COM/MP1/gd2 Date of Issuance 7/25/2011

Decision 11-07-028 July 14, 2011

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Order Instituting Rulemaking to implement Senate Bill No. 1488 (2004 Cal. Stats., Ch. 690 (Sept. 22, 2004)) relating to confidentiality of information.

Rulemaking 05-06-040
(Filed June 30, 2005)

DECISION MODIFYING DECISION 06-12-030 REGARDING CONDITIONS OF ACCESS TO MARKET SENSITIVE INFORMATION

DECISION MODIFYING DECISION 06-12-030 REGARDING
CONDITIONS OF ACCESS TO MARKET SENSITIVE INFORMATION 1 1

1. Summary 2 2

2. Rehearing Background 6 6

3. Background 8 8

4. Discussion 11 11

4.1. Do the procedures adopted in this rulemaking provide
all parties with a full and fair opportunity to participate
in the affected Commission proceedings? 11 11

4.2. Does the Commission have the authority to deny party
status to market participants, or limit the scope of their participation in proceedings where market sensitive
information is relevant to the subject matter of the
proceeding? 15 15

4.3. Do the confidentiality procedures adopted by the
rulemaking provide market participant parties with the opportunity to meaningfully participate in the affected proceedings and provide for open decisionmaking? 16 16

4.4. Do the adopted procedures provide parties in the
affected proceedings with requisite constitutional rights? 18 18

4.4.1. Equal Protection 18 18

4.4.2. Right to Petition 21 21

4.5. Is there a less restrictive means to achieve the public
interest in shielding the use of market sensitive
information by market participants for purposes other
than for the conduct of the proceeding? 22 22

4.6. Does participation in the electric and/or gas market in
excess of one megawatt create a material ability to affect
market price? If not, what amount of participation in the
electric and/or gas market creates such a material ability? 26 26

4.6.1. Electricity Market Participation 28 28

4.6.2. Gas Market Participation 29 29

4.7. Should the Commission reconsider or change its prohibition
of access to market sensitive information by attorneys or consultants who simultaneously represent market and
non-market participants? 32 32

4.8. Should the special limitations on market participants'
access to market sensitive procurement data adopted in
D.06-12-030 (or as may be considered in this rehearing)
extend to additional materials? 32 32

4.9. Does D.06-12-030 impose unique restrictions on the IEPs
from those of any other market participant? 34 34

5. Assignment of Proceeding 35 35

6. Comments on Alternate Proposed Decision 35 35

Findings of Fact 37 37

Conclusions of Law 40 40

ORDER 42 42

DECISION MODIFYING DECISION 06-12-030 REGARDING CONDITIONS OF ACCESS TO MARKET SENSITIVE INFORMATION

1. Summary

Decision (D.) 06-12-030 adopted a procedure for protecting market sensitive information from disclosure by defining "market participants" and imposing additional restrictions to ensure the confidentiality of market sensitive information, including the use of reviewing representatives, on market participants' access to the information than those imposed on non-market participants. D.08-04-023 adopted a Model Protective Order (MPO) as part of the Commission's confidentiality procedure.

This decision clarifies that all market participant parties can participate in Commission proceedings through the use of reviewing representatives. Further, the Commission's process, as clarified herein, ensures the protection of market sensitive information, provides for open decision-making, and affords meaningful participation. This decision also modifies D.06-12-030 to clarify that although reviewing representatives may not be employees of a market participant enterprise, market participants may employ outside representatives, such as attorneys, consultants, and experts to serve as reviewing representatives─provided, of course, that these reviewing representatives abide by the Commission's confidentiality requirements with respect to all confidential market sensitive information. Outside reviewing representatives may be a member or employee of a firm that is also advising clients on energy marketing at wholesale and related services, so long as the firm imposes an ethics wall (of the kind used by law firms to manage conflict-of-interest situations among different clients) between the reviewing representative and its members or employees who are involved in energy marketing at wholesale and related activity.

In addition, this decision modifies D.06-12-030 to eliminate language suggesting that a 1 megawatt de minimis threshold of participation in the natural gas market identifies "market participants;" and to eliminate the redundant prohibition on reviewing representatives from simultaneously representing market participants and non-market participants.

Finally, this decision directs that the parties to this proceeding, using a collaborative process, develop both an updated version of the Model Protective Order approved in D.08-04-023, to reflect the changes adopted here, as well as a new Model Nondisclosure Agreement, which can be used by parties on a bilateral basis where the formality of a Protective Order is not necessary.

1.1. Specific Modifications

1.1.1. Reviewing Representative

Market Participants may designate as Reviewing Representatives outside experts, consultants or attorneys who meet the following criteria:

· Reviewing Representatives may not currently be engaged in (a) a transaction for the purchase, sale, or marketing at wholesale of electrical energy or capacity or natural gas (or the direct supervision of any employee(s) engagement in such a transaction),
(b) the bidding on or purchasing of power plants (or the direct supervision of any employee(s) engagement in such a transaction), or (c) knowingly providing electricity or gas marketing consulting or advisory services to others in connection with a transaction for the purchase, sale, or marketing at wholesale of electrical energy or capacity or natural gas or the bidding on or purchasing of power plants (or the direct supervision of any employee(s) engagement in such a transaction or consulting).

· Reviewing Representatives may not be an employee of a market participant. If the market participant chooses to retain outside attorneys, consultants, or experts in the same law firm or consulting firm to provide advice in connection with marketing activities, then the attorney, consultant, or expert serving as a Reviewing Representative under our confidentiality rules must be separated by an ethics wall (of the kind used by law firms to manage conflict-of-interest situations among different clients) from those in the firm who are involved in wholesale commercial dealings.

· Reviewing Representatives shall use market sensitive data only for the purpose of participating in an affected Commission proceeding, and Reviewing Representatives are permitted to participate in regulatory proceedings on behalf of market participants.

· Reviewing Representatives shall abide by the terms of these confidentiality rules..

1.1.2. EPUC

The presumption from D. 06-12-030 that EPUC was a market participant is modified so that EPUC is presumed to be a non-market participant when EPUC files in a Commission proceeding solely as a bundled purchaser of power to serve on-site and end-use customers. However, for utility procurement proceedings, especially concerning procurement of combined heat and power (CHP), EPUC will presumed to be a market participant.

1.1.3. Ethics Wall

In circumstances where a Reviewing Representative is an employee or member of a firm that is also advising clients on energy marketing at wholesale and related services, the firm is to establish an ethics wall that incorporates the following standards:

· When reviewing or discussing any market sensitive data, the Reviewing Representative and those working with him/her shall employ all reasonable steps to ensure a physical separation from firm personnel who are not authorized Reviewing Representatives;

· The Reviewing Representative shall be responsible for informing all firm personnel about the existence and terms of the these confidentiality rules, and in particular the prohibition against sharing market sensitive information with market participants; and

· The Reviewing Representative shall take all reasonable steps necessary to ensure that market sensitive information and files, including electronic files, are not accessible to firm personnel who are not authorized Reviewing Representatives.

1.1.4. Model Protective Order and Nondisclosure Certificate Adopted in D.08-04-023

As noted above, in D.08-04-023, the Commission adopted a Model Protective Order for use in Commission proceedings covered by this rulemaking. Appended to the Model Protective Order was a Nondisclosure Certificate, which individual Reviewing Representatives would be expected to excecute, confirming they understood and agreed to abide by the terms of the Protective Order.

The Model Protective Order adopted in D.08-04-023 now needs to be updated, to reflect the changes in our confidentiality rules approved in this decision. We intend to adopt conforming changes to the Model Protective Order, but wish to allow the parties to this proceeding an opportunity to formulate a consensus version of the document.

In addition, we are persuaded by the comments of several parties, as well as our own experience in various proceedings, that the Commission also should adopt, and encourage the use of, a model "Nondisclosure Agreement" for use by parties on a bilateral basis.

Accordingly, in this decision, we order the parties to convene, on an informal basis, to develop both (1) an updated version of the Model Protective Order, to conform it with the rule changes adopted in this decision, and (2) a model Nondisclosure Agreement for use by parties on a bilateral basis. The parties should attempt to present consensus versions of both documents. The utilities shall jointly file via Advice Letter the consensus versions of both documents, for approval by the Commission by Resolution.