5. Advice Letter Tiers

5.1 Review & Suspension Under Pub. Util. Code § 455

The Public Utilities Code has many requirements for Commission procedures but relatively few requirements specific to advice letters.2 In devising our timelines for advice letter review, we have relied chiefly on Pub. Util. Code § 455. That statute only governs tariff changes "not increasing or resulting in an increase in any rate."3 Section 455 authorizes the Commission to investigate and, if need be, to suspend proposed tariff changes. In relevant part, Section 455 says:

    · Such a tariff change that is not suspended by the Commission shall become effective 30 days after filing "or a lesser time[,] subject to the power of the [C]ommission to . . . alter or modify" the tariff change;

    · The Commission may "enter upon a hearing" on the proposed tariff change;

    · The tariff change will not go into effect (i.e. the change is "suspended) pending the "hearing" and Commission decision; and

    · The Commission may continue the suspension for 120 days "beyond the time when [the tariff change] would otherwise go into effect" and may extend this period of suspension "for a further period not exceeding six months."

In GO 96-B, we propose to use the above timelines (with minor adjustments depending on the tier) for reviewing essentially all advice letters, including those advice letters that increase or result in an increase in rates. The only exceptions are those few advice letters for which a different process or timeline is specified by statute or by other Commission order.

While Section 455 allows up to 330 days (including initial review and periods of suspension) for disposition of an advice letter, we are confident that review of most advice letters under GO 96-B will consume much less time. To speed review and disposition, we (1) expressly delegate authority to the Industry Divisions to handle the review and disposition of many kinds of advice letters, and (2) allow certain noncontroversial advice letters to be immediately effective pending disposition. These two changes to current practice should significantly improve the timeliness of our advice letter dispositions.

Another improvement in GO 96-B over current practice is that, while we expressly authorize the reviewing Industry Division to suspend a proposed tariff change while investigating the change, we also limit the length of time for which the tariff change may be suspended. Regrettably, we will need to use this suspension authority often for advice letters that require disposition by Commission resolution. Resolutions generally must be circulated for public review and comment pursuant to Pub. Util. Code § 311(g)(1). Drafting, placing on the Commission's agenda, and voting on a resolution within the 30-day initial review period contemplated by Section 455 is generally not possible. With rare exceptions, the disposition of Tier 3 advice letters, and of any other type of advice letter for which a Commission resolution is usually required, will consume more than 30 days despite everyone's best efforts.4

5.2 Tiers of Review

Historic advice letter practice, as set forth in GO 96-A, has long served us well, but it has become inadequate in relation to the volume and variety of advice letters submitted for Commission review in recent years. For example, GO 96-A does not systematically distinguish advice letters from formal proceedings, or sort advice letters by type, or explain how, when, or by whom an advice letter would be approved or rejected. The proposed tier structure for advice letter review should improve this situation dramatically.

We propose to distinguish fundamentally between those advice letters that the reviewing Industry Division may approve or reject (and that may be deemed approved under certain conditions), and those advice letters whose disposition will require a Commission resolution. In short, we separate advice letters into two broad groups: advice letters disposed of by staff, where approval or rejection is ministerial; and advice letters disposed of by Commission resolution, where approval or rejection requires the exercise of discretion.

For advice letters in the water industry, we had originally proposed that the mode of disposition be the only generic distinction we make among advice letters. In light of the Water Action Plan, we now propose that for water, as well as for energy and (eventually) telecommunications, advice letters submitted for staff disposition be further divided between those that are "effective pending disposition," i.e., they may be implemented before approval (Tier 1), and those that are effective, and may only be implemented, on or after approval (Tier 2). Advice letters requiring a Commission resolution go to "Tier 3" under all of the Industry Rules.

As mentioned above, an advice letter may be deemed approved in limited circumstances. Only an advice letter that the utility has properly submitted for staff disposition (Tiers 1 or 2) may be deemed approved. If such an advice letter is not timely protested, it will be deemed approved at the end of the "initial review period," unless by that date the reviewing staff either rejects the advice letter or states in writing that review of the advice letter is ongoing.5

The tier under which a utility submits an advice letter does not irrevocably dictate the mode of disposition of that advice letter. For example, an issue may arise in the review of a Tier 1 or Tier 2 advice letter that requires the exercise of judgment about the meaning of a statute, so instead of the delegation to staff normal for the tier, disposition of that advice letter would be by Commission resolution.6 On the other hand, a Tier 3 advice letter may be clearly erroneous, e.g., it may contain errors of arithmetic or clear inconsistencies with the statute or Commission order that purportedly authorizes the advice letter. In those situations, Industry Division staff will reject the advice letter without the necessity of putting a proposed resolution before the Commission. Whenever disposition of an advice letter would be a ministerial act, staff has delegated authority under GO 96-B to make that disposition.

If a utility designates the wrong tier for an advice letter, the appropriate action is for the staff of the reviewing Industry Division to reject the advice letter without prejudice whenever the designated tier is lower than the proper tier.7 In other words, if the utility has designated for disposition by staff an advice letter that, under the applicable Industry Rules, belongs in the tier for advice letters to be resolved by the Commission, staff will reject the advice letter on that basis. The reason for rejection in this situation is that the utility improperly designating a lower tier could thereby gain improper advantages.

For example, where an advice letter is improperly submitted for filing under Tier 1, the utility generally will have implemented the action proposed in the advice letter without prior regulatory approval. If the action in fact was of a kind that requires prior regulatory approval, implementation without such approval may harm consumers, competitors, or both. Similarly, if a utility designates Tier 2 for an advice letter that should be designated Tier 3, the utility is saying that the advice letter could be deemed approved at the end of the initial review period, whereas Tier 3 advice letters, in fact, can only be approved and become effective pursuant to Commission resolution.

There is one situation where the designation of a wrong tier does not result in rejection without prejudice. Specifically, if a utility designates Tier 3 for an advice letter that should be reviewed under a lower tier, the reviewing Industry Division will approve or reject the advice letter under Tier 2. In other words, the utility cannot compel a Commission resolution on an advice letter that is subject to Industry Division disposition under this GO. However, by the utility's wrongly designating Tier 3 for an advice letter, that advice letter cannot be deemed approved.8

Along with tiers of review, GO 96-B introduces two major concepts already mentioned, namely, "effective pending disposition" (Tier 1 advice letters) and "deemed approved" (Tier 1 and Tier 2 advice letters). The following sections of today's decision contain a detailed explanation of these concepts in practice.

5.3 Concepts Underlying Tier 1

Advice letters are an informal procedure used by the Commission to deal with types of utility requests that are usually minor, noncontroversial, or otherwise appropriate for processing without hearings or a formal evidentiary record. Most often an advice letter is submitted to effect a tariff change to comply with a prior Commission order, or to document the specific implementation of a utility program for which the utility already has general authorization by statute or Commission order. No protest is ever filed in the large majority of advice letters. Also, in many instances, approval or rejection of an advice letter is ministerial, i.e., reviewing staff can determine the advice letter's validity through objective review of the supporting materials and authority cited by the utility. The Commission may lawfully delegate such determinations to its staff.

In proposing the concept of advice letters "effective pending disposition" (i.e., implemented at some time before their approval), we had in mind certain of those advice letters whose review and disposition can be delegated to our staff. The Industry Rules specify those subject matters that, under the current regulatory structure in those industries, seem appropriate for handling by means of advice letters that are effective pending disposition. We expect that our creating this new "tier" for the review and disposition of such advice letters will both help the Commission and the stakeholders to focus their resources on more controversial matters and ensure that less controversial matters do not fall through the cracks. With thousands of advice letters submitted to the Commission each year, improving the efficiency of our review process has great benefits for everyone.

The main reason to allow many advice letters to go into effect pending disposition, however, is to better accommodate innovation and competition in the marketplace. According to some commenters, a utility that must publicly announce and then await regulatory approval for a new product or service will often find that competitors are able to copy the program before the utility has had any significant chance to benefit from its initiative. As a result, the incentive to innovate is reduced, nominal competitors tend to "me too" each other so that prices move in lockstep, and any genuinely innovative advice letter is correspondingly more likely to elicit protests from competitors who hope to gain time to catch up with similar proposals of their own. By allowing certain types of advice letters to take effect before regulatory approval, we can fulfill our responsibilities while giving greater scope to market forces.

5.4 Tier 1 in Operation

Most commenters share our enthusiasm for the "effective pending disposition" concept, but their comments demonstrate the need to address certain questions about how the concept works in practice. These questions are: Must the utility implement such an advice letter immediately, or can the utility await approval? What is the procedure when, during review of such an advice letter, an issue arises that must be resolved by the Commission? Finally, what is the procedure when the utility mistakenly or deliberately requests the "effective pending disposition" tier for an advice letter that in fact does not qualify for such treatment? We address these questions below, in the order stated.

A necessary condition to our allowing any advice letter to go into effect before it has received our approval is that the utility must be prepared to undo any actions the utility has taken to implement the advice letter if the advice letter ultimately is not approved. The kinds of remedies that are appropriate will depend on the particular advice letter.9 Beyond such remedies as we may require, the utility in this situation will likely suffer loss of credibility and good will-losses that may be very damaging, especially in a competitive marketplace.

We think the severity of these potential losses helps to ensure the integrity of the Tier 1 process.10 However, some commenters feel that there may be gray areas where the propriety of a Tier 1 designation is not clear. In any case, they suggest that a utility that prefers to obtain prior regulatory approval should not be forced to implement an advice letter in advance of such approval.

There is a simple way to address this concern, namely, allow the utility submitting an advice letter that would qualify for Tier 1 to nevertheless submit the advice letter for processing under Tier 2 (effective upon staff approval). We have made changes to the General and Industry Rules to give utilities this choice.

All of the Industry Rules separate advice letters generally between those whose subject matter seems to be within staff's delegated authority to review and resolve, and those whose subject matter seems to require resolution by the Commission itself. There will be instances, however, where the utility submitting an advice letter has properly designated one of the lower (i.e., staff disposition) tiers and yet, because of the nature of an issue raised by a protestant or discovered by staff, the advice letter requires exercise of discretion to approve or reject, and so must go to the Commission.

If staff determines that a Tier 1 advice letter will require disposition by the Commission, staff will so notify the utility and any protestants by the end of the initial review period. The staff notification does not act to suspend the effectiveness of an advice letter already in effect; however, the notification will extend the review period and prevent the advice letter from being deemed approved.11

Unfortunately, delay in disposition is almost inevitable if a Tier 1 advice letter requires a Commission resolution, because Industry Division staff will have to write a proposed resolution, place it on the Commission agenda, and (in many instances) circulate it for public review and comment pursuant to Pub. Util. Code § 311(g)(1). Nevertheless, proposed GO 96-B will improve significantly on current practice in that the utility and any protestants will have better information on the status of pending advice letters and will know the steps for concluding the review process.

We emphasize that a change in the mode of disposition from a staff notification (the usual mode of disposition for advice letters in Tier 1 or 2) to a Commission resolution (the mode of disposition for advice letters in Tier 3) does not in itself trigger a new protest period. Finally, the foregoing discussion relates to advice letters that were properly designated Tier 1 or 2. We turn now to the problem of an advice letter improperly designated Tier 1.

Because a utility can implement a Tier 1 advice letter before receiving regulatory approval, the erroneous submittal of an advice letter under Tier 1 is consequential. We see two likely scenarios. First, there may be a good faith issue over whether a given advice letter meets the requirements for Tier 1. Second, the erroneous submittal may be knowing and deliberate, e.g., for the sake of competitive advantage.

As we discussed earlier, we expect that few utilities would run the risk of having to undo an action taken to implement an advice letter improperly designated Tier 1. The costs, the damage to the utility's reputation, and the possibility of sanctions (especially in our second scenario) should give pause to any management that contemplates running this risk. Nevertheless, we need to be clear on how staff will respond, should either of these scenarios occur.

Whenever an issue arises over whether an advice letter was properly designated Tier 1, the reviewing Industry Division will analyze the issue, and if staff determines that the Tier 1 designation was improper, staff will reject the advice letter without prejudice, its effectiveness will cease, and the Commission will further direct the utility regarding any other remedial actions necessary to undo the advice letter. If staff is unable, before the end of the initial review period, to determine the propriety of the Tier 1 designation, staff will so notify the utility and any protestants prior to the date that the advice letter would otherwise be deemed approved.

5.5 Advice Letters Deemed Approved

Historically, and still today, many advice letters are simple and uncontroversial, as when a utility submits revised tariff sheets to implement specific directions in a statute or Commission order. The revised tariff sheets are readily checked for conformity with the authority cited, and the large majority of such advice letters do not elicit any objection from the reviewing Industry Division or third parties. The "deemed approved" concept is carefully tailored to this situation.

The concept, in brief, is that an advice letter will be deemed approved at the end of the initial review period12 if the advice letter satisfies all of the following conditions. First, the advice letter is one whose subject is suitable for Industry Division disposition, pursuant to the applicable Industry Rules. Second, the advice letter is unprotested, i.e., no protest has been submitted within the 20 days following the date of filing. Third, there has been no disposition, and the Industry Division has not extended the review period or suspended the advice letter. The General and Industry Rules govern the types of advice letters that may be deemed approved. In particular, Tiers 1 and 2 under the Industry Rules list the types of advice letters that may be deemed approved.

When an advice letter is deemed approved, no written disposition is necessary; however, the approval will be reported in the Commission's Daily Calendar. Conversely, there will be a written disposition (approval or rejection) for all advice letters except those deemed approved.

5.6 Review of Tier 1 Advice Letters

The initial review period for a Tier 1 advice letter (i.e., an advice letter effective pending disposition) is 30 days; filing, protest, and reply all occur during this period, as described above.13 After 30 days have elapsed from the date of filing, the advice letter is deemed approved unless there is a timely protest or the reviewing Industry Division notifies the utility and protestants (if any) that the initial review period is being extended.

The Industry Division may extend the period for various reasons. For example, staff may need to get additional information regarding the advice letter, typically by means of an information request to the utility (see General Rule 7.5.1). Staff may also need more time to complete its analysis of the advice letter, or to draft a resolution if staff finds that Commission disposition of the advice letter is necessary. In addition, where there has been a timely protest and there has not been a disposition of the advice letter within the initial review period, staff will extend the review period and notify the utility and protestants of the length of the extension.

Specifically, on or before the 30th day, the Industry Division will notify the utility and any protestants if disposition of the advice letter will not occur within the 30-day initial review period. The notification will state the reason for the extension. An Industry Division extension of the review period is for up to 120 days. During this period, the Industry Decision must proceed promptly to dispose of the advice letter or, if Commission approval is necessary, prepare and submit the appropriate resolution. Staff's authority to extend is limited to 120 days beyond the initial review period; however, if the Commission's consideration of the proposed resolution extends beyond the 120-day period, there will be a further automatic extension until the Commission does act.

If the Commission does not act in 180 days following the 120-day period, the advice letter becomes approved by operation of law. Thus, disposition of a Tier 1 advice letter should not consume more than 330 days (i.e., 30 days for initial review + up to 120 days for 1st extension + up to 180 days for final extension). This overall timeline for Tier 1 advice letters is consistent with Section 455. Since we are allowing Tier 1 advice letters to become effective pending disposition, an extension of the Tier 1 review period means only that disposition of the advice letter will take a little longer; the extension does not cancel the effectiveness of the advice letter.

5.7 Review of Tier 2 Advice Letters

Like Tier 1, Tier 2 advice letters concern matters generally not expected to require a Commission resolution; however, unlike Tier 1, the tariff or other changes proposed in a Tier 2 advice letter do not become effective until the advice letter is approved. As discussed earlier, a utility that prefers prior approval to immediate effectiveness may submit under Tier 2 an advice letter that otherwise would qualify for Tier 1.

The initial and further review periods follow the Section 455 timeline exactly. Thus, a Tier 2 advice letter is deemed approved if, after the 30-day initial review period has ended, there is no timely protest and the reviewing Industry Division has not notified the utility that the advice letter is being suspended.14 However, the Industry Division may suspend the advice letter to continue its review beyond the initial review period. Our General Rules deliberately use "suspension" rather than "extension" to describe review of a Tier 2 advice letter beyond the initial review period. In contrast to a Tier 1 advice letter, which continues in effect during subsequent review periods, a Tier 2 advice letter is not in effect during the initial review period, and its effectiveness will be suspended throughout any subsequent review period. The suspension is consistent with Section 455 and with the fundamental premise of Tier 2 (and Tier 3) advice letters that approval of these advice letters must occur before any proposed change becomes effective.

We had originally proposed to delegate to staff the ability to impose suspensions cumulatively longer than 120 days for a given advice letter. In
D.05-01-032, the Third Interim Opinion, we decided to limit that delegation. As we there explained:

Regarding suspensions by our staff, we already have considerable experience as we authorized this procedure on an interim basis by Resolution M-4801 (April 19, 2001), modified and affirmed as modified by D.02-02-049. We made the interim procedure subject to further modification by order in this proceeding, and we do so today.

Specifically, we limit the delegated suspension authority to a single suspension, namely, the period of up to 120 days expressly provided by Pub. Util. Code § 455. That statute also provides for "a further period [of suspension] not exceeding six months," but we reserve to the Commission itself the power to impose this "further period." We make this change because we think that, generally speaking, five months (the initial review period plus a suspension of up to 120 days) is a reasonable amount of time for the reviewing Industry Division to prepare a proposed disposition.

One disposition option open to the Industry Division is to propose a further period of suspension if there is good reason to believe that further consideration of the advice letter will lead expeditiously to a clear approval or rejection on the merits. However, we think the more likely conclusion, where material issues raised by an advice letter remain in doubt after five months, is that the action proposed by the advice letter requires review in a formal proceeding, possibly with an evidentiary hearing. In that situation, a rejection without prejudice is preferable to continued suspension. (Pp. 12-13; footnotes omitted.)

In today's decision, where we fully implement the tier structure for advice letter review, the initial review periods and the periods that staff can take beyond initial review are uniform for all tiers, namely, 30 days and 120 days, respectively.

5.8 Review of Tier 3 Advice Letters

Tier 3 advice letters concern matters whose disposition is expected to require action by the Commission.15 As with Tier 2 advice letters, the initial review period is 30 days, but unlike Tier 2, a Tier 3 advice letter may not be deemed approved. Due to the kinds of subjects dealt with in Tier 3 advice letters, proper regulatory oversight requires us to ensure affirmatively the propriety of a Tier 3 advice letter before allowing the proposed changes to take effect, regardless of whether there has been a protest to the advice letter. Since GO 96-B provides that a tariff change proposed in a Tier 3 advice letter may not become effective unless and until the Commission itself approves the advice letter, the suspension of such advice letters under GO 96-B is automatic if (as generally will be the case) disposition does not occur by the end of the initial review period. (See General Rules 7.3.5, 7.5.2.)

Because Commission resolutions, like other Commission decisions, are subject to public review and comment under by Pub. Util. Code §  311(g)(1), only in extraordinary circumstances will we be able to dispose of a Tier 3 advice letter by the end of the initial 30-day review period.16 For virtually all Tier 3 advice letters, the reviewing Industry Division will send a suspension letter to the utility and any protestants by the end of that period. The letter will indicate that staff is drafting a resolution for the Commission's consideration, and will remind the utility that the proposed changes do not become effective during the suspension. The suspension letter will also note whether staff is seeking additional information or is otherwise still completing its analysis of the advice letter. As explained above, the suspensions for Tier 3 mirror those for Tier 2.

5.9 Other Advice Letter Tiers

At an early stage of developing GO 96-B, staff and workshop participants reduced the advice letter tiers to the three we just described. We agree with this recommendation. The tiers we have now depend on fundamental concerns, such as the scope of the authority that we may delegate to staff. Additional tiers are likely to result in complexity and confusion, rather than clarity and ease of administration.

We note, however, that the Legislature has enacted special procedures for certain advice letters.17 We have assigned these types of advice letter to the tier best approximating the statutory procedures, but we also propose Industry Rules specific to these types of advice letters where necessary to implement the respective statutes.

5.10 Disposition of Advice Letters

Unprotested advice letters in Tiers 1 or 2 may be deemed approved without a written disposition. In all other instances, there will be a written disposition. As discussed earlier, written disposition of Tier 1 and 2 advice letters typically will be by letter from the reviewing Industry Division, while disposition of Tier 3 advice letters typically will be by Commission resolution.

Whatever the mode of disposition, and regardless of whether the disposition is an approval or a rejection, all dispositions will be reported in tabular form at the Commission's Internet site. The table of dispositions will be updated regularly, so that anyone can readily determine whether and when a particular advice letter was approved or rejected.

On the following two pages, we provide tables summarizing the key provisions of GO 96-B regarding the disposition (Table 1) and effective date (Table 2) of advice letters. These tables distill many provisions of GO 96-B, most notably General Rules 7.6.1 and 7.6.2 (disposition) and General Rules 7.3.1 to 7.3.5 (effective date), and the tiers of review under the respective Industry Rules. While we have made great efforts to ensure the accuracy of these tables, they cannot substitute for careful reading of the relevant rules, the language of which is controlling.

Table 1: DISPOSITION OF ADVICE LETTERS

In general, the reviewing Industry Division, by letter, will approve or reject an advice letter (AL) submitted in Tiers 1 or 2. The Commission, by resolution, will approve or reject ALs submitted in Tier 3. Exceptions will occur, however, due to utility error or issues arising during review. This table shows how exceptions will be handled and what remedial actions a utility may take.

1. Utility Designates Wrong Tier 18

Designated Tier

Proper Tier

Staff Action

1

2 or 3

    Reject w/o prejudice

2

3

    Reject w/o prejudice

3

1 or 2

    Approve/reject under Tier 219

Any

none20

    Reject w/o prejudice

2. Utility Designates Correct Tier But . . .

Any tier: AL is clearly erroneous

Reject

Any tier: matter in AL requires hearing

Reject w/o prejudice

Any tier: issue requires exercise of discretion

Prepare resolution

3. Remedial Action by Utility if AL is Rejected w/o Prejudice

The utility may modify and resubmit an advice letter (with an explanation) if the utility believes the modification will moot the reason for rejection. Other possibilities:

Wrong Tier

Utility may submit new AL in proper tier

Utility must stop implementation (Tier 1)

Hearing Required

Utility may file formal proceeding

Matter Inappropriate for AL

Utility may file formal proceeding

Table 2: EFFECTIVE DATE OF ADVICE LETTERS

Normally, under GO 96-B, advice letters will become effective either upon approval (Tiers 2 and 3) or on the date when the utility submits its advice letter to the reviewing staff (Tier 1). Other effective dates are sometimes possible where statute, other Commission order, or the utility itself designates another effective date. This table summarizes the major possibilities, which are detailed in General Rules 7.3.1 to 7.3.5. Regarding the process by which disposition of advice letters occurs, see General Rules 7.6.1 and 7.6.2.

 

Tier 1

Tier 2

Tier 3

"Normal" effective date:

On date submitted (may be deemed approved)

Upon approval (may be deemed approved)

Upon resolution approval (no deemed approval)

"Early" effective date:

    Per statute, CPUC order

Per statute, CPUC order

    Per statute, CPUC order

"Later" effective date:

If requested by utility and not inconsistent w/ statute, CPUC order

Per statute, CPUC order

If requested by utility and not inconsistent w/ statute, CPUC order

Per statute, CPUC order

If requested by utility and not inconsistent w/ statute, CPUC order

    Per statute, CPUC order

2 One statute that expressly refers to advice letters is Pub. Util. Code § 455.1, authorizing the use of that procedure by water utilities on matters related to "service of recycled water." Also, Pub. Util. Code § 455.3 appears to contemplate the use of advice letters by oil pipelines in seeking rate changes. Both of these statutes contain their own timelines and provisions for the proposed rates to become effective on an interim basis subject to refund. When dealing with an advice letter whose subject comes within one of these statutes, the applicable Industry Rules follow the specific statutory timeline and not the general review timeline described in the text accompanying this footnote.

3 Rate changes generally are governed by Pub. Util. Code § 454, but that statute, in contrast to § 455, does not contain a timeline for review of proposed changes.

4 An exception would be those instances where the reviewing Industry Division can make the disposition on a ministerial basis. For example, if a Tier 3 advice letter depends on a calculation that proves to be mistaken, rejection of the advice letter would be ministerial, and there is no need for a Commission resolution.

5 We detail the timelines and review processes in our tier-by-tier discussion later. See Sections 5.6 to 5.8.

6 This change in mode of disposition generally will delay the disposition (due to the statutory public review and comment requirements that apply to Commission resolutions), but the utility will not have to re-submit its advice letter, nor will there be a new or extended protest period.

7 Staff will also reject an advice letter without prejudice if the subject matter of the advice letter requires a formal filing (typically, an application or petition for modification).

8 We note that there is also one situation in which the utility may properly designate a higher tier. Specifically, the utility submitting an advice letter that would qualify for Tier 1 may instead designate Tier 2 for that advice letter. We discuss this situation in Section 5.4.1. See text accompanying footnotes 9 and 10.

9 We expect customer refunds to be a common remedy but not necessarily the only remedy. We cannot be more definitive at this time except to say that we expect to approach these (hopefully) rare situations on a case-by-case basis.

10 We further discuss this point below in connection with the third question, regarding advice letters improperly requesting review under Tier 1.

11 Many advice letters that are subject to staff review do not go into effect pending disposition. These are Tier 2 advice letters. When an issue arises in the review of these advice letters that requires Commission resolution, staff will so notify the utility and any protestants. The notification will (1) prevent the advice letter from being deemed approved, and (2) serve as a "suspension" pursuant to Pub. Util. Code § 455 of any advice letter that would otherwise go into effect unless suspended within 30 days of the advice letter's filing. (See General Rule 7.5.) Consequently, the initial review period for Tier 2 advice letters is 30 days, and staff notification that the advice letter will go before the Commission for disposition will be given by the last day of the initial review period.

12 As we will discuss later, the "initial review period" is 30 days from the date of filing for all other advice letters.

13 We had originally proposed a 60-day initial review for Tier 1 advice letters, reasoning that until we had gained some experience with Tier 1 in operation, the longer review period would help us find and promptly correct any misuse. We have decided, however, that the extended initial review period would dilute some of the advantages of Tier 1. Moreover, the difference in review periods among the three tiers would be confusing and would significantly complicate the implementation of GO 96-B. Finally, since staff can extend its review of Tier 1 advice letters for up to 120 days beyond the
30-day initial review period in appropriate circumstances, we are confident that these advice letters will be subject to adequate scrutiny.

14 The grounds for suspension for Tier 2 advice letters are the same as for extension of the review period for Tier 1 advice letters: getting additional information, completing staff's analysis, dealing with a protest, or drafting a resolution where Commission disposition of the advice letter proves to be necessary.

15 Industry Division disposition of a Tier 3 advice letter is possible, however, where the advice letter contains the kind of defect where rejection of the advice letter would be ministerial.

16 Pub. Util. Code § 311(g)(2) provides for reduction or waiver of the period for public review and comment in some situations, and § 311(g)(3) allows the Commission to establish, by rule, additional categories of decision subject to such reduction or waiver. We have adopted rules to implement this authority. See Rule 14.6(c) of our Rules of Practice and Procedure. These rules, together with statutory provisions for reduction or waiver, should minimize delay beyond the initial 30-day review period for many Tier 3 advice letters, but neither the statute nor the rules are likely to eliminate the need for suspension except in the case of unforeseen emergencies.

17 See Pub. Util. Code §§ 455.1 (recycled water) and 455.3 (rate changes for oil pipelines).

18 Note that a utility may designate for Tier 2 an advice letter that would qualify for Tier 1. The Tier 2 designation therefore is not "wrong" in this situation.

19 However, by the utility's wrongly designating Tier 3, the advice letter may not be deemed approved.

20 This situation arises where the subject matter of the advice letter requires a formal proceeding (typically, an application or petition for modification).

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