BILL ANALYSIS
SB 1025
Date of Hearing: July 12, 1995
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Charles Poochigian, Chair
SB 1025 (Peace) - As Amended: July 6, 1995
Policy Committee: Utilities & CommerceVote: 12-0
State Mandated Local Program: Yes Reimbursable: No
SUBJECT
Public utilities: water corporations.
This bill:
1) Requires a water corporation, when it sells any real property
to invest any net proceeds from the sale in water system
infrastructure, plant facilities, and properties that are
necessary or useful in the performance of its duties to the
public.
2) Limits the use of these proceeds for capital investment
purposes for a time period of 8 years after which any remaining
balances, including accrued interest, would be allocated to
ratepayers.
FISCAL EFFECT
1) The Department of Finance estimates minor and absorbable costs
to the Utilities Reimbursement Account for the Public Utilities
Commission (PUC) to consider reinvestments for infrastructure
improvements.
2) Unknown, probably minor, costs to local government for
enforcement; crimes and infractions disclaimer.
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3) The PUC anticipates no net effect on ratepayers.
COMMENTS
1) Existing law authorizes the PUC to regulate utilities,
including water corporations. The PUC is vested with the authority
to make decisions on whether or not to allow capital gains to
revert to shareholders, return the gains to ratepayers, or to
reinvest these gains in infrastructure improvements in the system.
2) There are approximately 250 investor-owned, PUC regulated,
water utilities providing service throughout California. These
water companies provide service to approximately 20% of the
state's population. The capital outlay demands on water companies
have escalated in recent years as state and federal safe drinking
water laws mandate increased water treatment, which often requires
improvement in water treatment facilities. Because of their small
size relative to traditional investor owned utilities, obtaining
financing for infrastructure improvements has been historically
difficult.
3) The PUC has issued several decisions in the area of
gain-on-sale (the disposition of the proceeds) from a sale of
non-used and useful property. In some instances, the PUC has
permitted a water company to allow the gains to revert to
shareholders. In other instances, the CPUC has required the water
company to flow all or part of the gains to ratepayers, often in
the form of lower rates. The PUC makes these decisions on a
case-by-case basis.
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