VII. The Environmental Provisions of the MSA are in the Public Interest

A. The Land Conservation Commitment (LCC)

The PSA gives environmental representatives control over, and access to, 140,000 acres of land associated with PG&E's hydroelectric facilities (PSA ¶ 17), without compromising the ability of PG&E to generate electricity from those facilities. In 1999 PG&E proposed to sell these lands to the highest bidder. The PSA would replace the spectre of loss of public control with the promise of perpetual public access. The PSA's provisions for PG&E's either donating the land or granting conservation easements go much further than simply maintaining the status quo - instead a partnership of the environmental community, state and local governments, and environmental stewardship organizations will help preserve the lands and improve public access where desirable.

The proposed corporation and its governing board established in the PSA will ensure that PG&E complies with the requirement to donate the lands or grant conservation easements and will provide significant public (and Commission) oversight and participation into improvements made to the lands and the lands' ultimate disposition. Membership of the governing board would include representatives from PG&E, the Commission, the California Department of Fish and Game, the State Water Resources Control Board, the California Farm Bureau Federation, and three public members to be named by the Commission, plus others. This board should play an historic role in the protection of California's environment. The PSA expressly provides that enhancements to the lands not interfere with PG&E's hydroelectric operations, maintenance, or capital improvements. Funding is provided by $70 million to be paid over ten years, to be paid by ratepayers through their retail rates.

B. The Stewardship Council

Fourteen parties served testimony regarding the land conservation commitment taking a diversity of positions and making numerous suggestions for improvement. Consequently, the presiding Administrative Law Judge (ALJ) encouraged the parties to resolve their differences through a stipulation. The ALJ waived the notice requirements of Rule 51 (Stipulations).

On September 25, 2003, Association of California Water Agencies, California Farm Bureau Federation, California Hydropower Reform Coalition, California Resources Agency, ORA, Regional Council of Rural Counties, State Water Resources Control Board, Tuolumne Utility District, U.S. Department of Agriculture-Forest Service, which are parties, and non-parties California Forestry Association, California Wilderness Coalition, Central Valley Regional Water Control Board, Mountain Meadows Conservancy, Natural Resources Defense Council, Northern California Council Federation of Fly Fishers, The Pacific Forest Trust, Inc., Planning and Conservation League, Sierra Club California, Sierra Foothills Audubon Society, Sierra Nevada Alliance, Trust for Public Land and U.S. Department of Interior-Bureau of Land Management presented to the Commission a "Stipulation Resolving Issues Regarding The Land Conservation Commitment" (the Land Conservation Commitment Stipulation (Ex. 181)), that implements Paragraph 17 and Appendix E of the Settlement Agreement and constitutes an enforceable contract among those parties.

Several parties had indicated that the governing board of the Stewardship Council,⁴⁵ as proposed in the PSA, would be more effective and representative if it was expanded to include the fuller array of interests and expertise of the public agencies, local government and trade associations, environmental organizations, and ratepayer organizations who have worked on the watershed land protection issue. The stipulation provides that, after its formation, the by-laws will be amended to provide that, in addition to the five members provided for in the PSA, the governing board will include one representative each from the California Resources Agency, the Central Valley Regional Water Quality Control Board, Association of California Water Agencies, Regional Council of Rural Counties, California Hydropower Reform Coalition, The Trust for Public Land, ORA, and California Forestry Association. (Ex. 181 ¶ 10(a).) In addition, the U.S. Department of Agriculture-Forest Service and U.S. Department of Interior-Bureau of Land Management will together designate a federal liaison who will participate in an advisory and non-voting capacity. The Commission will name three additional board members to further provide for public representation. This board ensures that all of the key constituencies are represented in the development and implementation of the land conservation plan.

The stipulation provides that decisions of the governing board will be made by consensus, that meetings will be public, and that there is a dispute resolution process. The stipulation delineates a planning and assessment process that will examine all of the subject lands in the context of their watershed and county. For each parcel, the plan will assess its current natural resource condition and uses, state its conservation and/or enhancement objectives, whether the parcel should be donated in fee or be subject to a conservation easement, or both, that the intended recipient has the capability to maintain the property interest so as to preserve or enhance the beneficial public values, that the donation will not adversely impact local tax revenue, assurance that known contamination be disclosed, appropriate consideration of whether to split the parcel, a strategy to undertake appropriate physical measures to enhance the beneficial public values, a plan to monitor the impacts of disposition and implementation of the plan, and an implementation schedule. Consistent with Appendix E to the PSA, the plan may also consider whether land "without significant public interest value" should be sold to private entities with few or no restrictions. The stipulation does not alter § 851 authority. Any proposed disposition will be presented to the Commission for public notice, hearing, and approval. The stipulation is expected to enhance the existing environmental and economic benefits of the Watershed Lands and Carizzo Plains on an overall basis.

Problems identified with the framework and reporting requirements of the Board include placing a PG&E representative on a supposedly independent board that will advise PG&E as to specific actions with regard to PG&E watershed and other environmentally sensitive lands. To ensure the appearance and the reality of independence, the MSA deletes the PG&E representative from the board membership as PG&E will have ample opportunity to engage in a dialogue and discussion of the proposals submitted by the Board.

A second and potentially more serious legal vulnerability arises with respect to the Commission's statutory and constitutional jurisdiction over utility assets, including the property at issue here. We must avoid the challenge that the Commission is ceding its mandated authority to protect the ratepayers' interests in these lands and to implement the full panoply of state laws safeguarding the environment, as discussed above in the context of the legal infirmities associated with ceding Commission regulation and jurisdiction either by contract or to a federal court.

Moreover the Stipulation recognizes the fact that any transfers or disposition of lands will first need to be submitted to the Commission for analysis and consideration pursuant to the P.U. Code sec. 851 process, the MSA modifies the reporting requirements of the Board. Instead of reporting to PG&E, the Board shall report to and work with the Commission as well as with PG&E to determine the best and most environmentally sound uses of the lands at issue. This modification expands the scope of environmental analysis from that which has been traditionally undertaken by the Commission. The Commission envisions the Board functions to include being available to the Commission to undertake analyses and recommendations for the preservation of all environmentally sensitive lands within PG&E territory. We envision that such assistance could provide invaluable benefits to the Commission as it undertakes its regulatory functions and mandates. For example, the Board could undertake analyses, not only of land management issues, but also of concomitant streamflow issues which would assist the Commission in its analysis of costs necessary to address hydroelectric power licensing issues of paramount concern to Californians. Expanding the scope of the mission of the Board and refining the reporting requirements results in the LCC providing invaluable analysis and recommendations for all environmentally sensitive lands, not just the identified 140,000 acres called out by PG&E in the PSA.

We agree that the LCC as supplemented by the LCC stipulation will provide ratepayers with substantial benefits and is in the public interest. PG&E will undertake a study of all of these lands to determine current public values, and to recommend strategies and measures to preserve and enhance such values in perpetuity. PG&E will then implement such strategies and measures within six months after final receipt of all required government approvals no longer subject to appeal. The planning process, including surveys and inspections of 140,000 acres, will likely cost $20 million or less (Ex. 127a, pp. 4-5, CHRC/Sutton), and thus the balance of the $70 million will be available to implement physical measures, such as planting of trees to enhance fish and wildlife habitat and water quality, construction or improvement of recreational access, and protection of Tribal or other historical sites. The LCC limits the discretion of PG&E to take inconsistent action in future proceedings.

The State Water Resources Control Board argues that the term "beneficial public values," as used in Appendix C of the PSA, be modified to state that any agricultural, sustainable forestry and outdoor recreation uses on transferred lands "must be environmentally sensitive." (SWRCB Op. Br. at 6.) PG&E opposes this modification. It argues that the term "environmentally sensitive" is vague and, rather than clarifying the land conservation commitment, would only result in more confusion and debate. We agree with SWRCB that the Commission should ensure the commitment to California's environment by specifying that all uses of land to be protected be environmentally sensitive.

The Commission supports the intent of the LCC and believes that the structure contained in the parties' stipulation are reasonable. Notwithstanding any statements in the PSA and the stipulation that the Commissions will give up its ongoing authority and oversight of the amounts and uses of the money that are to be applied to the LCC, the Commission will retain its ability to modify this program as necessary as it deems necessary future. By retaining ongoing oversight and making clear the reporting requirements to the Commission are not solely to PG&E, we will avoid any potential problems regarding our ceding the Commission's authority, provide an opportunity for changes to the program scope and funding levels, and ensure that the LCC program meets its intended goals.

C. Environmental Opportunity For Urban Youth N Found in the Record

The Greenlining Institute has asked us to expand the LCC to address the needs of low-income urban PG&E ratepayers. A majority of PG&E's ratepayers do not live in the Sierra foothills, where the vast majority of the 144,000 acres are located. The requested expansion might be in a manner of having PG&E's ratepayers provide a wilderness experience for urban youth, especially disadvantaged urban youth, and to acquire and maintain urban parks and recreation areas. While the purposes of such experiences may be laudable, this issue was not presented or analyzed within the Commission's public tested procedures, and is not in our record for consideration.

The Commission agrees with the goals of the urban youth experience program and decries the lack of funding that has been devoted to such parks and programs by other governmental entities through the years. However, the Commission must carefully consider the scope of its regulatory authority and ensure that it does not use ratepayer monies for purposes not authorized by statute. Of course, PG&E Corp. is free at any time to propose and institute such a program with shareholder monies and we would applaud such an effort. The Commission further believes that it could make an agreement that could support urban parks and community groups through an appropriate public process, where the legal authority, the advantages and costs of such a program would be full vetted in a public process and with a public record. However, this analysis, discussion and evaluation has not yet occurred in this proceeding. For instance, we have no basis to conclude that $15M is the appropriate or sufficient amount of funding to ensure the success of this program. We can also envision a host of worthy programs that might be brought to the commission for funding consideration. All such programs, however, must be consistent with our regulatory and statutory mandates and authority, as this commission wields enormous powers to impose costs on all ratepayers located in investor owned utility service territories in California. Before imposing such costs or creating such programs, we much follow our own procedures and statutes, which could be begun immediately during the pendancy of the bankruptcy reorganization plan adopted herein.

Thus imposing such a requirement must be deferred given the complete lack of record presented here, until such a time that the public analysis creates a record to support it.

D. Clean Energy Technology Commitment

Under the PSA, PG&E will establish a shareholder-funded non-profit corporation dedicated to supporting research and investment in clean energy technologies primarily in PG&E's service territory. (PSA ¶ 18.) The non-profit's governing board will include Commission-selected appointees, PG&E-selected appointees, and appointees jointly selected by the Commission and PG&E. PG&E proposes an initial endowment of the non-profit at $15 million over five years (not to be recovered in rates). We view this commitment as part of the Commission's, and the State's, ongoing policies encouraging energy efficiency, demand response, renewable generation, and the entire range of more environmentally-friendly options for meeting load growth. Of course, this commission already supports considerable clean energy research through its low-emission vehicle proceedings and resulting decisions. To best optimize such research and development, we believe that all such funds and programs should be considered together, and prevent duplication and overlap, within the context of the Commission's already established LEV and clean energy proceedings.