IX. Interpretation of § 454.5(g) Protection for "Market Sensitive" Procurement Information
A. Introduction
Because Phase One of this proceeding is focused on the confidentiality of procurement data, the parties focus much of their energy on § 454.5(g), which provides:
(g) The commission shall adopt appropriate procedures to ensure the confidentiality of any market sensitive information submitted in an electrical corporation's proposed procurement plan or resulting from or related to its approved procurement plan, including, but not limited to, proposed or executed power purchase agreements, data request responses, or consultant reports, or any combination, provided that the Office of Ratepayer Advocates39 and other consumer groups that are non-market participants shall be provided access to this information under confidentiality procedures authorized by the commission.
In the sections that follow, we describe the various parties' general views on § 454.5(g). We discuss their substantive interpretation of the data, the detailed categories of data for which the IOUs claim confidentiality protection, and the time periods for such protection.
However, the IOU Matrix (Appendix 1) is the best source for determining our item by item determinations on how to treat each type of data. Because the IOUs' confidentiality windows differ based on the type of data, and other parties have different approaches depending on the data, it is difficult to summarize their positions briefly here. The parties filed a draft IOU Matrix, setting forth their various positions in more detail in spreadsheet format.40 This draft included not only the parties' positions, but the preliminary determinations that accompanied the OIR in this proceeding. Appendix 1 and Appendix 2 to this decision contain essentially the same data, but eliminate the parties' varying positions and make a determination on how each category should be treated.
B. Parties' Positions - Meaning Of § 454.5(g) "Market Sensitive" Information
1. IOUs' Positions - § 454.5(g) "Market Sensitive" Information
The IOUs generally claim that § 454.5(g) protects as confidential all information with any possible association with procurement, resource adequacy, and the renewables portfolio standard, including forecasts of future prices, demand, costs, and generation needs; historical price and cost information; contracts; the bidding (RFO) process for utility generation contracts. Under this interpretation, the public must be permanently (or for several years) denied access to the vast majority of such information. The IOUs therefore interpret § 454.5(g) expansively.
For example, according to SDG&E's witness, "virtually the entire range of data can be categorized as one of two types of sensitive procurement information: 1) net short data - information that indicates a company's need to buy or sell goods and services, and a feel for the extent of that need; and 2) valuation data - information that suggests the value a company places on needed goods and services."41
PG&E presents a long list of information that must be confidential under § 454.5(g), including utility-specific net open (short or long) positions (where there is little disagreement among any of the parties about the need for confidential treatment), but also including load and resource forecasts, generation contracts, gas hedging plans, RFO bid evaluation information, costs of generation, and many other types of data.42
SCE defines "market sensitive" information as "information that has not yet been made publicly available, which if made publicly available, would likely influence the decisions of a market participant."43 Under this definition, SCE seeks confidential treatment for four categories of data: (a) net short and net long positions; (b) information related to SCE's willingness to pay for power; (c) contract valuation methods; and (d) non-price contract terms. Virtually every category in the IOU Matrix (Appendix 1 to this decision) fits into one of these categories, according to SCE.
Like IEP (discussed in "Market Participant and CEC Positions - § 454.5(g) `Market Sensitive' Information," below), SCE asks us to look to other statutory schemes for assistance in defining "market sensitive" information. It cites a rule used by the U.S. Food and Drug Administration (FDA), which prohibits the disclosure of "financially sensitive information," which is "non-public information which could be reasonably expected to influence an investment decision by one having knowledge of the information."44 SCE also cites rules used in the United Kingdom and by the Joint Market Practices Forum, which represents entities who trade in derivatives and corporate debt.
The IOUs do not address the limitations or meaning of that portion of § 454.5(g) that applies protection only to an "electric corporation's proposed procurement plan or resulting from or related to its approved procurement plan, including, but not limited to, proposed or executed power purchase agreements, data request responses, or consultant reports, or any combination...." Nor do they address in detail what the statute means by requiring that the Commission "adopt appropriate procedures to ensure the confidential of [such] market sensitive information."
Generally speaking, the IOUs seek either permanent confidential protection for their data - with releases under protective order or confidentiality agreement allowable only to non-market participants - or protection in the three-year range. They choose three years because it is the shortest time within which new generation can come online. A shorter confidentiality period, according to these parties, could allow entities receiving the information to use it for ill, and new generation would be unavailable to offset energy price impacts.
2. Ratepayer Group Positions - § 454.5(g) "Market Sensitive" Information
TURN generally sides with the IOUs and advocates strong confidentiality protections for procurement data: "TURN believes that this Commission is free to adopt a definition of `market sensitive' procurement information that is geared toward protecting the ratepayer interest in the lowest reasonable procurement costs to the maximum extent possible, including barring MPPs from access to such information if its disclosure would provide such market participants with the means to extract higher prices."45
TURN receives all such data under a confidentiality agreement or other order, either because of its membership on the IOUs' Procurement Review Groups or because of its status as a non-market participant. TURN assures the Commission that it is watching out for the interests of ratepayers and that granting market participants' pleas for access to IOU procurement data will only cause ratepayer harm. TURN generally favors a window of confidentiality approach that would treat procurement information as "market sensitive" for one year backward and three to five years forward, depending on the specific nature of the information. TURN believes "three years is an approximation of the amount of time required for the entry of new supply into the market."46 However, TURN supports proposals to make more renewable resource procurement information public, in light of the strong public interest in such matters.
TURN also recommends that ESP compliance filings regarding RPS and Resource Adequacy (RA) requirements be made available to non-market participants, subject to confidentiality restrictions approved by the Commission.47
Green Power "urges the Commission to interpret § 454.5(g) narrowly rather than broadly, making as much utility procurement planning information publicly accessible as possible, while protecting the rights and interests of all parties."48 Alone among the parties, Green Power advocates a distinction between cost and price data. It claims that "cost data deserve far more consideration for confidential treatment than quantity data" because biomass generating plant owners treat the data differently. Green Power cites a study of biomass operators who had no objection to releasing information about the quantity of biomass (plant material, vegetation or agricultural waste used as fuel) they used, but strongly objected to disclosing how much they paid for that material.49
3. Market Participant and CEC Positions - § 454.5(g) "Market Sensitive" Information
The IOUs' competitors (except AReM and CNE, which focus only on the confidentiality of ESP data), take a much more limited view of § 454.5(g)'s requirement of a process to ensure confidentiality for "market sensitive" information. They seek either public release of data the IOUs claim is confidential or shorter time periods for protection. Where, for example, the IOUs seek a three-year window of protection for forecast information and a one-year window for historical data, competitors seek one- or two-year windows for forecast data and 90 day windows for historical data.
IEP focuses on process issues under § 454.5(g). It believes everyone may have access to market sensitive information so long as a reasonable protective order is in place: "To harmonize the requirements of SB 1488 with those of § 454.5(g), the commission should provide access to all information (including market sensitive information) to all participants who are willing to abide by the terms of a reasonable protective order."50 IEP does not believe § 454.5(g) requires that market participants be treated differently from non-market participants (a contention we discuss separately below).
IEP analogizes to securities law under § 10(b) of the Securities Exchange Act of 193451 and Securities and Exchange Commission Rule 10b-5.52 Under those provisions, in order to be deemed to have an impact on the market, information must be material. Materiality is determined by the significance a reasonable investor would place on the (misrepresented) information. By analogy to securities regulation, IEP states that a definition for "market sensitive" data could be based on a materiality standard:
Market sensitive information would be defined as information that is material to a reasonable buyer or seller of power in making decisions regarding the price for, or quantity of, a purchase or sale of electricity. Information that does not affect the price at which an electricity product is bought or sold or the quantity offered for sale or accepted for purchase is not material and thus not market sensitive.53
IEP also suggests we look to antitrust law in defining market sensitive information. Under this approach, we would undertake the following analysis to determine whether information is market sensitive: 1) does keeping the information confidential improve or undermine a well-functioning market?; 2) are the effects of disclosure ones that would not ordinarily be experienced in a competitive marketplace?; 3) can the information be used to manipulate the market in the future, even if all competitors have access to the same information?; and 4) are the effects persistent and measurable?54
The CEC also advocates great openness. In its view, market sensitive information under § 454.5(g) will always meet the definition of "trade secret" and therefore be entitled to the same protection as trade secrets receive under the California Public Records Act. In other words, the CEC contends, if data does not meet the definition of trade secrets, it is not market sensitive under § 454.5(g).55
C. Discussion - Meaning of "Market Sensitive" Information Under § 454.5(g)
We must strike an appropriate balance in interpreting § 454.5(g). We are a public agency that regulates public utilities, and most of our business must be conducted in a public forum.56 Allowing public access to documents is part and parcel of an open decision making process.
All parties concede, however, that there must be some limitation on data available to the general public - and, in turn, to market participants. We must not forget the context in which Assembly Bill (AB) 57 (the act that promulgated § 454.5(g)) arose. The statute, signed in 2002, was conceived in the midst of the state energy crisis. The Legislature wished to assist the IOUs' return to creditworthiness by encouraging them to enter into long term contracts for electricity. The IOUs asserted - and most agreed - that in order to encourage such contracting, the IOUs must be assured in advance of recovery in rates of their contracted energy prices, rather than running the risk that the Commission would disapprove their contracts in after-the-fact, hindsight-driven reasonableness reviews.
While there is no legislative history on the confidentiality provision of § 454.5(g), the provision is part of a larger statute dealing with the IOUs' return to long-term procurement through a competitive bidding process. As we discuss below, we believe this context, and the language of § 454.5(g) itself, dictate several outcomes.
First, the statute covers only procurement plans and related contracts and information. Second, not all procurement plan and related data is market sensitive; a subset of such information meets this definition. Such information must have the potential to materially affect an electricity buyer's market price for electricity. Data that can have no material impact on this price are not "market sensitive." Finally, we must develop procedures to ensure the confidentiality of information meeting the foregoing two requirements.
Section 454.5(g) is limited in scope to "an electrical corporation's proposed procurement plan or resulting from or related to its approved procurement plan, including, but not limited to, proposed or executed power purchase agreements, data request responses, or consultant reports, or any combination."
To the extent the IOUs attempt to extend protection for "market sensitive" information to every document that conceivably relates to resource adequacy, the RPS, and their procurement function, they overstate the statute's scope. The information must, at the very least, be contained in procurement plans or power purchase agreements, or relate to these documents.
Section 454.5(g) does not protect every record connected to procurement; it only relates to "market sensitive" information submitted in procurement plans and related documents. Had the Legislature intended all information in procurement plans and related documents to be confidential, it could have said so. The term "market sensitive" must be limited to information with the potential to affect the market for electricity in some way.
For this reason, we agree with IEP that there must be a materiality standard attached to the term "market sensitive." Information only has the potential to affect the market if it is material. Immaterial information will have no impact on the market price for energy. We do not intend to import the law regulating securities (§ 10(b) and Rule 10b-5) into our materiality determination, and parties should not use case law interpreting those legal provisions in this context. We do agree, however, that in order to be deemed "market sensitive" in the context of § 454.5(g), information must be material. Information is material if it affects the market price an energy buyer pays for electricity.
The IOUs effectively concede this point by opposing access to procurement information by market participants. They assert that such access will allow such parties to overprice the electricity the IOUs procure, and harm ratepayers through higher prices. Information that does not allow market participants to raise the price of electricity the IOUs procure from them is not, therefore, market sensitive information.
4. Procedures to Ensure the Confidentiality of Market Sensitive Information
Section 454.5(g) requires the Commission to adopt appropriate procedures to ensure the confidentiality of any market sensitive information submitted in procurement plans and related submissions. The procedure we adopt here relies on the IOU Matrix in the first instance to identify the data the IOUs may treat as confidential.
Because IOUs must show that information they seek to keep confidential could have a material impact on their market price for electricity, only data in the Matrix that meet this definition may be held in confidence. Several categories in the IOU Matrix do not meet this required showing, as shown in Appendix 1 to this decision. Where we find that the material is not "market sensitive," we require the data's public disclosure. Where some but not all related data require confidentiality protection, we specify the relevant data. Where the data have the potential, if released to market participants, to materially affect a buyer's market price for electricity, we require confidentiality of that data. The most sensitive data may require protection for five years, but cases of such protection in the IOU Matrix are rare. In most cases, we adopt a window of confidentiality for such data that protects it for three years into the future, and one year in the past at most.
We disagree with IEP and others who argue that all data should be available pursuant to a "reasonable protective order." Data that are confidential may be kept from market participants altogether, although we will always require that the producing party meet its burden of proving that it cannot produce aggregated, partially redacted, summarized or other data that do not reveal the confidential material.
39 The Office of Ratepayer Advocates is now DRA.
40 Joint Parties' IOU Matrix of Electric Procurement-Related Data in Rulemaking 05-06-040, filed Jan. 17, 2006.
41 SDG&E Opening Brief at 14.
42 See PG&E Opening Brief at 3-5.
43 SCE Opening Brief at 23.
44 Id. at 24, citing "Nondisclosure of Financially Sensitive Information," Integrity Memorandum G92-1, FDA Office of Device Evaluation Review Staff (March 5, 1992).
45 TURN Opening Brief at 6.
46 See Prepared Rebuttal Testimony of Michael Peter Florio, Ex. 1201 at 7:15-16.
47 TURN Opening Brief at 1.
48 Green Power Opening Brief at 2, citing its Opening Testimony, Ex. 1001 at 2-3. We admit the study as Ex. 1010, upon Green Power's motion of June 19, 2006. The ALJ gave parties time to object to the exhibit and no party did so.
49 Green Power Opening Brief at 6.
50 IEP Opening Brief at 12.
51 15 U.S.C. § 78j(b).
52 18 C.F.R. § 240.10b-5.
53 IEP Opening Brief at 19.
54 Id. at 19-20.
55 CEC Opening Brief at 7.
56 Public Records Act, Cal Gov. Code § 6250 et seq., California Constitution, Article 1, § 3(b).
