3. Penalty Phase Proceeding

On August 11, 1999, PFL applied for a modification of its operating authority to include compliance with CEQA. The application included a three-volume Proponent's Environmental Assessment, which evaluated the potential environmental impact of the project. The assessment concluded that if proper mitigation measures were put in place, the conduit project would not create significant adverse effects on the environment.

There were two formal protests to the application. The Commission's Consumer Services Division (CSD) urged that approval not be granted until CSD investigated complaints about construction that already had taken place. The California Department of Fish and Game urged a more thorough environmental analysis. It alleged that applicant had not obtained required determinations from the department to ensure against adverse effects on fish and wildlife resources.

The Commission's CEQA staff, with the help of consultant Entrix, conducted further inspections and review of the application. On October 1, 1999, staff issued a Proposed Mitigated Negative Declaration and Initial Study. Following publication and comments, a Final Mitigated Negative Declaration and Initial Study was issued on November 24, 1999. The report established mitigation measures to govern the construction work and concluded that with these measures and continued oversight, the project would not have significant effects on the environment. In light of this report, CSD withdrew its protest.

In D.00-01-022, issued on January 6, 2000, the Commission adopted the mitigated negative declaration, granted modification of applicant's operating authority to include CEQA approval, and lifted the stop work order that had been in place since July 6, 1999. However, the Commission kept this proceeding open for investigation of whether sanctions should be assessed against PFL for starting construction prior to CEQA review. The Commission stated:


"We recognize that our stop work order has effectively shut this project down for six months, with attendant financial loss to applicant. We also recognize that applicant has taken steps to mitigate environmental damage. Nevertheless, we believe that further consideration must be given to whether this Commission should levy fines or other sanctions against applicant and its officers. (See, e.g., In Re Coral Communications, D.99-08-017, 1999 Cal. PUC LEXIS 519.) Our concern is that carriers may not have adequate incentives to comply with the law if the only penalty they face for non-compliance is the possibility of delays in construction, delays which would have occurred in the early stages of the project anyway if the carrier had complied with the law and submitted to environmental review and mitigation. Accordingly, we will keep this proceeding open to investigate whether and the extent to which fines or other sanctions should be imposed on [applicant]." (D.00-01-022, p. 12.)

The assigned administrative law judge (ALJ) was directed to "consider whether a fine or other sanctions should be imposed on applicant and its officers for commencing work without appropriate authority and in violation of the law." (D.00-01-022, Ordering Paragraph 10.) CSD, one of the Commission's major investigative units, was directed to investigate the alleged violations by PFL and, depending on the results, to prepare a case against the applicant.

In a Scoping Memo issued on March 9, 2000, Assigned Commissioner Duque identified the issues to be addressed in this proceeding as follows:

Both CSD and the Department of Fish and Game submitted direct testimony on May 26, 2000. Following a stay of proceedings to permit further discovery, PFL responded with its testimony on November 7, 2000. Rebuttal testimony was received on December 18, 2000, and five days of hearings were conducted on January 8-12, 2001. Final briefs were submitted on March 26, 2001, at which time the matter was deemed submitted for resolution.

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