II. Background

In 1985, San Diego Gas and Electric Company (SDG&E) applied to this Commission, under Section 854 of the Public Utilities Code, to reorganize under a holding company structure.¹ Specifically, SDG&E sought to form a new holding company to which SDG&E would transfer ownership of (a) all of its common stock, and (b) all of its non-utility subsidiaries.² According to SDG&E, this reorganization was necessary because of trends toward deregulation and increasing competition in the electric industry.³ The Commission approved that application, subject to a variety of conditions the Commission found were necessary to protect the public interest.⁴ SDG&E ultimately decided not to form its holding company at that time, primarily because it did not want to comply with certain of those conditions, including conditions applicable to SDG&E's holding company and its affiliates.⁵

One year later, Southern California Edison Company (SCE) applied, also under Section 854, to reorganize under a holding company structure.⁶ According to SCE, the primary purpose underlying the proposed reorganization, as was the case with SDG&E, was to "face the new challenges resulting from the partial deregulation of the traditional electric utility business."⁷ We approved the application, once more contingent on certain conditions designed to protect the public interest.⁸ Specifically, the conditions we imposed were intended to mitigate the dangers stemming from the reorganization so that ratepayers would be indifferent to the change.⁹ As required by the Commission's order, SCE filed a written notice agreeing to the conditions.¹⁰

In 1995, SDG&E returned to the Commission, once again seeking authorization to reorganize under a holding company structure.¹¹ At the time, the Commission determined that the reorganization involved no change in actual control of SDG&E, and therefore decided the application could proceed under Section 818 of the Public Utilities Code, rather than Section 854.¹² Despite this difference, we once again imposed certain conditions on the utility and its holding company as a prerequisite to our approval, designed to maintain ratepayer indifference and protect the public interest.¹³ And, once again, we required the utility and holding company to pass board resolutions signifying their agreement to those conditions.¹⁴ Both the utility and its holding company passed resolutions signifying their agreement.¹⁵

The same pattern continued in two more applications. In 1996, Pacific Gas and Electric Company (PG&E) applied under section 818 of the Public Utilities Code to reorganize under a holding company structure.¹⁶ We approved that application, subject to a number of conditions designed to maintain ratepayer indifference and protect the public interest, and subject to the agreement of PG&E's and its holding company's boards of directors.¹⁷ The following year, SDG&E's parent holding company, Enova Corporation, applied to merge with Pacific Enterprises, to form a new holding company that would own SDG&E, and which eventually became Sempra Energy.¹⁸ We approved this application pursuant to Section 854 of the Public Utilities Code, once more imposing certain conditions intended to protect the public interest, and demanding that the newly formed holding company agree to those conditions.¹⁹

Despite the fact that the utilities and their holding companies agreed to the conditions imposed in the authorization decisions, reaped the benefits of these reorganizations, knew from the outset that we would not have approved the formation of the holding companies absent the conditions we imposed,²⁰ and failed to challenge our jurisdiction to impose those conditions either during the underlying proceedings or in an application for rehearing, the holding companies now move to dismiss the present proceedings. They allege that we never had jurisdiction to impose the conditions in the first place, and that we lack jurisdiction to enforce those conditions or to investigate whether changes to the conditions are warranted to protect the public interest.

Specifically, the holding companies make three separate sets of allegations. First, they allege the Commission lacks subject matter jurisdiction over the holding companies because these entities are not "utilities" under the provisions of the Public Utilities Code. They assert that because subject matter jurisdiction may not be created by waiver or estoppel, this jurisdictional defect cannot be cured.²¹ Thus, they allege, even if they accepted the conditions of the holding company decisions by having their Boards of Directors stipulate to abide by those conditions, those conditions are not now enforceable because the Commission in actuality never had subject matter jurisdiction to create them. If the Commission could not lawfully impose the conditions, they allege, then the Boards' acceptance of those conditions could not effect a waiver of the holding companies' subject matter jurisdiction objections.²²

Second, they allege that even if the Commission had jurisdiction to create the holding company system pursuant to Public Utilities Code Sections 818 and 854, it did not retain jurisdiction to enforce those conditions. In effect, they allege, the Commission had jurisdiction at one moment in time to approve formation of the holding company systems, but lacks jurisdiction to enforce the conditions that went along with that grant of authority.²³

Third, the holding companies allege that there is no basis to pierce the corporate veil or otherwise ignore the holding company systems' corporate form in order to reach the assets of or challenge the behavior of entities within that system.²⁴

As we discuss below, the holding companies' claims are incorrect. The issue before us is not one of subject matter jurisdiction; the Commission had jurisdiction to impose conditions and retains jurisdiction to enforce them. The holding companies are estopped from challenging those conditions - or our jurisdiction to enforce them now - due to their failure to appeal those orders at the time they were entered. It would also be inequitable to allow them to reap the benefits of our holding company orders while reneging on the obligations those orders imposed and to which the holding companies voluntarily agreed. Finally, regulatory doctrine allows the Commission to ignore corporate form and reach the assets and conduct of all entities within the system - and the prerequisites to common-law veil piercing need not be met.