Buchanan (D) Amended: 7/13/11 in Senate Vote: 21 SENATE ENERGY, UTILITIES & COMMUNIC. COMM. : 10-0, 7/05/11 AYES: Padilla, Fuller, Berryhill, Corbett, DeSaulnier, Pavley, Rubio, Simitian, Strickland, Wright NO VOTE RECORDED: De León SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8 ASSEMBLY FLOOR : 70-4, 6/3/11 - See last page for vote SUBJECT : Local publicly owned electric utilities: utility poles and Support structures SOURCE : California Cable & Telecommunication Association DIGEST : This bill requires local publicly owned electric utilities, including irrigation districts, to make appropriate space and capacity on and in their utility poles and support structures available for use by communication service providers. ANALYSIS : Existing federal law directs the Federal Communications Commission (FCC) to ensure that rates, terms, and conditions for telecommunications attachments to CONTINUED AB 1027 Page 2 utility poles are just and reasonable but exempts publicly owned utilities (POUs). Existing law requires the California Public Utilities Commission (PUC) to regulate pole attachment rates charged by investor-owned utilities (IOUs) and establishes a formula consistent with the FCC formula for setting that rate if an IOU and cable company cannot agree on a rate. This bill: 1. Requires a POU to make appropriate space and capacity on and in its utility poles and support structures available for use by a communication provider. 2. This bill specifies that its provisions do not apply to pole attachment contracts entered into prior to January 1, 2012, unless a contract does not specify a fee. 3. Specifies that its provisions do not apply to a jointly owned pole if the joint owner other than the POU has sole control of the space requested. 4. Requires a POU to respond to a request for a use of a pole or support structure within 45 days of receipt of the request or 60 days if the request is for more than 300 poles, and, if it denies a request, to provide a reason for the denial and remedy to gain access. 5. Specifies a timeline for a POU to provide a cost estimate to a requester, for a requester's response to that estimate, for notice to existing attachers, and for completion of make-ready work prior to the attachment, and provides that the timeline dates may be extended under special circumstances upon agreement of the parties. 6. Authorizes a POU to deny a request because of insufficient capacity or safety, reliability, or engineering concerns, which may take into account the impact of granting the request on an approved project for future use by the POU of its utility poles or support structures for delivery of its core utility services. CONTINUED AB 1027 Page 3 7. Provides that, if it becomes necessary for the POU to use space or capacity on or in a support structure occupied by the cable company, the cable company shall either pay all costs for rearrangements necessary to maintain the pole attachment or remove its equipment at its own expense. 8. Requires the governing body of a POU to determine the annual pole attachment fee pursuant to the formula specified in this bill. 9. Specifies that a POU's annual pole attachment fee shall not exceed an amount determined by multiplying the percentage of the total usable space that would be occupied by the attachment by the annual costs of ownership of the pole and its supporting anchor, with a rebuttable presumption that a single attachment occupies one foot of usable space and an average pole contains 13.5 feet of usable space. 10.Specifies that a POU's annual fee for use of a support structure not exceed the POU's annual costs of ownership of the percentage of the volume of the capacity of the structure rendered unusable by the equipment of the cable company. 11.Defines "annual costs of ownership" as the sum of the annual capital costs and annual operation costs of the pole or support structure, which shall be the average costs of all similar utility poles or structures owned or controlled by the POU. 12.Prohibits a POU from charging a fee that exceeds actual costs and requires the governing body of a POU to ensure that neither customers of the POU or cable company are subsidized by that fee. 13.Authorizes a POU to charge a one-time fee to process a request for attachment based on actual costs and a one-time fee for a rearrangement requested by a cable company and to impose a penalty for unlawful attachment. 14.Requires the governing body of a POU, before adopting or CONTINUED AB 1027 Page 4 increasing a fee, or changing terms and conditions of access, to hold at least one open and public meeting, provide notice of the meeting least 14 days prior to the meeting, make available at least 10 days prior to the meeting data indicating its cost to grant a request and rationale for any changes in terms and conditions of access. 15.Requires that action to adopt or increase a fee or adopt or change terms and conditions of access be taken solely by an ordinance or resolution or contract approved by the governing body and prohibits the governing body of the POU to delegate the authority to another entity or board. 16.Requires that an action adopting or increasing a fee be at a regularly scheduled public meeting no earlier than 30 days after the initial public meeting and that the action be effective no sooner than 60 days after the action. 17.Specifies that any person or entity may protest the adoption of a fee or terms and conditions of access with written notice within 30 days of the action that specifies the facts and legal theory of the protest. 18.Provides that a person or entity subject to a fee, term or condition of access, or a trade association representing them, may bring legal action challenging the fee, term, or condition and that this action be commenced within 120 days of the effective date of the action adopting it. 19.Authorizes a person or entity subject to a pole attachment fee, or trade association representing them, to request an audit in order to determine whether a fee exceeds the amount reasonably necessary to cover the costs of use of the pole or support structure, requires the requester to pay for the audit, and authorizes the person or entity to retain an independent auditor for this purpose, and requires the POU to adjust the fee if the audit determines it does not meet the requirements of this bill. CONTINUED AB 1027 Page 5 ÝExisting law and General Orders of the PUC establish standards for overhead and underground utility structures. 20.Requires any use of a utility pole or support structure by a cable company to comply with PUC General Orders 95 and 128 and all other applicable provisions of law. Background History of Shared Use of Poles . Since providers of electric and telephone service first began stringing wires on poles across America, shared use of poles and other utility infrastructure has been the most efficient and practical way for both providers to reach their customers. Most utility poles are jointly owned by the local electric utility and telephone local exchange carrier or are subject to a joint pole agreement that allocates space for each user and apportions costs pursuant to a formula. Electric utilities with sole ownership of poles typically have provided access to telephone companies and charge an annual fee for use of specified "communications" space on the pole. The advent of the cable television industry in the 1970s introduced a new player seeking access to utility poles for stringing cables to reach customers. Concern that utilities charging cable companies excessive pole attachment rates would stifle the fledgling industry led Congress to enact the Pole Attachment Act of 1978, adding Section 224 to the Communications Act of 1934, which directs the FCC to ensure that rates, terms, and conditions for pole attachments by cable television systems are just and reasonable, except where such matters are regulated by a state. In response, the California Legislature enacted Section 767.5 of the Public Utilities Code giving the PUC responsibility to regulate pole attachment rates charged by IOUs and establishing a formula for setting that rate if an IOU and cable company cannot agree on a rate. The Pole Attachment Act of 1978 exempted POUs, as does California's law because POUs are not regulated by the PUC. Thus, neither federal nor state law requires POUs to provide access to their poles or restricts the amount a POU can charge for attachment. CONTINUED AB 1027 Page 6 Broadband Deployment Requires Access to Poles . In recognition that access to broadband is essential to virtually every aspect of modern life, breaking down barriers to broadband deployment and adoption has become a national and state priority. The FCC's National Broadband Plan released in March 2010 identified the expense and delay in obtaining access to utility poles as a major barrier to broadband deployment and recommended that Congress adopt a nationwide policy for access to poles, ducts, conduits, and rights-of-way. Accordingly, in April 2011, the FCC reformed its pole attachment rules to streamline access and establish attachment rates that compensate utilities for their actual costs of providing access. Although these rules continue to exempt POUs, the FCC has recommended that Congress amend the Pole Attachment Act of 1978 to eliminate this exemption. Several states, including West Virginia, Colorado, Kentucky, North Carolina, Oregon, Washington, Texas, and Virginia, have enacted pole attachment laws making rate provisions similar to the FCC's applicable to POUs. POU Attachment Rates . While pole attachment rates charged by IOUs generally range from under $3 to $15, the rates some POUs charge cable companies have been as high as $75 in recent years. Cable companies claim that POUs are charging rates beyond their actual costs and are using pole attachment fees for general fund revenue, especially in recent years during the economic downturn. However, some POUs claim that their attachment rates are high due to unique local requirements and lack of economies of scale enjoyed by IOUs. Comments According to the author's office, this bill creates parity by requiring POUs to provide cable and telephone companies access to utility poles and support structures at rates, terms and conditions the same as those applicable to IOUs, ensures an open and public process for setting fair pole attachment rates, and will increase affordable access to broadband in communities served by POUs. FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes Local: Yes CONTINUED AB 1027 Page 7 SUPPORT : (Verified 8/16/11) California Cable & Telecommunications Association AT & T California Association of Competitive Telecommunications Companies California Communication Association Charter Communication Comcast Cox Communications CTIA - The Wireless Association Frontier Communications Inland empire Economic Partnership Time Warner Cable OPPOSITION : (Verified 8/16/11) California Municipal Utilities Association City of Burbank City of Glendale Water and Power City of Los Angeles City of Pasadena City of Riverside Modesto Irrigation District Southern California Public Power Authority Turlock Irrigation District ARGUMENTS IN SUPPORT : The sponsors of the bill, the California Cable and Telecommunications Association (CCTA) claim that "California local publicly owned electric utility pole attachment rates are unilaterally set by the local governing bodies, allowing them to act in a monopolistic manner without any redress if the rate is clearly excessive. CCTA believes this bill is aimed at developing an open and transparent process for the establishment of fees that comply with state requirements is essential for god government." ARGUMENTS IN OPPOSITION : The California Municipal Utilities Association writes, "On behalf of our consumers, the California Municipal Utilities Association (CMUA) regrettably remains OPPOSED to AB 1027 (Buchanan) regarding publicly owned utilities (POU) pole attachment rates. CONTINUED AB 1027 Page 8 However, we are working with the author and hope to find a solution to address our concerns. "While the goal of accelerating the pace of broadband deployment and adoption is laudable, AB 1027 benefits private companies at the expense of electric ratepayers and publicly owned utilities. "We appreciate the author's acceptance of recent amendments, however we believe that they do not go far enough to ensure that our ratepayers are protected against subsidizing for-profit corporations. "CMUA and the other POU organizations have provided suggested amendments to the author that outline the responsibility of the utilities to provide an open and transparent process and ensure that the rates are based upon actual costs." ASSEMBLY FLOOR : 70-4, 6/3/11 AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Beall, Bill Berryhill, Block, Blumenfield, Bonilla, Bradford, Brownley, Buchanan, Butler, Campos, Cedillo, Chesbro, Conway, Cook, Davis, Dickinson, Donnelly, Eng, Feuer, Fletcher, Fong, Fuentes, Furutani, Galgiani, Garrick, Gatto, Gordon, Grove, Hagman, Halderman, Hall, Harkey, Hayashi, Hill, Huber, Hueso, Huffman, Jones, Knight, Lara, Logue, Bonnie Lowenthal, Ma, Mendoza, Miller, Mitchell, Monning, Nielsen, Norby, Pan, Perea, V. Manuel Pérez, Portantino, Silva, Skinner, Smyth, Solorio, Swanson, Torres, Valadao, Wagner, Wieckowski, Williams, Yamada, John A. Pérez NOES: Jeffries, Mansoor, Morrell, Olsen NO VOTE RECORDED: Charles Calderon, Carter, Beth Gaines, Gorell, Roger Hernández, Nestande RM:do 8/16/11 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END **** CONTINUED AB 1027 Page 9 CONTINUED