VII. Edison is Required to Comply with Commission GOs; the Commission has Inherent Power to Give a Utility Notice of a Violation and an Opportunity to Cure it Before Imposing Fines.
The Commission has broad regulatory authority over the safety of utility facilities and operations. (See e.g., Pub. Util. Code §§ 701, 761, 762 and 768.) Utilities are required to provide reasonable service, equipment, and facilities as necessary to promote the safety, health, comfort, and convenience of their patrons, employees, and the public. (See Pub. Util. Code § 451.) In implementing its regulatory responsibilities, the Commission has adopted regulations governing safety in the form of GOs, and has also issued decisions giving guidance regarding safety policy.
Utilities are required to comply with relevant safety statutes, Commission GOs, and decisions, and the Commission has the statutory obligation to require utilities to do so. (See e.g., Pub. Util. Code §§ 702, 2101 and 2106.) A utility's failure to comply with these statutes, GOs and decisions may give rise to related Commission enforcement actions or other compliance-related regulatory proceedings.
Commission enforcement has taken a variety of forms over many years. In particular, we have enforced compliance with electrical system maintenance obligations in part by notifying the utility from time to time of observed violations and giving it a reasonable period of time within which to make corrections. Illustrative of this practice is the tree-trimming settlement we approved in D.00-07-029 in which we allowed PG&E 14 days to trim trees that were closer to power lines than our GOs permit.5 We have also been aware of and generally in agreement with Edison's practice of undertaking system repairs in order of severity and urgency, although we do not agree with Edison that it can immunize itself from liability for violations by complying with its own maintenance schedules or the minimum maintenance intervals contained in our GOs.
CPSD has urged us to adopt an interpretation of our GOs that would subject Edison to fines totaling nearly $100 million based on the existence of violations that we have in the past dealt with by giving Edison an opportunity to cure before imposing a fine. For reasons set forth herein, we reject CPSD's proposal and affirm our historic practice of graduated enforcement measures ranging from warnings with an opportunity to make corrections to substantial fines for serious breaches of our rules.
CPSD's approach to correcting violations of our GOs rests in large part on an interpretation of our GOs that proposes fining Edison for any observed violation of a GO even while acknowledging that it is impossible for Edison to maintain its system in an as-new condition at all times. Even though the language of the GOs clearly distinguishes between new construction standards and maintenance standards, CPSD would have us largely ignore the maintenance standards. GO 95 Rule 31.1 requires electrical supply and communication systems to be "maintained in a condition which will enable the furnishing of safe, proper and adequate service." GO 128 Rule 12.2 requires that systems "be maintained in such condition as to secure safety to workmen and the public in general." Rule 17.1 contains a similar standard, requiring that all systems be "maintained in a condition which will provide adequate service and secure safety to workmen, property and the general public." In addition to these general maintenance requirements, each of the cited GOs also contains specific, detailed maintenance requirements, designed to implement and achieve the general purposes.6
As these various versions of the maintenance standards make clear, we have directed the electric utilities to meet two broad system maintenance requirements: delivery of adequate service and provision of safety to both members of the public and workmen. At a minimum, before we impose fines for violations of our GOs, we have to conclude that the utility failed to meet one or the other of these requirements. The MOD-POD correctly observes that there is no qualifying language in the GOs: "Nothing in the language of GO 95, 128 or 165 provides a specified grace period within which to comply with these GOs, or provides that failure to comply is a `nonconformance,' with a violation occurring at a later time determined by the utility in accordance with its maintenance schedules." (MOD-POD, p.11) The MOD-POD then concludes that the absence of qualifying language in the GO implies that we have no enforcement mechanism available to us other than fines (which we may choose to suspend after a hearing before an ALJ such as occurred in this case). We believe this approach confuses the standards for finding a violation with the means available to deal with a violation.
The purpose of the maintenance requirements of our GOs is not to create an enforcement regime where every failure to comply, no matter how minor, no matter what its cause, no matter whether it has been corrected, puts a utility in jeopardy of substantial daily fines. On the contrary, their purpose is to ensure safe, reliable operation of the electrical system. It is within our broad discretion under Public Utilities Code §§ 701 and 702 to establish an enforcement regime that achieves this purpose in a flexible and cost-efficient way, as we have historically done, in cooperation with the utility, and in full recognition that improvements are always possible and fines are sometimes necessary.
Although the MOD-POD accepts CPSD's interpretation of our GOs, it wisely rejects most of the requested fines, implicitly recognizing that without a demonstration that the utility has failed to furnish adequate service or safe conditions, there is little reason to impose a fine. While this approach is prudent and practical, it leads to the anomalous result that once we find a violation of a GO, our only options are either to impose a fine or to impose no fine. In this case, the ALJ found there had been over 4,000 violations for which she imposed no fines. Her stated reason for refusing to impose fines was that CPSD had failed to show that the violations had resulted in any harm or compromised the safety or reliability of the electrical distribution system. (MOD-POD p. 29)
While the result is one with which we broadly agree, the ALJ's approach too narrowly construes our remedial powers. Even where a violation has been found, we have inherent power to do more than impose a fine. We can do what we have done for decades, namely, give the utility notice of the violation and a reasonable period of time within which to cure it. And, indeed, that is what happened in this case. Edison cured more than 4,000 violations (many involving signage and similar requirements) that CPSD brought to its attention. That should have been the end of the matter as to those violations. Instead, the utility was forced to defend itself in this proceeding against the possibility of nearly $100 million in fines for violations that caused no harm to anyone and which it had already cured.
Imposing fines for cured violations that involved no harm to anyone removes most of the utility's incentive to cure. Conversely, providing an opportunity to avoid fines by curing violations not only creates a significant incentive to cure, it also fosters an atmosphere of cooperation between our inspectors and the utility's maintenance personnel who share a common purpose: to make the electrical system as safe and reliable as possible.
We turn now to the cases in which the MOD-POD proposes to fine the utility because of a "nexus" between a violation and injury or death to an employee or a member of the public. Edison and some of the commentators on this part of the decision have urged us to adopt a civil liability standard of negligence rather than the "nexus" approach of the MOD-POD. We decline to adopt either the negligence standard urged by the utilities or the "nexus" approach of the MOD-POD. Instead, we apply the same approach to imposing fines for violations of our general orders to these cases as to the others. We will articulate this approach more fully in order to provide guidance and a rationale in regard to our future actions.
As noted above, we decline to apply the negligence rules of civil litigation to our enforcement actions. Were we to adopt the civil litigation concepts of negligence and proximate cause, we would find ourselves embroiled in full-scale trials analogous to those that occur in the civil courts. In addition to being enormously wasteful of our limited resources, such an approach fundamentally misconstrues our mission. The goal of civil litigation is to recompense injured parties for their losses. The goal of our regulatory regime is to maximize the safety and reliability of the electric distribution system. The system of notices and fines that we have historically employed to accomplish that goal balances encouragement to the utility to correct violations in order to avoid fines, on the one hand, with fines for failures to act, on the other. In short, we believe the proper enforcement policy is to impose fines in situations where
(a) there is a violation of a GO of which the utility either knows or should have known; and
(b) after acquiring either actual or constructive knowledge of the violation, the utility fails to cure it within a reasonable period.
This approach allows the utility a limited defense in situations where death or injury occurs. For example, under this approach we would not fine the utility for an injury caused when a passerby touches a power line downed by a storm before the utility learned of the damage. On the other hand, if the utility knew of the downed line and unreasonably delayed sending a crew to repair it, we would impose a fine.
Edison has argued that if it has complied with the maintenance intervals of GO 165, it should be excused from liability for GO violations, for example, if a tree has grown enough since its last inspection that it is less than the minimum GO clearance from a power line. We do not agree. GO 165 sets minimum intervals for maintenance inspections. Circumstances may dictate that shorter intervals are required in particular cases. For example, an exceptionally wet or mild winter may result in faster vegetation growth. Simply complying with the minimum intervals set by our GO will not be sufficient to deal with that situation and the utility should be presumed to know that. In the same vein, we note that we may also impose fines if we become convinced that a utility is gaming the system by deliberately allowing violations to pile up until we give them notice.
Edison has also objected that by treating all failures to comply with our general orders as violations, we raise their risks in associated civil suits. Because violation of a Commission safety standard may be introduced in a related civil action as prima facie evidence of negligence, Edison argues that if we find a violation in a case where injury or death has occurred without also finding that Edison was negligent and its negligence proximately caused the harm, we unfairly handicap the utility in any related civil action for injury or wrongful death. We recognize that by finding a violation we may indeed affect a related civil suit, but we note that at most our finding shifts the burden of proof to Edison. That is the type of inquiry that civil courts are well equipped to handle. We are not.
Having affirmed the principle that we do not base our enforcement actions on general negligence principles, we need to frankly acknowledge that certain of our GOs contain language that incorporates negligence-related concepts. Rule 17.1 of GO 128 is an example. It requires the utility to use "due care" to reduce hazards of accidental injury to a minimum.7 "Due care" is a negligence-based concept that implies an inquiry into standards of care, causality, contributory negligence and the like. By way of example, the first case discussed in Appendix B to this decision involves an alleged violation of the "due care" standard of Rule 17.1. An Edison contractor sub-contracted certain maintenance work without Edison's knowledge. An employee of the sub-contractor sawed a lock off a transformer case and was injured when he touched the transformer. CPSD alleged a violation of the "due care" standard in Edison's failure to prevent its contractor from sub-contracting the work. We do not reach the "due care" issue in this case because it is undisputed that the contractor concealed the fact of the sub-contract from Edison. Therefore Edison did not know, and could not reasonably have known, of the sub-contract. Failure to correct a situation that has been deliberately concealed cannot be the basis of liability.
However, not every case that involves a potential violation of a "due care" standard can be disposed of in this way. Given the wording of our GOs, there are cases where an inquiry into the utility's degree of care is unavoidable. These cases fall into two broad categories, consistent with the principles we articulate in this opinion. In one group are cases where the utility had actual knowledge of a violation, an opportunity to correct it, and failed to do so. In such situations, we will assume a lack of due care and impose a fine in proportion to the severity of the violation. In the second group are cases where we conclude the utility should have known of the violation. We frankly acknowledge that reaching a conclusion that the utility "should have known" something is an unavoidably subjective exercise. However, given the wording of our GOs, on the one hand, and our reluctance to convert our proceedings into full-scale trials, on the other, we will endeavor on a case-by-case basis to determine from the record before us whether such a conclusion is warranted. When we find that it is warranted, we will impose fines on the same basis as we would in cases involving actual knowledge.
We discuss and dispose of the cases in Appendix B by applying the general principles articulated above.
