Code Section Group

Public Utilities Code - PUC

DIVISION 1. REGULATION OF PUBLIC UTILITIES [201 - 3260]

  ( Division 1 enacted by Stats. 1951, Ch. 764. )

PART 1. PUBLIC UTILITIES ACT [201 - 2120]

  ( Part 1 enacted by Stats. 1951, Ch. 764. )

CHAPTER 4. Regulation of Public Utilities [701 - 922]

  ( Chapter 4 enacted by Stats. 1951, Ch. 764. )

ARTICLE 6. Transfer or Encumbrance of Utility Property [851 - 857]
  ( Article 6 enacted by Stats. 1951, Ch. 764. )

851.
  

A public utility, other than a common carrier by railroad subject to Part A of the Interstate Commerce Act (49 U.S.C. Sec. 10101 et seq.), shall not sell, lease, assign, mortgage, or otherwise dispose of, or encumber the whole or any part of its railroad, street railroad, line, plant, system, or other property necessary or useful in the performance of its duties to the public, or any franchise or permit or any right thereunder, or by any means whatsoever, directly or indirectly, merge or consolidate its railroad, street railroad, line, plant, system, or other property, or franchises or permits or any part thereof, with any other public utility, without first having either secured an order from the commission authorizing it to do so for qualified transactions valued above five million dollars ($5,000,000), or for qualified transactions valued at five million dollars ($5,000,000) or less, filed an advice letter and obtained approval from the commission authorizing it to do so. If the advice letter is uncontested, approval may be given by the executive director or the director of the division of the commission having regulatory jurisdiction over the utility. The commission shall determine the types of transactions valued at five million dollars ($5,000,000) or less, that qualify for advice letter handling. For a qualified transaction valued at five million dollars ($5,000,000) or less, the commission may designate a procedure different than the advice letter procedure if it determines that the transaction warrants a more comprehensive review. Absent protest or incomplete documentation, the commission shall approve or deny the advice letter within 120 days of its filing by the applicant public utility. The commission shall reject any advice letter that seeks to circumvent the five million dollar ($5,000,000) threshold by dividing a single asset with a value of more than five million dollars ($5,000,000), into component parts, each valued at less than five million dollars ($5,000,000). Every sale, lease, assignment, mortgage, disposition, encumbrance, merger, or consolidation made other than in accordance with the advice letter and approval from the commission authorizing it is void. The permission and approval of the commission to the exercise of a franchise or permit under Article 1 (commencing with Section 1001) of Chapter 5, or the sale, lease, assignment, mortgage, or other disposition or encumbrance of a franchise or permit under this article shall not revive or validate any lapsed or invalid franchise or permit, or enlarge or add to the powers or privileges contained in the grant of any franchise or permit, or waive any forfeiture.

This section does not prevent the sale, lease, encumbrance, or other disposition by any public utility of property that is not necessary or useful in the performance of its duties to the public, and any disposition of property by a public utility shall be conclusively presumed to be of property that is not useful or necessary in the performance of its duties to the public, as to any purchaser, lessee, or encumbrancer dealing with that property in good faith for value, provided that this section does not apply to the interchange of equipment in the regular course of transportation between connecting common carriers.

(Amended by Stats. 2010, Ch. 328, Sec. 202. (SB 1330) Effective January 1, 2011.)

852.
  

No public utility, and no subsidiary or affiliate of, or corporation holding a controlling interest in, a public utility, shall purchase or acquire, take or hold, any part of the capital stock of any other public utility, organized or existing under or by virtue of the laws of this state, without having been first authorized to do so by the commission; provided, however, that the commission may establish by order or rule categories of stock acquisitions which it determines will not be harmful to the public interest, and purchases within those categories are exempt from this section. Every assignment, transfer, contract, or agreement for assignment or transfer of any stock by or through any person or corporation to any corporation or otherwise in violation of any of the provisions of this article is void and of no effect, and no such transfer shall be made on the books of any public utility. Nothing in this section prevents the holding of stock previously lawfully acquired.

(Amended by Stats. 1989, Ch. 390, Sec. 1.)

853.
  

(a) This article does not apply to any person or corporation which transacts no business subject to regulation under this part, except performing services or delivering commodities for or to public utilities or municipal corporations or other public agencies primarily for resale or use in serving the public or any portion thereof, but shall apply to any public utility, and any subsidiary or affiliate of, or corporation holding a controlling interest in, a public utility, if the commission finds, in a proceeding to which the public utility is or may become a party, that the application of this article is required by the public interest.

(b) The commission may from time to time by order or rule, and subject to those terms and conditions as may be prescribed therein, exempt any public utility or class of public utility from this article if it finds that the application thereof with respect to the public utility or class of public utility is not necessary in the public interest. The commission may establish rules or impose requirements deemed necessary to protect the interest of the customers or subscribers of the public utility or class of public utility exempted under this subdivision. These rules or requirements may include, but are not limited to, notification of a proposed sale or transfer of assets or stock and provision for refunds or credits to customers or subscribers.

(c) The provisions of Sections 851 and 854 that prohibit any assignment, acquisition, or change of control without advance authorization from the commission, do not apply to the transfer of the ownership interest in a water utility, with 10,000 or fewer service connections, from a decedent to a member of the decedent’s family in the manner provided in Section 240 of the Probate Code or by a will, trust, or other instrument.

(d) It is the intent of the Legislature that transactions with monetary values that materially impact a public utility’s rate base should not qualify for expedited advice letter treatment pursuant to this article. It is the further intent of the Legislature that the commission maintain all of its oversight and review responsibilities subject to the California Environmental Quality Act, and that public utility transactions that jurisdictionally require a review by the commission, as the lead agency, under the act should not qualify for expedited advice letter treatment pursuant to this article. An advice letter may be filed for transactions by the public utility if the lead agency has completed the appropriate review under the California Environmental Quality Act for the transaction, and the commission is the responsible agency under the act. The advice letter shall be subject to approval by resolution voted upon by the commission.

(Amended by Stats. 2009, Ch. 370, Sec. 2. (AB 698) Effective January 1, 2010.)

853.2.
  

For a water or sewer system corporation or an entity merging with or acquiring control of a water or sewer system corporation with less than 2,000 service connections, the following shall apply to transactions valued at five million dollars ($5,000,000) or less, notwithstanding Sections 851 and 854:

(a) (1) A water or sewer system corporation or an entity merging with or acquiring control of a water or sewer system corporation shall receive the commission’s approval before entering into a transaction that would otherwise be subject to Section 851 or 854.

(2) If a water or sewer system corporation or an entity merging with or acquiring control of a water or sewer system corporation fails to receive the commission’s approval pursuant to paragraph (1), the transaction is voidable by the commission until the commission does either of the following:

(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 the fulfillment of specified conditions that would ensure that the transaction is in the best interests of both the corporation and its ratepayers.

(b) The commission may delegate the authority to make the determinations described in subdivision (a) to the director of the division that investigates water and sewer system service quality issues and analyzes and processes utility rate change requests.

(Added by Stats. 2016, Ch. 631, Sec. 1. (SB 1112) Effective September 25, 2016.)

854.
  

(a) No person or corporation, whether or not organized under the laws of this state, shall merge, acquire, or control either directly or indirectly any public utility organized and doing business in this state without first securing authorization to do so from the commission. The commission may establish by order or rule the definitions of what constitute merger, acquisition, or control activities which are subject to this section. Any merger, acquisition, or control without that prior authorization shall be void and of no effect. No public utility organized and doing business under the laws of this state, and no subsidiary or affiliate of, or corporation holding a controlling interest in a public utility, shall aid or abet any violation of this section.

(b) Before authorizing the merger, acquisition, or control of any electrical, gas, or telephone corporation organized and doing business in this state, where any of the utilities that are parties to the proposed transaction has gross annual California revenues exceeding five hundred million dollars ($500,000,000), the commission shall find that the proposal does all of the following:

(1) Provides short-term and long-term economic benefits to ratepayers.

(2) Equitably allocates, where the commission has ratemaking authority, the total short-term and long-term forecasted economic benefits, as determined by the commission, of the proposed merger, acquisition, or control, between shareholders and ratepayers. Ratepayers shall receive not less than 50 percent of those benefits.

(3) Not adversely affect competition. In making this finding, the commission shall request an advisory opinion from the Attorney General regarding whether competition will be adversely affected and what mitigation measures could be adopted to avoid this result.

(4) For an electric or gas utility, ensures the utility will have an adequate workforce to maintain the safe and reliable operation of the utility assets.

(c) Before authorizing the merger, acquisition, or control of any electrical, gas, or telephone corporation organized and doing business in this state, where any of the entities that are parties to the proposed transaction has gross annual California revenues exceeding five hundred million dollars ($500,000,000), the commission shall consider each of the criteria listed in paragraphs (1) to (8), inclusive, and find, on balance, that the merger, acquisition, or control proposal is in the public interest.

(1) Maintain or improve the financial condition of the resulting public utility doing business in the state.

(2) Maintain or improve the quality of service to public utility ratepayers in the state.

(3) Maintain or improve the quality of management of the resulting public utility doing business in the state.

(4) Be fair and reasonable to affected public utility employees, including both union and nonunion employees.

(5) Be fair and reasonable to the majority of all affected public utility shareholders.

(6) Be beneficial on an overall basis to state and local economies, and to the communities in the area served by the resulting public utility.

(7) Preserve the jurisdiction of the commission and the capacity of the commission to effectively regulate and audit public utility operations in the state.

(8) Provide mitigation measures to prevent significant adverse consequences which may result.

(d) When reviewing a merger, acquisition, or control proposal, the commission shall consider reasonable options to the proposal recommended by other parties, including no new merger, acquisition, or control, to determine whether comparable short-term and long-term economic savings can be achieved through other means while avoiding the possible adverse consequences of the proposal.

(e) The person or corporation seeking acquisition or control of a public utility organized and doing business in this state shall have, before the commission, the burden of proving by a preponderance of the evidence that the requirements of subdivisions (b) and (c) are met.

(f) In determining whether an acquiring utility has gross annual revenues exceeding the amount specified in subdivisions (b) and (c), the revenues of that utility’s affiliates shall not be considered unless the affiliate was utilized for the purpose of effecting the merger, acquisition, or control.

(g) Paragraphs (1) and (2) of subdivision (b) shall not apply to the formation of a holding company.

(h) For purposes of paragraphs (1) and (2) of subdivision (b), the legislature does not intend to include acquisitions or changes in control that are mandated by either the commission or the Legislature as a result of, or in response to any electric industry restructuring. However, the value of an acquisition or change in control may be used by the commission in determining the costs or benefits attributable to any electric industry restructuring and for allocating those costs or benefits for collection in rates.

(Amended by Stats. 2018, Ch. 626, Sec. 33. (SB 901) Effective January 1, 2019.)

854.2.
  

(a) The Legislature finds and declares all of the following:

(1) California’s electric and gas utilities provide essential services to California residents and businesses, which are necessary to maintaining the vitality of California’s economy.

(2) Consistent with Sections 913.4, 961, and 977, an adequately sized workforce of experienced electric and gas utility employees with the appropriate training and skills, as well as the knowledge of an electric or gas utility’s facilities and equipment, is essential to the safe, efficient, and uninterrupted provision of electrical and gas services. Safe and reliable electric and gas utility service is vital to public health, public safety, air quality, and reducing emissions of greenhouse gases.

(3) Changes in the ownership or control of an electrical corporation or gas corporation may create uncertainty regarding the safe, efficient, and continuous provision of safe and reliable electrical and gas service to California consumers, leading to economic instability.

(4) Mass displacement of electrical corporation or gas corporation workers as a result of a change in the ownership or control of an electrical corporation or gas corporation causes excessive reliance on the unemployment insurance system, and public social services and health programs, increasing costs to these vital governmental programs and placing a significant burden on the state and California taxpayers.

(5) The state has a compelling interest in ensuring that when there is a change in the ownership or control of an electrical corporation or gas corporation, the new employer maintains a qualified and knowledgeable workforce with the ability to ensure safe, efficient, reliable, and continuous service to California consumers and communities.

(b) For purposes of this section, the following definitions shall apply:

(1) “Change of control” means any event that triggers the application of Section 851 or 854, any material change in ownership of the electric corporation or gas corporation, its parent company or its holding company, or any filing seeking bankruptcy protection.

(2) (A) “Covered employee” means an individual who has been employed by an electrical corporation or gas corporation for at least 90 days immediately before a change of control affecting that individual’s principal place of employment. A change of control affects a covered employee’s principal place of employment where the change of control results in the predecessor employer transferring control of the place of employment to the successor employer.

(B) “Covered employee” does not include any of the following:

(i) A managerial, supervisory, or confidential employee.

(ii) A temporary employee.

(iii) A part-time employee who has worked less than 20 hours per week for the predecessor employer for at least 90 days immediately before the change of control.

(3) “Person” means a corporation as defined in Section 204, a person as defined in Section 205, any other individual, corporation, partnership, limited partnership, limited liability partnership, limited liability company, business trust, estate, trust, association, joint venture, agency, instrumentality, or any other legal or commercial entity, whether domestic or foreign.

(4) “Predecessor employer” means the person who controls the electric or gas utility before the change of control.

(5) “Principal place of employment” of an employee means the office or other facility of the electrical corporation or gas corporation where the employee is principally assigned to work by the predecessor employer.

(6) “Successor employer” means the person who controls the electrical corporation or gas corporation after the change of control.

(7) “Total compensation” means the combined value of the covered employee’s wages and benefits immediately before the change of control. Total compensation may be paid entirely as wages or in any combination of wages and fringe benefits, to be determined by the successor employer. Total compensation includes, but is not necessarily limited to, both of the following amounts:

(A) The covered employee’s hourly wage rate or the per diem value of the covered employee’s monthly salary.

(B) Employer payments toward the covered employee’s health and welfare and pension benefits. Employer payments toward health and welfare and pension benefits shall include only those payments that are recognized as employer payments under paragraphs (1) and (2) of subdivision (b) of Section 1773.1 of the Labor Code.

(8) “Transition period” means a period of 180 days immediately following the effective date of a change of control.

(c) (1) Except as otherwise provided in this section, a successor employer shall retain all covered employees for at least the transition period following a change of control, unless the commission approves a reduction in the workforce pursuant to subdivision (i). During the transition period, the successor employer shall not reduce the total compensation of a covered employee.

(2) During the transition period, a successor employer shall not terminate a covered employee without cause.

(3) A successor employer and a labor organization representing covered employees may, in a collective bargaining agreement, provide that the agreement supersedes the requirements of this section.

(d) No later than 15 days before the effective date of a change of control, the predecessor employer shall cause to be posted public notice of the change of control at each principal place of employment of any covered employee. The notice shall include the name of the predecessor employer and its contact information, the name of the successor employer and its contact information, and the effective date of the change of control. The notice shall be posted in a conspicuous place in a manner that is readily viewed by covered employees. No later than 15 days before the effective date of a change of control, the predecessor employer shall also cause the notice to be sent to any labor organization that represents covered employees.

(e) This part shall not be construed to limit the right of covered employees to bring legal action for wrongful termination.

(f) The rights and remedies provided pursuant to this section are in addition to, and are not intended to supplant, any existing rights or remedies.

(g) No later than 15 days before the effective date of a change of control, a predecessor employer shall provide to the successor employer the name, address, date of hire, total compensation, and classification of each covered employee.

(h) A successor employer shall retain the following written or electronic records for at least three years:

(1) The list provided to the successor employer pursuant to subdivision (g).

(2) Any offer of employment made to a covered employee.

(3) Any termination of a covered employee during a transition period, including the reasons for the termination.

(4) Any written evaluation of a covered employee.

(i) For two years after the transition period, a successor employer may reduce the total number of employees who would have qualified as covered employees during the 90-day period immediately before a change of control only if approved by the commission. The commission shall not authorize a successor employer to reduce the number of those employees except on a showing by a preponderance of the evidence of all of the following:

(1) The electrical corporation or gas corporation has conducted a study of the nature and scope of the work performed by those employees proposed to be eliminated and the study shows that neither the nature nor the scope of this work is necessary to providing safe and reliable utility service.

(2) There will be no reduction in the ability of those employees to prevent damage from or to respond to an emergency such as a wildfire, storm, flood, mudslide, or earthquake, or to gas leaks, electric outages, interconnection requests, work requested by others, locate and mark requests, or other utility services.

(3) There will be no reduction in the ability of the electrical corporation or gas corporation to respond to mutual aid requests of other utilities.

(j) A successor employer may terminate an employee with cause consistent with any applicable selective bargaining agreement during the period specified in subdivision (i).

(k) The provisions of this section are severable. If any provision of this section or its application is held invalid, that invalidity shall not affect other provisions or applications that can be given effect without the invalid provision or application.

(Added by Stats. 2018, Ch. 626, Sec. 34. (SB 901) Effective January 1, 2019.)

854.5.
  

(a) For purposes of this section, a “nonstate entity” means a company, corporation, partnership, firm, or other entity or group of entities, whether organized for profit or not for profit.

(b) The commission, by order, decision, motion, settlement, or other action, shall not establish a nonstate entity with any moneys other than those moneys that would otherwise belong to the public utility’s shareholders. A nonstate entity to be created with moneys from a public utility’s shareholders shall be subject to a 30-day review by the Joint Legislative Budget Committee prior to creation. This subdivision does not limit the authority of the commission to form an advisory committee or other body whose budget is subject to oversight by the commission and the Department of Finance.

(c) The commission shall not enter into a contract with a nonstate entity in which a person serves as an owner, director, or officer while serving as a commissioner. Any contract between the commission and a nonstate entity shall be void and cease to exist by operation of law, if a commissioner, who was a commissioner at the time the contract was awarded, entered into, or extended, becomes, on or after January 1, 2014, an owner, director, or officer of the nonstate entity while serving as a commissioner.

(d) Beginning June 1, 2014, a commissioner who acts as an owner, director, or officer of a nonstate entity that was established as a result of an order, decision, motion, settlement, or other action by the commission in which the commissioner participated, neglects his or her duty pursuant to Section 1 of Article XII of the California Constitution, and as a result the commissioner may be removed pursuant to that section by the Legislature, two-thirds of the membership of each house concurring.

(Amended by Stats. 2014, Ch. 546, Sec. 1. (SB 434) Effective January 1, 2015.)

855.
  

Whenever the commission determines, after notice and hearing, that any water or sewer system corporation is unable or unwilling to adequately serve its ratepayers or has been actually or effectively abandoned by its owners, or is unresponsive to the the rules or orders of the commission, the commission may petition the superior court for the county within which the corporation has its principal office or place of business for the appointment of a receiver to assume possession of its property and to operate its system upon such terms and conditions as the court shall prescribe. The court may require, as a condition to the appointment of such receiver, that a sufficient bond be given by the receiver and conditioned upon compliance with the orders of the court and the commission, and the protection of all property rights involved. The court shall provide for disposition of the facilities and system in like manner as any other receivership proceeding in this state.

(Added by Stats. 1980, Ch. 1078, Sec. 2.)

856.
  

Every officer, agent, or employee of a public utility, or of a subsidiary or affiliate of, or a corporation holding a controlling interest in, a public utility, and every other person subject to the requirements of this article, who violates or fails to comply with, or procures, aids, or abets any violation of, this article is guilty of a misdemeanor.

(Added by Stats. 1989, Ch. 390, Sec. 3.)

857.
  

(a) A public utility that owns real property acquired for purposes of obtaining a utility right-of-way, may lease that property to a governmental entity for purposes of a public park, if the utility retains the use of the right-of-way for public utility purposes.

(b) In determining whether a lease of real property to a governmental entity for park purposes is for fair value, the commission shall include the community benefits of parks and open space as a benefit to ratepayers.

(c) As used in this section, “community benefits” include, but are not limited to, improving public health, protecting the environment, and increasing recreational assets.

(Added by Stats. 2009, Ch. 448, Sec. 1. (AB 521) Effective January 1, 2010.)

PUCPublic Utilities Code - PUC