VI. Employee-Related Transition Costs

ORA raised several issues with respect to the generation-related employee transition costs PG&E recorded in the TCBA during the record period. Through subsequent discussion, PG&E and ORA were able to resolve all of the issues except for one. The one unresolved issue relates to an amount of $500,000 paid by PG&E to 11 employees under the Bargaining Unit Severance and Displacement Program.⁷

A. Position of ORA

ORA recommends disallowance of the $500,000 amount paid by PG&E to the 11 employees because the employees were released from their positions in divested plants and placed in other positions in PG&E in less than one month. ORA questions the combination of the employees spending such a short period of time in the divested plants in conjunction with their immediate hire by PG&E, and so challenges both the propriety and amount of these payments.

ORA argues that after having presented a program in the 1998 ATCP to the Commission which focused on severance and was therefore subjected to less scrutiny, PG&E and the CUE now seek to expand the program to provide $50,000 payments and other benefits to employees that return to PG&E after less than one month in a divested facility. ORA finds no reference in the Settlement Agreement to individuals whose employment status is comparable to that of the 11 individuals at issue in this proceeding. ORA believes that it was misled in the 1998 ATCP and contends that PG&E and CUE are attempting to change the terms and eligibility requirements of the Settlement Agreement.

Also, ORA contends that as a result of the 1998 ATCP, ORA believed that employees returning to PG&E after only a brief time at a divested plant would receive a prorated payment. The basis for ORA's contention is the vesting provision in the April 14, 1997 Letter Agreement between PG&E and the International Brotherhood of Electrical Workers (IBEW) 1245 (Exh. 31), specifically Title 206 in the context of the employee severance and displacement program.⁸ ORA believes that it reasonably interpreted the proration provisions of Title 206 in negotiating the settlement agreement in the 1998 ATCP. In the 1998 ATCP, ORA witness Godfrey testified that: "This bonus program pays $50,000, per employee, to IBEW employees located at a plant to be sold and who remain in the retention plan for the entire duration, otherwise a pro-rated portion will be received." (1998 ATCP Exhibit (Exh.) 34, pp. 5-6.)

B. Position of PG&E

PG&E argues that as the testimony in the 1998 ATCP made clear, employees are eligible for the $50,000 payment when they are displaced, regardless of whether that occurs prior to year four after the trigger date, so long as it occurs at a plant for which Section 851⁹ approval has been granted. Therefore, PG&E contends that these employees were entitled to receive these payments under the Program.

According to PG&E, the Program provides employees with an incentive to stay at the plant until PG&E displaces them through the provisions of the collective bargaining agreement. PG&E points out that the reasonableness of the Program was approved in last year's ATCP Decision (D.) 00-02-048, and should not be relitigated in this year's proceeding.

C. Position of CUE

CUE disagrees with ORA's argument that the vesting provision in the Letter Agreement provides that the payments to these 11 employees should be prorated. CUE notes that the vesting provision, as cited by ORA, states:

"Employees who are in the Plan for the entire duration of the retention vesting period or are displaced in accordance with Title 206 or exercise the provision of subsection 206.9(a) will receive full retention benefits. A pro-rated portion will be received if any of the following conditions are met ... an employee is released from their current position pursuant to Section 205.17, ... an employee is hired, returns from LTD, or enters a covered regular position under the provisions of Titles 205 and 206, during the retention vesting period."¹⁰

CUE points out that ORA does not explain which of these two conditions requires proration of the payments for the 11 employees at issue. According to CUE, none of them do.

CUE explains that the first condition states that a "pro-rated portion will be received if ... an employee is released from their current position pursuant to Section 205.17." Section 205.17 (which refers to Section 205.17 of the collective bargaining agreement between PG&E and IBEW 1245) describes job appointments that are due to urgent necessity, such as health crises. CUE states that ORA has received and reviewed Title 205 of the collective bargaining agreement as part of this proceeding and is well aware of the limited applicability of Section 205.17. It does not apply to any of the employees at issue here.

Further, CUE explains that the second condition in the provision cited by ORA states that a "pro-rated portion will be received if ... an employee is hired, returns from LTD, or enters a covered regular position under the provisions of Titles 205 and 206, during the retention vesting period." CUE states that this condition refers to individuals who are hired or return from long-term disability into a position at a divested plant after the trigger date for the program. According to CUE, the provision does not apply to any of the 11 individuals at issue here, all of whom worked at their respective plants for several years prior to the plant being sold.

CUE believes that because none of the conditions of the vesting provision apply to the 11 employees at issue, ORA must have misunderstood the provision. CUE contends that, however, the remainder of the record in the 1998 ATCP dispels any notion that ORA did or reasonably could have misinterpreted this provision to conclude that employees whose jobs were eliminated prior to the end of the "retention vesting period" (the Operation and Maintenance (O&M) period) and transferred to other positions in PG&E would receive prorated benefits.

CUE contends that the record in the 1998 ATCP established that employees whose jobs were eliminated prior to the end of the O&M period would receive the full $50,000 program payment. According to CUE, the Letter Agreement that ORA relies on itself clarified that an employee receives the full $50,000 payment if his or her job is eliminated prior to the end of the O&M period. The Letter Agreement states that:

Following approval by the CPUC of the process to sell a power plant, eligible bargaining unit employees will receive annual lump sum payments of $10,000 for the first two years, $15,000 for the third year, and the final payment of $50,000, once the two-year O&M obligation has been completed or if an employee has been displaced through the 206 process. In any event the final payment will be $50,000.¹¹

The Letter Agreement also describes the criteria for program eligibility, none of which requires an employee to remain at the plant for the entire duration of the O&M period.¹² These provisions eliminate any ambiguity that ORA may find in the language of the vesting provision, according to CUE.

Further CUE points out that in addition, PG&E testified in the 1998 ATCP that:

The $50,000 final payment is made in conjunction with an employee's displacement or layoff, and therefore may be paid prior to year four in conjunction with the application of the demotion and layoff provisions of the appropriate collective bargaining agreement.¹³

CUE contends that this testimony also contradicts ORA's notion that the $50,000 payment is prorated for employees who are displaced or laid off prior to the end of the O&M period.

CUE argues that most significantly, ORA's recommendation that payments should be prorated if an employee's job is eliminated prior to the end of the O&M period conflicts with its own recommendation in the 1998 ATCP. In that proceeding, ORA recommended that the Commission allow PG&E to recover severance and displacement program costs for 10 employees who lost their jobs prior to the start of the O&M period.¹⁴

Also, CUE points out that Aglet Consumer Alliance (Aglet) actively litigated this issue in the 1998 ATCP proceeding, arguing that the severance and displacement program was unreasonable because program benefits did not differentiate among employees that are severed and those that are rehired or transferred. According to CUE, ORA was a prominent player in this debate. ¹⁵

D. Discussion

PG&E seeks recovery of $500,000 in severance and displacement costs for 11 employees whose jobs were eliminated as a result of restructuring. Under the terms of the Settlement Agreement adopted in D.00-02-048, PG&E may recover these costs if: (a) the costs were incurred only for employees eligible to receive benefits under the specific terms of the Program, as described in the 1998 ATCP; (b) PG&E appropriately identified the costs; (c) PG&E accurately recorded the costs; and (d) the costs do not exceed the cost caps established in the Settlement Agreement. ORA opposes recovery of these costs because the 11 employees were only employed in the divested plants for approximately one month before being placed in other positions with PG&E. However, ORA has provided no evidence that these 11 employees were ineligible to receive benefits under the specific terms of the Program, as described in the 1998 ATCP.

In general, the Program is triggered at a specific plant when the Commission approves a Section 851 application for plant divestiture. In approving the Program, the Commission noted that the payment schedule for employees remaining at a facility after approval of the § 851 process would be as follows:

· $10,000 one year after the trigger date;

· $10,000 two years after the trigger date;

· $15,000 three years after the trigger date;

· $50,000 final payment, when the employee is displaced.

The $50,000 payment is made in conjunction with an employee's displacement or layoff, and therefore may be paid prior to year four in conjunction with the application of the demotion and layoff provisions of the appropriate collective bargaining agreement. (Exh. 33, pp. 3-27 - 3.28).¹⁶

We believe that the record in the 1998 ATCP makes clear that an employee at a divested plant receives a $50,000 final payment under the Program when the employee is displaced through the 206 process regardless of whether that employee is actually severed or demoted following displacement. The relevant issue in this proceeding is whether PG&E seeks to recover costs for employees eligible to receive benefits under the specific terms of the Program as it was described in the 1998 ATCP. The evidence establishes that it does. In fact, this issue was fully litigated in A.98-09-003 and the settlement specifically asked for multi-year approval of this program, subject only to a cap. We conclude that ORA's recommendation to disallow recovery of these costs should be denied.