6. Ex Parte Violations
6.1. Background
The assigned Commissioner and the assigned ALJ determined that PG&E violated Pub. Util. Code § 1701.3(c), and Rule 8.2 of the Commission's Rules of Practice and Procedure (Rules) in two meetings that occurred on Thursday, May 17, 2007, between representatives of PG&E and personal advisors for two Commissioners, as well as with the assigned Commissioner, John A. Bohn, and the Commission President, Michael R. Peevey.6 On May 22, 2007, PG&E served a letter indicating that "PG&E did not file a three-day notice in Docket number A.06-11-005." Rule 8.2(c)(2) Ex Parte Requirements states:
(c) In any ratesetting proceeding, ex parte communications are subject to the reporting requirements set forth in Rule 8.3. In addition, the following restrictions apply:
(2) Individual oral communications: If a decisionmaker grants an ex parte communication meeting or call to any party individually, all other parties shall be granted an individual meeting of a substantially equal period of time with that decisionmaker. The party requesting the initial individual meeting shall notify the other parties that its request has been granted, at least three days before the meeting or call. At the meeting, that party shall produce a certificate of service of this notification on all other parties. If the communication is by telephone, that party shall provide the decisionmaker with the certificate of service before the start of the call. The certificate may be provided by facsimile transmission or electronic mail. (Emphasis added.)
Rule 8.2 was adopted to implement Pub. Util. Code § 1701.3(c), which mandates:
Ex parte communications are prohibited in ratesetting cases. However, oral ex parte communications may be permitted at any time by any commissioner if all interested parties are invited and given not less than three days' notice. ... If an ex parte communication meeting is granted to any party, all other parties shall also be granted individual ex parte meetings of a substantially equal period of time and shall be sent a notice of that authorization at the time that the request is granted. In no event shall that notice be less than three days.
PG&E acknowledged it violated Rule 8.2 and its May 22, 2007 notice included an apology.
On May 23, 2007, DRA served a letter on the Commissioners and the assigned ALJ indicating PG&E failed to inform DRA of the ex parte meetings with Commissioners Bohn and Peevey, and it thereby "request[ed] that it [DRA] receive equal lobbying time in this matter."
PG&E filed several separate ex parte reporting notices on May 21, 2007 for separate meetings with Commissioners and Commissioner's advisors that occurred on or about May 17, 2007. Additionally, the assigned ALJ noted there were possibly several errors in the e-mail transmittals and ex parte reports. PG&E subsequently filed corrections to its ex parte reports.
A separate hearing on June 19, 2007 afforded parties an opportunity to offer further evidence or argument on applicable law or relevant policy. PG&E, DRA, and The Utility Reform Network (TURN) actively participated. At that hearing, PG&E's Vice President accepted full and personal responsibility for the violations7 and outlined the remedial steps PG&E implemented immediately to improve future documentation for ex parte requests. (TR. pp. 6-7.) DRA and TURN addressed the relevant sanctions.
6.2. Discussion
By Ruling dated August 8, 2007, the assigned Commissioner and assigned ALJ ruled that PG&E committed five separate violations and based these determinations on PG&E's admissions at the June 19 hearing:
(a) Two violations of Rule 8.2(c)(2), conducting an ex parte meeting with a Commissioner without producing a certificate of service of the ex parte meeting notification on all other parties;
(b) Two violations for scheduling a meeting with a Commissioner where PG&E failed to issue a notice or subsequently issue a notice and change the date of the ex parte meeting; and
(c) One violation for inadequate and incorrect reporting on May 21 of the four ex parte meetings held on May 16 and May 17, 2007.
We must determine the appropriate response predicated on the harm, if any, caused by these violations, any mitigation of the harm, and PG&E's prior compliance with the ex parte rules. The August 8, 2007 ruling found that the Commission has discretion, under Rule 8.2(j), to determine the appropriate response for the ex parte violation.
In terms of financial resources, PG&E is an extremely large company with ownership equity in the billions. The penalty range of $500 to $20,000 per transaction is a small sum for any deterrence value - if deterrence means avoiding the financial harm of the penalty. We could therefore impose the maximum penalty with little likelihood of a discernable financial impact on PG&E.
There are few precedents for ex parte violation enforcement. As the Commission has recognized, it is also difficult to find closely matching precedent since "The Commission adjudicates a wide range of cases which involve sanctions, many of which are cases of first impression. As such, the outcomes of cases are not usually directly comparable." (84 CPUC2d 155, 184.)
The violations in this proceeding may be a case of first impression covering a permissible ex parte contact gone awry because of the failure to provide advance notice. Nevertheless, we view any ex parte violation as a breach because such ex-record communication without the other parties' prior knowledge or presence diminishes the quality and fairness of the deliberative process. Thus, we find there was harm.
In developing a recommendation for the Commission, the ruling required PG&E to either develop a best practices model8 in cooperation with the Commission's General Counsel, or face a financial sanction.9
PG&E subsequently met with the General Counsel and designee and in good faith developed a best practices model to document, control, and report on ex parte contacts.
We choose to adopt a constructive remedial action. We therefore affirm the August 8, 2007 ruling of the assigned Commissioner and assigned ALJ and find that the development of written best practices to document, control, and report on ex parte contacts, is in the long-term best interests of the ratepayers and all other parties. PG&E's model of best practice is attached to this decision (Attachment B). We therefore find that no financial sanction is necessary.
6 The meetings with personal advisors are subject to Rule 8.5 and do not require equal time or three days' notice. (Rule 8.5: "Communications with Advisors - Communications with Commissioners' personal advisors are subject to all of the restrictions on, and reporting requirements applicable to, ex parte communications, except that oral communications in ratesetting proceedings are permitted without the restrictions of Rule 8.2(c)(1) and (2).")
7 Mr. Cherry, on behalf of PG&E, apologized and accepted responsibility: "First, I want to apologize to the parties in this room, to the ALJ, and to the Commission for our oversight in failing to give prior notification of our ex parte meetings in this proceeding." (TR. p. 4, lines 5-8.) As well as: "I take full responsibility for the miscommunications in my department. That was an oversight that shouldn't have happened. But I do want to assure you and the people in this room that it was an unintentional mistake, and we are sorry. We are very deeply sorry." (TR. p. 6, lines 9-14.)
8 Best Practice is a management concept which asserts that there is a technique, method, or process that is more effective at delivering a particular outcome when compared to all other available techniques, methods, processes, etc. That is, with best practices, which include checks, and testing, a desired outcome can be delivered with fewer problems and unforeseen complications. Any best practice must also be tempered with good judgment applicable to the specific circumstances.
9 Ruling, mimeo., p. 10 ff. "We believe a written best practices model will provide a long-term tool to avoid ex parte violations by any party appearing before the Commission that relies on a good model and exercises good judgment."
