II. Background

On January 21, 1998, the Commission issued an Order opening Rulemaking (R.) 98-01-011 to assess the market and regulatory framework of California's natural gas industry and to consider reforms that might foster competition and benefit all California natural gas consumers. In D.99-07-015, on July 8, 1999, the Commission identified the most promising options for changes to the regulatory and market structure of the natural gas industry. The Order Instituting Investigation herein issued the same day, designed this proceeding as a quasi-legislative case appropriate for hearing. That order asked parties to prepare more detailed analyses of the costs and benefits of the promising options,¹ but allowed a short hiatus for exploring the possibility of settlement before prepared testimony was due. At the first prehearing conference in this case, on September 1, 1999, an extension of time was granted for the submission of testimony in order to facilitate settlement.²

Meanwhile, the Legislature enacted Assembly Bill (AB) 1421 in 1999 (Stats. 1999, Ch. 909), repealing the former Pub. Util. Code § 328,³ which had prevented the Commission from enacting any gas restructuring program until January 1, 2000. In its place the Legislature substituted statutes clarifying its intent that the utilities continue to serve the core with bundled services.

This case proceeded on two tracks, one for the PG&E system, and one for the SoCalGas and SDG&E systems. All issues with regard to the PG&E system were resolved in two separate settlements, approved in D.00-02-050 and D.00-05-049, respectively. The southern California settlement discussions proved more difficult. On December 27, 1999, the IS, supported by SoCalGas and SDG&E as well as 20 other parties, was filed. On January 28, 2000, three other proposed settlements and one proposal for consolidating settlements were filed. The parties were directed by the Assigned Commissioner to go back to the negotiating table to try to consolidate the proposals by April 3, 2000.

On that date, the three settlements filed on January 28 were withdrawn, but a new settlement was filed, the PI, to which SoCalGas and SDG&E were not parties. SoCalGas asked for, and received, more time to complete another settlement proposal. On April 17, 2000, SoCalGas, SDG&E and approximately 26 other parties filed the CS. At that point, three settlements were extant: the IS, the PI and the CS. Since each of these settlements was obviously contested, the case was set for hearing⁴. There were pre-hearing discovery motions aimed at clarifying whether SoCalGas still supported the IS; SoCalGas preferred the CS, but still supported the IS if the Commission did not find the CS acceptable.

There were eight days devoted to an evidentiary hearing⁵ from May 30 to June 8, 2000. The Assigned Commissioner was present on four days of the hearing. On July 10, 2000, late-filed exhibits were received into evidence or rejected and the evidentiary record was closed. Opening briefs were concurrently filed by 20 parties on July 10, 2000; reply briefs were concurrently filed on July 31, 2000⁶. The case was deemed submitted on August 1, 2000.

On September 20, 2000, SoCalGas petitioned to reopen in order to submit amendments to the CS necessitated by the refusal of a company, which was specifically named in the CS to provide the third-party trading platform, to enter into a contract. The record was reopened on October 6, 2000, the amendments and declaration in support thereof received into the record, and the evidentiary record was closed again and the matter resubmitted. The proposed decision of Commissioner Bilas was mailed to the parties on November 21, 2000. The proposed decision recommended approval of the IS with certain modifications. Comments and reply comments to the proposed decision were filed. On May 22, 2001, a full panel hearing was convened to hear argument on the issues contained in the proposed decision.

On October 11, 2001, the revised proposed decision of Commissioner Bilas was mailed to the parties. This revised proposed decision was issued in response to the changes suggested in the comments and reply comments of the parties to the November 21, 2000 proposed decision, and to the comments made at the full panel hearing. The revised proposed decision replaces the proposed decision of November 21, 2000 in its entirety.

¹ We also incorporated the entire record from R.98-01-011 into the record for this proceeding.

² Since that time, two further extensions were granted regarding PG&E's system, and a third granted with regard to the natural gas industry in the southern part of the state.

³ All statutory references are to the Public Utilities Code, unless otherwise noted.

⁴ As mandated by § 1708, an opportunity to request a hearing must be afforded to the parties if the Commission plans to alter or amend a previous decision affecting them. Parties to a number of previous Commission decisions affecting SoCalGas were notified of the upcoming hearing.

⁵ There were seven days of prehearing or informational conferences, including those relating to PG&E. The Assigned Commissioner was present at three prehearing conferences.

⁶ Southwest Gas Corporation (Southwest Gas) requested leave to late-file its reply brief, because it had changed its position on the CS, to support it. The permission to late file is granted.