9. Comments on Proposed Decision

The proposed decision of President Peevey in this matter was mailed to the parties in accordance with Section 311 of the Public Utilities Code and Rule 14.2 of the Rules of Practice and Procedure. Opening Comments were filed on January 9, 2007, by certain Energy Utilities (Pacific Gas and Electric Company, Southern California Edison Company, Southern California Gas Company, San Diego Gas and Electric Company, and Southwest Gas Corporation); certain Telecommunication Carriers (Calaveras Telephone Company, Cal-Ore Telephone Company, Ducor Telephone Company, Forest Hill Telephone Company, Global Valley Networks, Inc., Happy Valley Telephone Company, Hornitos Telephone Company, Kerman Telephone Company, Pinnacles Telephone Company, The Ponderosa Telephone Company, Sierra Telephone Company, Inc., The Siskiyou Telephone Company, Volcano Telephone Company, and Winterhaven Telephone Company); Cox California Telcom LLC; Verizon California, Inc., and AT&T California; and the California Water Association (CWA). Reply comments were filed on January 16, 2007, by the Commission's Division of Ratepayer Advocates (DRA) and Surewest Telephone.

9.1 Status of Telecommunications Utilities

All the commenting telecommunications utilities pointed to the uncertainties resulting from the Commission's recent Uniform Regulatory Framework decision (D.06-08-030) and ongoing proceedings in that docket
(R.05-04-005). The Telecommunications Carriers, consisting of small local exchange carriers (LECs), commented that they remain rate-regulated carriers and, unless Telecommunications Industry Rules are adopted by July 1st, they face uncertainty about advice letter procedures. Cox California, Verizon California, and AT&T California all urge that the tier system not apply to telecommunications companies until industry-specific rules are adopted in coordination with the ongoing proceedings in R.05-04-005.

The Commission is always at work changing and refining its regulatory policies in all industries under its jurisdiction, and these industries are themselves continually in flux as the result of economic, social, and technical factors. It will never be possible to hold an industry static while a comprehensive General Order 96-B is adopted. We seek, therefore, to harmonize this General Order with existing Commission policies and provide opportunities for needed modifications during implementation.

In addressing various comments about perceived inconsistencies with the Uniform Regulatory Framework, the proposed General Rules already provide two "savings" provisions that can be relied upon telecommunications carriers to transition to the new Uniform Regulatory Framework envisioned by the Commission. General Rule 7.3.1, concerning the effective date of advice letters provides:

If a statute, Industry Rule, or other Commission order specifically authorizes an advice letter to go into effect on a date different from that otherwise provided by these General Rules, the advice letter shall go into effect on any date (as designated by the utility in the advice letter) that is consistent with the authorization.

Similarly, General Rule 8.1, concerning tariffs, provides in part,

These requirements shall apply except where and to the extent that, by statute, or Commission order, compliance is expressly excused for the specific utility or type of utility, or for the specific services offered by the utility or type of utility.

These sections allow specific authorizations set forth in Uniform Regulatory Framework to supersede otherwise applicable requirements in General Order 96-B. It is incumbent on telecommunications carriers to identify General Order requirements they believe are superseded by the Uniform Regulatory Framework or other decisions or statutes.

In response to the small local exchange carriers, which remain rate-regulated, we anticipate that Telecommunications Industry Rules will be in place by the overall effective date of General Order 96-B. To assist the drafting of these rules in the context of the Uniform Regulatory Framework and other developments in R.05-04-005, we invite these carriers, as well as other interested persons, to propose within 30 days of the mailing of this decision, what subjects they believe should be listed under each of the three tiers envisioned for the Telecommunications Industry Rules. The ordering paragraphs of this decision have been modified to allow the filing of these comments.

9.2 Grace Period for Filings Under Tier Structure

The Energy Utilities request a five-day grace period to allow utilities to become experienced with the tier structure for advice letter. We appreciate the need for utilities and staff to become more familiar with the workings of these rules. This need is already addressed by the delayed effective date for the General Order, allowing an opportunity for workshops on these topics. We are also confident that our Industry Divisions and utilities will work constructively to improve understanding and resolve difficulties during the implementation of the General and Industry Rules. We conclude, however, that the formal adoption of a five-day grace period would complicate the various effective date scenarios available under the new rules.

9.3 Effective Date

Cox Communications comments on a perceived inconsistency concerning the effective date when an advice letter, otherwise eligible for immediate effect (General Rule 7.3.3), is submitted with the request that it be subject to Industry Division disposition (General Rule 7.3.4). This is not an exception that "swallows the rule," as state in the comment, but an optional procedure available to a utility that desires the certainty of an Industry Division decision before embarking on the course of conduct outlined in the advice letter. Any conflicts between the suspension periods for advice letters and the Uniform Regulatory have been discussed under "Status of Telecommunications Utilities," supra.

9.4 Tariff Sheet Numbering

The Energy Utilities comment on the problems of shifting to a new tariff sheet numbering system (see General Rule 8.4). We originally proposed to adopt the Federal Communications Commission's (FCC's) tariff sheet numbering system. New utilities would have to use that system, and existing utilities not already using that system would have a transition period within which to comply. We still prefer the FCC numbering system because we find it greatly simplifies the process of locating revised tariffs, particularly compared to the labyrinthine tariff books of many energy utilities. However, we have decided to modify the proposal. As the principal medium of tariff storage and retrieval changes from paper to electronic files, we are reluctant to impose potentially high costs on utilities to refine a paper system that may shortly be abandoned altogether.

While we do not require existing utilities to convert to the preferred numbering system, we impose on all utilities the obligation to maintain their entire historic tariff record, and in that regard to respond promptly to inquiries regarding their tariffs no longer in effect. Ideally, the historic tariffs, like the current tariffs of most utilities, would be available on-line in a searchable database. Absent such a database of historic tariffs, utilities should provide copies of the requested tariffs within a reasonable time, which would depend on the scope of the request.

9.5 Notice Requirements

The Energy Utilities suggest the deletion of General Rule 4.2 because, if we understand the comment, the rule creates the risk of a duplicative notice requirement. We agree with the Energy Utilities' general interpretation that, if the Commission has previously authorized a rate change (e.g., in a general rate case decision where notice has previously been given to ratepayers and others), there is no requirement to give additional notice (unless specifically required by statute or separate Commission order) when the advice letter effectuating the rate change is filed. Because there are instances where rates and terms and conditions of service may be proposed initially by advice letter, we retain the rule. We also rejected the Electric Utilities' related suggestion to delete subsections (4) and (5) of Energy Industry Rule 3.

9.6 Notices to Correct Tariffs

The Energy Utilities suggest an improvement to General Rule 8.3, concerning the correction of tariff sheets. We agree that the submission of a substitute appropriate sheet may be more expeditious in some circumstances, and we have modified the rule to allow it.

9.7 Penalties and Sanctions

The Energy Utilities and CWA oppose the potential imposition of fines and other sanctions for the failure to submit timely reports or required revisions. (See, e.g., General Rule 6.2 & 7.5.3.) Our Industry Divisions are available to help regulated entities in timely and complete filing of required reports and other documents. In appropriate circumstances, the Commission may use its authority under the Public Utilities Code to address noncompliance with its orders, decisions, or other requirements. (See, e.g., Public Utilities Code Section 2107.) We believe it is useful to bring these consequences to the attention of regulated entities that may not be familiar with these statutory provisions.

9.8 Confidentiality

Several of the comments express concern that the confidentiality procedures set forth in General Rule 9.0 either duplicate or divert from Public Utilities Code Section 583; General Order 66-C, which addresses confidentiality; or industry-specific decisions on confidentiality. The Energy Utilities urge various changes to General Rule 9.0. The Telecommunications commenters urge wholesale deletion of the rule and reliance on Section 583, General Order 66-C, and specific Commission decisions.

We recognize that General Order 66-C is likely to be updated in Phase II of R.05-06-040, an ongoing Order Instituting Investigation addressing confidentiality. In response to comments, we have decided to modify General Rule 9.0 to create a procedural rule describing the unique steps necessary to assert and address confidentiality claims in the advice letter context. Accordingly, we have chosen to rely on state law, General Order 66-C (or its successor), specific Commission decisions, and other legal sources for the substantive basis for confidentiality claims. We have also adopted other comments concerning cross-references to existing protective orders, the ALJ Division's resolution of confidentiality disputes, and other minor provisions. We see no basis for wholesale exemption of an industry, such as telecommunications, from these confidentiality procedures. Concerns about confidential contract provisions can be addressed under General Rule 9.0 and General Order 66-C. Indeed, our confidentiality provisions strike a balance between the public's right to know of information coming into this agency's possession and the interests of utilities and other persons in certain information not being made public.

California Water Association also expresses its concern about public access to certain types of information - only filings made under General Rule 6.1. Under General Order 66-C, confidentiality may be claimed for eligible documents, and CWA and others will have an opportunity to comment on any future proposal to access information - only filings on the Internet, which is a subject not before us in this proceeding.

9.9 Governmental Agency Contract Procedures

Regarding General Rule 8.2.3, "Emergency Service; Service to Government Agencies," several comments discussed the additional work for all involved if all government contracts must be approved by Commission resolution. The intent of the proposed rule was not to require a resolution approving all such governmental contracts, and language in the second paragraph of the rule has been amended to indicate that such contracts may be effective pending disposition under General Rules 7.3.3 and 7.5.3. However, as indicated by General Rule 7.3.3, "If an advice letter is effective pending disposition, all services rendered pursuant to the advice letter before disposition will be subject to a Commission order requiring refunds or such other or additional adjustments as the Commission may require."

Another comment on General Rule 8.2.3 was why telecommunications utilities are not eligible to provide service to government agencies for free or for reduced cost. This language results from a settlement adopted by the Commission in D.88-08-059, 1988 Cal. PUC LEXIS 641; 29 CPUC2d 376 (1988). In the remaining phase of this proceeding, parties may argue that this General Rule should be modified as the result of superseding Commission decisions concerning the telecommunications industry.

9.10 Other General Rules Changes

We have made other minor changes in the General Rules:

· General Rules 5.4, "Cover Sheet," and 5.5, "Form and Content," have been moved and renumbered as General Rules 4.6 and 4.7, respectively. These rules are more appropriately placed in Section 4.

· In General Rule 8.4, "Tariff Format and Sheet Numbering," we have replaced the "CIS number" with the "U" number for the utility. (See also minor change to General Rule 8.5.1 to incorporate this correction.)

· In General Rule 8.5.3, "Preliminary Statement and Explanation of Symbol," we have deleted the definition requirement because General Rule 8.5.7(a) already requires that utilities define the terms used in their tariffs (see also page 36-37).

9.11 Comments on Water Industry Rules

In specific comments on the Water Industry Rules, CWA objects to the definitions of "balancing accounts," which are approved by the Commission for recovery or refund, and "memorandum accounts," which may be recovered only after Commission approval. CWA also opposes the listing of memorandum account approval as a Tier 3 item. We have not changed the definitions, the Tier 3 designation, or other related suggestions since we believe these different concepts provide useful flexibility at the Commission. For instance, some formal proceedings may be resolved if there is a deferral of an issue to a later date by allowing the posting of certain expenditures to a memorandum account for future Commission consideration. The Commission's historic practice is that memorandum accounts must be approved for recovery by the Commission. We have substituted "balancing account amortization" for "balancing account offset" in Water Industry Rule 7.3.1 since the former term is more appropriately used in this context (see also change to Water Industry Rule 8.5).

CWA also opposes the current version of Water Industry Rule 8.5 for the reason that the text would modify existing balancing account practices for Class A water utilities as recently set forth in D.06-04-037. DRA responds that Class A utilities undergo a general rate case plan every three years, pursuant to the general rate case plan, and that D.06-04-037 recognizes such general rate proceedings as the appropriate time to amortize under- or over-collections in these accounts. In DRA's view, proposed Water Industry Rule 8.5 and
D.06-04-037 are consistent. We concur in this interpretation of the two provisions, and we have not changed the rule except to describe it as "balancing account amortization."

CWA does not object to the definition of "standard practice" in Water Industry Rule 1.10 but it comments that the use of "procedural guidelines" in the definition raises concerns about the binding nature of the Water Division's standard practices, which are designed to provide guidance on many topics of concern to water utilities. We do not believe this is the appropriate proceeding to address the legal stature of the Water Division's series of standard practices as we prefer such questions to be raised in an actual controversy.

In response to other CWA comments and in explanation of other changes:

· We agree with CWA that the Weather Normalized Means test and U-27-W, as defined in Water Industry Rule 1.12, should be removed from the Water Industry Rules since this test has been imposed only in specific cases.

· We have added minor change to Water Industry Rule R 3.1 to require the utility to provide, in the notice of an advice letter pending approval, the Uniform Resource Locator (URL) locating the advice letter on the utility's Interest site.

· CWA opposes the requirement of notifying LAFCOs of transfer of ownership filings. In furtherance of our cooperation with other governmental agencies, we believe that transfer of ownership information will provide LAFCOs with contact information that may be important as these agencies seek to improve planning, fire protection, and other local governmental services. We also believe that sufficient information can be obtained from county recorder and assessor offices to ascertain real property ownership for purposes of complying with the rule. We do not change the rule.

· The last sentence of Water Industry Rule 7.1 has been deleted since it does not pertain to the initial review of advice letters.

· In Water Industry Rule 7.3.1, we have renamed "step-rate filing" as "escalation" and moved it to a Tier 1 item.

· In Water Industry Rule 7.3.2, we have eliminated "attrition filing" as a Tier 2 item since both attrition filings and step-rate filings are subsumed under the concept of "escalation."

· In Water Industry Rule 9.1, we agree with CWA's recommendation of using the term "published." We do not consider the list of tariff schedules to be comprehensive, but we have added "other water or sewer services" to the list. However, we encourage water utilities to use appropriately named tariff schedules to cover the general water or sewer services they provide.

· CWA also questions the inclusion of Tariff Rule 21 (which includes fire protection service) in Water Industry Rule 9.2. Requiring the tariff does not mean the water utility must offer the service. The tariff can be reserved for possible future use in appropriate circumstances.

· CWA expresses concern about the deadlines for water utilities to comply with the requirement set forth in Water Industry Rule 10 for preparing digital maps of their service areas. CWA indicates that many water utilities may not have the expertise for preparing such maps. CWA's concern is addressed in General Rule 8.5.4, which instructs the Industry Divisions to establish compliance schedules for those utilities that do not have maps when the rules become effective on July 1, 2007.