USA – CALIFORNIA Law and Practice Contributed by: Nora Sheriff, Gwenneth O’Hara, Samir Hafez, Antonio Carrejo and Timothy Lee, Buchalter LLP
The two principal laws governing the sale or transfer of these IOU-owned assets are Public Utilities Code Sections 851 and 854. Section 851 (Transfer of Property) Under Section 851, IOUs are required to obtain CPUC approval before selling, leasing, assigning or other- wise disposing of any property necessary or useful in the performance of their duties to the public. Transac- tions valued above USD5 million are subject to review and approval through the CPUC’s formal application process. Certain transactions valued under USD5 million may be reviewed and approved through the CPUC’s advice letter process. To approve a Section 851 request, the CPUC must make a formal determination that the proposed trans- action “is not adverse to the public interest”. The CPUC has broad discretion to make this determina- tion, and may apply a heightened standard, including whether the transaction will serve the public inter- est or result in a “tangible ratepayer benefit”. Such heightened standards are typically applied to novel, unprecedented transactions, as well as to transac- tions that could potentially impact rates or the CPUC’s jurisdiction. Section 854 (Utility Acquisitions) Section 854 (a) prohibits any person or corporation from directly or indirectly merging, acquiring or con- trolling a California IOU without prior CPUC approval. This is intended to ensure that the CPUC can evaluate whether the change in control would be consistent with and promote the public interest. Section 854 sets forth several public interest factors to be considered, including potential impacts on the IOUs’ financial condition, quality of service, quality of management, and the CPUC’s capacity to effectively regulate and audit public utility operations. To approve a Section 854 application, the CPUC must find that the transaction: • provides short-term and long-term economic ben- efits to ratepayers; • equitably allocates 50% of forecasted economic benefits to ratepayers;
• does not adversely affect competition; and • ensures that the resulting corporation will have an adequate workforce to maintain the safe and reli-
able operation of the utility assets. Interstate Transmission Facilities
Section 203 of the FPA mandates that a “public utility” (which includes entities involved in interstate whole- sale sales) must obtain FERC approval before selling, leasing or otherwise disposing of facilities used for interstate transmission or wholesale sales, if the value of the assets exceeds USD10 million. FERC approval is also required for mergers or consolidations and the purchase, lease, or acquisition of an existing genera- tion facility. 1.5 Central Planning Authorities California does not have a single, centralised agency that oversees every aspect of electricity supply and infrastructure development. Instead, the responsibil- ity is shared among CAISO, the CPUC, the Califor- nia Energy Commission (CEC) and the California Air Resources Board (CARB). Each agency has distinct roles related to energy supply adequacy, system reli- ability and grid development. CAISO CAISO is a non-profit, federally regulated organisation responsible for managing the flow of electricity across about 80% of California’s high-voltage transmission grid. It functions as the real-time system operator and wholesale market administrator. Scope of authority CAISO performs the following within its scope of authority: • balances supply and demand in real time; • oversees grid reliability and contingency planning; • runs day-ahead and real-time electricity markets, including regional market platforms such as the Western Energy Imbalance Market (WEIM) and, as of May 2026, the Extended Day-Ahead Market (EDAM), which expands co-ordinated day-ahead operations with participating utilities in the west; • leads the Transmission Planning Process (TPP) to identify new grid infrastructure needs; and
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