VII. Discussion

A. Modification of Rule V.F.1 for All Utilities Covered by the Rules

D.99-09-033 revised Rule V.F.1's disclaimer requirement as to SDG&E and SoCalGas under the following rationale:

"We have considered our rejection of the request for a revised disclaimer. After careful reconsideration and further reflection, we now believe that the disclaimer set forth in Rule V.F.1 is not narrowly tailored to achieve an appropriate balance between the rehearing applicants' commercial speech rights and our substantial interest in promoting competition. We find the practical aspects raised by the rehearing applicants in their petition for modification and application for rehearing persuasive in determining that we have erred. Thus, we conclude that this disclaimer needs to be and should be changed to meet the standards established by the courts for the last prong of the Central Hudson test.

"Accordingly, we will grant rehearing in order to correct this error. We believe that additional hearings, either through notice and comments or evidentiary hearings, are not necessary to make the correction. The record for the instant rulemaking/investigation (R.97-04-011/I.97-04-012), which includes the record evidence for the petition for modification, is sufficient. Thus, relying on the record for this proceeding, we adopt the following revised disclaimer, which is narrowly tailored to achieve our stated objectives for promoting competition." (D.99-09-033 at p. 12.)

Although our holding in D.99-09-033 was expressly limited to SDG&E and SoCalGas, the rationale the Commission used to modify the decision (i.e., that the original disclaimer was not narrowly tailored to achieve an appropriate balance between commercial speech rights and the government's interest in promoting competition) applies to all utilities covered by the Rules. Indeed, the Commission rejected SDG&E and SoCalGas' efforts to distinguish their situation from that of other utilities and concluded the evidentiary record supported a disclaimer requirement for all utilities covered by the Rules because exempting SDG&E and SoCalGas from the disclaimer requirement could potentially result in customer confusion and misleading customers about their competitive choices.

Therefore, we modify Rule V.F.1 of the Affiliate Transaction Rules as set forth in the ordering paragraphs so that all utilities are now subject to Rule V.F.1 as modified by D.99-09-033. However, we clarify that utilities will not be found in violation of the Affiliate Transaction Rules if they comply with either version (the original or modified) of Rule V.F.1.

B. Suspension of PG&E Penalty

D.99-09-033 found the original version of Rule V.F.1 to be overbroad and modified it accordingly. The modification involved removing part (3) of Rule V.F.1 which required the utilities to include as part of any disclaimer "you do not have to buy the affiliate's products in order to continue to receive quality regulated services from the utility."

PG&E's penalty was based on a violation of a Rule the Commission has subsequently found to be overbroad (and by implication, unconstitutional as violating the First Amendment of the United States Constitution). Because PG&E's penalty was based on a violation of a Rule which we have found to be overbroad, we vacate the penalty we imposed on PG&E in D.98-11-026 and D.99-03-025.

We do not agree that PG&E should be fined for violating the legibility requirement of Rule V.F.1. In this case, the harm of PG&E's legibility violation would be to interfere with the reader's ability to read the disclaimer. However, the Commission has subsequently found this disclaimer to be overbroad.

This decision is not intended to minimize the importance of Rule V.F.1's disclaimer. Indeed, we affirm that the modified disclaimer is an integral part of the Rules with which all covered utilities must comply.