GTN

GTN states that El Paso offered PG&E Corporation an equity interest of 25.5% of the Ruby Pipeline at meeting on May 14, 2007. Despite this inherent conflict of interest, PG&E negotiated the Precedent Agreement with Ruby LLC, with the knowledge that one of its counterparties was its parent company.

GTN notes that PG&E briefed senior executives of PG&E Corporation about the status of PG&E's negotiations. PG&E also obtained approval from its risk management and risk policy committees to enter into the Precedent Agreement. Both of those committees included officers of PG&E Corporation. GTN believes these facts prove that (1) PG&E utility employees knew that its parent company stood to profit if the utility executed a Precedent Agreement with Ruby LLC, and (2) PG&E Corporation had influence over the content of the Ruby Precedent Agreement.

GTN alleges that the purpose of PG&E's agreement with Ruby was to support PG&E Corporation's prospective investment in Ruby. GTN also alleges that PG&E Corporation dropped its plan to acquire an equity interest when the projected cost of building the Ruby Pipeline increased by 50%, leaving PG&E's ratepayers stuck with an unattractive contract.

GTN further alleges that PG&E violated the Commission's rules governing affiliate transactions set forth in D.02-10-062, D.04-12-048, and D.06-12-029. These rules require (1) that utility transactions with affiliates occur through an open and transparent solicitation process, and (2) that utility energy procurement solicitations that could result in transactions with affiliates to be reviewed by an independent evaluator in order to provide a neutral, unbiased perspective on the fairness of the procurement process.

GTN claims that because PG&E Corporation was a de facto partner of Ruby LLC, PG&E was required to use the safeguards set forth in the Affiliate Rules. The subsequent withdrawal of PG&E Corporation's equity ownership interest does not remedy PG&E's violation of the Affiliate Rules because the damage was done. PG&E already had entered into the Precedent Agreements without an open and transparent solicitation process or the use of an independent evaluator. These violations cannot be undone by an after-the-fact withdrawal of the ownership interest.