III. Discussion

A. Ratesetting Category

We conclude that the investigation of Respondents' prior actions has been appropriately categorized as quasi-legislative. This investigation fits within the Public Utilities (PU) Code section 1701(c)(1) definition of quasi-legislative proceedings. Section 1701(c)(1) includes among quasi-legislative matters both rulemakings and investigations to establish policy. While ORA contends a ratesetting category should apply, we do not agree. In the AB970 OII, this Commission stated that ratesetting should be used when matters affect the rates of the investigation's respondents and "where the policy setting aspects of the case are relatively minor...." (D.00-12-060, mimeo. at 3.) The Commission also noted that it found ratesetting appropriate because the AB970 OII implemented rather than established policy. (Id.) We are not implementing policy here.

In this proceeding, we are currently looking at changing current holding company policy and establishing new policy, as well as investigating compliance with past decisions. This case is analogous to I.98-12-013, in which we are investigating the December 1998 PG&E outages as a quasi-legislative matter, which might result in a second adjudicative enforcement proceeding. This same approach should be employed here. Therefore, if we should find probable cause to believe that any Respondent violated our prior holding company decisions or other law, we will at that time recategorize the proceeding.

As to TURN and ORA's objections to the ex parte rules accompanying the quasi-legislative category, we observe these rules are statutory and cannot be altered by the Commission. If a proceeding properly fits a statutory category, we must accept the statutory ex parte rule requirements accompanying the category. This does not mean, however, that any Commissioner must allow such ex parte contacts if requested.

Pursuant to Rule 6.1(b) of the Commission's Rules of Practice and Procedure, the Commission may determine which category appears most suitable to the proceeding. Additionally, Rule 6.1(d) authorizes the Commission in exercising its discretion under subsection (b) to make such other procedural orders as best to enable the Commission to achieve a full, timely, and effective resolution of the substantive issues presented in the proceeding.

As we show in the next section, Respondents' due process arguments lack merit, and in any event are mooted by the procedure we adopt here.

B. Due Process Claims

We do not believe the quasi-legislative categorization ever compromised Respondents' due process protections. We were and continue to be fully prepared to recategorize the proceeding as adjudicatory if and when we find probable cause to believe Respondents have violated the law and we opt to make final findings on such violations and settle on remedies.

Respondents' due process claims (especially those of PG&E and PG&E Corp.) fundamentally misapprehend both the nature of these proceedings and the requirements of due process. They argue unpersuasively that the OII fails to provide respondents with sufficient notice of the "conduct subject to potential punishment" and that the Commission should bear the "burden of proof" in the proceedings. In the first part of these proceedings, as the OII indicates, we will investigate whether respondents have violated, inter alia, certain conditions imposed by our decisions authorizing the formation of the holding companies. In an investigation, due process does not require the full panoply of procedures that are required in an adjudicatory proceeding.¹¹ Specifically, due process does not require that a party be informed of the "specific charges that are being investigated," and it does not require that a party be permitted to cross-examine witnesses.¹² Nor does due process require, at this stage, a ban on ex parte contacts.¹³ Finally, because no rights or liabilities are being finally adjudicated, there is no burden of proof to place on any party.¹⁴

At the end of the investigation, if we determine that one or more of the Respondents likely have violated the conditions imposed by our holding company decisions or other law, we will specify, in detail, the nature of those alleged violations, and the evidence supporting those charges. At that point, if we decide to proceed to determine finally whether such violations occurred, and whether Respondents should be held liable for such violations, we will recategorize the proceedings as adjudicatory - thus imposing an ex parte ban and affording Respondents the right to cross-examine witnesses - and proceed to make those determinations. Nothing in this two-stage process violates the Respondents' due process rights.¹⁵

PG&E and PG&E Corp. overlook the fundamental distinction between an investigation - in which an agency investigates whether a respondent has likely violated a rule, law, or order - and an adjudication - in which an agency makes "binding determinations which directly affect the legal rights of individuals."¹⁶ As the United States Supreme Court has made clear, different due process rights attach in these two sorts of proceedings, and there is no due process violation if the same agency undertakes both an investigation followed by an adjudication.¹⁷ In approving procedures strikingly similar to those we intend to engage in here, the Court stated:

When the Board instituted its investigative procedures, it stated only that it would investigate whether proscribed conduct had occurred. Later in noticing the adversary hearing, it asserted only that it would determine if violations had been committed which would warrant suspension of appellee's license. Without doubt, the Board then anticipated that the proceeding would eventuate in an adjudication of the issue; but there was no more evidence of bias or the risk of bias or prejudgment than inhered in the very fact that the Board had investigated and would now adjudicate. Of course, we should be alert to the possibilities of bias that may lurk in the way particular procedures actually work in practice. The processes utilized by the Board, however, do not in themselves contain an unacceptable risk of bias. The investigative proceeding had been closed to the public, but appellee and his counsel were permitted to be present throughout; counsel actually attended the hearings and knew the facts presented to the Board.¹⁸

Thus, we reject Respondents' due process challenges.

¹³ See United States v. Litton Indus., Inc., 462 F.2d 14, 17 (9^th Cir. 1972).

¹⁵ See Withrow v. Larkin, 421 U.S. 35, 56-58 (1975) (agency may informally investigate and make findings that there is probable cause that respondent violated regulations, and subsequently proffer former charges in adjudicatory proceeding, without violating due process); Litton Indus., 462 F.2d at 17 (same).