There are alternative possibilities, like "we don't have enough vehicles to serve this area appropriately" or "we don't have statistical power to ensure this area meets safety standards even though it looks fine", and "there are missing features (like freeways) that would make public service uncompetitive in this area" to simply "the CPUC hasn't approved a fare area expansion".

It's an area they're operating legally, so it's part of their operational area. It's not part of their public service area, which I'd call that instead.