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
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|Policy |Utilities and Commerce |Vote:|15 - 0 |
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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
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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:
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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
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319-2081