SCC MEMORANDUM
January,1998
To: Members, Senate Commerce and Labor Committee
Members, House Corporations, Insurance and Banking Committee
Members, Senate Courts of Justice Committee
Members, House Courts of Justice Committee
From: Chairman Hullihen William Moore
Commissioner Clifton Miller
Commissioner Theodore V. Morrison, Jr.
Re: Condemnation Powers for Public Service Corporations
The new competitive era which has arrived in the telecommunications industry, and which
could develop for electric power, might bring benefits to consumers of the Commonwealth,
but it will also bring problems. One such problem is the use of the power of eminent
domain by the many "non-traditional" companies now being formed to seek a share of
these new markets.
In earlier days, companies furnishing utility services were assigned discrete operating
territories in which they were the sole provider of a particular service, such as electricity or
telecommunications.
Granting such companies the power of eminent domain was a reasonable public policy
measure under these circumstances. It enabled the companies to bring vital public
services to customers located throughout their territories, even when it was necessary to
cross private property in order to do so.
In the new competitive era, however, many companies are now vying for the same block of
customers, as monopolistic service territories are being dismantled by law. Such
companies are incorporating as "public service corporations" (PSCs). Under existing law,
these companies clearly have condemnation powers once they acquire State Corporation
Commission ("SCC") certificates to operate or build facilities as a "public utility." Indeed, at
least one PSC has sought to acquire property by use of eminent domain, or the threat
thereof, prior to receiving such certificates.
In the recent past, 41 companies have been certificated by the SCC to provide local
telephone services, and more applications are pending. Most such companies seek
authority to provide services state-wide. See Report of the SCC to the Joint Commission
on Technology and Science Pursuant to House Joint Resolution No. 635, Nov. 14, 1997.
No legal grounds exist for the SCC to place any limit on the number of such companies
which may be formed. Indeed, the federal Telecommunications Act of 1996, 47 U.S.C. 153
et seq. forbids states from maintaining or imposing "barriers to entry" into the market by
new entrants, to avoid favoring the older, incumbent companies. 47 U.S.C. 253. Imposing
limits on the number of PSCs which can be formed might well be deemed such a barrier.
These new circumstances raise a number of troubling issues. For example, with most
such companies having the power of eminent domain over the entire state, the real
possibility exists that the same parcel of private property could be encumbered, against the
will of the owner, by numerous easements of competing companies seeking routes for
fiber optic lines, cables, power lines, etc. However, is there really a public need for the
same property to be criss-crossed by perhaps half a dozen telecommunications or electric
lines, all offering essentially similar services to end users some distance away? In
addition, the nature of competition means that some such companies will flourish, while
others will fail. In the case of a failure, what recourse will the landowner have regarding
the now useless facilities which may have been constructed on his property by such
companies?
Because of issues such as these, the State Corporation Commission believes there is a
very real question of whether public policy still requires that private companies of this
nature be allowed continued use of the power of eminent domain to the same extent
permitted in the past.
Other suitable alternatives to condemnation may exist. The Telecommunications Act of
1966, for example, contains provisions allowing new entrants in the telecommunications
market to use existing poles of established companies to attach their own lines, cables,
etc.This provision may fill the need in areas where there are already developed utility
facilities.
As another possibility, the power of eminent domain could be denied to private companies
and a procedure established whereby such companies would have to request the state,
counties, or local government to condemn property for their use. Placing such authority at
the appropriate government level could offer affected landowners better protection against
unnecessary or ill-advised condemnations. Such action could also result in centralized
easement "pathways" across jurisdictions, which all companies would be required to use,
rather than selecting their own routes piecemeal.
This issue will not be an easy one to resolve, and the State Corporation Commission does
not have a solution to offer at this time. The SCC believes, however, that new legislation
will be required, and that it is important that a dialog be opened very soon to address this
subject. We therefore recommend that the General Assembly create a special study
committee to analyze this issue and to issue a report of its findings prior to the beginning
of the 1999 legislative session. The SCC will, of course, be pleased to offer our full
assistance in this effort.
January,1998
To: Members, Senate Commerce and Labor Committee
Members, House Corporations, Insurance and Banking Committee
Members, Senate Courts of Justice Committee
Members, House Courts of Justice Committee
From: Chairman Hullihen William Moore
Commissioner Clifton Miller
Commissioner Theodore V. Morrison, Jr.
Re: Condemnation Powers for Public Service Corporations
The new competitive era which has arrived in the telecommunications industry, and which
could develop for electric power, might bring benefits to consumers of the Commonwealth,
but it will also bring problems. One such problem is the use of the power of eminent
domain by the many "non-traditional" companies now being formed to seek a share of
these new markets.
In earlier days, companies furnishing utility services were assigned discrete operating
territories in which they were the sole provider of a particular service, such as electricity or
telecommunications.
Granting such companies the power of eminent domain was a reasonable public policy
measure under these circumstances. It enabled the companies to bring vital public
services to customers located throughout their territories, even when it was necessary to
cross private property in order to do so.
In the new competitive era, however, many companies are now vying for the same block of
customers, as monopolistic service territories are being dismantled by law. Such
companies are incorporating as "public service corporations" (PSCs). Under existing law,
these companies clearly have condemnation powers once they acquire State Corporation
Commission ("SCC") certificates to operate or build facilities as a "public utility." Indeed, at
least one PSC has sought to acquire property by use of eminent domain, or the threat
thereof, prior to receiving such certificates.
In the recent past, 41 companies have been certificated by the SCC to provide local
telephone services, and more applications are pending. Most such companies seek
authority to provide services state-wide. See Report of the SCC to the Joint Commission
on Technology and Science Pursuant to House Joint Resolution No. 635, Nov. 14, 1997.
No legal grounds exist for the SCC to place any limit on the number of such companies
which may be formed. Indeed, the federal Telecommunications Act of 1996, 47 U.S.C. 153
et seq. forbids states from maintaining or imposing "barriers to entry" into the market by
new entrants, to avoid favoring the older, incumbent companies. 47 U.S.C. 253. Imposing
limits on the number of PSCs which can be formed might well be deemed such a barrier.
These new circumstances raise a number of troubling issues. For example, with most
such companies having the power of eminent domain over the entire state, the real
possibility exists that the same parcel of private property could be encumbered, against the
will of the owner, by numerous easements of competing companies seeking routes for
fiber optic lines, cables, power lines, etc. However, is there really a public need for the
same property to be criss-crossed by perhaps half a dozen telecommunications or electric
lines, all offering essentially similar services to end users some distance away? In
addition, the nature of competition means that some such companies will flourish, while
others will fail. In the case of a failure, what recourse will the landowner have regarding
the now useless facilities which may have been constructed on his property by such
companies?
Because of issues such as these, the State Corporation Commission believes there is a
very real question of whether public policy still requires that private companies of this
nature be allowed continued use of the power of eminent domain to the same extent
permitted in the past.
Other suitable alternatives to condemnation may exist. The Telecommunications Act of
1966, for example, contains provisions allowing new entrants in the telecommunications
market to use existing poles of established companies to attach their own lines, cables,
etc.This provision may fill the need in areas where there are already developed utility
facilities.
As another possibility, the power of eminent domain could be denied to private companies
and a procedure established whereby such companies would have to request the state,
counties, or local government to condemn property for their use. Placing such authority at
the appropriate government level could offer affected landowners better protection against
unnecessary or ill-advised condemnations. Such action could also result in centralized
easement "pathways" across jurisdictions, which all companies would be required to use,
rather than selecting their own routes piecemeal.
This issue will not be an easy one to resolve, and the State Corporation Commission does
not have a solution to offer at this time. The SCC believes, however, that new legislation
will be required, and that it is important that a dialog be opened very soon to address this
subject. We therefore recommend that the General Assembly create a special study
committee to analyze this issue and to issue a report of its findings prior to the beginning
of the 1999 legislative session. The SCC will, of course, be pleased to offer our full
assistance in this effort.
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