Complainants' Position

Based on the facts set forth above, complainants argue that they are entitled to be served under PG&E's agricultural tariffs. Complainants reason that because the change-of-form language in PG&E's tariff eligibility statement is ambiguous, one must turn to Commission decisions and to the legislative intent behind Pub. Util. Code § 744 in deciding how to interpret the tariff.⁷ Complainants conclude that under the Commission's analysis in Producers -- which decided that fluid milk processing qualifies for agricultural rates -- it is clear that cotton ginning also qualifies for such rates, because cotton ginning, like fluid milk processing, does not change the form of the raw agricultural product.

Before analyzing Producers, complainants argue strenuously that a common-sense analysis of what occurs in cotton ginning makes it clear that this case involves no change of form. Complainants argue that all ginning does (apart from some cleaning) is to separate the cotton fiber from the cottonseed without damaging either, and that the cottonseed and fibers that exit the gin are "the same in all respects" as the fiber and seeds that enter the gin. Both before and after ginning, complainants continue, the appearance of the cotton fiber and cottonseed is the same, and their USDA characteristics are the same. (Complainants' Opening Brief, pp. 3-4.) Moreover, Toscano notes, cotton ginning is seasonal work that is tied to the cotton harvest. (Ex. 5, p. 2.)

Complainants also argue that, quite apart from these common-sense considerations, the analysis in Producers entitles them to relief. In Producers, the Commission held that the pasteurizing, homogenizing, vitaminizing and standardizing of the fat content of milk produced by the dairy's own cows (as well as milk purchased from others) did not disqualify the dairy from taking service under PG&E's agricultural rates, because no change in the form of the milk products had occurred. Complainants argue that in reaching this conclusion, "Producers viewed the raw milk not as a single whole, but as an aggregation of various individual milk products (cream, whole, lowfat, nonfat), each of which already existed within the raw milk." (Complainants' Opening Brief, p. 4.) Producers likened milk processing to activities such as the sorting of eggs, which results in containers of eggs that are uniform in size (a difference from the randomly-sized eggs laid by the hen), but which does not change their form. Complainants continue:

"Like the sorted eggs and processed milk in Producers, the seed cotton contains within it multiple agricultural products: seed and fiber. Like the sorted eggs and standardized milk products, the seed and fiber are not 'created' by ginning but are merely separated into different packages. Like the sorted eggs and processed milk, the seed and fiber have not changed in form." (Id. at 5-6.)

Complainants also argue that the emphasis in Producers on practical marketing considerations supports extending agricultural rates to cotton ginning. They note that while significant markets exist for both cotton fiber and cottonseed, there is no market at all for unginned cotton (i.e., seed cotton). They point to the following language in Producers on the relevance of marketing considerations:

"The processes used by Producers are necessary in order to realistically market the milk in the quantities Producers handles. [PG&E's witness] states that the milk could be sold for purposes other than direct human consumption, but offers no evidence that such markets exist for the quantities involved here . . . Eggs, too, perhaps could be sold in random size and quality, but practical marketability may deem otherwise. Regardless, we do not believe that the intent of the legislature was to force milk producers to find less viable markets in order to benefit from AG rates." (74 CPUC2d at 681.)

Complainants also point to what they say are numerous inconsistencies in PG&E's interpretation of its agricultural tariff. PG&E concedes that waxing apples, cutting the tops off of carrots, removing the stems from sun-dried raisins and washing potatoes and carrots all qualify for agricultural rates, even though these activities all result in some change in the form of the agricultural product. Since ginning results in the separation from the cotton mass of seed that is embedded within the cotton fiber, but does not otherwise change the appearance of the seed or fiber, complainants ask why ginning should not also qualify for agricultural rates. (Ex. 8, pp. 9-10.) They do not accept PG&E's argument that apple waxing, carrot topping, etc. result in only a "de minimis" change in the form of these crops, and thus should be ignored for purposes of interpreting the tariff.

Finally, complainants attack PG&E's argument that the issue of whether there has been a change of form in an agricultural product should be decided by determining whether a process "invades the corpus" of the harvested plant. On this issue, complainants state:

"[T]his 'de minim[i]s'/'invade the corpus' requirement is based on language that PG&E manufactured for purposes of this case. It does not appear in any statute, tariff, Commission decision, or even PG&E's own Tariff Application Guide. And while PG&E attempts to characterize 'invade the corpus' as a restatement of the tariff, it is really the articulation of a narrow exception to the tariff, an exception that only applies to ginners and hullers. No other products are denied agricultural rates based on an alleged 'invasion of the corpus'." (Complainants' Reply Brief, pp. 4-5; footnotes omitted, emphasis in original.)