request for approval of Telecommunication leases between SCEC and MCImetro access transmission services LLC pursuant to GO 173 Accepted

Transcription

1 STATE OF CALIFORNIA EDMUND G. BROWN JR., Governor PUBLIC UTILITIES COMMISSION 505 Van Ness Avenue San Francisco CA Southern California Edison IEC (Corp ID 6096) Status of Advice Letter 130 As of March 27, 2014 Subject: request for approval of Telecommunication leases between SCEC and MCImetro access transmission services LLC pursuant to GO 173 Division Assigned: Telecommunications Date Filed: Date to Calendar: Authorizing Documents: None Disposition: Effective Date: Accepted Resolution Required: No Resolution Number: None Commission Meeting Date: None CPUC Contact Information: AL Certificate Contact Information: Darrah Morgan

2 STATE OF CALIFORNIA EDMUND G. BROWN JR., Governor PUBLIC UTILITIES COMMISSION 505 Van Ness Avenue San Francisco CA To: Telecommunications Carrier Filing Advice Letter From: Telecommunications Division PAL Coordinator Subject: Your Advice Letter Filing The Telecommunications Division of the California Public Utilities Commission has processed your recent Advice Letter (AL) filing and is returning an AL status certificate for your records. The AL status certificate indicates: Advice Letter Number Name of Filer CPUC Corporate ID number of Filer Subject of Filing Date Filed Disposition of Filing (Accepted, Rejected, Withdrawn, etc.) Effective Date of Filing Other Miscellaneous Information (e.g., Resolution, if applicable, etc.) The Telecommunications Division has made no changes to your copy of the Advice Letter Filing; please review your Advice Letter Filing with the information contained in the AL status certificate, and update your Advice Letter and tariff records accordingly. All inquiries to the California Public Utilities Commission on the status of your Advice Letter Filing will be answered by Telecommunications Division staff based on the information contained in the Telecommunications Division's PAL database from which the AL status certificate is generated. If you have any questions on this matter please contact the: Telecommunications Division PAL Coordinator at (415) , or by to

3 Megan Scott-Kakures Vice President, Regulatory Operations February 28, 2014 ADVICE 130 (U 6096-C) PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA COMMUNICATIONS DIVISION SUBJECT: Request for Approval of Telecommunications Leases Between Southern California Edison Company and MCImetro Access Transmission Services LLC Pursuant to General Order 173 PURPOSE Pursuant to General Order 173, 1 Southern California Edison Company (SCE) respectfully requests approval from the California Public Utilities Commission (Commission or CPUC) under Public Utilities Code Section 851 to lease to MCImetro Access Transmission Services LLC (MCImetro) certain underground conduit as specified in two separate underground conduit agreements, each of which were executed by SCE and MCImetro (collectively, the Parties) on February 12, The proposed leases are described in more detail below. 1 General Order 173 makes permanent the former pilot program regulations for Section 851 advice letters, as adopted or amended in CPUC Resolutions ALJ-186, ALJ-202, ALJ-244, and ALJ-272 (Section 851 Pilot Program). The General Order authorizes regulated utilities to request CPUC approval of Section 851 transactions of certain transactions transferring interests in utility property valued at $5 million or less by advice letter. 2 The Commission recently approved SCE s similar requests to lease fiber optic cables through the Section 851 Pilot Program, which was made permanent in General Order 173 (see footnote 1). See Advice Letter 105 (filed on January 20, 2012 and effective February 19, 2012), where SCE requested and received approval by the CPUC to lease fiber optic cables to U.S. TelePacific Corp; Advice Letter 111 (filed on July 9, 2012 and effective October 18, 2012), where SCE requested and received approval to lease fiber optic cables to MCImetro; Advice Letter 123 (filed on August 12, 2013 and effective September 3, 2013) where SCE requested and received approval to lease fiber optic cable to MCImetro; and Advice Letter 128 (filed on December 30, 2013 and effective January 30, 2014) where SCE requested and received approval to lease fiber optic cable to MCImetro. P.O. Box Rush Street Rosemead, California (626) Fax (626)

4 (U 6096-C) February 28, 2014 BACKGROUND SCE owns and maintains underground conduit systems within its service territory. The primary purpose of this system is electric system operations. To make productive use of available capacity in the underground conduit system, SCE licenses or leases available capacity to telecommunications companies operating within SCE s service territory when third party use of the capacity will not interfere with delivering reliable electric service. All of the underground conduit systems subject to the leases were constructed for electric utility purposes. No construction by SCE will be necessary to implement the leases. Since the leased portion of the underground conduit system represents excess capacity, the lease will not diminish the reliability of electric system operations. The leases will contribute to increased competition in the telecommunications marketplace and will provide additional ratepayer revenue. SCE s Underground Conduit Leases with MCImetro On June 6, 1994, SCE and Access Transmission Services, Inc. (ATS) (the predecessor to MCImetro) executed a Conduit Use Agreement that permitted ATS to exclusively license the installation of one fiber optic cable (Cable) within a 4,666 lineal-foot portion of five-inch underground conduit on portions of SCE s underground conduit system in the City of Beverly Hills. The original conduit agreement had a twenty (20) year term that expires on June 5, 2014, and an amendment that includes a 2,450 foot extension of the Cable for an overall total of 7,116 feet of Cable. Additionally, on August 1, 1994, SCE and Metropolitan Fiber Systems of California (MFS) (also a predecessor to MCImetro) executed a Cable License Agreement that permitted MFS to exclusively license the installation of three innerducts and one Cable (in one of the three innderducts) all within the same 3,285 lineal-foot portion of SCE s Underground System in the City of Beverly Hills. The original Cable License Agreement had a twenty (20) year term that expires on July 31, On February 12, 2014, SCE and MCImetro executed two separate Underground Conduit Lease Agreements (Beverly Hills II and Beverly Hills III, respectively) whereby SCE agreed to grant MCImetro exclusive leases to underground conduits that are covered under the original agreements and that are along specified portions of SCE s underground conduit system. MCImetro intends to use the conduits to continue to supplement its telecommunications services to its customers. Pursuant to the February 12, 2014 Underground Conduit Lease Agreements, the lease transactions are subject to CPUC approval, which SCE seeks through this advice letter. Upon CPUC approval, the Underground Conduit Lease Agreements will supersede the original agreements (which would expire on June 5, 2014, and July 31, 2014, respectively). The lease transactions under the February 12, 2014 Underground Conduit Lease Agreements each have a ten (10) year term with a five (5) year renewal option.

5 (U 6096-C) February 28, 2014 The leases specify varying fixed annual payments (Annual Fee) by MCImetro to SCE for the use of the underground conduit. The Annual Fee for the Beverly Hills II agreement is Twenty Three Thousand Dollars ($23,000.00). The Annual Fee for the Beverly Hills III agreement is Six Thousand Nine Hundred Dollars ($6,900.00). Based upon its experience with other conduit transactions, its knowledge of the marketplace, and the arms-length negotiations with MCImetro, SCE believes that the Annual Fees are equivalent to the fair-market rental value of the specific conduit. Using a 12 percent discount rate derived from SCE's Capital Asset Pricing Model (CAPM) analysis of its telecommunications customers, the net present value of the revenue from the Beverly Hills II lease is $175,448, and the net present value of the Beverly Hills III lease is $52,634. The combined net present value of both leases is $228,082. INFORMATION REQUIRED UNDER RULES 3 AND 4 OF GENERAL ORDER 173 Rule 3 Requirements SCE is permitted to file this advice letter seeking CPUC approval under Section 851 because the company believes it has satisfied the eligibility requirements set forth in Rule 3 of General Order 173: 3a: The activity proposed in the transaction will not require environmental review by the CPUC as a Lead Agency under California Environmental Quality ACT (CEQA). The lease is not a project for the purposes of the California Environmental Quality Act (CEQA). There is no work that requires CEQA review because the underground conduits subject to the lease are already in place and no new construction will occur by SCE to make use of the capacity transferred to MCImetro via the lease. 3b: The transaction will not have an adverse effect on the public interest or on the ability of the utility to provide safe and reliable service to customers at reasonable rates. This transaction is in the public interest and will not diminish the safety or reliability of electric system operations because the underground conduits are excess capacity and the transaction employs existing utility infrastructure, will contribute to increased competition in the telecommunications marketplace, and will provide additional ratepayer revenue.

6 (U 6096-C) February 28, c: Any financial proceeds from the transaction will either be booked to a memorandum account for distribution between shareholders and ratepayers during the next general rate case or be immediately divided between shareholders and ratepayers based on a specific distribution formula previously approved by the Commission for that utility. The financial proceeds received by SCE from the lease will be allocated between SCE s ratepayers and shareholders through the Gross Revenue Sharing Mechanism as described in SCE s response to Rule 4e below. 3d: If the transaction results in a fee interest transfer of real property, the property does not have a fair market value in excess of $5 million. Not applicable because no real property is at issue. 3e: If the transaction results in a sale of a building, the building does not have a fair market value in excess of $5 million. Not applicable because no sale of a building is at issue. 3f: If the transaction is for the sale of depreciable assets, the assets do not have a fair market value in excess of $5 million. Not applicable because no sale of an asset is at issue. 3g: If the transaction is a lease or a lease-equivalent, the total net present value of the lease payments, including any purchase option, does not have a fair market value in excess of $5 million, and the term of the lease will not exceed 25 years. The net present value of the Beverly Hills II lease is $175,448, and the net present value of the Beverly Hills III lease is $52,634. The maximum net present value of the lease is below the $5 million limit for eligibility in General Order 173. The initial term of the lease is 10 years. There is no purchase option. 3h: If the transaction conveys an easement, right-of-way, or other less than fee interest in real property, the fair market value of the easement, right-of-way, or other interest in the property does not exceed $5 million. Not applicable because no transfer of an interest in real property is at issue. 3i: The transaction will not materially impact the ratebase of the utility. Due to the small amount of revenue derived from this transaction compared to SCE s ratebase, the transaction will not materially impact SCE s ratebase.

7 (U 6096-C) February 28, j: If the transaction is a transfer or change in ownership of facilities currently used in regulated utility operations, the transaction will not result in a significant physical or operational change in the facility. Not applicable because the underground conduits to be leased are not currently used for regulated electric utility operations. 3k: The transaction does not warrant a more comprehensive review that would be provided through a formal Section 851 application. This transaction is typical of transactions for which the Section 851 Pilot Program was developed. This transaction does not contain any issues that would trigger a need for a more comprehensive review via a formal Section 851 application. Rule 4 Requirements Rule 4 requires that the following information be included in advice letters submitted under General Order 173: 4a: Identity and addresses of all parties to the proposed transaction. Southern California Edison Company 2244 Walnut Grove Avenue Rosemead, CA Verizon 2400 North Glenville Drive Dept /107 Richardson, TX Verizon is the parent company of MCImetro, which is why Verizon is listed as the contact party for purposes of Rule 4a and in the Notice provision on page 9 of this advice letter. 4b: A complete description of the property, including its present location, condition, and use. The Beverly Hills II lease grants MCImetro the exclusive right to use one innerduct, including any cables installed in the innerduct within a 7,116 lineal-foot portion of SCE s underground conduit system. The conduit at issue is currently licensed to MCImetro. The Beverly Hills III lease grants MCImetro the exclusive right to use one innerduct, including any cables installed in the innerduct within a 3,285 lineal-foot portion of SCE s underground conduit system. The conduit at issue is currently licensed to MCImetro.

8 (U 6096-C) February 28, c: Transferee s intended use of the property. MCImetro intends to use the underground conduits to supplement its telecommunications services to its customers. 4d: A complete description of the financial terms of the proposed transaction. The Beverly Hills II lease requires an Annual Fee of $23, The net present value of the lease is $175,446 The Beverly Hills III lease requires an Annual Fee of $6, The net present value of the lease is $52,634. 4e: A description of how the financial proceeds of the transaction will be distributed. D approved a settlement between SCE and the Office of Ratepayer Advocates (ORA) concerning SCE s application for a revenue sharing mechanism for certain other operating revenues. The adopted Gross Revenue Sharing Mechanism allocates revenues resulting from non-tariffed products and services between shareholders and ratepayers. In the settlement, SCE and ORA agreed to classify all existing non-tariffed products and services as either active or passive. The gross revenue from active products and services is allocated 90 percent to shareholders and 10 percent to ratepayers; passive products and services are allocated 70 percent-30 percent. The classifications are listed in Attachment A to the settlement agreement and were subsequently affirmed in Resolution E-3639 (effective May 15, 2000, approving Advice Letter 1286-E/ 1286-E-A). They are also filed as Preliminary Statement Part G to SCE s tariffs. The leasing of unused underground conduit in SCE s underground conduit system was an existing non-tariffed product or service at the time the settlement agreement was executed. Attachment A to the settlement agreement classifies Use of Transmission Towers, Distribution Poles, Facilities, Conduits, Ducts and Streetlight Poles as Passive. SCE s lease with MCImetro is a lease of underground conduit on SCE s underground conduit system. SCE s participation in the lease is therefore classified as passive. The annual gross revenue from the lease will be allocated 70 percent to shareholders and 30 percent to ratepayers. 4f: A statement of the impact of the transaction on ratebase and any effect on the ability of the utility to serve customers and the public. Due to the small amount of revenue derived from this transaction compared to SCE s ratebase, the transaction will not materially impact SCE s ratebase.

9 (U 6096-C) February 28, 2014 This transaction is in the public interest and will not diminish the safety or reliability of electric system operations because the underground conduits are excess capacity and the transaction employs existing utility infrastructure, will contribute to increased competition in the telecommunications marketplace, and will provide additional ratepayer revenue. 4g: For sales of real property and depreciable assets, the original cost, present book value, and present fair market value, and a detailed description of how the fair market value was determined (e.g., appraisal). Not applicable because no sale is at issue. 4h: For leases of real property, the fair market rental value, a detailed description of how the fair market rental value was determined, and any additional information necessary to show compliance with Rule 3(g). Not applicable because no real property is at issue. 4i: For easements or rights-of-way, the fair market value of the easement or right-ofway and a detailed description of how the fair market value was determined. Not applicable because no easements or rights-of-way are at issue. 4j: A complete description of any recent past (within the prior two years) or anticipated future transactions that may appear to be related to the present transaction, such as sales or leases of real property that are located near the property at issue or that are being transferred to the same transferee; or for depreciable assets, sales of similar assets or sales to the same transferee. There are no recent past or anticipated future transactions that may appear to be related to the lease. The original licenses were executed more than two years ago (June 6, 1994, and August 1, 1994). 4k: Sufficient information and documentation (including environmental documentation) to show that all of the eligibility criteria stated in Rule 3 have been met. As presented in the discussion on Rule 3, SCE believes that all applicable eligibility criteria stated in Rule 3 have been satisfied. 4l: The filing utility may submit additional information to assist in the review of the advice letter, including recent photographs, scaled maps, drawings, etc. No additional information is being submitted.

10 (U 6096-C) February 28, m: Environmental Information: If the applicant believes that the transaction is not a project under CEQA, the applicant shall include an explanation of its position. The lease is not a project for the purposes of CEQA. There is no work that requires CEQA review because the underground conduits subject to the lease are already in place and no new construction will occur by SCE to make use of the capacity transferred to MCImetro via the lease. TIER DESIGNATION Pursuant to Section 851, General Order 96-B, and General Order 173, this advice letter is submitted with a Tier 2 designation. EFFECTIVE DATE This filing shall become effective when approved by the Director of the Communications Division, the Executive Director, or the Commission. NOTICE Anyone may object to this advice letter within the deadline set below by sending a written protest to: Telecommunications Advice Letter Coordinator Communications Division California Public Utilities Commission 505 Van Ness Avenue, 3rd Floor San Francisco, CA TD_PAL@cpuc.ca.gov Copies should also be mailed to the attention of the Director, Communications Division (same address above). The protest must state specifically the grounds on which it is based. The protest must be received by the Telecommunications Advice Letter Coordinator no later than 20 days after the date that the advice letter was filed. On or before the day that the protest is sent to the Telecommunications Advice Letter Coordinator, the protestant must send a copy of the protest via facsimile or electronically to: Megan Scott-Kakures Vice President, Regulatory Operations Southern California Edison Company 8631 Rush Street Rosemead, CA Facsimile: (626) AdviceTariffManager@sce.com

11 (U 6096-C) February 28, 2014 Leslie E. Starck Senior Vice President, Regulatory Affairs c/o Karyn Gansecki Southern California Edison Company 601 Van Ness Avenue, Suite 2030 San Francisco, CA Facsimile: (415) and (415) Karyn.Gansecki@sce.com Verizon 2400 North Glenville Drive Dept /107 Richardson, TX Patty.Mcmurray@verizon.com To obtain information about the Commission s procedures for advice letters and protests, go to the Commission s Internet site ( and look for document links to General Order 96-B. In accordance with Section 4, et seq., of General Order 96-B, SCE is serving copies of this advice filing to the interested parties shown on the attached General Order 96-B service list. In accordance with Telecommunications Industry Rule 10(2) of General Order 96-B, SCE is serving copies on the Communications Division advice letter list identified as Any Advice Letter not fitting within the preceding categories. Furthermore, in accordance with Rule 5 of General Order 173, SCE is serving copies on the CPUC s Director of the Communications Division, the Office of Ratepayer Advocates, and the Commission Energy Division staff handling CEQA issues. SCE is also serving copies on the cities and counties where the property subject to this transaction is located (see Appendix A for list). Address change requests to the General Order 96-B service list should be directed by electronic mail to AdviceTariffManager@sce.com or at (626) For changes to all other service lists, please contact the Commission s Process Office at (415) or by electronic mail at Process_Office@cpuc.ca.gov. Further, in accordance with Public Utilities Code Section 491, notice to the public is hereby given by filing and keeping the advice filing at SCE s corporate headquarters. To view other SCE advice letters filed with the Commission, log on to SCE s web site at

12 (U 6096-C) February 28, 2014 For questions, please contact Tana Lakin at (626) or by electronic mail at tana.lakin@sce.com or Gloria Ing at (626) or by electronic mail at gloria.ing@sce.com. Southern California Edison Company /s/ MEGAN SCOTT-KAKURES Megan Scott-Kakures MSK:tl/gi:sq cc (via ): RD3@cpuc.gov (Ryan Dulin, Director of Communications Division) JOC@cpuc.ca.gov (Joe Como, Acting Director, Office of Ratepayer Advocates) BOR@cpuc.ca.gov (Mary Jo Borak, Energy Division) JMU@cpuc.ca.gov (Jensen Uchida, Energy Division)

13 APPENDIX A Cities for Beverly Hills II Lease Beverly Hills Cities for Beverly Hills III Lease Beverly Hills Counties Los Angeles Counties Los Angeles

14 CALIFORNIA PUBLIC UTILITIES COMMISSION Advice Letter Filing Summary Sheet (PAL) Company Name: Southern California Edison Company Address: P.O. Box 800, 8631 Rush Street City, State, ZIP:: Rosemead, CA (Date Filed / Received Stamp by CPUC Industry Division) Date AL served on parties: 2/28/14 CPUC Utility Number: U 6096-C GRC-LEC URF-Carrier Other Commission Resolution Requested Carrier of Last Resort (See D ) Filing AL #: 130 Requested Effective Date: upon approval AL Tier I II III Name: Address: Phone No.: Fax No.: Filer Darrah Morgan advicetariffmanager@sce.com Certif. Darrah Morgan advicetariffmanager@sce.com (Name, address & Phone and FAX numbers are Required for Filer ) Tariff Schedules (see keyword list on reverse): None Keyword: Contracts No. Tariff Sheets: -0- For Contract Keyword, Type: Government Other Beverly Hills II: Date Executed 2/12/14 Contract Total Rev ($) 230,000 (10-year term) ($) 115,000 (5-year renewal option) Beverly Hills III: Date Executed 2/12/14 Contract Total Rev ($) 69,000 (10-year term) ($) 34,500 (5-year renewal option) Subject of filing (Service(s) included): Request for Approval of Telecommunications Leases Between Southern California Edison Company and MCImetro Access Transmission Services LLC Pursuant to General Order 173 Authorization for filing: General Order 173 (Resolution #, Decision #, etc.) Affected services: (Other services affected, pending or replacement AL filings) Rate Element(s) affected and % change: (Non-recurring and / or recurring) Customer Notice Required (if so, please attach) Notes/Comments: (Other information & reference to advice letter, etc.) Confidential treatment requested? Yes No If yes, specification of confidential information: Confidential information will be made available to appropriate parties who execute a nondisclosure agreement. Name and contact information to request nondisclosure agreement/access to confidential information: File Protest and/or Correspondence to: Director, Telecommunications Division 505 Van Ness Ave., San Francisco, CA and if you have capability, ALSO to: TD_PAL@cpuc.ca.gov Protest also must be served on utility: (see utility advice letter for more information) GRC-LEC = Cost of Service LEC Carrier URF-Carrier = Uniform Regulatory Framework Carrier (see D /D ) OTHER = Wireless (CMRS) Carrier

15 (FOR CPUC USE ONLY) Resolution Required Executive Action Resolution Req d. TD Suspension on: / / Comm. Suspension on: / / Resolution No.: T - Rev. 09/24/07 Supv. / Analyst / Due Date to Supv.: Analyst Completion Date: Supervisor Approval Date: AL / Tariff Effective Date: Notes: