Word Document

Decision 99-07-029

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Investigation on the Commission's Own Motion into the Operations and Practices of The Pacific Gas and Electric Company in Connection with Public Utilities Code Section 451, General Order 95, and Other Applicable Standards Governing Tree-Line Clearances.

I.98-09-007

(Filed September 3, 1998)

(See Appendix B for appearances.)

OPINION

Summary

By this decision the Commission adopts a settlement agreement proffered by Pacific Gas & Electric Company (PG&E), the Commission's Consumer Services Division (CSD), William Adams (Adams), and James Weil (Weil) in the Commission's investigation into PG&E's compliance with tree-line clearance standards. Under the settlement, PG&E shareholders will fund up to $22.7 million in vegetation-related activities and programs over the next five years and make an immediate, one-time $6 million contribution to the California general fund. The settlement also establishes various forward-looking PG&E/CSD vegetation management inspection and compliance protocols. The Commission accepts the settlement, the full text of which is set forth in Appendix A, as resolving all issues in the proceeding and makes no finding as to whether violations have occurred.

Procedural History

The Commission issued Order Instituting Investigation (OII) 98-09-007 on September 3, 1998 to look into CSD allegations that PG&E had violated the law by not meeting tree-line clearance and vegetation control requirements and by

not properly recording expenditures of Pub. Util. Code § 368(e) funds as required by Decision (D.) 96-12-077. The investigation was to afford CSD a forum to advance its evidence of violations and explain information it had gathered about PG&E's vegetation management practices, and for PG&E to respond. Later, the assigned Commissioners' scoping memo more specifically defined the issues to be addressed as:

1. Has PG&E violated Pub. Util. Code § 451 by not complying with General Order 95 and other lawful requirements, including but not limited to provisions of the Public Resources Code, for tree-line clearance and/or vegetation control?

a. If so, what was the extent of the violations?

b. If there were such violations, what sanctions, if any, should the Commission impose under Pub. Util. Code §§ 2107 and 2108?

2. What utility practices led to the alleged tree-line clearance and vegetation control problems?

3. What is the current state of PG&E's tree-line clearance and vegetation control program?

4. What enforcement measures, if any, should the Commission establish to ensure PG&E will comply with applicable tree-line clearance and vegetation control standards in the future?

5. Did PG&E violate Pub. Util. Code § 702 by failing to comply with the Commission's D.96-12-077 requirement to record monthly, by Uniform System of Accounts

subaccounts, expenditures of special vegetation control and/or tree-trimming funds made available under Assembly Bill 1890?

a. If there were such violations, what sanctions, if any, should the Commission impose under Pub. Util. Code §§ 2107 and/or 2108?

Assigned Administrative Law Judge (ALJ) McVicar was designated the presiding officer.

Evidentiary hearings began March 16, 1999 and were suspended March 22 when the parties indicated they had signed a memorandum of understanding outlining terms for a proposed settlement. On April 2, PG&E, CSD, Adams, and Weil filed a joint motion for approval and adoption of the settlement agreement. The ALJ held an additional day of hearing April 7 to receive previously-served exhibits and to provide an opportunity for testimony on the settlement. Hearings were then suspended pending receipt of comments on the settlement from other parties. No party other than the four who signed the settlement participated in the evidentiary hearings or settlement negotiations, although one, The Utility Reform Network (TURN), commented on the settlement.

On April 19, 1999, the Commission's Office of Ratepayer Advocates (ORA) filed a petition to intervene for the purpose of commenting, and concurrently ORA and TURN filed joint comments. On May 4, CSD, Adams and Weil filed joint reply comments, and PG&E filed reply comments on its own. ALJ McVicar issued a ruling on May 10 denying ORA's petition to intervene and submitting the proceeding effective May 4.

Discussion

The settlement places on PG&E shareholders up to $28.7 million in future expenditures spread across five cost categories: (1) $5 million over a five-year period for public safety programs and activities; (2) up to $3.6 million over a three- to five-year period for PG&E's quality assurance program and a CSD-managed monitoring and inspection program; (3) $14 million over a three-year period for tree removal and replacement; (4) $6 million as a one-time contribution to the state general fund; and (5) up to $100,000 reimbursement to CSD for consultant costs incurred in connection with this proceeding. In addition to these pecuniary provisions, the settlement establishes protocols for three different levels of tree and vegetation clearance noncompliance and requires PG&E to establish an electronic database for customers who refuse PG&E permission to trim trees on their property.

Four parties have tendered an "uncontested settlement" as defined in Rule 51(f), i.e., a settlement that "...is not contested by any party to the proceeding within the comment period after service of the [ ] settlement on all parties to the proceeding." Rule 51.1(e) requires that settlement agreements be reasonable in light of the whole record, consistent with law, and in the public interest.

In San Diego Gas & Electric (1992) 46 CPUC2d 538, the Commission further defined its policy as applicable to all party settlement proposals. As a precondition to approval the Commission must be satisfied that:

a. the proposed all party settlement commands the unanimous sponsorship of all active parties to the instant proceeding;

b. the sponsoring parties are fairly reflective of the affected interests;

c. no term of the settlement contravenes statutory provisions or prior Commission decisions; and,

d. the settlement conveys to the Commission sufficient information to permit it to discharge its future regulatory obligations with respect to the parties and their interests.

This settlement is tendered pursuant to Rule 51, and the settling parties aver that it conforms as well to the criteria for all party settlements in San Diego Gas & Electric. While we do not agree that there is complete conformity, it is still helpful to review the settlement in light of these criteria.

First, the parties signatory to the settlement are certainly the most active parties. No other party participated in the evidentiary hearings or settlement negotiations, and although TURN questions two aspects, no party has proposed the Commission not adopt the settlement as tendered. We will address in a later section TURN's request that the Commission issue clarifying language.

Second, the sponsoring parties do represent the affected interests. PG&E represents its shareholders and CSD represents the service and reliability interests of PG&E's energy customers and the safety interests of the public in PG&E's service territory. This is an enforcement proceeding and it is to CSD that we looked first to pursue the issues set forth in the OII. The OII, in fact, explicitly anticipated the possibility of a settlement involving only CSD and PG&E: "This enforcement proceeding is adjudicatory, and, absent settlement between staff and the respondent, will be set for evidentiary hearing." (OII 98-09-007 at page 4.) The interests of the public are further upheld by Adams and Weil, both of whom the ALJ in his intervenor compensation ruling found eligible as participants representing consumers. These parties served extensive testimony and exhibits setting forth and supporting their positions before evidentiary hearings began. By agreement, that material was admitted into the record and shows all four to be vigorous and capable participants on behalf of their constituencies.

Third, the sponsoring parties assert, and we agree, that the settlement violates no statutory provision or prior Commission decision.

Fourth and last, the settlement conveys information sufficient to permit us to discharge our future regulatory obligations with respect to the parties and their interests. To that end, the settlement is forward-looking. Rather than having the parties continue to litigate whether PG&E's past conduct constituted violations, it requires PG&E to focus its energies on programs and activities designed to promote effective vegetation management practices and ensure compliance with statutory and regulatory requirements. Further, it provides CSD with the enforcement tools it needs and establishes various forward-looking PG&E/CSD vegetation management inspection and compliance protocols. Those protocols will aid both PG&E and CSD by better defining their procedures, relationships and responsibilities. The parties' joint motion seeking approval sets forth in more detail how the settlement's major provisions will help PG&E and CSD, and in turn the Commission, meet their future responsibilities.

There will no doubt be considerable interest generated by the parties' agreement to have PG&E shareholders contribute $6 million to the state general fund. While the settlement itself is silent on the purpose of this provision, the joint supporting testimony (Exhibit J2) is explicit: it relates to the violations alleged under scoping issue (1), but the settlement does not constitute an admission of guilt or liability by any party. The settling parties urge the Commission not to examine individual elements of their settlement against the scoping issues, but rather to understand that the settlement as a whole is intended to reflect a unified, comprehensive resolution of all issues in the proceeding.

It is neither necessary nor advisable to attempt to dissect each element of a settlement to see whether it approximates the result we might have reached had the underlying issue been prosecuted to completion. No settlement could survive such scrutiny, nor would it leave parties sufficient room for negotiating settlements. This settlement is an acknowledged compromise of strongly-held views on all sides. When examined as a total product, we find it to be reasonable in light of the whole record, consistent with law, and in the public interest.

TURN (jointly with non-party ORA) was the only party to comment on the settlement. TURN expresses concern over how the following two specific settlement provisions may impact issues before the Commission in PG&E's pending general rate case (GRC). While TURN does not suggest the Commission reject the settlement or require its amendment, TURN does ask that any decision approving the settlement clarify them:

Section III.A.(6) PG&E shall expend on a tree removal/ replacement program over a three year period beginning March 22, 1999, a total of $14 million over and above that amount allowed in the 1999 GRC for a tree removal/ replacement program; the $14 million shall not be recorded as an operating expense for ratemaking and shall be funded by shareholders.

* * *

Section III.A.(8) The OII and violations alleged by CSD pertain to past events. CSD is optimistic that PG&E has developed a vegetation management program that, if properly maintained and consistently implemented, should allow it to fully comply with all applicable state standards. CSD recognizes the development of this program involved a major commitment from PG&E, and CSD supports GRC funding appropriate to maintain and implement that program into the future.

According to TURN, PG&E proposed in its GRC a supplemental tree removal/replacement program at an annual cost of $23.4 million in addition to its routine vegetation management program. In response to PG&E's GRC proposal, ORA (with TURN presumably in agreement) supported the supplemental program but recommended it be funded by shareholders. TURN would have the Commission clarify here that the $14 million in Section III.A.(6) is in addition to whatever spending level is found appropriate in the GRC regardless of funding source. That is, the Commission should clarify that "allowed" in the context of Section III.A.(6) means not the level allowed in rates but that level plus any supplement the Commission in the GRC were to require PG&E shareholders to bear. Absent this clarification, TURN believes, the settling parties would effectively be resolving an issue in the GRC, contrary to Rule 51.1.

CSD, Adams and Weil were unaware of ORA's GRC recommendation when they negotiated the settlement. Because the Section III.A.(6) issue TURN raises would only mature if the Commission were to adopt shareholder funding of a supplemental tree removal/replacement program in the GRC, CSD, Adams and Weil request the Commission suspend deliberations on the settlement until that decision is made. In settlement negotiations, PG&E also did not contemplate a GRC outcome requiring its shareholders to shoulder any part of its tree removal/replacement program. PG&E strongly believes there is no confusion regarding the settlement's wording or the parties' intent and would view Commission clarification as a change or modification of the agreement triggering reconsideration by the parties pursuant to settlement Section III.B.

We decline TURN's invitation to clarify how the settlement agreement might be applied to possible future events. We believe the specific language of the agreement provides sufficient foundation for our implementation should the need arise. No party actually opposes approving the settlement and the settling parties have, in fact, reaffirmed their support. The GRC proceeding is submitted and neither this settlement nor this decision is part of that record. Accepting the settling parties' Section III.A.(6) wording without clarification will have no effect on how we decide the corresponding GRC issue and thus does not run afoul of Rule 51.1.

TURN's concern with Section III.A.(8) is to ensure that CSD's commitment to "support[] GRC funding appropriate to maintain and implement [PG&E's vegetation management program] into the future" does not prejudice vegetation management-related issues which are before the Commission in the GRC. TURN requests clarifying language to that effect. CSD, Adams and Weil's reply characterizes Section III.A.(8) as a "general statement of support for appropriate funding that does not imply support for any particular level of funding or recommendation in the GRC," but they do not object to clarifying language. PG&E's position is that "CSD's support for an appropriate level of funding will not prejudice the GRC proceeding and does not require specific clarification by the Commission." We agree with PG&E; the GRC proceeding is submitted and whatever additional clarification we might give beyond this discussion would be without effect.

We turn next to addressing a petition and various motions still outstanding, and one ALJ Ruling:

a. PG&E Petition for Modification of OII 98-09-007 to Move the Pub. Util. Code § 368(e) Issues into PG&E's 1999 General Rate Case Proceeding (filed December 16, 1998)

b. PG&E Motion to Dismiss or Limit the Scope of the Investigation (filed December 22, 1998)

c. CSD Motion to Accept Late-Filed Response (filed January 22, 1999)

d. PG&E Motion to Strike the Rebuttal Testimony of John Sevier (filed March 12, 1999)

e. PG&E Motion to Strike the Declaration of Jenny Ross (filed March 15, 1999)

f. PG&E Motion to Strike a Portion of the Rebuttal Testimony of James Weil (filed March 15, 1999)

g. PG&E Motion to Strike the Rebuttal Testimony of Siegfried Guggenmoos or, in the Alternative, for Leave to File Surrebuttal Testimony (filed March 19, 1999)

h. PG&E Motion to Strike Portions of the Rebuttal Testimony of William Marcus or, in the Alternative, for Leave to File Surrebuttal Testimony (filed March 22, 1999)

i. ALJ's Ruling Denying Intervention and Submitting Proceeding (Issued May 10, 1999)

The petition and motions are rendered moot by our decision to adopt the settlement. After reviewing the reasoning the ALJ set forth in denying ORA's intervention, we affirm his ruling.

Findings of Fact

1. The settlement is a compromise of strongly-held views of the sponsoring parties.

2. The settlement does not constitute an admission of guilt or liability by any party.

3. The settlement represents a reasonable resolution of all issues in this proceeding.

4. There is no known opposition to the settlement.

5. It is not necessary to clarify in this decision the interpretation to be assigned to any provision of the settlement.

6. The parties sponsoring the settlement are fairly reflective of the affected interests.

7. No term of the settlement contravenes statutory provisions or prior Commission decisions.

8. The settlement conveys to the Commission sufficient information to permit the discharge of its future regulatory obligations with respect to the parties and their interests.

9. The settlement is reasonable in light of the whole record, consistent with law, and in the public interest.

Conclusions of Law

1. The settlement is an uncontested settlement as defined in Rule 51(f).

2. The settlement should be approved.

3. The pending petition for modification and motions listed in this decision are rendered moot by approval of the settlement.

4. The ALJ's ruling denying ORA's petition to intervene should be affirmed.

5. It is in the public interest to implement the provisions of the settlement as rapidly as possible.

ORDER

IT IS ORDERED that:

1. The Joint Motion of Consumer Services Division, Pacific Gas & Electric Company, William Adams, and James Weil for Approval and Adoption of Settlement Agreement is granted. The settlement agreement attached to this decision as Appendix A is approved.

2. The Administrative Law Judge's ruling denying the Office of Ratepayer Advocates' Petition to Intervene is affirmed.

3. This proceeding is closed.

This order is effective today.

Dated July 20, 1999, at San Francisco, California.

APPENDIX A

SETTLEMENT AGREEMENT

PARTIES

The parties to this Settlement Agreement ("Settlement") are the Consumer Services Division ("CSD"), Pacific Gas and Electric Company ("PG&E""), and intervenors William Adams ("Adams") and James Weil ("Weil") (together, "Settling Parties" or "Parties").

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