ALJ/BWM/avs REVISED DRAFT Agenda ID #3051

Quasi-Legislative

1/22/2004 Item 23

Decision REVISED DRAFT DECISION OF ALJ MATTSON (Mailed 12/22/2003)

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Rulemaking to implement the provisions of Public Utilities Code § 761.3 enacted by Chapter 19 of the 2001-02 Second Extraordinary Legislative Session.

R.02-11-039 (Filed November 21, 2002)

ORDER REGARDING SEMPRA ENERGY AS A RESPONDENT

On November 21, 2002, the Commission opened this proceeding and named eight respondents. On September 4, 2003, the Commission named 16 additional respondents. (Decision (D.) 03-09-002.)¹ Among the additional respondents was an entity identified as Sempra represented by David Follett.

On September 15, 2003, Sempra Energy Resources (SER) and Sempra Energy Elk Hills Power Corp. (SEEHP) filed and served a motion for modification or clarification of D.03-09-002. By Ruling dated September 23, 2003, the motion was granted by clarifying and correcting the named respondent from Sempra to Sempra Energy, represented by Follett.

On October 14, 2003, Follett filed and served a motion for Sempra Energy asking for reconsideration of the Ruling dated September 23, 2003. Sempra Energy asks that the Commission clarify that it is not an appropriate respondent, and remove Sempra Energy from the list of named respondents. No responses have been received. The motion is denied.

Discussion

This proceeding is opened for the purpose of implementing Public Utilities Code § 761.3.² Facilities covered by this law include, with limited exceptions, all electric generation facilities "owned by an electrical corporation or located in" California.³ (§ 761.3(a).) An electrical corporation includes "every corporation or person owning, controlling, operating, or managing any electric plant for compensation within" California, with some exceptions.⁴ (§218(a).) Respondents are public utilities, electrical corporations, and owners and operators of divested plant in California subject to § 761.3. (See D.03-09-002, mimeo., pages 2 - 3.)

The Ruling dated September 23, 2003 relied on the company's statement that Sempra Energy "is a holding company that through various subsidiaries and affiliates, provides a wide spectrum of electric...products and services to a diverse range of customers...in California..." (SER and SEEHP Motion dated September 15, 2003, pages 3-4.) As a result, the Ruling concluded that "Sempra Energy is understood to be an electrical corporation that owns, controls, operates, or manages electric plant for compensation within California through various subsidiaries and affiliates." (Ruling dated September 23, 2003, page 4.)

The latest motion states that "Sempra Energy does not own, control, operate, or manage an electric generation facility." (Motion dated October 14,2003, page 6.⁵) Based on this representation, the Assigned Administrative Law Judge (ALJ) filed a draft decision finding that: "Sempra Energy does not own, control, operate or manage any electric plant for compensation within California or located in California, either directly or indirectly through any subsidiaries, affiliates or related corporate entities." The draft decision concluded that Sempra Energy should not be a respondent.

In comments on the draft decision, Sempra Energy recommends deletion of the phrase "either directly or indirectly through any subsidiaries, affiliates or related entities." Sempra Energy asserts that otherwise the decision "could be mistakenly read to imply that the Sempra Energy Motion represented to the Commission that Sempra Energy has no subsidiaries, affiliates or related corporate entities that own, control, operate or manage an electric generation facility." (Comments dated December 9, 2003, page 3.)

We are not persuaded that the motion should be granted. Respondents are named, among other reasons, so that they may be notified of this proceeding, participate, comment, provide the Commission with the benefit of their expertise and views, and be made aware of possible forthcoming duties and obligations.

We are unaware of any significant obligation or burden placed on any entity by being named a respondent. This is not the time and place to engage in detailed litigation regarding the facts and law that control respondent status. Rather, specific jurisdictional questions may be resolved elsewhere as needed (e.g., a proceeding where the stakes are material). We are not persuaded by the facts and argument presented by Sempra Energy to conclude otherwise for Sempra Energy here. Limited resources of parties and the Commission should be devoted to getting the § 761.3 program in place, and engaging in initial implementation and enforcement, not detailed and expensive litigation of respondent status when the burden, if any, of such status is minimal and not unreasonable.

A named respondent may be released based on clear evidence that it is a member of a specifically excluded group (e.g., § 761.3 provides exclusions for some nuclear powerplants, qualifying facilities, publicly owned facilities). Sempra Energy does not seek to be removed as respondent on the basis of membership in a specifically excluded group.

According to Sempra Energy, it does not directly own, control, operate or manage any electric plant for compensation within California or located in California. Rather, Sempra Energy owns, controls, operates or manages subsidiaries or affiliates that in turn own, control, operate or manage electric plant for compensation within California or located in California. A corporation or company that owns, controls, operates or manages another corporation or company that owns, controls, operates or manages electric plant for compensation within California or located in California is generally a covered entity for purposes of § 761.3. In short, a corporate owner of an owner is an owner. Sempra Energy does not provide sufficiently compelling facts or arguments to conclude otherwise.

Sempra Energy also argues that § 761.3 does not extend to "indirect" ownership, control, operation or management. In support, Sempra Energy notes other code sections that specifically address Commission authority when the ownership is either direct or indirect (e.g., §§ 366.5(b)(1)(B), 390(c), 851, 854). Sempra Energy concludes that the Legislature would have included in § 761.3 specific Commission authority over a corporation even when the relationship is indirect if that was the intent.

We are not persuaded. The issue here is not whether the corporate relationship is direct or indirect. Rather, it is the degree of ownership, control, operation and management. There is a continuum of ownership, control, operation and management in the corporate structures of companies in the United States, including electric corporations, and electric generation facilities owned by an electrical corporation or located in California. The Commission has responsibility along that continuum, and we decline to adopt Sempra Energy's view that we should use direct or indirect as the criterion.

Many respondents have stated that they reserve the right to challenge the Commission naming them as respondents at the appropriate time and place. They accept deferring the issue until later, and state that they intend to actively participate and help the Commission with the complex task presented by § 761.3. This approach is reasonable. We have specifically endorsed it with regard to two respondents. (D.03-12-023.) The approach remains reasonable, and should similarly be adopted here.

Moreover, we point out that every corporation and person must comply with § 761.3 to the extent the law applies, whether or not named a respondent. That is, to the extent § 761.3 ultimately applies to a facility, it applies to Sempra Energy, its affiliates, and subsidiaries to the extent they are subject to § 761.3 to the same degree that it applies to any other entity covered by § 761.3, whether or not the entity is a named respondent. Similarly, it does not apply to a facility not subject to § 763.1 whether or not named as respondent.

Thus, for all these reasons, we are not persuaded by Sempra Energy to grant its motion.

¹ Also, on October 2, 2003, the Commission deleted two respondents. (D.03-10-012.) On November 13, 2003, the Commission deleted a respondent and added a respondent. (D.03-11-009.)