Discussion

The Second Modification Decision found that PG&E had not justified its failure to implement the weekly averaging PX price calculation methodology on the timeline imposed by the Cost Separation Decision and extended by the First Modification Decision. (D.99-06-056, Finding of Fact 4.) The Second Modification Decision also found that the delay "may affect the evolution of competitive energy markets and the ability of customers to understand their energy alternatives." (Id., Finding of Fact 5.) In defense of its actions, PG&E had introduced evidence about ongoing problems in upgrading its CIS, which runs the PG&E billing system.

Meanwhile, the Commission continued its review of PG&E's 1999 general rate case (GRC) and in February 2000, issued a decision resolving most Phase 1 issues, D.00-02-046 [the GRC Decision]. Among the Phase 1 issues were the CIS components of PG&E's revenue requirement. The Commission considered an extensive evidentiary record developed by PG&E, and by ORA and Enron Corp. (Enron), the two parties which contested PG&E's CIS-related capital additions and expense request.

The GRC Decision noted that PG&E's initial CIS-related request included estimates of $146.7 million in capital additions and $20.5 million in test year expenses. PG&E later reduced its request by removing incremental costs related to electric restructuring, i.e., approximately $62 million in capital additions and approximately $3.7 million in expenses. The parties did not dispute the reduced CIS operations expense estimate and the GRC Decision adopted it. However, the reduced capital additions estimate, approximately $16.8 million, remained contentious. The GRC Decision exhaustively reviewed the parties' evidence regarding this remaining capital additions request, including a number of substantial disallowances proposed by ORA and Enron for PG&E's alleged mismanagement of CIS, involving several plans to upgrade it or substitute another operating system for it. The GRC Decision resolved this portion of the revenue requirement by further reducing PG&E's CIS-related capital additions request by $10.8 million and adopting the difference, $73.8 million.

As this recitation of events indicates, resolution of Phase 1 of PG&E's 1999 GRC has provided a more detailed history of PG&E's management of CIS, including certain ineffectual upgrade strategies. We made ratemaking adjustments in the GRC Decision to protect ratepayers appropriately, both reflecting savings which resulted in benefits for ratepayers and expenditures, such as the IBM Integrity project, which did not.

After reviewing the briefs filed in this proceeding and considering the general penalty criteria established in D.98-12-075 (issued in the Affiliate Rule Enforcement Proceeding), we do not find the support necessary for imposition of a penalty in addition to the GRC Decision ratemaking adjustments we have ordered already. One of the primary factors we must consider under D.98-12-075 is the severity of the offense, including economic or competitive harm. The record developed in this proceeding is inconclusive and merely suggests that PG&E's delay in implementing weekly PX price calculations may have a negative effect on development of the direct access market. Since we cannot conclude that it has resulted in economic or competitive harm, we need not consider the other factors. Accordingly, we decline to issue a penalty and we close this proceeding.