II. Dismissal of Certain Telecommunications Carriers and Gas Storage Providers from Proceeding

When we initiated the Order Instituting Rulemaking (OIR), we proposed to cover assets sold by electric and gas utilities, certain telecommunications carriers, and water utilities. Since that time, several parties have asked that the Commission dismiss them from the proceeding. We discuss each request below.

A. SBC/Pacific Bell and Verizon California

Pacific Bell Telephone Company, dba SBC California (SBC) and Verizon California Inc. (Verizon) filed motions seeking their dismissal from this proceeding on the ground that another proceeding, Rulemaking (R.) 01-09-001, would examine how to treat their gains on sale. Both SBC and Verizon are regulated under our New Regulatory Framework (NRF), a form of incentive regulation, although we are currently examining whether a newer form of regulation is appropriate in R.05-04-005, our Uniform Regulatory Framework (URF) proceeding. The URF proceeding lists gains on sale from telecommunications assets as one of the issues for resolution.

The Utility Reform Network (TURN) and the Commission's Office of Ratepayer Advocates (ORA)³ oppose the carriers' request. They claim Pacific and Verizon seek exemptions to industry-wide rules and regulations and fail to show why it is better to consider telecommunications gains on sale in another proceeding than in a proceeding designed to develop gain on sale rules across industries.

Either way we handle the issue, one might argue there are efficiencies to be gained. However, the URF proceeding seems to be the best forum to resolve gain on sale issues for Pacific and Verizon, because that proceeding is examining all aspects of telecommunications regulation. It may be that regulatory issues other than gains on sale have bearing on how to treat Pacific and Verizon's gains on sale. On balance, we find that it is best to deal with the telecommunications industry - including the gain on sale issues and many others, and perhaps related, regulatory issues - in one forum. Because the Commission will resolve gains on sale applicable to telecommunications carriers in the URF proceeding, we dismiss SBC and Verizon from this proceeding.

B. SureWest Telephone and Frontier Communications

Second, the other two California NRF carriers, SureWest Telephone (SureWest) (formerly known as Roseville Telephone) and Citizens Telecommunications Company (dba Frontier Communications (Frontier)), have also requested dismissal.

SureWest and Frontier alternately ask that they be required to follow whatever rules we generate in R.01-09-001, even though they are not parties, or that we decline to regulate the gains on sale of NRF carriers.

ORA and TURN oppose the motions on the ground that SureWest and Frontier fail to show why it would be more appropriate for the Commission to address gain on sale issues as part of NRF instead of in the gain on sale rulemaking. They also disagree with SureWest and Frontier's assertion that the gain on sale issue is different for rate base regulated utilities than it is for NRF carriers. Finally, they contend this proceeding is the place to consider all utilities' gain on sale issues because it is focused only on that issue.

Again, on balance, we find the argument in favor of examining the gain on sale issue for NRF carriers in a comprehensive telecommunications proceeding more persuasive than the one asserting that we should resolve all gain on sale issues in one place. Therefore, as with SBC and Verizon, we will dismiss SureWest and Frontier on the ground that their gain on sale issues will be handled in the URF proceeding, R.05-04-005. We do not dismiss other regulated telecommunications carriers from this proceeding.

C. Wild Goose Storage and Lodi Gas Storage

Third, two natural gas storage facilities have asked to be dismissed from this proceeding. Wild Goose Storage Inc. (Wild Goose) and Lodi Gas Storage, L.L.C. (Lodi Gas) each filed comments noting that they operate in a competitive market and are largely unregulated by the Commission. No party opposes their requests.

Since the premise of the OIR is that regulated firms operate on different economic principles than unregulated firms, Wild Goose and Lodi Gas Storage contend that the OIR does not apply to them. We agree, and dismiss them from the proceeding.

³ ORA is now known as the Division of Ratepayer Advocates, or DRA. To avoid having to change all references to ORA in the draft decision, we continue to use the ORA acronym.