3. Procedural Activities
Parties filed statements on July 16, 2009 and replies on August 20, 2009 in advance of the first Prehearing Conference (PHC), which was held on September 30, 2009. At the PHC, parties expressed interest in pursuing discussions through workshops. Administrative Law Judge (ALJ) Gamson suggested parties attempt to develop a detailed set of rules, and divide issues into three categories (referred to as "buckets" in workshops). The first bucket would contain rules and wording with which all parties agreed. The second bucket would include items that, while the parties disagreed regarding need, content or wording, their disagreement could potentially be resolved through further discussion and compromise. The third bucket would contain rules or wording for which the disagreement was so complete that any resolution would require intervention by a disinterested third party (i.e., would either benefit from mediation or need Commission resolution). A Scoping Ruling was issued on November 4, 2009.
After workshops were held on November 11-12, 2009, on December 31, 2009 staff proposed a set of rules (Staff Proposed Rules, attached as Appendix B to this decision) as a starting point for parties to discuss in additional workshops. The proposed rules were derived from (a) various energy utility holding company decisions starting in the 1980s (described above); (b) energy affiliate transactions rules first adopted by the Commission in D.97-12-088 (later revised in D.06-12-029); (c) water utility holding company decisions (listed above); and (d) D.00-07-018 regarding water utility non-tariffed products and services. Three additional workshops were held, led by Commission staff, on February 23-24, March 8 and March 23, 2010.
At the completion of the workshops, staff prepared a Workshop Report, issued to parties on April 26, 2010 and attached as Appendix C to this decision. The Workshop Report provided an overview of the discussions and broad positions taken by parties in the workshops, as well as a spreadsheet laying out rules as modified from the Staff Proposed Rules where agreements existed, and proposed wording changes from parties where they differed.
Parties commented on the Workshop Report on May 7, 2010, with reply comments on May 17, 2010. Opening comments were filed by California Water Association (CWA), Division of Ratepayer Advocates (DRA), The Utility Reform Network (TURN), Consumer Federation of California (CFC), Park Water, Cal-Am, Cal Water, and SCE.14 Reply Comments were filed by CWA, DRA, TURN, CFC, Cal-Am and Park Water.15
The Workshop Report indicated that much progress was made in the four workshops. The parties identified approximately 150 rules, subsections of rules, or differences in wording to categorize into the three "buckets" described above. The Workshop Report provided a spreadsheet representing the state of agreement among parties on proposed rules. The spreadsheet incorporates collective edits made during workshops to the Staff Proposed Rules.
The Workshop Report states that, in general, all parties agreed during the workshops with the Commission's goals stated in the Rulemaking that these rules should be applied uniformly to all similar utilities; that cross-subsidy of affiliates by the utilities should be prevented; and that anti-competitive behaviors of the utilities, if any, should also be prevented. However, even though industry representatives support these overall goals, they argue that, for the most part, their companies already act in concert with them and no significant correction or constraint by this Commission is warranted.
The Workshop Report states:
Significantly, the industry representatives argue that their utilities have little or no market power, and that their affiliates are not able to engage in anticompetitive behavior as they do not currently provide products and services into competitive markets. Thus, any cost or competitive advantage provided them through their affiliation with the utility would have no impact on the markets they serve. Instead of rules specifically designed to prevent transfer of market power and effect separation between utility and affiliate, such as those governing the transfer of employees from utility to affiliate, the companies argue that it is sufficient to ensure that actual costs are allocated between affiliates and their utilities accurately, using methods that measure cost causation reliably. While DRA and TURN agree that some of the staff's proposed separation rules are not needed, cumbersome, unnecessarily burdensome, or simply unenforceable, such as the proposed prohibition against sharing office space and equipment with affiliates, they are not willing to depend on cost allocation methods entirely and insist on retaining some separation rules.
The Workshop Report cautions that there is "a continuing subtext expressed by the utility representatives that most of these rules are unnecessary because of their claim that most utilities do not have affiliates that provide products or services to unregulated or competitive markets, or that have California operations."
In comments, parties generally adhered to the views attributed to them in the Workshop Report. Parties' overall comments and comments on specific issues are discussed in more detail below. An exception is CFC. In its comments, CFC states that the Workshop Report does not fairly or accurately represent its position on a number of issues. CFC clarifies its position in edits to the Workshop Report spreadsheet of proposed rules. We consider the views of CFC ands all other parties based on their comments and the overall record, using the Workshop Report spreadsheet as a reference.
We adopt the rules for affiliate transactions and non-tariffed products and services in Appendix A to this decision, based on the discussion below. Our discussion includes our overall objectives and criteria for evaluating the rules to be adopted. For non-controversial "Bucket 1" issues, we adopt the consensus rules as proposed by parties and laid out in the Workshop Report. We discuss the significant issues in contention from "Bucket 2" and "Bucket 3" below.
14 SCE owns a Class C water company on Catalina Island.
15 In comments, several parties requested the services of a Commission mediator to help narrow or resolve further outstanding issues. Because no mediator was available for a period of time, parties ultimately withdrew their request for a mediator in an e-mail to the ALJ on June 25, 2010.
