Consistency with Precedent: Any decision that levies a fine should address previous decisions that involve reasonably comparable factual circumstances and explain any substantial differences in outcome.
We have been referred to a number of Commission decisions which imposed fines. Most of those decisions concerned either small utilities (as compared to SCE) or facts that did not involve false and misleading activities. The most comparable decisions are:
Toward Utility Rate Normalization, Inc. v. Pacific Bell, D.94-04-057, 54 CPUC2d 122: Pacific Bell" assessed improper late payment charges and reconnection fees, and disconnected customers in error," 7.5 million times. Pacific Bell overcharged its customers $34.32 million. We fined Pacific Bell $2.00 per violation, which totaled $15 million, and ordered Pacific Bell to refund the improperly collected sums. We determined that Pacific Bell "knew or should have known" it was overcharging customers. (Id. at 125.)
The Utility Consumers' Action Network v. Pacific Bell, D.02-10-073, 2002 Cal. PUC LEXIS 729 (2002): Pacific Bell Internet and SBC Advanced Solutions acknowledged billing problems and complaints from an estimated 30,000 to 70,000 customers. These errors amounted to wrongful billing practices which constituted violations of Section 2890(a). We adopted a settlement agreement in which Pacific Bell, Pacific Bell Internet Services, and SBC Advanced Solutions were required to pay a penalty of $27 million.
Investigation into Qwest Corp., D.03-01-087, 2003 Cal. PUC LEXIS 67 (2003): We denied Qwest's application for rehearing of D.02-10-059, in which Qwest was fined $20.3 million for unauthorized services switching. Qwest's 8000+ violations were condensed into a small period, so it argued it should be subject to daily penalties (totaling $2 to $4 million) instead of a per-violation penalty (totaling $20+ million). We rejected this argument, finding the $20.3 million fine was not excessive or unconstitutional.
Pacific Bell Wireless, LLC v. Pub. Util. Comm'n, 140 Cal. App. 4th 718, 728 (2006): The Court of Appeal upheld our assessment of a $10,000 per day penalty for each day the wireless carrier failed to offer a trial period for its service, and another $10,000 per day penalty for each day the carrier failed to offer potential customers disclosures detailing network deficiencies. These penalties, levied under § 2107, totaled $12.14 million.
As in the prior cases, in this decision we are imposing penalties in addition to substantial refunds, and the size of the penalty relative to the refund is reasonable. For example, compared to D.94-04-057 where Pacific Bell was fined $15 million when it overcharged customers $34 million, a fine of $30 million when the overcharges exceeded $81 million is reasonable.
It is also clear that a $30 million fine to a $10 billion utility is neither excessive nor unconstitutional.
Finally, a fine of $30 million is reasonable when viewed as an ongoing violation that should be subject to a daily penalty, as recommended by CPSD and used by the Commission in the case that was upheld in Pacific Bell Wireless, LLC v. Pub. Util. Comm'n. If SCE's violations are viewed as daily violations that continued for seven years, then a $30 million dollar fine equates to a daily penalty of just less than $12,000 ($30 million / 7 years / 365 days). We find this to be a reasonable daily penalty given the range provided by § 2107.
As previously discussed, the most serious violations are those involving physical harm, and SCE's misreporting of health and safety records is closely linked to physical harm, although we have no evidence that the misreporting presented a direct physical harm of the most severe nature. Furthermore, the ongoing manipulation of customer satisfaction data and the unreliable reporting of data caused significant economic harm, as well as harm to the regulatory process, and must be addressed accordingly. Therefore, we believe the severity of the violations justifies a penalty toward the upper end of the range provided by § 2107.
However, in light of significant mitigating factors, as discussed above, we feel it is appropriate to order a more moderate fine that is equivalent to a daily fine of just under $12,000. We believe this amount will be substantial enough to deter future violations without being excessive.
On October 1, 2007, the presiding Administrative Law Judge (ALJ), pursuant to Rule 14.1 et seq. of the Commission's Rules of Practice and Procedure, issued his Presiding Officer's Decision (POD). Southern California Edison Company (SCE), Consumer Protection and Safety Division (CPSD), and Greenlining, pursuant to Rule 14.4, filed appeals. SCE, CPSD, Greenlining, Division of Ratepayer Advocates (DRA), and The Utility Reform Network (TURN) filed responses to the various appeals. Oral argument before the Commission was heard on January 30, 2008, and the matter submitted.
SCE appeals asserting that the POD does not fairly reflect the record, the facts, or the scope of Phase 1 of this investigation. SCE says the POD makes an additional error by prejudging other components of customer satisfaction that were reserved for review in Phase 2, which denies SCE the opportunity to offer evidence in Phase 2 to show that there was no data falsification in other business units. Finally, SCE claims the POD orders unjustified monetary sanctions in the form of refunds of PBR awards and Results Sharing compensation totaling more than $200 million, including the largest statutory fine ($40 million) in the Commission's history.
CPSD states that the POD's findings are correct, but appeals on the ground that the relief the POD orders is inconsistent with the findings and the law. CPSD asserts that the POD commits legal error, because the same findings and law that require the refund of PBR rewards also mandate maximum PBR penalties; the POD cannot order refunds of PBR rewards for customer satisfaction and employee health and safety, while failing to impose maximum PBR penalties. In addition, CPSD argues that the POD commits legal error in determining that a statutory penalty of $40 million is adequate to impose on a utility that has committed data falsification and manipulation of the magnitude shown in this investigation. CPSD recommends a payment to ratepayers of PBR penalties of $48 million for customer satisfaction, and $35 million for employee health and safety. CPSD recommends a statutory penalty of between $83 million and $100 million.
Greenlining supports the findings of the POD, but is concerned that the penalty levied against SCE falls far short of matching the severity of SCE's malfeasance. Greenlining's appeal recommends that the fine levied against SCE should be symmetrical to the amount of rewards that SCE could have reaped under PBR during its period of malfeasance, which amounts to $70 - 102 million.
The appeals of CPSD and Greenlining need not detain us. They contend we did not fine SCE sufficiently given the widespread nature of the fraud and the magnitude of the ratepayer money at risk. Further, CPSD says we should have invoked the penalty provisions of the PBR metric to the maximum permissible. Both of these contentions were discussed and resolved in the POD. However, we have determined that the appropriate level for the statutory fine is $30 million, as described in the decision.
19.1. SCE's Appeal - Due Process
SCE's appeal basically reargues every issue resolved adversely to it, using arguments similar to those briefed prior to the issuance of the POD. However, SCE has raised three issues that require further discussion: the issues to be considered in Phase 2, the method of computing the Reward Sharing refund, and the reasonableness of the fine.
SCE asserts that the POD's premature disposition of customer satisfaction issues previously reserved for Phase 2 violates due process. SCE argues that a party to a legal proceeding has a due process right to notice, a hearing, and an opportunity to present evidence, testimony, and argument. Due process applies with equal force to bifurcated proceedings, where certain issues are contested in one phase, and others reserved for a second phase. Here, SCE claims, the POD violates SCE's due process rights by overruling the presiding ALJ's own ruling which limited the scope of customer satisfaction review in Phase 1. Previously, the ALJ had ruled that non-planning, non-meter-reading customer satisfaction issues would be reserved for Phase 2 of this proceeding. At the July 25, 2006 prehearing conference, the ALJ stated that customer satisfaction refund issues in areas other than planning and meter reading would be heard in Phase 2 of these proceedings. Initially, CPSD proposed bifurcation over SCE's objections. CPSD's counsel stated: "We propose that this case go forward in two phases: The first phase would deal with the portion of the customer satisfaction PBR that deals with the planning and the meter reading . . . . Everything else we feel should be dealt with at a later stage . . . . We don't look at it as causing too much of a problem in dealing with customer satisfaction in two phases." (PHC Tr. 8: 18-26; 22: 22-24.)
After hearing argument on the merits of bifurcating the proceeding, the ALJ adopted CPSD's proposal: "I am going to bifurcate this matter as the CPSD has requested." (PHC Tr. 30: 24-25.) After the conclusion of the evidentiary hearing, the ALJ said: "Well, for the purpose of this Phase 1, I'm going to make a finding based on CPSD's statement that this Phase 1 only covers 30% of customer satisfaction." (10 Tr. 1181: 7-10.) "But I am planning to write a decision on this Phase 1, and I am willing to limit it to the - as far as customer satisfaction goes, to the 30% that has been presented by CPSD. And everybody's covered that area." (10 Tr. 1182:26 - 1183: 3) Then on October 1, 2007, according to SCE, the ALJ issued the POD that overruled his prior ruling on the scope of Phase 1. SCE contends that based on the redefined scope of Phase 1, the ALJ ordered additional refunds of $33.6 million of customer satisfaction rewards - refunds that were based on customer satisfaction areas outside of planning and meter reading and which represent 70% of customer satisfaction rewards earned by SCE - without giving SCE the opportunity to present evidence on those areas, and despite having stated that those issues would not be considered until Phase 2. SCE contends that this change is a clear denial of due process and argues that the customer satisfaction rewards attributable to those areas to be heard in Phase 2 were warranted; SCE has the right to have that evidence heard and judged fairly. SCE maintains that the Commission must overturn the POD's refund order for the non-planning, non-meter reading components of customer satisfaction and limit any refunds of customer satisfaction PBR rewards in Phase 1 to the 30% attributable to planning and meter reading. SCE maintains that this denial of its fundamental right to present evidence, plus the imposition of a $33.6 million refund of customer satisfaction rewards attributable to issues reserved for Phase 2, must be reversed.
19.2. DRA's Response
DRA, supported by CPSD, TURN, and Greenlining, argues that SCE has not been denied due process. DRA asserts that the facts contradict SCE's argument: SCE 1) had notice, 2) had the opportunity to present evidence and did present evidence, and 3) had the opportunity to present arguments and did present arguments. The standard for determining proper notice is whether the notice would fairly apprise the interested persons of the subjects and issues the agency was considering. (Cal Jur 3d, Constitutional Law § 307.)
First, DRA says, the company clearly had notice that all customer satisfaction issues could be presented in Phase 1. The August 24, 2006 "Administrative Law Judge's Ruling Setting Hearings" discussed the issues to be addressed in the November hearings:
5. The hearing will cover all phases of customer satisfaction, health and safety, survey techniques and responsibilities, corrective action, and refunds and penalties.
6. Because of the complexity of this investigation the PHC did not resolve the question of whether all aspects could be completed in the November 2006 hearings. I leave open (1) the possibility that a Phase 2 will be needed and (2) the issues to be covered in Phase 2, including system reliability.16
The scoping ruling clearly states that all customer satisfaction issues would be considered in the first phase, and that the ALJ did not decide on whether a Phase 2 was necessary.
Second, DRA maintains, SCE also had notice of DRA's and TURN's proposals, which were granted by the POD, to refund all customer satisfaction PBR rewards in Phase 1. TURN and DRA served testimony on September 12, 2006, before SCE served testimony. SCE knew of the intervenor proposals before it filed its initial testimony on October 16, 2006. In their Phase 1 testimony, both DRA and TURN proposed $48 million in refunds for all customer satisfaction PBR.17 Neither TURN nor DRA asked for a Phase 2.
DRA's testimony asserted that Phase 1 evidence alone justified a full PBR customer satisfaction refund. While CPSD asked for PBR refunds and penalties for planning and meter reading, DRA requested full PBR refunds for all customer satisfaction. Because of the impropriety of SCE practices in regard to customer satisfaction surveys, DRA argued that all PBR rewards earned in connection to customer satisfaction should be refunded. (DRA O. B., pp 9-10.)
SCE submitted testimony on October 16, 2006. SCE's testimony states that it investigated all PBR customer satisfaction in all areas subject to PBR:
Well before SCE had completed its investigation of customer satisfaction survey irregularities in Planning, the Law and Audit Services Departments had decided to expand the inquiry to all of the other areas subject to PBR incentives mechanisms. These included the functions within the Customer Service Business Unit (CSBU) that were also a part of the PBR customer satisfaction metric: field delivery (including meter reading), call centers and in-person services. (SCE Exh. 1, p. 25.)
In its appeal SCE cites to its Exhibit 11, which presented its defense of the business units, and which asserts that "there was no evidence of data falsification in phone center operations, or in any of the other CSBU sub-units (field delivery, business offices) that comprised the majority of CSBU RS customer satisfaction goals." (SCE Appeal, p. 51.) But, DRA contends, SCE's Exhibit 1 and its testimony directly addressed DRA's proposals for a full PBR refund: "DRA bases its recommended disallowance for customer satisfaction on an assertion that the customer satisfaction data were unreliable, and that the integrity of the PBR was tainted by the actions of SCE, citing selling the survey, data manipulation, and data falsification . . . . (Ex. 1, p. 101.) Similarly, SCE extensively addressed TURN's proposals. (Ex. 1, pp. 80-98; 101-102; 109-124.) In Response to OII Ordering Paragraph 7, SCE served Exhibit 67, entitled "SCE's Response to Information Requested in Ordering Paragraph 7 of Investigation (I.) 06-06-014," which presented SCE's defense that other business units did not commit data falsification so a refund of their PBR was not appropriate.
DRA points out that during hearings, SCE presented evidence on the refunds proposed by DRA and TURN. SCE never filed a motion to strike the TURN and DRA customer satisfaction testimony. DRA and TURN litigated the case as if all customer satisfaction proposals (not just planning) were part of Phase 1 and SCE did nothing to remove the DRA and TURN positions from Phase 1.
In its appeal, SCE states that at the end of hearings, the presiding ALJ said that he planned to limit his Phase 1 decision to the planning portion of customer satisfaction. DRA agrees that the ALJ initially said that, but later in the transcript, after further discussion from the parties, the ALJ also recognized that a Phase 2 might not be necessary, depending on how he ruled in Phase 1:
ALJ: I quite agree, Phase 1 could decide all of Phase 2 depending upon the findings, for instance, regarding the experts that Edison put on, discussing the effects of the survey and what manipulation could have done to it and essentially saying that even if manipulation had taken place it didn't affect the surveys. Now, if we make a finding in Edison's favor on that, that will carry over into Phase 2 and might kill Phase 2 right away. Of course, it could go the other way, and then the only question is how much money is Edison is going to pay if the Commission decides that the survey was manipulated. And then it just gets down to how much money. (10 RT 1187-1188, lines 20-28, lines 1-4.)
DRA observes that the ALJ clearly provided notice to parties that a Phase 2 might not be necessary depending on his weighing of the evidence. He did not find SCE's witnesses on customer satisfaction credible, ruled against the company on the appropriateness of selling the survey and other suggestive customer satisfaction-related behavior, (POD pp. 111-112, Finding of Fact 30) and, therefore, entirely within his authority, ruled that a Phase 2 was not necessary. Certainly, he could not be expected to know how he was going to rule on the last day of hearings before he had reviewed the lengthy record so it was prudent to acknowledge that a Phase 2 might be necessary.
Finally, DRA argues, SCE had an opportunity to brief its arguments in opposition to DRA's proposals on full PBR customer satisfaction refunds. SCE addressed DRA's and TURN's customer satisfaction proposals in its opening brief. (SCE O. B., pp. 6-7.) SCE also presented opening and closing arguments during the hearings. Clearly, then, the due process requirements that SCE be given notice, a hearing, and an opportunity to present evidence were met.
DRA concludes, therefore, SCE's appeal's statement that SCE did not have "the opportunity to present evidence on those areas," (SCE Appeal, p. 13) of customer satisfaction is wrong. The POD is very clear on why a Phase 2 is not necessary. It relies entirely on Phase 1 evidence in coming to its conclusion in Finding of Fact 30:
30. SCE should refund $28.0 million with interest and forgo $20 million due to data falsification and manipulation of the customer satisfaction survey results. Because of extensive problems with SCE's survey process a full refund of all PBR rewards earned during the period is appropriate. The impact of selling the survey, falsifying customer contact information, and employee discretion over choice of customer contacts affect all customer satisfaction rewards.
Despite the fact that CPSD did not yet investigate the other SCE divisions besides Planning, the POD agreed with DRA and TURN that as a policy matter the Commission should order full refunds. (POD, pp. 90-91.)
We need no citation of authority to affirm that SCE is entitled to due process of law. We agree that it has a right to notice, a hearing, and an opportunity to present evidence, testimony, and argument on the disposition of those customer satisfaction issues which, it argues, were reserved for Phase 2. (People v. Western Air Lines (1954) 42 Cal. 2d 621, 632, 268 Pac. 2d 723.) We find that SCE had the opportunity and has been afforded due process. A timeline of the process of this case is helpful.
1. June 15, 2006: OII issued and ordered that:
An investigation on the Commission's own motion is hereby instituted into the operations of SCE (Respondent) to determine:
(a) the extent to which SCE employees may have increased PBR rates from 1997 through 2003 through data falsification and manipulation.
(b) the appropriate refund or other relief associated with the falsification and manipulation.
(c) other increased rates or other damages if any, wrongfully caused, and the refunds and other relief associated with such wrongdoing.
1. July 25, 2006, First PHC:
Mr. Sher (CPSD Attorney): We propose that this case go forward in two phases:
The first phase would deal with the portion of the customer satisfaction PBR that deals with the planning and the meter reading. The other section we would deal with in the first phase would be the health and safety PBR.
Everything else we feel should be dealt with at a later stage. (PHC Tr. 8:20-26.)
ALJ Barnett: So with that in mind I am going to bifurcate this matter as the CPSD has requested. (PHC Tr. 30:24-25.)
2. August 24, 2006, ALJ Ruling:
The hearing will cover all phases of customer satisfaction, health and safety, survey techniques and responsibilities, corrective action, and refunds and penalties.
Because of the complexity of this investigation the PHC did not resolve the question of whether all aspects could be completed in the November 2006 hearings. I leave open (1) the possibility that a phase 2 will be needed, and (2) the issues to be covered in phase 2, including system reliability.
3. September 13, 2006: DRA and TURN serve testimony proposing refunds of all customer satisfaction PBR.
DRA: Exh. 81; TURN: Exh. 74 and 76.
4. October 16, 2006: SCE serves testimony in opposition to the positions of DRA and TURN. SCE Exh. 1, p. 25, pp. 80-98, pp. 101-102, Exh. 10, p. 10, Exh. 11, pp 43-46, 81-83.
5. October 30, 2006: DRA, TURN, and CPSD serve rebuttal testimony.
6. SCE witness testimony regarding Results Sharing. (Silsbee, Ziegler, Cogan, Exh. 1.)
7. DRA and TURN witness testimony regarding Results Sharing. (Godfrey and Lyons, (Exh. 81), Finkelstein (Exh. 74).)
8. November 28, 2006: Statement of ALJ and comments of SCE after evidentiary portion of the OII was completed.
ALJ Barnett:
All right. Well, for the purpose of this Phase 1, I'm going to make a finding based upon CPSD's statement that this Phase 1 only covers 30 percent of customer satisfaction.
And I take it Edison agrees with that?
Mr. Reed (SCE Attorney): That is what CPSD's position is. And my understanding is they have not conducted an investigation of the other components of customer satisfaction.
Edison, in accordance with the OII, provided such information in response to Ordering Paragraph 7, and it's also included in some of its exhibits, but I - - - that's my understanding of CPSD's position. (10 Rt. 1181, L. 7-15; emphasis added.)
. . .
Mr. Reed: I think I understand DRA's position on it. Just to illustrate it, for example, the position - they're recommending a refund of all of the revenue requirement for results sharing that was paid out to Edison employees. Some of that was earned for achieving goals in, let's say, in the phone center for meeting customer satisfaction goals.
So they're recommending refunding all of it, and yet, you know, they have presented some evidence that they think indicates there was selling of the survey, and so forth, at the phone center that justifies that position.
But if in Phase 2 we go into a subsequent phase that says, all right, were the phone center customer satisfaction results reliable or not, it may raise a problem in terms of can you make a finding in Phase 2 that says they are reliable if in Phase 1 the Commission has relied upon this testimony of DRA to justify a refund of results sharing.
I think we can handle it, actually, in Phase 1, the entirety of DRA's results sharing proposal, without that. But I just wanted to highlight there is at least a potential problem in that regard. (10 RT. 1184-85, L. 16-28, 1-10, emphasis added.)
ALJ Barnett: I quite agree, Phase 1 could decide all of Phase 2 depending upon the findings . . . . (10 RT. 1187, L. 20-21.)
. . .
ALJ Barnett: But I am planning to write a decision on this Phase 1, and I am willing to limit it to the - as far as customer satisfaction goes, to the 30 percent that has been presented by CPSD. And everybody's covered that area. (10 RT. 1182-83, 626-28, L. 1-2.)
The timeline shows that SCE had notice that all aspects of customer service were to be covered, and that SCE responded to all aspects of customer service. The OII statement was inclusive, "to determine (a) the extent to which SCE employees may have increased PBR rates . . . ."; the ALJ Ruling on August 24, 2006, was inclusive: "the hearing will cover all phases of customer satisfaction . . . ."; On September 13, 2006, DRA and TURN served testimony proposing refunds of all customer satisfaction PBR; On October 16, 2006, SCE served testimony in opposition to the positions of DRA and TURN; During the hearing, DRA and TURN presented witnesses who testified without objection that all PBR rates based on customer satisfaction surveys should be refunded. SCE witnesses testified in opposition.
The statement of the ALJ at the prehearing conference regarding bifurcation (superseded by the ALJ Ruling of August 24, 2006) cannot negate the fact that the entire customer satisfaction survey was put in issue, was testified to by DRA, TURN, and SCE, was briefed, and was litigated strenuously. The discussion of bifurcation after the evidentiary portion of the hearing was submitted has no bearing on the due process issue. Regardless, SCE's counsel stated "I think we can handle it actually, in Phase 1, the entirety of DRA's results sharing proposals . . . . "
SCE was given an opportunity to be heard and availed itself of that opportunity; it cannot be heard to complain. (California Trucking Assn. v. PUC (1977) 19 Cal. 3d 240, 561 Pac. 2d 280.) Because of the importance of the due process issue, we have modified the POD by adding (1) an additional finding regarding notice and, (2) an additional conclusion of law regarding due process of law.
19.3. SCE's Appeal - Results Sharing
The POD recommended a refund of $76.7 million plus interest for SCE's use of false and misleading data in obtaining the Results Sharing revenue requirement. SCE argues that even accepting the POD's logic, the amount of the Results Sharing refund is overstated. SCE says, following the POD's approach, a Results Sharing refund should be calculated to identify all Results Sharing dollars attributable to the Planning portion of customer satisfaction and the under-reporting of OSHA recordable injuries at SONGS - the only two components of PBR metrics where employee misconduct was found. In SCE's opinion, the resulting Results Sharing revenue requirement refund for 2003 - 2005 is $7 million rather than the nearly $90 million ordered by the POD.
SCE claims the POD accepted DRA's premise that the Results Sharing payouts made in 1999 and 2000 were tainted with fraud and that without the fraud, the Results Sharing goals would not have been achieved, the Results Sharing payouts therefore would have been lower, and the Results Sharing revenues adopted in D.04-07-022 would have been lower. However, SCE maintained the POD uses an entirely novel method to impose a refund of 40 percent of the revenues that were authorized company-wide for the purpose of the Results Sharing program for the period from May 22, 2003 through December 2005. The POD attributed 40 percent of the company-wide Results Sharing payouts for 1999 and 2000 to fraudulent achievement of internal Results Sharing customer satisfaction and safety goals. The POD concluded that the "entire Results Sharing revenue requirement based on corrupt information should be refunded to the ratepayers" and that "DRA does not have to demonstrate anything; it is SCE which must demonstrate that the Commission would have authorized Results Sharing funds based on fraudulent numbers." SCE contends the assertion that DRA need not prove anything is clearly contrary to law and Commission precedent. In SCE's opinion, the POD would make this investigation into a retrospective reasonableness review of Results Sharing payouts made by SCE in 1999 and 2000, where SCE would be the party with the burden of proof. This is an enforcement proceeding. Parties such as DRA who advocate penalties have the burden of proof to impose penalties.
SCE asserts that the POD relied on the maximum, single business unit weighting of Results Sharing customer satisfaction (15%) and safety (25%) goals, which was TDBU's 40 percent weighting for year 2000. SCE contends that the POD set up an arbitrary comparison when it uses 33.4% as a weighting of company-wide Results Sharing goals for customer satisfaction and employee safety to determine a refund of Results Sharing revenues. Moreover, according to SCE, the POD assumed that each business unit with a Results Sharing safety goal met its goal through fraud or falsification. In fact, three of five units in 1999 and two of five in 2000 did not meet their safety goals. Thus, the POD imposed Results Sharing refunds for the large majority of business units that did not even have customer satisfaction or employee safety goals and for business units that had safety goals but did not receive corresponding Results Sharing payouts in 1999 or 2000.
In this analysis, SCE assumes data falsification was the reason the Results Sharing goals for customer satisfaction were achieved for TDBU for 1999 and 2000 and the employee safety Results Sharing goal was achieved for nuclear generation in 2000. The only adjustment possibly consistent with the limit set by the subject-to-refund provision of D.04-07-022, i.e., data falsification affecting customer satisfaction surveys, would be for the Planning component of TDBU customer satisfaction. Based on this correction of the method employed by the POD, SCE concludes, the maximum Results Sharing refund attributable to data falsification with respect to customer satisfaction surveys in Planning and employee safety in nuclear generation is about three percent of the total Results Sharing revenue requirement for 1999 through 2000. If this percentage reduction is applied to the Results Sharing revenue requirement for 2003 through 2005, the Results Sharing refund would be approximately $6.7 million.
19.4. Discussion
Upon further review, we have revised the Results Sharing refund analysis and concluded that a refund of $32,714,000 should be ordered. The recommended refund represents the portion of the 1999 and 2000 actual Results Sharing payouts for the TDBU, CSBU, and Generation business unit related to customer satisfaction and health and safety that was affected by unreliable data.
19.5. The Reasonableness of the Fine
The POD recommended that SCE be fined $40 million. SCE claims the fine is too high; it recommends $2.5 million. CPSD claims the fine is too low; it recommends $102 million. We agree with SCE that a $40 million fine is excessive and, as discussed above, find that $30 million is reasonable and should serve as a sufficient deterrent to future malfeasance.
Here, we wish to emphasize the principle that imposing a fine is a matter of discretion, not an unfettered discretion, but one that has broad boundaries.18 This is best exemplified by the testimony of SCE's expert witness Judge John Davies who, when asked how he arrived at his proposal that SCE be fined $2.5 million, responded:
Well, I think the art, if it is an art, of sentencing and assessing penalties that judges generally undertake on a daily basis in the variety of courts that exist in this state is the exercise of discretion after looking at all of the facts and becoming as well informed as they can and considering those facts, the nature of the parties, etcetera. That's simply, that is the method I used. (Exh. 64, p. 49.)
During cross-examination when asked how he arrived at $2.5 million, he responded:
A: After some thought, and after I felt that I had understood the facts as they were presented to me, it was just exercise of discretion. (9 Rt. 1039, L 4-6.)
Lastly, in his prepared testimony, Judge Davies concluded:
The CPSD points out that the "potential" for economic harm to ratepayers is $200 million in PBR rates. If this is found by the trier of fact to be so the penalty should be substantial. (Exh. 4, p. 22, L. 17-19.)
In this investigation, we have found the economic harm to ratepayers to be substantial, approximately $81 million; SCE's senior management knew or should have known of the fraud; the fine is reasonable; and SCE certainly has the ability to pay a $30 million fine.
16 "Administrative Law Judge's Ruling Setting Hearing," August 24, 2006, p. 1, emphasis added.
17 DRA: Ex. 81, pp 3-1 through 3-3; DRA Opening Brief, pp. 9-10. TURN: Exhibits 75 and 76, TURN Opening Brief, pp. 5-7.
18 "The Commission has considerable discretion, once it has established a violation, to weigh competing factors and select a point within that range." Re Qwest Corp., I.00-11-052, D.03-01-087, p. 9; Re Southern California Gas Co., A.99-10-036, D.01-06-080, p. 19; Re Vista Group Int. I.99-04-020, D.01-09-017, p. 23; Pac Bell Wireless v. PUC (2006) 140 Cal App 4th 718, 728 (the Commission imposed a penalty of $10,000 per day for violation 1, and penalty of $10,000 per day for violation 2. "The Commission's authority has been liberally construed." (at 736).)
