12. Fine

The Commission may impose fines payable to the State of California pursuant to § 2104 and § 2107. Such fines must be between $500 and $20,000 per offense. Each day of a continuing offense constitutes a separate and distinct offense per § 2108.

To provide guidance in setting fines within the broad statutory range, the Commission recently distilled the principles that it has historically relied upon in assessing fines and restated them such that they may form the basis for future decisions assessing fines. (Rulemaking to Establish Rules for Enforcement of the Standards of Conduct Governing Relationships between Energy Utilities and Their Affiliates Adopted by the Commission in Decision 97-12-088, D.98-12-075, App. B.) Those principles begin by distinguishing reparations from fines. The purpose of reparations is to return improperly collected amounts to customers. The purpose of fines, in contrast, is to deter further violations. In setting the fine level, the Commission will consider the severity of the offense, the utility's conduct, the financial resources of the utility, the totality of circumstances in furtherance of the public interest.

In determining the amount of a fine, we are guided by the standards we adopted in D.98-12-075. The conduct of the utility is an important factor in setting fines. Pacific Bell detected and on its own rectified the violations made by BRI. In addition, Pacific Bell has been cooperative and forthcoming in this complaint litigation.

We also consider precedents in determining whether this is a continuing problem. Repeat violations can lead to harsher fines. In the case before us we do not believe a pattern of recidivism exists as to the 1986 marketing abuse cases. Those decisions specifically dealt with, among other violations, the selling of basic exchange service as part of a package of optional services and selling services without Commission authorization, a situation unlike the alleged violations in this case. As we stated above, Pacific's marketing of optional packages in this 1998 case neither contain basic service as a component of the package nor were they unauthorized services. Pacific has established, and based on the evidence we have accepted, that it offers a customer optional services only after the customer has selected basic service. We have also found that the Commission approved all the optional package services that are the subject of alleged violations in this proceeding.

Finally, the financial resources of the utility also play a role in determining the appropriate level of fine. In light of the above, and mitigated by the two factors noted, we will impose a fine of $2,000 per day for each day of violation starting on the day Pacific began marketing its Caller ID Plan. We consider in assessing this figure that Pacific should have known it was under a continuing obligation to fully inform customers on Caller ID options.

The evidence does not clearly show when these practices began but the Residence Caller ID Plan appears to contemplate marketing to occur in 1998. Therefore, for the purposes of determining the fines we shall use January 1, 1998, as the date on which violations began. We shall apply the fine for each day of violation commencing on January 1, 1998 and ending on December 31, 1999. This appears to be the period covered by Pacific's Residence Caller ID Marketing Plan (Exhibit 4.) Based on $2,000 per day and the total number of days in 1998 and 1999, we shall impose a fine of $1,460,000 on Pacific. We also consider the cost, which is undetermined in this record but nonetheless significant, that Pacific will incur in contacting customers as part of the fine.

We also find Pacific in violation of §2896 for its failure to make customers aware of their lower cost options in its sequential marketing of optional services. As we have noted in this order, we do not find Pacific in violation of §2896 or Tariff Rule 12 in selling these packages or even the sequential offering of the packages. We see no nexus or pattern connecting the facts of this proceeding to the 1986 marketing abuse cases. Our problem is Pacific's failure to inform the customer about the availability of other (lesser priced and with fewer services) options and his or her ability to buy each service separately.

With sequential marketing of Saver Packages, the record does not make clear when Pacific started and ended the marketing of the Saver Packages in the manner alleged to violate §2896. We know from Pacific's advice letter filings that it promoted The Basics and The Works Saver Packs starting in 1998 and through 2000. Whether Pacific continued the same problematic marketing approach throughout these years is not apparent. However, the record does not show that Pacific has ceased marketing the Saver Packs in the manner, which we now find to be in violation §2896. Therefore, for the purpose of determining a fine in this particular violation, we shall use each day of 1998, 1999 and the first six months of 2000 to approximate the duration of violation. We will impose a fine of $1,000 per day applied to the total number of days in these years and order Pacific to pay a total fine of $913,000.

Therefore, Pacific shall pay a total fine of $2,373,000 to the General Fund within 120 days from the effective date of this order. We believe this fine is necessary and warranted under the circumstances described in this order to protect the public interest.