3. Should the Petition to Modify
D.11-07-036 be Granted?
In D.11-07-036, among other things, we determined that the Nevada Hydro is subject to the mandates of Pub. Util. Code §§ 1801 et seq., whether or not the proposed transmission line is not certificated by this Commission. We reasoned that: "A transmission line proceeding often has many interested parties and intervenors who `have a stake' in the outcome of this matter.
It would have a chilling effect on effective participation, if there is not some guarantee that funding will be available to pay those eligible intervenors who are determined to have made a substantial contribution to this proceeding, whether or not a CPCN is issued to Nevada Hydro. In addition, this approach treats all applicants for a transmission CPCN similarly; to hold otherwise would be to impose more stringent requirements on utility CPCN applicants than on non-utility applicants without any justification for this differential treatment."4
We concluded that the costs of providing a performance or surety bond and entering into a progressive invoicing and reimbursable contract arrangement with DRA are reasonable costs of doing business for an entity proposing to be certified as a public utility and proposing to build a project now estimated to cost $684 million5 and therefore ordered Nevada Hydro to post a surety or performance bond with a face value of $550,000, or approximately 1.5 times the budgets estimated by the three eligible intervenor groups in this proceeding. The bond requirement is to remain in effect until the proceeding is completed and Nevada Hydro has compensated all intervenors that the Commission determines have made a substantial contribution to the proceeding. While there is a fund within the Commission's budget to pay intervenors in broad policy rulemakings where there are either numerous or unnamed respondents, this proceeding does not meet the requirements for paying intervenors from this fund.6
Nevada Hydro was ordered to post the bond within 30 days of the effective date of D.11-07-036. Ordering Paragraph 5 stated that the application would be dismissed if Nevada Hydro did not comply with these requirements. Pursuant to Rule 16.6, On August 22, 2011, Nevada Hydro requested an extension of time from the Executive Director to comply with these requirements. On August 25, 2011, the Executive Director granted a 60-day extension and required Nevada Hydro to provide the appropriate bond by October 28, 2011. On October 28, 2011, Nevada Hydro filed a motion for acceptance of a bond and cashiers check made payable to the California Public Utilities Commission. In its motion, Nevada Hydro acknowledged its confusion regarding the intervenor compensation program and who was responsible for paying the intervenors. On November 9, 2011, as directed by the assigned ALJ, Nevada Hydro filed a petition for modification of D.11-07-036 to request that a letter of credit with cash backing be accepted in lieu of the bond. FRONTLINES and Joint Intervenors filed timely responses to the petition.
Nevada Hydro states that it understands that it is subject to the laws of the State and the Rules of Practice and Procedure, and further acknowledges its responsibility to pay intervenor compensation ultimately awarded by the Commission. Nevada Hydro contends that because the Commission did not specify the "form, language, beneficiary, conditions precedent to performance, creditworthiness of the surety, or other legal elements" of the bond, it believes the alternative proposed approach should be acceptable.7 Nevada Hydro further understands that a letter of credit is not a form of guarantee under California law, but explains that it has set aside $550,000 in cash that is on deposit with Wells Fargo to compensate intervenors. Nevada Hydro further contends that this arrangement may be more conducive to intervenor funding because the funds will be readily available and will not require the extensive paper trail that a surety or performance bond would require.
Joint Intervenors urge the Commission to reject the Petition for Modification because the intervenor compensation program requires a well-defined and well-functioning guarantee of payment, particularly if (as is the case here) the application is denied or dismissed, the CPCN is not issued, and Nevada Hydro does not become a public utility. The parties argue that a letter of credit and the revocable funds on deposit do not provide the necessary guarantee that funds will be in place to compensate intervenors. In addition, these intervenors explain that the letter of credit contain both cancellation and expiration clauses that are inapposite to the requirements of Ordering Paragraph 2 of D.11-07-036. FRONTLINES agrees with the Joint Intervenors, stating that the Letter of Credit as structured is inadequate to guarantee payment and secure intervenor compensation funds.
We agree with the intervenors: as structured, the Letter of Credit proffered by Nevada Hydro and the funds placed on deposit by Rex Waite are not a sufficient substitute for the guarantees intended to be in place by a performance or surety bond. As FRONTLINES points out, a bond cannot be arbitrarily or unilaterally cancelled by Nevada Hydro or Mr. Waite, is secured by a reliable funding source, and must clearly designate that payments must be made to eligible intervenors if Nevada Hydro defaults on its intervenor compensation obligations. Therefore, we deny Nevada Hydro's Petition to Modify D.11-07-036 and require Nevada Hydro to post the requisite bond within 15 days of the effective date of this decision. No time extensions will be granted. We urge Nevada Hydro to work with appropriate outside counsel to ensure that the bond is issued expeditiously. While the bonding requirements will serve to protect the interests of the intervenors, we expect Nevada Hydro to promptly pay all approved intervenor compensation claims. Nevada Hydro must demonstrate that such payments have been made within 30 days of our decisions authorizing such payments and must include any interest payments so ordered. To the extent that payments have not been made when a new application is filed, Nevada Hydro must include a status report on the payment of any pending claims.
4 D.11-07-036, Conclusion of Law 8 at 18.
5 November 30, 2010 Testimony of Nevada Hydro Witness Drzemiecki, Exhibit 2 indicating Gross Plant Beginning of Year. Gross plant includes costs associated with construction of physical plant, acquisition of rights-of-ways and easements, and financing costs during the construction period.
6 D.00-01-020 established a fund within the Commission's budget for intervenor awards in quasi-legislative proceedings in which there are either numerous respondents or respondents are not named.
7 Petition to Modify D.11-07-036 at 2.
