II. Background

SET's motion (filed January 3, 2005) arises in the context of Phase I of our investigation of spikes in natural gas prices at the California border in 2000 and 2001. In Phase I, Southern California Gas Company (SoCalGas) and San Diego Gas & Electric Company (SDG&E) are named as respondents. An important component of the inquiry is whether there were improper transactions involving these companies and their affiliates. SoCalGas' and SDG&E's relationship with their corporate affiliates, including SET, is repeatedly identified for investigation during the proceeding. (See Issue 2, Scoping Memo for Phase I of I.02-11-040 and Ruling of Assigned Commissioner at 4-6 (April 16, 2003) ("Did any of SoCalGas and SDG&E's affiliates or their parent company, Sempra, play a role in causing the increase in border prices?")¹

Southern California Edison Company (Edison) has participated as an active party in the proceeding, and may have been affected by any impermissible transactions involving respondents and their affiliates. Upon Edison's request, the Commission on August 27, 2003, issued a series of subpoenas duces tecum requiring SET's production of certain documents identified in earlier data requests propounded by Edison. At a law and motion hearing on February 13, 2004, the Law and Motion ALJ ordered SET to search back-up electronic tapes of corporate e-mails for documents responsive to the subpoenas.

On February 25, 2004, SET filed a motion for an order requiring Edison to pay SET's costs in responding to the subpoenas. Edison opposed the motion and another Law and Motion ALJ heard the matter on April 15, 2004. SET argued that California Evidence Code Section 1563, pertaining to discovery costs incurred by a witness not a party to a proceeding, required Edison to reimburse SET for e-mail recovery and review costs. The Law and Motion ALJ, however, ruled that SET was required to bear the costs of responding to the subpoenas. The ruling indicated that Evidence Code Section 1563 is not directly applicable to a Commission-initiated investigation and, furthermore, the Commission has special powers and obligations to investigate allegedly impermissible transactions between utilities and their corporate affiliates. (See ALJ Ruling on Motion Concerning Discovery Costs (April 15, 2004).)

On May 11, 2004, SET filed a motion for reconsideration of the ALJ Ruling. The Law and Motion ALJ denied the motion for reconsideration on June 25, 2004. (See ALJ Ruling Denying Reconsideration of Ruling on Motion Concerning Discovery Costs (June 25, 2004).) Thereafter, SET filed a petition for a writ of mandate with the California Court of Appeal. With the court's permission, SET subsequently withdrew its petition without prejudice. SET then proceeded to file the pending motion with us on January 3, 2005. SET represents that it has spent almost $220,000 as of that date in complying with the e-mail discovery rulings. SET asks us to reverse the ALJ rulings concerning discovery and order Edison to reimburse SET for the reasonable cost of responding to the subpoenas. Edison opposes the motion.