II. Background
A. Nature of the Proceeding
This proceeding is an investigation into transactions between the three major California investor-owned utilities and their respective holding companies and affiliates. The Commission seeks to determine both whether these entities engaged in conduct in the past that violates relevant statutes and Commission decisions that allowed them to establish holding companies, 1 and whether additional rules, conditions, or other changes are needed to protect ratepayers and the public from dangers of abuse of the holding company structure.
When this Order Instituting Investigation (OII) was initiated, it was characterized as a quasi-legislative proceeding. According to Public Utilities Code section 1701(c)(1), "[q]uasi-legislative cases . . . are cases that establish policy, including, but not limited to, rulemakings and investigations which may establish rules affecting an entire industry."
B. Challenges to Categorization
1. Challenges Based on Ex Parte Rules
Several parties challenge the quasi-legislative categorization. The first pair of challengers - the Commission's Office of Ratepayer Advocates (ORA) and The Utility Reform Network (TURN) - objects to the ex parte rules that accompany the quasi-legislative category.2 (In quasi-legislative cases that require a hearing, ex parte communications with a decision maker are permitted "without any restrictions."3) ORA and TURN are concerned that unlimited and undisclosed ex parte communications in this proceeding will compromise the integrity of the decision-making process.
TURN specifically criticizes the recent Memorandum of Understanding (MOU) signed on April 9, 2001 by the California Department of Water Resources, SCE and EIX as "the product of a backroom deal" and asserts that the Commission must guard against even the appearance of non-public process in its proceedings. ORA contends the proceeding should be categorized as ratesetting. TURN proposes that the proceeding be recategorized as adjudicatory so that ex parte contacts are prohibited.
2. Challenges Based on Nature of Investigation and Due Process Rules
A second group, which includes PG&E, PG&E Corp., SDG&E, Sempra - and to some extent the City and County of San Francisco (CCSF), ORA and TURN - claims the quasi-legislative category is inappropriate for an investigation aimed at imposing penalties or other remedies on Respondents.
PG&E, PG&E Corp., SDG&E, and Sempra claim that due process considerations mandate another categorization. PG&E and PG&E Corp. ask that the proceeding be bifurcated into separate quasi-legislative and adjudicatory proceedings.4 SDG&E and Sempra, in a joint appeal, seek an adjudicatory categorization unless "the Commission clarifies that the only remedies to be considered in this proceeding will be prospective rule changes, [in which case] the proceeding may properly remain categorized as `quasi-legislative.'"5
CCSF claims the proceeding should be deemed adjudicatory "because the Commission clearly states that its purpose is to `determine whether respondent utilities and their respective holding companies have complied with relevant statutes and Commission decisions in the management and oversight of their companies.'"6
ORA and TURN do not raise due process concerns but claim that the quasi-legislative categorization is most appropriate for proceedings whose basic thrust is to establish policy. Because, ORA claims, this OII is "a fact-finding mission focused on past compliance, . . . it does not fit within the definition of a quasi-legislative proceeding."7 The ratesetting category, however, is appropriate: "Beyond setting specific rates . . . , a ratesetting proceeding may also include a broad policy component."8 Moreover, asserts ORA, the ratesetting category is the "most appropriate for cases in which there is a mix of fact finding and policy making . . . ."9
Similarly, TURN states that "it is fairly unprecedented for an investigation contemplating enforcement actions to be characterized as quasi-legislative . . . . [T]he clear impetus behind this investigation is the concern that the utilities are not in compliance with the existing rules . . . . The primary purpose of this OII is therefore clearly related to enforcement."10
1 The holding company decisions for each Respondent are as follows: PG&E - D.96-11-017, 69 CPUC2d 167 (November 6, 1996) (PG&E Authorization I); D.99-04-068, 194 P.U.R.4th 1 (April 22, 1999) (PG&E Authorization II); SDG&E - D.95-05-021, 59 CPUC2d 697 (May 10, 1995) (SDG&E Authorization I); D.95-12-018, 62 CPUC2d 626 (December 6, 1995) (SDG&E Authorization II); and D.98-03-073, 184 P.U.R.4th 417 (March 26, 1998) (Sempra Merger Authorization) and SCE - D.88-01-063, 27 CPUC2d 347 (January 28, 1998) (Edison Authorization). 2 Appeal of Categorization by the Office of Ratepayer Advocates (ORA Category Appeal), filed April 13, 2001, at 5 ("It is inappropriate to allow unrestricted and unreported ex parte communications on this matter."); Appeal of The Utility Reform Network to Initial Categorization of Investigation (I.) 01-04-002 as Quasi-Legislative (TURN Category Appeal), filed April 16, 2001, at 3 ("Allowing unlimited private, non-reported ex parte meetings is anathema to . . . a [public] process . . . ."). 3 Pub. Util. Code § 1701.4(b). 4 [PG&E's] Appeal of Categorization for Order Instituting Investigation 01-04-002 (PG&E Category Appeal), filed April 13, 2001, at 2; PG&E Corporation's Special Appearance to Appeal Categorization (PG&E Corp. Category Appeal), filed April 13, 2001, at 2. 5 Appeal of San Diego Gas & Electric Company (U 902 M) and Sempra Energy of Categorization (SDG&E/Sempra Category Appeal), filed April 13, 2001, at 1-2. 6 [CCSF] Objection to Proceeding Categorization (CCSF Category Appeal), filed April 16, 2001, at 1. 7 ORA Category Appeal at 2. 8 ORA Category Appeal at 3, citing Order Instituting Investigation into Implementation of Assembly Bill 970, D.00-12-060, 2000 Cal. PUC Lexis 987, at *3 (AB 970 OII). 9 Id., citing AB 970 OII, D.00-12-060, 2000 Cal. PUC Lexis 987, at *4. 10 TURN Category Appeal at 2.
