BILL ANALYSIS Ó SB 1112 Page 1 Date of Hearing: August 10, 2016 ASSEMBLY COMMITTEE ON APPROPRIATIONS Lorena Gonzalez, Chair SB 1112 (Cannella) - As Amended August 1, 2016 ----------------------------------------------------------------- |Policy |Utilities and Commerce |Vote:|15 - 0 | |Committee: | | | | | | | | | | | | | | ----------------------------------------------------------------- Urgency: No State Mandated Local Program: NoReimbursable: No SUMMARY: This bill authorizes the California Public Utilities Commission (PUC) to retroactively approve, or conditionally approve, transactions by small water or sewer corporations valued at $5 million or less, when the utility fails to obtain prior approval. Specifically, this bill: 1)Requires water or sewer system corporations, or an entity merging with or acquiring control of a water or sewer system corporation, with less than 2,000 service connections, to obtain prior approval from the PUC before entering into a transaction related to property subject to and valued at $5 SB 1112 Page 2 million or less. 2)Provides that if a water or sewer system corporation, or an entity merging with or acquiring control of a water or sewer system corporation, fails to obtain prior approval, the transaction is voidable by the PUC unless the PUC takes the following action: a) Retroactively approves the transaction upon a determination that the transaction is in the best interests of both the corporation and its ratepayers. b) Conditionally approves the transaction, subject to specified conditions that would ensure the transaction is in the best interest of the corporation and its ratepayers. 3)Authorizes the PUC to delegate the authority to make the determinations in this bill to the director of the division that investigates water and sewer system service quality issues and analyzes and processes utility rate change requests. FISCAL EFFECT: The PUC indicates minor cost savings associated with not having to void future accidental asset sales. This will reduce PUC attorney workload associated with locating the last legal owner of record and sorting out property rights. COMMENTS: SB 1112 Page 3 1)Background. The PUC has jurisdiction over 12 sewer and 108 water companies that provide water service to about 16% of California's residents. Ninety-four of these water utilities have service connections of 2,000 or less. 2)Purpose. This bill is sponsored by the PUC. According to the PUC, there have been instances when small water corporations sell their utilities and are unaware that they must first get approval from the PUC for any transactions involving the "property necessary and useful in the performance of its duties to the public," as required by Public Utilities Code Section 851. In those instances, the PUC's only option is to void the sale. When this occurs, PUC staff must track down the original owner and explain that the sale is now void. Locating the original owner may be difficult, as the owner may have died, may be out of state, or not able to cooperate. Although the PUC attempts to educate owners of these utilities of their many responsibilities, sales may still occur without PUC prior approval, particularly when the operator dies and a family member inherits the utility and is not aware of the responsibilities and requirements. The PUC has provided recent examples that have surfaced with January Water Company, Wendell Water Company, Sonoma Springs Water Company, Black Butte Water Company and Live Oak Springs Water Company. This bill would provide the PUC some discretion to make a post-sale approval, or conditional approval, determination for transactions involving small water and sewer utilities, those with 2,000 service connections or less, for specified transactions valued at $5 million or less. 3)Urgency amendments. The author proposes to add an urgency clause to this bill to allow the PUC to immediately resolve transactions that have been voided under existing law. Analysis Prepared by:Misty Feusahrens / APPR. / (916) SB 1112 Page 4 319-2081