ALJ/TRP/acr Date of Issuance 5/18/2012

Decision 12-05-010 May 10, 2012

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Joint Application of Southern California Edison Company (U338E) and Pacific Gas and Electric Company (U39E) for an Order Granting Limited Exemptions from the Commission's Affiliate Transaction Rules.

Application 11-11-019
(Filed November 29, 2011)

DECISION GRANTING LIMITED EXEMPTIONS FROM THE
COMMISSION'S AFFILIATE TRANSACTION RULES

DECISION GRANTING LIMITED EXEMPTIONS FROM THE COMMISSION'S AFFILIATE TRANSACTION RULES 1 1

1. Summary 2 2

2. Procedural Background 4 4

3. Summary of Joint Applicants' Requested Relief 5 5

3.1. STARS Alliance Purposes and Functions 7 7

3.2. Conditions on Approval of Applications 10 10

4. Discussion 11 11

4.1. Affiliate Transaction Rules Subject to Limited Exemption 12 12

4.1.1. No Preferential Treatment Regarding Provision of Services (Rule III.A.) 12 12

4.1.2. Contemporary Provision of Supply, Capacity, Services, or Information (Rule III.B.2.) 13 13

4.1.3. Processing Requests for Services Provided by the Utility (Rule III.B.6.) 14 14

4.1.4. Restrictions on Information Provided to Utility Affiliates (Rules III.E., IV.B., and IV.D.) 14 14

4.1.5. Sharing of Plant, Facilities, Equipment or Costs, Personnel, and Joint Purchases (Rules V.C. through V.E.) 17 17

4.1.6. Corporate Identification and Advertising (Rule V.F.) 18 18

4.1.7. Proscription against Joint Employees and Officers (Rule V.G.) 18 18

4.1.8. Pricing of Services between Utilities and STARS Alliance (Rule V.R.5. through V.R.6.) 19 19

4.2. Conditions on Approval of the Application 20 20

5. Waiver of Comment Period 22 22

6. Assignment of Proceeding 22 22

Findings of Fact 23 23

Conclusions of Law 26 26

ORDER 27 27

APPENDIX A Annual Report of Utility on the Activities of Stars Alliance, LLC Recorded Year 20XX and Budget Year 20XX

Utility Savings / Avoided Costs by Stars Team / Project

DECISION GRANTING LIMITED EXEMPTIONS FROM THE
COMMISSION'S AFFILIATE TRANSACTION RULES

1. Summary

In this decision, we approve the joint application of Southern California Edison (SCE) and Pacific Gas and Electric Company (PG&E) (the Joint Utilities) for an order granting specified limited exemptions from the Commission's Affiliate Transaction Rules (ATR) set forth in Decision (D.) 06-12-029.¹ These rules govern the relationship between Commission-regulated gas and electric utilities and certain of their corporate affiliates. The ATR creates nondiscrimination, disclosure and information, and separation standards aimed at fostering competition and protecting consumers' interests. We conclude, however, that limited exemptions from these rules, as specified and discussed below, are in the public interest.

The Joint Utilities, together with five other nuclear power plant operators, plan to establish a limited liability corporation named the STARS Alliance, which will constitute a new affiliate for PG&E and SCE. The limited exemptions granted herein are warranted in order to enable the Joint Utilities to achieve ratepayer benefits through their participation and ownership interests in the STARS Alliance. The objective of STARS Alliance is to increase efficiency and to reduce costs related to operation of members' nuclear power generation facilities. Other anticipated benefits include making nuclear power more competitive with other electric generation sources, more efficiently coordinating the purchase and location of assets necessary to ensure effective responses to potential disruption in operations, and collectively to achieve the safest and most efficient generation of electricity from nuclear units.

STARS Alliance members will perform functions such as sharing resources, jointly procuring selected goods and services, and, possibly, consolidating certain internal accounting and management functions related to members' nuclear generation facilities. STARS Alliance members also intend to engage in cooperative activities focused on enhancing operational performance, joint planning and coordination regarding nuclear safety, and obtaining license approvals. The synergies gained through the STARS Alliance are intended to reduce the cost to consumers of nuclear power generation, make nuclear power more competitive with other forms of electric generation for customers of STARS Alliance's members, and enhance the ability of STARS alliance members to efficiently coordinate purchasing and location of assets necessary to ensure effective responses to potential disruption in its operations.

Because the Joint Utilities' ownership interest in the STARS Alliance is expected to exceed a 5% threshold, STARS Alliance would be an affiliate subject to the ATRs under D.06-12-029. Without specified exemptions from ATRs, the Joint Utilities will not be able to participate in providing the full range of services for which the STARS Alliance was formed. We grant the requested exemptions, however, provided that the Joint Utilities comply with the conditions specified below. These conditions are designed to ensure that ratepayers benefit from the Joint Utilities' participation in the STARS Alliance. We thus grant the requested exemptions based on our findings that the Joint Utilities participation in the STARS Alliance will benefit their respective retail customers, reducing customers' cost of service and enhancing efficiency and coordination of service.

¹ D.06-12-029 amended the Commission's ATRs that are applicable to large California energy utilities.