4. Procedural Issues

The utility parties in their comments raise numerous procedural issues with regard to due process and statutory compliance. Some utilities argue that the Commission has identified no problem that requires new policy or rules. PG&E is correct that we did not adduce evidence in the traditional format, that is, with testimony, hearings and briefs. We did, however, hear from dozens of parties, some of whom presented studies, reports and written expert opinion. The law requires the Commission to provide notice and an opportunity to be heard before it resolves a matter of controversy or changes existing regulation or policy. We accomplished that here and we find that there is enough evidence to suggest that more explicit oversight of utility contracting procedures may produce benefits for utility ratepayers, utility employees and the public generally. The Commission does not need to identify immediate problems before adopting rules and regulations designed to forestall a problem or make improvements to existing circumstances. We wonder whether the utilities would apply the standard they propose in this proceeding to the proposals they bring before us and thereby require them to present evidence of a factual problem before we change policies or rules on their behalf.

We have changed our regulation many times without evidence of a specific problem at the request of the utilities and to their benefit. For example, we instituted performance-based ratemaking for energy utilities and the New Regulatory Framework for telephone utilities under the theory that these new policies would improve utility productivity and service. We recently changed utility reserve margins without hearings and have adopted hundreds of settlements signed by the utilities without explicit findings of an identifiable problem. Several years ago, we adopted maintenance standards for electric utility distribution systems on the basis that such standards would mitigate the safety risks and promote system reliability, and we did so without specific evidence of a problem. In all of these cases and others, we implicitly or explicitly found that a change in policy or rules - and in some cases rates -- would improve circumstances for utilities and their customers.

Moreover, this Commission has established new rules or requirements in numerous proceedings without including those changes in the initial rulemaking or scoping memo, but incorporating those changes along the way pursuant to an ALJ or Assigned Commissioner Ruling as was accomplished here. In some cases the Commission establishes new requirements without even reopening the evidentiary record, as was provided for in this proceeding. To take only one example, R.04-04-003 was initiated to consider six specific issues:  1) review and adoption of long-term procurement plans for the three utilities; 2) resource adequacy issues not otherwise addressed in workshops; 3) treatment of confidential information; 4) the development of procurement incentives for each utility; 5) development of a long-term policy for expiring QF contracts; and 6) review of the management audits of SDG&E's and PG&E's electric procurement transactions with affiliates.  The Proposed Decision on the Commission's 12/16/04 agenda addressing issue #1, the utilities' long-term procurement plans, makes major policy changes covering at least two issues not identified in the original rulemaking or scoping memo in R.04-04-003:  affiliate rules and greenhouse gas costs.   In neither case was the scope of the rulemaking changed from the original June 4, 2004 scoping memo, although in the case of the greenhouse gas cost adder, the assigned commissioner solicited answers from IOUs to several greenhouse-related questions.  In that case, as here, parties had full ability to comment on that ruling.

Some utilities also argue that the reopening of the record provided them with too short a period to provide meaningful comment. SDG&E cites California Trucking Assoc. v. PUC, (1977) 19 Cal.3d 240, concerning the opportunity to be heard. However, that case dealt with a rescission and amendment of a previously promulgated order and the notice and opportunity to be heard necessary under Public Utilities Code sec. 1708, which the Court ruled required a hearing. Here this rulemaking is a quasi-legislative proceeding pursuant to sec. 1701.4. In a quasi-legislative proceeding, the Commission can determine that a hearing is not necessary. The ALJ did allow other parties an opportunity to comment and submit new record evidence once SCDCL provided additional evidence, an opportunity not always afforded parties in Commission proceedings. All parties have had a full opportunity to comment on the Draft Decision and the Alternate Decision, as provided in Commission rules. Additionally, many utility parties argue that this rulemaking does not comport with Public Utilities Code sec. 321.1. The utilities' argument is misplaced. Section 321.1 does not require an economic analysis of the proposed impact of the rule. Rather, Section 321.1 requires only an assessment of the economic effects or consequences, not an analysis that would require additional staff resources and new Commission structures and procedures. Indeed, the Legislature specifically directed the Commission to conduct such an assessment "using existing resources and within existing Commission structures." This statute does not require any particular analysis, evidentiary hearing or other process.

Here the record in this case is sufficient to provide the basis for an assessment. Our findings regarding reverse auction bidding and the payment of prevailing wages constitutes an economic assessment sufficient to satisfy sec. 321.1 as we are using existing Commission structures and resources. The discussion in this decision regarding the merits of prevailing wages and their ultimate benefits to ratepayers and the problems raised by reverse auction bidding itself constitutes the assessment contemplated by the statute. Moreover, since the enactment of sec. 321.1, the Commission has acted many times pursuant to its existing structures and resources and has not specifically identified a separate economic analysis. The Commission routinely conducts the kind of assessment that is contained in this decision. To be crystal clear, we clarify in our findings that the requirement of paying prevailing wages is in the public interest and is consistent with Public Utilities Code Section 451.

The telecommunications utilities argue that imposing prevailing wage requirements and prohibitions on reverse auction bidding impermissibly interfere with New Regulatory Framework requirements. Although we are clearly within our authority to set these rules for all jurisdictional utilities, we will further consider the application of these rules to the telecommunications utilities in Phase II of this proceeding. Thus, we need not reach the utilities' arguments regarding potential recovery under the limited exogenous factor established in D.98-10-026.

Finally, some utility parties raise Public Utilities Code Section 8281 in asserting that any requirement of prevailing wages will run afoul of its provisions. The utilities provide no support for their assertions. Section 8281 is a declaration of policy which does not conflict with the rules developed here. The rules promulgated in this decision are race and gender neutral and comport fully with Section 8281. The utilities provide no basis or cognizable argument how these rules conflict and thus we do not accept their suppositions.