Positions of Responding Parties

Responses to the motion were filed on July 22, 2008, by the Commission's Division of Ratepayer Advocates (DRA), The Utility Reform Network (TURN), Greenlining Institute (Greenlining), jointly by the California Farm Bureau Federation and California Large Energy Consumers Association (CFBF/CLECA) and separately by Independent Energy Producers (IEP), and L. Jan Reid. DRA, TURN, CFBF/CLECA and Reid all categorically oppose granting the motion for an interim waiver of Rule V.E.

TURN argues that the motion should be denied because the stated urgency of the request is entirely of PG&E's own making, and because the existence of a "dual-hatted" President and CEO would create undue risk to ratepayer interests. TURN argues that even though PG&E Corporation does not currently have any subsidiaries active in the energy business, the holding company is continuously on the look-out for such opportunities and has very recently considered investing a development project for which PG&E, the utility company, was a potential customer. In this regard, TURN refers to PG&E's application
(A.07-12-021) for authority to enter into a long-term natural gas transportation agreement with the Ruby Pipeline Company. TURN argues that even though PG&E Corporation decided against making an investment in Ruby, the events surrounding that project demonstrate that even the current Affiliate rules are inadequate to meet the challenge of a holding company investing in projects that offer service to its regulated utility. TURN contends that allowing even a temporary waiver of Rule V.E would create the potential environment for conflicts of interest between the holding company and its utility.

Greenlining expresses limited opposition to the motion based on the concern that by combining the offices of President and CEO on a shared basis, a single CEO may be spread too thin, without sufficient time to ensure the good corporate citizenship that Greenlining believes is embodied in Morrow. Greenlining, therefore, requests that PG&E demonstrate whether the duties of Morrow, including those relating to corporate responsibility and community involvement, can be effectively carried out by Darbee. Greenlining states that it may withdraw its opposition pending such a demonstration as it has requested.

IEP has no objections to Applicants being granted the temporary waiver, but does object to the automatic triggering mechanism for termination of the waiver as proposed by Applicants. Under Applicants' proposed triggering mechanism, the waiver would remain in effect until such time as PG&E's
Rule II.B affiliates constitute 5% of PG&E Corporation's consolidated assets or generate 5% of PG&E Corporation's consolidated operating revenue. IEP proposes instead that if any waiver is granted by the Commission, it should be reevaluated whenever a new compliance plan is filed under Rule VI.A, whenever a new affiliate is created under Rule V.B, or as part of PG&E's regularly scheduled biennial affiliate audit under Rule VI.C.

Applicants were granted leave to file a third-round reply to parties' responses on January 28, 2008. PG&E argues in its reply that no party has demonstrated that the public interest will be harmed by granting the motion for a temporary waiver of Rule V.E. PG&E notes that IEP suggests an alternate approach to Applicants' proposed triggering mechanism for revisiting or withdrawing the limited exemption from Rule V.E. PG&E believes that issue raised by IEP can be addressed in the second phase of the proceeding, but that IEP does not present any reason to defer granting the temporary waiver requested in its motion.

In response to Greenlining's request for assurances of PG&E's continuing commitment to good corporate citizenship, diversity and community involvement, Applicants do not offer any specific commitments, except to express "confidence that their allegiance to [those commitments] will only strengthen under Darbee's leadership of PG&E." (Reply at 3.)

Applicants disagree with CFBF and CLECA who argue that granting the temporary waiver would set a bad precedent by upsetting the balance struck in D.06-12-029. Applicants claim that CFBF and CLECA identify no specific harm that would result from granting the motion, and argue that the Commission expressly contemplated that future exemptions might be appropriate.

Applicants argue that the objections raised by TURN and Reid based upon claims of a potential future conflict of interest created by PG&E Corporation's consideration of an equity interest in the Ruby Pipeline project are issues that can and should be decided in A.07-12-021. Applicants do not believe that disposition of those issues, however, have any bearing on the Commission's ruling on the instant motion for a temporary waiver of Rule V.E.

Applicants maintain that although PG&E's current President and CEO, Morrow, had expressed a willingness to remain at PG&E through February of 2009, that it would not be in the public interest for California's largest utility to be led by a President and CEO who everyone knows will be phasing out and hence will not have lasting authority to enforce his decisions. Likewise, Applicants argue that filling his position with a temporary caretaker would be no better at providing the leadership required in view of the challenges that PG&E faces.