TURN
TURN maintains that because PG&E's proposed transportation arrangements with Ruby are highly beneficial to ratepayers, GTN's and Reid's concerns do not merit rejection of PG&E's application. While there was clearly a potential for PG&E's shareholders to benefit at ratepayer expense, TURN contends that no such harm occurred.
The issue before us is whether PG&E negotiated the Ruby Precedent Agreement at arms-length, without any undue favoritism to PG&E Corporation, given that PG&E Corporation had an outstanding offer to acquire an option for an ownership stake in the Ruby Pipeline project. PG&E Corporation ultimately acquired the option, which it chose not to exercise. After carefully reviewing the record, we find no evidence that PG&E Corporation had any influence on PG&E's negotiations with Ruby LLC.
Although GTN alleges that PG&E Corporation exerted pressure on PG&E to negotiate a contract with Ruby LLC that benefited PG&E Corporation at the expense of ratepayers, there is not a scintilla of evidence that such pressure was ever brought to bear. To the contrary, the two PG&E officers responsible for the Ruby Precedent Agreement both testified that PG&E's negotiations with Ruby LLC were free from any influence from PG&E Corporation and were focused strictly on what was best for the utility.78 We agree with PG&E that if it were acting on behalf of PG&E Corporation, it would not have negotiated a fixed-price of $0.68/Dth, which is considerably lower than the current rate for non-anchor shippers of $0.95/Dth. Nor would PG&E have negotiated a most-favored-nation clause. This provision states that if Ruby offers a rate lower than $0.68/Dth to similarly situated customers, PG&E will also receive the lower rate. This ensures that PG&E will receive the best deal available on the Ruby Pipeline. PG&E would not have negotiated these favorable terms for its ratepayers if its focus was lining the pockets of its parent company as GTN alleges.
We disagree with GTN's assertion that PG&E violated the provision in D.06-12-029, Appendix A-3, Rule III.B.1, which requires utilities that procure energy resources from affiliates to obtain prior approval from the Commission.79 In A.07-12-021, PG&E requested the prior approval required by Rule III.B.1, so there is no violation of this provision in the Rule.
On the other hand, Rule III.B does require that utility transactions with affiliate occur through an open and competitive procurement process. This is consistent with D.04-12-048, which requires utilities to (1) use an open and transparent solicitation process in electric resource procurement involving affiliates, and (2) have a neutral independent evaluator review solicitations that involve affiliates.80 The solicitation process used by PG&E was not open and transparent, and PG&E did not use an independent evaluator. PG&E engaged in secret negotiations with El Paso and never disclosed publicly that it wished to acquire pipeline capacity to the Rocky Mountains.
We recognize, however, that there are mitigating circumstances which call into question whether D.06-12-029 and D.04-12-048 are applicable to PG&E's acquisition of Ruby capacity. First, the rules prescribed by D.06-12-029 and D.04-12-048 apply to affiliate transactions. Arguably, there is no affiliate transaction here because PG&E Corporation never acquired an equity interest in the Ruby Pipeline. Rather, at the time PG&E was negotiating with Ruby LLC, PG&E Corporation had an outstanding offer to acquire an option for an equity interest, and then acquired the option which it chose not to exercise.
Second, as described previously in today's decision, the acquisition of capacity on a large new interstate pipeline does not lend itself to an open and transparent process. Aside from PG&E's possible violation of D.06-12-029 and D.04-12-048, PG&E used a reasonable process under the circumstances to acquire capacity on the Ruby Pipeline.
Finally, there is no evidence that PG&E Corporation attempted to influence the negotiations between PG&E and Ruby, or that PG&E strived for anything but the best deal for its ratepayers.81 To the contrary, PG&E reached what TURN and DRA consider to be a "great deal" for ratepayers.82
Based on the totality of circumstances, we decline to spend further time, effort, and resources on investigating whether PG&E violated the Commission's affiliate transaction rules.
78 Exhibit PG&E-6, pp. 2-1 to 2-5; and Exhibit PG&E-6, p. 1-3, lines 14-31.
79 Even though GTN expresses concern about PG&E negotiating with Ruby LLC at a time when PG&E Corporation could acquire an equity interest in the Ruby Pipeline, GTN had no qualms about negotiating with PG&E under similar circumstances. GTN's witness testified that when Sunstone approached PG&E, "we wanted the utility to know that...we planned to ask PG&E Corporation if they'd like to participate in equity." (7 TR 795-796, GTN/Ferron-Jones.)
80 D.04-12-048, Finding of Fact 84 and Conclusion of Law 29.
81 Exhibit PG&E-6, pp. 2-1 to 2-5; and Exhibit PG&E-6, p. 1-3, lines 14-31.
82 TURN Opening Brief, p. 1.
