COM/GFB/niz Mailed 12/20/2006

Decision 06-12-029 December 14, 2006

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Order Instituting Rulemaking Concerning Relationship Between California Energy Utilities And Their Holding Companies And Non-Regulated Affiliates.

Rulemaking 05-10-030 (Filed October 27, 2005)

OPINION ADOPTING REVISIONS TO (1) THE AFFILIATE TRANSACTION RULES AND (2) GENERAL ORDER 77-L, AS APPLICABLE TO CALIFORNIA'S MAJOR ENERGY UTILITIES AND

THEIR HOLDING COMPANIES

1. Summary

Today's order amends the Commission's Affiliate Transaction Rules by adopting the Affiliate Transaction Rules Applicable to Large California Energy Utilities and amends General Order (GO) 77-L (which governs the reporting of compensation paid to executive officers and employees of regulated utilities), by adopting GO 77-M. The adopted amendments apply solely to Respondents, California's major energy utilities and their holding companies: Southern California Edison Company (Edison)/Edison International, Pacific Gas and Electric Company (PG&E)/PG&E Corporation, and Southern California Gas Company (SoCalGas) and San Diego Gas & Electric Company (SDG&E), both owned by Sempra Energy.

These amendments retain many of the proposals put forward by Commission staff but the Proposed Decision has been revised further under the direction of the assigned Commissioner. These revisions to the Affiliate Transaction Rules have been designed to close existing loopholes in three main ways: (1) ensuring that key utility and holding company officers understand the Rules and their obligations under them; (2) providing greater security against the sharing within the corporate family, through improper conduits, of competitively-significant, confidential information; and (3) ensuring a utility's financial integrity is protected from the riskier market ventures of its unregulated affiliates and holding company parent. GO 77-M includes new provisions developed to yield a more complete and accurate picture of Respondents' compensation practices while protecting reasonable privacy interests.

The amendments to both Rules have required us to strike difficult balances between the public interest and the private interests of unregulated utility affiliates and the individuals employed within the holding company structure. Though we recognize these private interests, we have not lost sight of the reason these electric and natural gas utilities exist: to provide energy services in a safe, reliable and environmentally sustainable manner at the lowest reasonable cost.