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BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA
Order Instituting Rulemaking Concerning Relationship Between California Energy Utilities And Their Holding Companies And Non-Regulated Affiliates.
PUBLIC UTILITIES COMMISSION
OCTOBER 27, 2005
ORDER INSTITUTING RULEMAKING CONCERNING RELATIONSHIP BETWEEN CALIFORNIA ENERGY UTILITIES AND THEIR HOLDING COMPANIES AND NON-REGULATED AFFILIATES
This Order Instituting Rulemaking (OIR) is issued to allow the Commission to re-examine the relationship of the major energy utilities with their parent holding companies and affiliates. The current parent holding companies were formed more than 10 years ago, and these companies have made significant investments in distribution and transmission lines, natural gas pipelines and terminals, powerplants, trading companies, marketing companies and other energy service companies ("energy infrastructure") both overseas and within the United States. The Commission through this OIR will review current investments of the parent holding companies that is part of the overall energy infrastructure that California consumers depend upon. The Commission also will review the capital budgets of the utilities and their parent holding companies to better understand the amount of capital that is expected to be allocated to either the utilities or an affiliate for investment in energy infrastructure that will meet any part of California's need for reliable supplies of energy.
This OIR also is issued in response to the recent enactment by Congress of the Energy Policy Act of 2005 (EPAct 2005), Public Law 109-58, which, among other things, repealed the Public Utility Holding Company Act of 1935 (PUHCA), 15 U.S.C. §§ 79 - 79z-6, and ordered the Federal Energy Regulatory Commission to review its rules regarding dispositions, consolidations, or acquisitions made by FERC-jurisdictional entities pursuant to the Federal Power Act. As a result, the parent holding companies of the California energy utilities may try to expand the unregulated activities of the utilities' affiliates, may try to merge with or acquire other companies or may be acquired by other companies. It is therefore necessary for this Commission to review its existing regulations and to consider whether additional, new rules or regulations are needed.
The Commission's goals remain the same: (1) to ensure that the utilities meet their public service obligations at the lowest reasonable cost and (2) to ensure that the utilities do not favor or otherwise engage in preferential treatment of their affiliates.
The Commission also needs to ensure that the California energy utilities retain sufficient capital and the ability to access such capital in order to meet their customers' needs. Additional rules or regulations may be necessary to address the potential conflicts between the utilities' ratepayers' interests and the parent holding companies' and affiliates' interests in order to ensure that these conflicts do not undermine the utilities' ability to meet their public service obligations at the lowest possible cost.
As an initial step, we require California's four largest energy utilities, Southern California Gas Company (SoCalGas), San Diego Gas & Electric Company (SDG&E), Pacific Gas and Electric Company (PG&E) and Southern California Edison Company (Edison) (collectively the "Utility Respondents") and their parent holding companies Sempra Energy, PG&E Corporation and Edison International (collectively the "Parent Holding Companies") to provide the Commission with current information concerning their capital budgets for the next 5 years, i.e. 2006-2010. We also require the Parent Holding Companies to provide financial statements for any current investments in energy infrastructure serving California as well as estimates of the participation, if any, of their affiliates in the development, financing, construction, operation, management or ownership of energy infrastructure that will meet any part of California's expected need for reliable supplies of energy.
After reviewing this information the Commission may propose additional rules or regulations regarding, but not necessarily limited to, (1) reporting requirements for the allocation of capital between utilities and their non-regulated affiliates by the parent holding companies, (2) changes to the Commission's Affiliate Transaction Rules. The Commission also may clarify requirements as to the Commission's access to documents of the parent holding company or affiliates.
Each of the above-mentioned California utilities are respondents in this proceeding and are required to submit a report on 2006-2010 capital budgets for the utilities. The Parent Holding Companies also are respondents and are required to submit capital budgets for affiliates participating in the development, financing, construction, management or ownership of energy infrastructure that will meet any part of California's need for reliable sources of energy as well as financial statements for any affiliate that has a financial interest in energy infrastructure serving California.