BILL ANALYSIS �
AB 1027
Page 1
Date of Hearing: April 25, 2011
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Steven Bradford, Chair
AB 1027 (Buchanan) - As Amended: April 25, 2011
SUBJECT : Energy: Local Publicly Owned Electric Utilities:
utility pole and support structures.
SUMMARY : 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 cable television corporations, video
service providers, and telephone corporations. Specifically,
this bill :
1) Requires local publicly owned electric utilities (POU) and
irrigation districts (ID) to make appropriate space and capacity
on and in a utility pole and support structure owned or
controlled by the local publicly owned electric utility
available for use by a cable television corporation, video
service provider, or telephone corporation (Proponents).
2) Excludes existing contracts prior to the enactment of this
part, which shall remain valid until the contract, rate, term or
condition expires or is terminated according to its terms, or
until the local POU/ID proposes a change in the rate, term or
condition in the contract. Annual rates unspecified in an
existing contract are subject to the provisions in this bill.
3) Requires a POU or ID to respond to Proponents' request for
use of a utility pole or support structure owned or controlled
by the local publicly owned electric utility within 45 days of
the request, or 60 days for requests to attach to over 300
poles. If the request is denied, the local publicly owned
electric utility shall provide the reason for the denial and the
remedy to gain access to the utility pole or support structure.
4) Clarifies that no additional authority is granted herein to a
local publicly owned electric utility to impose a fee that is
not otherwise authorized by law.
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5) States that a local POU/ID may require an additional one-time
charge equal to three years of the annual fee for attachments
reasonably shown to have been made after January 1, 2012,
without authorization.
6) Limits the annual fee charged by a POU/ID for the use of a
utility pole by a Proponent is not to exceed an amount
determined by multiplying the percentage of the total usable
space which is occupied by the pole attachment by the annual
costs of ownership of the pole and its supporting anchor. It
shall be presumed, subject to factual rebuttal, that a single
attachment to a pole by a Proponent occupies one foot of usable
space and that an average utility pole contains 13.5 feet of
usable space.
7) Mandates that the annual fee charged by a local publicly
owned electric utility for use of a support structure by a
Proponent shall not exceed the local publicly owned electric
utility's annual costs of ownership of the percentage of the
volume of the capacity of the structure rendered unusable by the
equipment of the Proponent.
8) Specifies procedures for setting or increasing a fee charged
by the local publicly owned electric utility to a Proponent for
a pole attachment.
9) Excludes jointly-owned poles from certain provisions in the
bill.
10)States that the use of a utility pole or support structure by
a cable television corporation,
video service provider, or telephone corporation shall comply
with PUC General Order 95 and all other applicable provisions of
law.
EXISTING LAW :
1) Defines "Public Utilities" as private corporations and
persons that own, operate, control, or manage a line, plant, or
system for the transportation of people or property, the
transmission of telephone and telegraph messages, or the
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production, generation, transmission, or furnishing
of heat, light, water, power, storage, or wharfage directly or
indirectly to or for the public, and common carriers.
2) Specifies that public utilities are subject to control by the
Legislature.
3) Exempts locally owned electric utilities from federal
regulations of pole attachment rental rates.
4) Mandates that pole rental rates must be just, reasonable,
nondiscriminatory and sufficient.
5) Defines "Surplus Space" as that portion of the usable space
on a utility pole which has the necessary clearance from other
pole users, as required by the orders and regulations of the
California Public Utilities Commission (PUC), to allow its use
by a cable television corporation for a pole attachment.
6) Defines "Usable Space" as the total distance between the top
of the utility pole and the lowest possible attachment point
that provides the minimum allowable vertical clearance.
7) Defines "Annual Cost of Ownership" as the sum of the annual
capital costs and annual operation costs of the support
structure which shall be the average costs of all similar
support structures owned by the public utility.
8) States the "basis for computation of annual capital costs"
shall be historical capital costs less depreciation. The
accounts upon which the historical capital costs are determined
shall include a credit for all reimbursed capital costs of the
public utility. It shall not include costs for any property not
necessary for a pole attachment.
9) States "Depreciation" shall be based upon the average service
life of the support structure.
10) Mandates that a utility provide a cable television system or
any telecommunications carrier with nondiscriminatory access to
any pole, duct, conduit, or right-of-way owned or controlled by
it.
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FISCAL EFFECT : Unknown.
COMMENTS : According to the author, this bill creates a public
and transparent process for local publicly owned utilities and
irrigation districts to establish fair and reasonable pole
attachment rates. Under the current process, cable and
telephone companies are often charged very different pole
attachment rates, for poles in similar locations, based solely
on whether or not the pole is owned by a local publicly owned
utility or investor owned utility.
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
good government."
1)Background : On April 7, 2011, the Federal Communications
Commission (FCC) reformed
its pole attachment rules to "streamline access and reduce costs
for attaching broadband lines and wireless antennas to utility
poles."
The Commission recognized that "�r]ather than insisting upon a
single regulatory method for determining whether rates are just
and reasonable, courts and other federal agencies with rate
authority similar to its own evaluated whether an established
regulatory scheme produces rates that fall within a 'zone of
reasonableness.' For rates that fall within the zone of
reasonableness, the agency rate must undertake a 'reasonable
balancing' of the 'investor interest in maintaining financial
integrity and access to capital markets and the consumer
interest in being charged non-exploitative rates."
The FCC also opened an inquiry into how the Commission could
work with other government entities and the private sector to
improve polices for access to other physical spaces where wires
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and wireless broadband can be deployed, including rights-of-way
on other locations for wireless facilities.
The Commission's Order included: 1) setting a maximum timeframe
of 148 days for utility companies to allow pole attachments in
communications space, with a maximum of 178 days allowed for
attachments of wireless antennas on pole tops, and an extra 60
days for large orders. (Large orders would be 300 poles or 0.5
percent of a utility's total poles within a state, whichever is
less.); 2) set the rate for attachments by telecommunications
companies at or near the rate paid by cable companies; 3)
confirmed that wireless providers are entitled to the same rates
as other telecommunications carriers, and 4) clarified that the
denial by a utility of a request for an attachment must explain
the specific capacity, safety, reliability or engineering
concern.
Pole Attachments: 47 U.S.C. Section 224 : Section (e)(2)
provides the formula used prior to April 7, 2011. It states
that a utility shall apportion the cost of providing space on a
pole, duct, conduit, or right-of way other than the usable space
among entities so that such apportionment equals two-thirds of
the costs of providing space other than the usable space that
would be allocated to such entity under an equal apportionment
of such costs among all attaching entities.
In Section (e)(3) a utility requires apportioning the cost of
providing usable space among all entities according to the
percentage of usable space required for each entity.
The law also included the following safeguards: Section (f)(1)
stated that a utility shall provide a cable television system or
any telecommunications carrier with nondiscriminatory access to
any pole, duct, conduit, or right-of-way owned or controlled by
it. However, a utility providing electric service could deny a
cable television system or any telecommunications carrier access
to its poles, ducts, conduits, or rights-of-way, on a
non-discriminatory basis where there was insufficient capacity
and for reasons of safety, reliability and generally applicable
engineering purposes.
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The American Recovery and Reinvestment Act of 2009 (ARRA)
included a requirement that the FCC develop a national broadband
plan to ensure that every American had access to broadband
capability. On March 16, 2010, the Plan was released, and
identified access to rights-of-way-including access to poles-as
having a significant impact on the deployment of broadband
networks. In the National Broadband Plan, the FCC estimated
that pole attachments amount to 20 percent of the total cost of
deploying fiber-optic cable. Generally large telecom companies
paid about $20 per foot of pole annually while smaller
competitors paid about half of that. Cable companies paid about
$7 per foot per pole.
2) One size fits all : Currently, local publicly owned electric
utilities have the sole discretion over the rates they charge
communications providers for pole attachments. This bill would
create a process for local publicly owned electric utilities to
determine pole attachment rates by multiplying the percentage of
the total usable space which is occupied by the pole attachment
by the annual costs of ownership of the pole and its supporting
anchor. In other words, this basis for calculating the fee is
equal to 7.45 percent (1 feet divided by 13.5 feet = 7.45).
However, it is unclear if this assumption would allow the local
publicly owned electric utilities full cost recovery for pole
attachment agreements since the bill places a cap on the costs
that can be recovered.
CCTA and AT&T claim that the basis for this calculation would
establish fair and reasonable pole attachment rates.
Furthermore, CCTA notes that other states, such as West
Virginia, Colorado, Kentucky, North Carolina, Oregon,
Washington, Texas and Virginia, have enacted state laws to
regulate local publicly owned electric utilities pole attachment
rates, terms and conditions to mitigate escalated pole rates.
The Northern California Power Authority and the California
Municipal Utilities Association claim this cap provision would
not give them flexibility to determine actual costs. For
instance, the POU/IOU costs exceed the cap; they would
essentially be subsidizing the cable or telecommunication
equipment provider. According to the Sacramento Municipal
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Utility District (SMUD), this bill would prohibit POUs from
recovering the costs associated with the specialized attachments
for cell phone antennas that are placed on top of the utility
poles resulting in higher costs to SMUD ratepayers.
In the case of irrigation districts, which typically have
smaller service territories (or a proportionately small number
of ratepayers and a large geographic territory), this proposed
calculation may not permit recovery of the actual costs of
providing access to the pole. According to the Modesto
Irrigation District (MID), electric ratepayers of the state
would be required to bear the unrecovered costs, and will
receive no benefit in return. MID further claims that the cost
of pole attachments is a very small percentage of the overall
cost of providing broadband service so reducing the cost of the
pole attachments will not reduce the costs charged to consumers
for such services. MID ratepayers would essentially be paying
for the benefits of the private telecommunications companies.
MID states the difference in costs to its ratepayers could
exceed $725,000 annually.
The author and this committee may wish to add a provision in the
findings and declarations section of the bill that would
preclude the subsidizing of communications companies by
ratepayers for pole attachments.
3) What happens with the IOUs : Current California law pertaining
to IOUs states in Public Utilities Code Section 767.5 that
whenever a public utility (IOU) and a single or association of
cable television corporations are unable to agree on pole
attachment terms, the PUC shall establish and enforce the rates,
terms, and conditions for pole attachments and rearrangements so
as to assure an IOU the recovery of both of the following: 1) a
one-time reimbursement for actual costs incurred by the IOU for
rearrangements performed at the request of the cable television
corporation and; 2) an annual recurring fee computed as follows:
a) for each pole and supporting anchor actually used by the
cable television corporation, the annual fee shall be $2.50 or
7.4 percent of the IOUs annual cost of ownership for the pole
and supporting anchor, whichever is greater. If an IOU
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applies for a fee greater than $2.50, the annual fee shall be
7.4 percent of the IOUs annual cost of ownership for the pole
and supporting anchor, and
b) for support structures used by the cable television
corporation, other than poles or anchors, a percentage of the
annual cost of ownership for the support structure, computed
by dividing the volume or capacity rendered unusable by the
cable television corporation's equipment by the total usable
volume or capacity. Here "total usable volume or capacity"
means all volume or capacity in which the public utility's
line, plant, or system could legally be located, including the
volume or capacity rendered unusable by the cable television
corporation's equipment.
As seen in California's existing IOU formula, the annual fee is
capped but contains sufficient flexibility to ensure true
recovery. It states that an annual fee shall be $2.50 or 7.4
percent of the annual cost of ownership, whichever is greater.
According to CCTA, the pole attachment rates for regulated
investor owned electric utilities in California are
significantly less than those charged by local publicly owned
utilities and irrigation districts, depending on the regulated
utility and its costs.
4) Makes Accessibility Mandatory Without Safeguards : As noted
above, Congress and the FCC has a long history of ensuring that
electric utilities could deny access to a cable corporation if
it determined there was insufficient capacity and for reasons of
safety, reliability and generally applicable engineering
purposes.
As proposed in this bill, a local publicly owned electric
utility shall make appropriate space and capacity on and in a
utility pole and support structure owned or controlled by the
local publicly owned electric utility available for use by a
cable television corporation, video service provider, or
telephone corporation. The author and this committee may wish
to make an amendment that adds the long standing safeguards of
insufficient capacity, safety, reliability and engineering as
valid reasons for denying an application for a pole attachment.
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Utilities claim that not all poles are created equal. Houses,
population, traffic, soil conditions and wind all factor into
the safety and reliability of a pole.
5) Timelines for Approval : As noted above, on April 7, 2011,
the FCC in its Pole Attachment Order provided two new timetables
for approving pole attachments. The order would allow a maximum
timeframe of 148 days for utility companies to allow pole
attachments in communications space, with a maximum of 178 days
allowed for attachments of wireless antennas on pole tops, and
an extra 60 days for large orders as adopted on April 7, 2011.
As proposed in the bill, a local publicly owned electric utility
must respond to a request for use by a Proponent within 45 days
of the request or 60 days for requests to attach to over 300
poles. This is very similar to the recent FCC ruling. This bill
states that when a request is denied, the local publicly owned
electric utility shall provide in writing the response the
reason for the denial and the remedy to gain access to the
utility pole or support structure. This too is similar to what
the FCC recently ordered.
If a request to attach is accepted, the local publicly owned
electric utility will have 14 days to provide a cost estimate
based on the actual cost for the work necessary to accommodate
the attachment. In turn, the Proponent will have 14 days to
accept the cost estimate. After the acceptance, the publicly
owned electric utility will have 60 days, or 105 days in the
case of requests to attach to over 300 poles, to notify any
existing attachers that make ready work for a new attacher needs
to be performed.
According to CMUA, the acceptance or denial of a pole attachment
request may take more than 45 or 60 days depending on the
municipal utility staff size, the size of the request, and the
specific engineering of the pole in question as some pole have
more complex engineering than others and attachment engineering
reviews take longer for those poles.
The MID sees the value in setting forth a standard time frame
for responding to pole attachment requests, MID also believes
that there should be a provision for an extension of the
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standard time frame when circumstances warrant and upon
agreement of the parties. The author and this committee may
wish to allow an extension of the standard time frame for
special circumstances upon agreement of the parties .
REGISTERED SUPPORT / OPPOSITION :
Support :
AT&T
California Association of Competitive Telecommunications
Companies (CALTEL)
California Cable & Telecommunications Association (CCTA)
(Sponsor)
Verizon
Opposition :
California Municipal Utilities Association (CMUA)
Modesto Irrigation District (MID)
Northern California Power Agency (NCPA) (unless amended)
Sacramento Municipal Utility District (SMUD)
Southern California Public Power Authority (SCPPA)
Analysis Prepared by : DaVina Flemings and Sue Kateley / U. &
C. / (916) 319-2083