Discussion

Based on the limited record that is available under the expedited schedule requested in Applicants' motion, we conclude that the circumstances surrounding the pending departure of PG&E's current President and CEO warrant an interim waiver of Rule V.E to permit Darbee serve in a dual capacity subject to certain necessary conditions set forth below.

We have considered Applicants' argument that either temporarily extending Morrow's tenure or appointing an interim replacement would not be in the public interest, because such a temporary appointee would not have lasting authority to enforce his decisions. We shall accordingly grant the motion for a temporary waiver of Rule V.E subject to Applicants' compliance with the specific conditions as set forth below. We have reviewed opposing parties' concerns as to why the temporary waiver should not be granted. We agree with parties that the limited exemption sought in the application raises important questions that require careful consideration in the next phase of this proceeding. As part of our review of the request for a limited exemption of Rule V.E in the next phase of this proceeding, we intend to review the existing reporting relationships among employees and officers between the holding company and the utility. However, we are not persuaded that parties' objections preclude us from granting a limited temporary waiver of Rule V.E, as long as appropriate protective conditions are in place, as outlined below. With these conditions in place, we conclude that the limited temporary waiver of Rule V.E, as granted herein, will not pose an adverse risk to ratepayers.

In granting Applicants' motion for a temporary waiver, we make no prejudgment concerning the underlying merits of Applicants' request for a limited exemption from Rule V.E beyond the period covered by the temporary waiver granted herein. This temporary waiver does not constitute a precedent, and shall not be referenced as support in this proceeding or any other proceeding, relating in any way to the substantive merits, applicability, or enforcement of the Commission's Affiliate Transaction Rules.

By granting the temporary waiver, Applicants can proceed to have Darbee serve concurrently as President and CEO of both PG&E and PG&E Corporation on an interim basis while the underlying merits of this Application are being addressed. We accordingly conclude that granting the temporary waiver is acceptable, as long as the conditions outlined herein are met, as discussed below.

The temporary waiver of Rule V.E shall be effective for a limited period not to exceed 120 days from the effective date of this decision, or upon the adoption of a final decision on this application, whichever occurs sooner. This period takes into account the proposed schedule that Applicants have presented for addressing the underlying application, but ensures that this temporary waiver will remain in effect only for a short finite period. During this period, we will undertake a substantive review of the merits of the Application, and develop a full record as a basis to decide whether, or subject to what conditions to grant the limited exemption of Rule V.E as proposed by Applicants.

We grant the temporary waiver based upon the recognition that PG&E's Rule II.B affiliates are currently inactive with no operating revenue. As an additional condition of granting the temporary waiver, we shall require that PG&E's Rule II.B affiliates not expand their existing activities or enter into new commitments throughout the duration of the temporary waiver, and that no new holding company capital investment commitments be undertaken and no new holding company subsidiaries shall be formed during the waiver period.

As a further condition for granting the temporary waiver for Darbee to serve in this dual capacity, we shall require Applicants to affirmatively commit to have Darbee function on a substantially full-time basis as the President and CEO of PG&E, with the responsibility to the utility and its operations constituting his primary duty. In imposing this requirement, we recognize that under California law, officers and directors of every California corporation owe that corporation the same high standard of care and loyalty as a fiduciary responsibility. By conditioning approval on this commitment, we will provide additional protection to ratepayers while Darbee functions in a dual capacity during the period of the limited temporary waiver.

We shall address Applicants' proposal for a waiver of Rule V.E as part of its underlying application in subsequent decision, after a record is developed.