IV. Comments on Draft Decision
The draft decision of the ALJ in this matter was mailed to the parties in accordance with Pub. Util. Code § 311(g)(1) and Rule 77.7 of the Rules of Practice and Procedure. Comments were filed on June 12, 2001, by Sempra. We have modified this decision in response.
In addition, on July 19, 2001, an Alternate Proposed Decision of President Lynch was mailed to the parties. Comments were filed by Sempra, The Utility Reform Network, and the Southern California Generation Counsel on July 26, 2001. Sempra filed reply comments on July 31, 2001. These comments have been fully considered in the preparation of this decision.
1. The merger decision (D.98-03-073) authorized the combination of applicants Pacific Enterprises and Enova Corporation into a single entity, Sempra Energy.
2. Each utility retained its existing legal and regulatory status, including name, headquarters, corporate identity, separate capital structure, and existing franchises, permits, tariffs and licenses. Only one limit was put on functional integration - that the combined company's gas operations would be operated independently of, and physically separated from, its gas acquisition.
3. Each utility was authorized, to the extent it made business sense, to share resources with the other utility.
4. Sempra represents that its proposed reorganization will not shift to the holding company level any operations or managerial responsibilities that currently reside at the utility level.
5. To date, substantially all practicable quantitative efficiency and savings measures have been implemented through elimination of duplication, economies of scale and scope, and adoption of best practices. In December 1999, Sempra announced to its employees that the last of merger-related position reductions had taken place.
6. Service reliability, service quality, and cost savings could benefit by further integrating the management of SDG&E and SoCalGas.
7. Charts A and B, set forth in the body of this decision, illustrate the functions approved by this decision. It is not expected that these functions be adopted in their entirety, but that business judgement be used in their implementation.
8. The "no merger layoff" Guarantee was collectively bargained between the utilities and their respective unions. Any change to the merger Guarantee or adoption of an "Integration Guarantee" is likewise the subject of collective bargaining between each utility and the unions representing their member employees.
1. The authority granted by D.98-03-073 encompasses the proposed reorganization of Sempra's California utility subsidiaries, SoCalGas and SDG&E.
2. The petition to modify should be granted.
3. Sempra is authorized to integrate core utility functions as set forth in this decision at the leadership level by appointing common officers who would lead integrated functions for both SDG&E and SoCalGas.
IT IS ORDERED that:
1. The Petition to Modify Decision 98-03-073 is granted to the extent set forth in this decision.
2. Sempra may reorganize its regulated California utility operations by (1) returning to the utilities certain transactional support services previously integrated at the corporate parent, and (2) by integrating the management of certain utility operations. This latter aspect would integrate most gas and electric operations at the senior leadership level; most officers would carry responsibility for their function in both corporate utility entities. Such integrated operations would report to the President or CEO of Sempra's regulated utility group. Integration of functions below the officer level should be designed and carried out by these officers, and should follow a similar model, although some functions should continue to be managed based on business drivers such as geography, market segment, scope and scale of operations, technology, etc. as appropriate to the function. The reorganization would comply with all imitations on utility integration set forth in the merger decision, as well as the conditions set forth in Attachment B to the merger decision.
3. Sempra must obtain the approval of the Commission before it may transfer any operational or managerial responsibilities from the utility level to the holding company level beyond the holding company responsibilities that were set forth in Sempra's original merger proposal.
4. The proposed termination of the merger Guarantee and implementation of an Integration Guarantee is denied solely with respect to the utilities' union-represented work force. Any change in the merger assurances negotiated between the Sempra utilities and their union-represented employees, including the "no merger layoff" Guarantee or an "Integration Guarantee" shall be the subject of collective bargaining.
5. This proceeding is closed.
This order is effective today.
Dated September 20, 2001, at San Francisco, California.
LORETTA M. LYNCH
President
HENRY M. DUQUE
RICHARD A. BILAS
CARL W. WOOD
GEOFFREY F. BROWN
Commissioners
