1 Panel: Commission Policy and Wall Street Commissioner Timothy Alan Simon California Public Utilities Commission CCPUC Annual Conference Monterey October 5, 2009

2 The California Public Utilities Code PU Code Section 818 (excerpt)  No public utility may issue stocks … or other evidence of interest or ownership, or bonds, notes, or other evidences of indebtedness unless … it shall first have secured from the commission an order authorizing the issue stating:  the amount thereof,  the purposes to which the issue or the proceeds … are to be applied,  and that, in the opinion of the commission, the money, property, or labor … is reasonably required for the purposes specified in the order,  and that … such purposes are not, in whole or in part, reasonably chargeable to operating expenses or to income.

3 The California Public Utilities Code PU Code Section 822 (excerpt)  [T]he commission may, upon an application for an order to issue stocks, bonds, debentures, notes, or other securities or to deliver other consideration in exchange for one or more bona fide outstanding stocks, bonds, debentures, notes, or other securities, claims or property interests, or partly in such exchange and partly for cash,  approve the terms and conditions of such issuance and exchange or such delivery and exchange  and the fairness of such terms and conditions,  after a hearing upon the fairness thereof.

4 The California Public Utilities Code PU Code Section 826 (excerpt)  Every public utility which, directly or indirectly issues or causes to be issued, any stock or stock certificate or other evidence of interest or ownership, or bond, note, or other evidence of indebtedness,  in nonconformity with the order of the commission authorizing the issue,  or contrary to the provisions of this part, or of the Constitution of this State,  or which applies any part of the proceeds from the sale thereof, to any purpose other than the purpose or purposes specified in the commission's order  or in an amount in excess of the amount authorized for a specified purpose in the order,  is subject to a penalty of not less than five hundred dollars ($500), nor more than twenty thousand dollars ($20,000) for each offense.

5 The California Public Utilities Code PU Code Section 829 (excerpt)  Subsection (a):.... This article shall apply to any 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.  Subsection (b)(1):... [A] telephone corporation that is not regulated under a rate-of-return regulatory structure is exempt from this article.