IV. Discussion
A. The Commission Had the Legal Authority to Issue the TRO
Both PG&E and Edison argue that the Commission did not have the legal authority to issue the TRO. In D.01-01-046, we discussed our legal authority for taking the actions we did in order to ensure that PG&E and Edison's customers receive adequate utility service. Because the utilities have filed applications for rehearing of D.01-01-046 alleging legal error, we will further address our legal authority for issuing the TRO in our decision addressing the applications for rehearing.
However, we briefly address one of Edison's procedural arguments. Edison believes that the Commission violated Public Utilities Code Sections 1701.1(a) and (b) and its own procedural rules by failing to separately categorize the proceeding on the TRO and properly scope the issues to which Edison should respond.
The interim TRO decision was not issued in a new proceeding, but was issued in this very docket, where both PG&E and Edison are seeking a rate increase to cover the costs of procuring future energy in the wholesale markets that they cannot produce themselves to serve their loads. The utilities' financial obligation is at the heart of the Rate Stabilization Proceeding, as is their obligation to provide a full and adequate service to all customers in this context. A declaration that the utilities would be unwilling to purchase power to serve their customers beyond the generating capacity of their retained generation and capacity generated from QF contracts directly impacts the other issues being addressed in this proceeding.
The Commission had already categorized and scoped the Rate Stabilization Proceeding in a scoping memo issued in late December and needed to do nothing further to underscore the very basic obligation to serve.5 Therefore, we reject Edison's procedural argument.
B. Is a Preliminary Injunction Required?
At the TRO hearings, Edison and PG&E were afforded the opportunity to clarify the events described in the declarations attached to D.01-01-046 and to define their understanding of their obligation to serve on a going-forward basis. Although both PG&E and Edison state that DWR is now responsible for procuring the entire "net short"6, the utilities recognize that the law and the Commission continue to require them to retain the obligation to purchase power, and that they have an obligation to serve their customers. Furthermore, although they do not believe the Commission should order them to do so, Edison and PG&E agree to perform the scheduling coordinator task on behalf of their customers.
PG&E's counsel Niven represented that PG&E has an ongoing obligation to serve in accordance with all the Public Utilities Code provisions and Commission orders. (TR at p. 817.) Edison recognizes that it has the obligation to directly serve bundled retail customers. (Edison February 2, 2001 Brief at p. 23.)
In the February hearings, PG&E's policy witness McManus acknowledged that PG&E has a continuing obligation to serve, and specifically to purchase electricity for its customers:
Q. What regulations require PG&E to continue in this losing business?
A. PG&E's obligation to buy electricity for customers is specifically stated in Decision 01-01-046. The concept of obligation to serve is a part of a larger economic and legal concept known as the regulatory compact that forms the basis for the regulation of natural monopolies. The goal of California's electric industry deregulation was to move away from this framework for the generation of electricity, but not for the procurement, transmission or distribution of electricity. I cannot construe regulations that knowingly compel continued sales at a loss as a "reasonable opportunity" to earn an appropriate profit. (Exhibit 39, p. 1-12.)
Edison in the February hearings also reaffirmed its obligation to serve and specifically cited the role of scheduling coordinator as the vehicle by which it remains obligated to purchase electricity for its customers. In response to questions from the Administrative Law Judge (ALJ) in the February hearings in the Rate Stabilization Proceeding, Edison's witness Fellows acknowledge that the ISO believes that Edison, as scheduling coordinator, is responsible for procuring any power that ISO purchases on behalf of Edison's customers:
"Q. If they [DWR] didn't buy it all [the portion of the net short that DWR believed was not priced reasonably], who would be responsible for the difference?
"A. Southern California Edison.
"Q. And why would you be responsible?
"A. Because we are the ones that have submitted the schedules to the ISO. We continue to be the scheduling coordinator on behalf of our native load. We submit energy schedules to the ISO on a daily basis for that load. And the ISO considers us fully responsible for those costs." (TR at p. 1841.)7
Because both utilities recognize the ongoing obligation to serve, and state that they continue to act as scheduling coordinators, issuance of a preliminary injunction is not required at this time. The TRO which is currently in effect by operation of D.01-01-046 is dissolved.
The TRO restrained the two utilities from refusing to act as scheduling coordinators to serve all their non-direct access customers with the ISO. Details regarding the scheduling coordinator function were also addressed at the TRO hearings. One of the responsibilities of a scheduling coordinator is the obligation to pay the ISO's charges in accordance with the ISO tariff. If a utility schedules a balanced load, then it must pay for any amounts that the ISO needs to purchase in the real time market to serve its customers. The utilities may also have another entity act as a Scheduling Coordinator.
The Commission does not here address intricate issues regarding the identity and role of the scheduling coordinator. The utilities' obligation to serve requires that they act as scheduling coordinators or ensure that this function is being performed. Under ABX1 1, DWR is authorized to procure electricity on behalf of utility end-use customers. To the extent that the ISO procures imbalance energy in the real-time and out-of-market markets, the ISO will bill all scheduling coordinators. The scheduling coordinators will, in turn, bill their participants. Because a lack of clarity as to the utilities' obligation to serve led to the issuance of the TRO, we clarify that the utilities' obligation to serve requires that they have the ultimate financial responsibility to pay the ISO for those functions.8
Comments of Proposed Decision
The proposed decision of Administrative Law Judge Walwyn in this matter was mailed to the parties in accordance with Section 311(d) of the Public Utilities Code and Rule 77.1 of the Rules of Practice and Procedure. Comments were filed by _______________, and reply comments were filed by ____________.
1. The Rate Stabilization proceeding from which the TRO was issued continues to be an ongoing proceeding.
2. PG&E and Edison acknowledge their obligation to serve, specifically to purchase energy on behalf of their non-direct access, or bundled, customers.
3. The responsibilities of the Scheduling Coordinator is relevant to the issue of ultimate financial liability to the ISO for purchases made for or on behalf of the utilities' customers.
1. PG&E and Edison have an ongoing obligation to provide adequate service to their customers, which includes the obligation to purchase electricity to serve all non-direct access, or bundled, customers, and may not unilaterally act to reduce, limit, or curtail service to these customers without formal approval from the Commission.
2. Information provided by affidavits and declarations established the possibility of an unreasonable threat of irreparable harm to public health and safety, thereby providing a sufficient basis for the Commission to issue the TRO.
3. This decision should be effective today, in order to allow the TRO to be dissolved expeditiously.
IT IS ORDERED that:
1. There is no need to issue a preliminary injunction because Pacific Gas & Electric Company and Southern California Edison Company at hearing and in their briefs affirm their continuing obligation to serve and reorganize that they cannot unilaterally refuse to purchase energy on behalf of their non-direct access, or bundled, customers.
2. The Temporary Restraining Order imposed by Decision 01-01-046 is dissolved.
This order is effective today.
Dated , , at San Francisco, California.
5 Rule 6.1 (b) provides that when a proceeding may fit more than one category, the Commission may determine which category appears more suitable to the proceeding or may divide the subject matter of the proceeding into separate phases or one or more new proceedings. Here, by not amending the December scoping memo, the Commission effectively determined that its December ratesetting categorization was suitable to the entire proceeding. 6 "Net short" is the amount of power that the ISO must purchase on the spot market to make up the difference between the demand scheduled and procured in the day-ahead market (either through trades, from the utilities' own retained generation, or from QF contract capacity) and the actual resulting demand. (Tr. p. 917 and Exhibit 23, Declaration of Joseph Henri.) We do not find that DWR has the responsibility to procure the entire net short in this decision. 7 Edison also states that when it receives the bills, it intends to pass them on to DWR, and presumes DWR will refuse to pay any unreasonable costs. (Id.) 8 Prior to the hearing, the utilities did not contact the declarants, request to take their deposition, or request their presence at the hearing. Their belated claims of deprivation of due process because the declarants were not present at the hearing, first made on the day of the hearing, therefore have no merit.
