Position of the Parties

A. Tenby

Tenby takes the position that it had a written contract to take GN-10 service from SoCalGas on December 7, 2001, as evidenced by Exhibit A to the Declaration of Julie Chase, and that this service was to be provided by SoCalGas beginning on January 1, 2001.⁶ Tenby contends that SoCalGas breached the contract by failing to provide service to Tenby in January 2001. As a result, Tenby had to use a different provider to supply gas for the month of January 2001.

Since Tenby had already entered into a contract with SoCalGas before the effective date of the Resolution, Tenby asserts that the Resolution did not invalidate the contract because there was no "transfer" to suspend as contemplated by the Resolution.

Tenby requests that the Commission "clarify the Resolution so it is clear that the Resolution did not invalidate core subscription contracts, such as Tenby's, that were entered into by SoCalGas prior to the effective date of the Resolution." (A.01-12-042 Application, p. 17.) In support of its position, Tenby points out that the Resolution recognized Tenby's protest letter, adopted some of Tenby's arguments, and sought to protect "current core customers from possible harm." (Resolution, p. 9.)

If the Commission can award damages to Tenby for SoCalGas' actions, then Tenby requests an opportunity to present an accounting of the damages. If the Commission cannot award damages to Tenby, Tenby states that the Commission "should make clear that it did not intend to invalidate existing contracts and SoCalGas' improper attempts to profit from the Resolution should not be any further sustained." (A.01-12-050, Tenby Protest, pp. 16-17.)

SoCalGas contends that it did not have a contract to provide Tenby with GN-10 service because no written agreement granting Tenby's request was entered into by SoCalGas. Tenby points out, however, that the Energy Division's informal opinion stated that an "Application for core service (GN-10) does not require a signed contract," and that the informal "opinion held that Tenby's date of transfer to be a GN-10 customer was December 7, 2000." (A.01-12-050, Tenby Protest, p. 5.) Tenby also points out that SoCalGas' letter of January 31, 2001 to the Energy Division admitted that "no written contract is required for service under schedule GN-10." (Declaration Of Julie Chase, p. 6, Exhibits B and H.) Contrary to SoCalGas' assertion, Tenby contends that during the January 31, 2001 teleconference, SoCalGas did not specifically deny that Tenby's letter of December 7, 2000 established a contractual relationship.

Tenby further asserts that the date for delivery of the product is irrelevant in determining when the contractual relationship was established between the parties. Tenby contends that the "rights, benefits, and obligations of the contract become effective at the time of the contract even though the actual performance may occur at a later date," and that the Commission "would not and could not have intended to confuse the date of entry into a contract for a change of service, December 7, 2000, with the date of delivery of the natural gas, January 1, 2001. (A.01-12-042 Application, p. 9; A.01-12-050, Tenby Protest, p. 7.) If SoCalGas' position is upheld, Tenby contends this would allow any supplier to repudiate a contract on the day before it was to deliver the product.

Based upon the actions of SoCalGas' representatives, Tenby asserts that SoCalGas should be estopped from arguing that it had no contract with Tenby. When BP notified Tenby in November 2000 that BP was terminating its gas supply contract, Tenby contacted SoCalGas, who then "solicited Tenby to enter into a contract for its Schedule GN-10 service and enable SoCalGas to become both Tenby's provider and transporter of gas." (A.01-12-042, Tenby Reply, p. 2.) After repeated solicitations from SoCalGas and other providers, Tenby elected to take service from SoCalGas and "explicitly followed SoCalGas' instructions to do so." (Id.) Tenby relied on SoCalGas' representations that SoCalGas would provide GN-10 service to Tenby beginning on January 1, 2001, and Tenby therefore did not enter into any other contracts for natural gas service.

Tenby asserts that Tenby and SoCalGas had a definite "meeting of the minds" when Tenby entered into the contract on December 7, 2000, and that both sides understood the terms and conditions of the contract. Although SoCalGas argues that Tenby wanted core subscription service rather than bundled core service, Tenby contends that neither party ever claimed confusion as to the type of service at issue in the contract until SoCalGas filed its response to Tenby's petition to modify the Resolution.

Tenby also contends that SoCalGas recognized the contract beginning on February 1, 2001. Tenby asserts that if a contract did not exist, as alleged by SoCalGas, then "what currently governs SoCalGas' provision of Schedule GN-10 service to Tenby and Tenby's payments for such service." (Id. at p. 3.) Tenby also contends that when it decided to return to core service beginning on January 1, 2002, SoCalGas refused to allow Tenby to do so, citing SoCalGas' tariff Rule 19, which does not permit a transfer until after 12 months of service under the schedule.

Tenby further contends that SoCalGas' clarification or modification would violate the contract clause of the United States and California constitutions because SoCalGas is seeking a retroactive application of laws or regulations to invalidate or impair the obligation of an already existing contract. Tenby agrees that the Commission can prospectively alter contracts subject to its jurisdiction, but the Commission cannot retroactively alter a contract's past terms. Tenby also asserts that SoCalGas' interpretation discriminates against Tenby because Tenby's existing contract would be invalidated while others with GN-10 contracts would be continued.

Tenby also argues that if the Resolution is modified as recommended by SoCalGas, that this would violate Tenby's due process rights because the advice letters addressed in the Resolution did not raise the issue of whether contracts that were entered into before the effective date of the Resolution should be suspended. Instead, the advice letters only proposed a change to a two-tiered level of core customers.

Tenby also contends that fairness and equity demand that SoCalGas should not be rewarded for its conduct regarding these events. Tenby points out that it entered into a core service contract as a result of SoCalGas' repeated solicitations, which promised great savings. At about the same time, SoCalGas was attempting to drastically change the rates associated with such service by filing advice letters proposing the two-tiered system. After the Resolution was adopted, SoCalGas did not inform Tenby of its interpretation of the Resolution until the last week of 2000, forcing Tenby to find a replacement provider at the last moment. Tenby notes that the Resolution acknowledged the unfairness of SoCalGas' conduct when it stated that "SoCalGas seeks to change the rules just as customers seek to exercise the option they believed was available to them." (A.01-12-042 Application, p. 11; Resolution G-3304, pp. 8-9.) Tenby also contends that SoCalGas' actions with regard to the advice letters and the Resolution attempt to take advantage of "whatever interpretation afforded SoCalGas the greater profit...." (A.01-12-042 Application, p. 12.)

Tenby also points out that when SoCalGas filed Advice Letter 2981 with the Commission, it failed to serve a copy on Tenby. This advice letter contained language which favored SoCalGas' interpretation of the Resolution. The Energy Division struck this language as going beyond the Resolution. Tenby contends that SoCalGas' actions evidence a motivation on SoCalGas' part to deny Tenby a contract for GN-10 service.

Tenby also contends that despite repeated requests in January 2001, SoCalGas has not provided any support for its contention that if a contract exists between Tenby and SoCalGas, that several other written notices of election for core service would have to be recognized as well, which SoCalGas argues would overwhelm the core portfolio. Tenby refers to this as SoCalGas' "parade of horribles argument." Tenby points out that the Energy Division's informal opinion stated that no other non-core customers made such a request in writing. Tenby also cautions the Commission to carefully scrutinize the materials that SoCalGas supplied to the Energy Division on April 9, 2001, more than two months after the January 31, 2001 teleconference, regarding other end users whose circumstances of electing service are allegedly similar to Tenby's. (See A.01-12-042 Application, pp. 14-15; Declaration Of Julie Chase, Ex. K.)

Tenby also notes that a draft decision was issued in A.01-02-015, which recommends that all wholesale customers of SoCalGas be allowed to take core subscription service. A.01-02-015 is a proceeding in which the City of Long Beach (Long Beach) seeks to modify Resolution G-3304.⁷ SoCalGas and San Diego Gas & Electric Company support Long Beach's petition to modify the Resolution in that proceeding. Tenby contends that since SoCalGas openly welcomes massive users into its core service portfolio, any argument of SoCalGas about the adverse impact of allowing Tenby, a small user, and any other customers from taking core service, cannot be given much weight.

B. SoCalGas

SoCalGas contends that the Commission's intent in Resolution G-3304 was to suspend all noncore customers, except for those customers whose gas provider was no longer providing gas service in California and those who were actually receiving core or core subscription service, from switching to core or core subscription service effective December 21, 2000. SoCalGas contends that the Resolution recognized that many of SoCalGas' noncore customers were requesting core or core subscription service because of the rapid rise in natural gas prices. Although the Commission was aware that these requests had been made before the issuance of the Resolution, SoCalGas contends that the Commission did not create any exception for these noncore customers. Instead, the "Commission merely ordered SoCalGas to suspend transfers of noncore customers to either core or core subscription service, but did not state that Tenby, or any other noncore customer who had requested core or core subscription service, should be exempted from the suspension, other than those customers whose gas supplier was no longer offering service in California." (A.01-12-050 Application, p. 4.)

According to SoCalGas, the advice letters that were filed in December 2000 set forth SoCalGas' concern that a transfer of a large volume of noncore service to either core or core subscription service would raise gas commodity costs for existing core and core subscription customers. The advice letters proposed that customers who transferred from noncore transportation service to core or core subscription service pay a price based upon the incremental cost of SoCalGas having to purchase additional gas supplies.

SoCalGas contends that the Resolution agreed with SoCalGas' concerns, but rejected SoCalGas' proposed solution. The Commission then ordered SoCalGas "to suspend transfers of customers to core subscription service, Schedule G-CS or applicable core service schedules, except for those customers where their gas service provider is no longer offering service in California." (Resolution, OP 2, p. 12.)

In response to ordering paragraph 3 of the Resolution, SoCalGas filed Advice Letter 2981 on December 28, 2000 to implement the Resolution. According to SoCalGas, it:

"interpreted the Resolution to mean that noncore transfers to core or core subscription service effective January 1, 2001, were suspended and stated that `customers taking noncore transportation service on December 21, 2000 [the effective date of the Resolution], will not be eligible for core subscription or core service, except as identified in the above applicability statement [addressing customers whose supplier was no longer offering service in California], even if they requested the transfer prior to December 21, 2000, since such service would not begin until January 1, 2001, which is after the effective date of Resolution G-3304.' " (A.01-12-050 Application, pp. 4-5.)

Although SoCalGas "inadvertently failed to serve Tenby with a copy of the Advice No. 2981 when it was filed,"⁸ Tenby filed a late-filed protest to this advice letter. SoCalGas states that the essence of Tenby's protest is that it should be permitted to take core service as of January 1, 2001, because it had a contract with SoCalGas to take such service, which pre-dated the issuance of the Resolution. SoCalGas' response to Tenby's protest asserted that SoCalGas had not executed any written agreement with Tenby, and had only received a written request for core service from Tenby.

On February 2, 2001, in response to Advice Letter 2981, the Energy Division sent a letter to SoCalGas stating that SoCalGas should remove from its tariffs the language addressing whether noncore customers should be permitted to transfer to core or noncore service if they were not taking such service as of the effective date of the Resolution. The letter stated that this language "goes beyond compliance with Resolution G-3304."

SoCalGas contends that it never had a contract with Tenby, and did not execute any written agreement granting Tenby's written request for GN-10 service. In order for there to be a contract between Tenby and SoCalGas, SoCalGas states that there has to be a mutual obligation by SoCalGas to provide GN-10 service to Tenby, and for Tenby to take and pay for that service.

SoCalGas also contends that there was no "meeting of the minds" on the material terms and conditions of the alleged contract. SoCalGas contends that any agreement with Tenby would have also been governed by provisions that give the Commission jurisdiction over any such agreement, and that the Commission can modify any such obligation at any time. The Commission did so by adopting the Resolution which prevented Tenby and all other noncore customers from taking GN-10 service.

SoCalGas also argues that no contract existed between Tenby and SoCalGas because Section X.A. of the Commission's General Order 96-A requires that any contract seeking public utility service at rates or conditions other than what is contained in the tariff schedules requires Commission approval. SoCalGas asserts that since no such authorization was ever obtained, there can be no valid and enforceable contract between SoCalGas and Tenby.

As for Tenby's contract clause argument, SoCalGas asserts that the contract clause is not violated when the power to make changes is expressly reserved to the state. Thus, if a contract existed between Tenby and SoCalGas, SoCalGas states that General Order 96-A permits the Commission to modify any such contract without violating the contract clause.

With respect to Tenby's due process argument, SoCalGas points out that Tenby protested the advice letters and the Resolution acknowledged and summarized Tenby's protest. Thus, SoCalGas contends that Tenby had an opportunity to be heard before the Resolution was adopted. In addition, since Tenby and SoCalGas seek clarification or modification of the Resolution, Tenby has yet another opportunity to make its views known to the Commission.

SoCalGas also points out Tenby's confusion over "core service" and "core subscription service." Tenby asserts that SoCalGas solicited Tenby to enter into a contract "for its core service" and that "Tenby accepted the SoCalGas offer of core subscription service by sending SoCalGas written notice that Tenby terminated its Master Service Contract and Interstate Transmission Agreement with SoCalGas." (A.01-12-042 Application, pp. 3-4.) Tenby's petition also states that the December 7, 2000 notice "clarified that Tenby elected to take service under SoCalGas tariff schedule no. GN-10 (core subscription service)." (Id., p. 4.) SoCalGas states that GN-10 service is not core subscription service, but rather bundled core transportation and commodity service. Core subscription service, on the other hand, is where noncore customers continue to take noncore transportation service, but elect to purchase gas commodity from SoCalGas rather than from an alternative gas supplier.⁹

Since Tenby was allegedly offered core subscription service by SoCalGas, and Tenby wrote to SoCalGas on December 7, 2000 that it would take GN-10 service, SoCalGas contends that no contractual relationship exists because it did not accept Tenby's "counteroffer" to take GN-10 service. In support of its argument that it did not accept Tenby's counteroffer, SoCalGas points out that Tenby filed a protest to Advice Letters 2978 and 2979 because Tenby knew that approval of the advice letters would prevent it from taking the GN-10 service that Tenby had offered to take from SoCalGas beginning on January 1, 2001.

Although a contract is not necessary to elect GN-10 service, SoCalGas asserts that this is not an admission on its part that Tenby's December 7, 2000 letter created a contract between SoCalGas and Tenby. SoCalGas also points out that the Energy Division's informal opinion did not agree that a contract had been created, but instead merely stated that an "Application for core service (GN-10) does not require a signed contract." SoCalGas also contends that during the January 31, 2001 telephone conference, SoCalGas' representatives specifically denied that Tenby's December 7, 2000 letter established a contract.

Based on the Energy Division's informal opinion, SoCalGas allowed Tenby to take GN-10 service effective February 1, 2001. However, SoCalGas believes "that the intention of the Resolution was to prevent all noncore customers, including Tenby, from switching to core or core subscription service unless they were actually taking such service as of the effective date of the Resolution or their gas supplier was no longer offering service in California...." (A.01-12-050 Application, pp. 5-6.)

SoCalGas points out that as of December 7, 2000, Tenby was not a core customer, nor was it taking core subscription service. Instead, Tenby was taking noncore interruptible service in December 2000. Thus, Tenby's argument that it was a core subscription customer as of December 7, 2000, has no merit.

Even if SoCalGas had a contract with Tenby, SoCalGas contends that the Resolution changed the eligibility requirements for GN-10 service, and specifically prohibited the type of transfer requested by Tenby. Although Tenby requested that its GN-10 service commence on January 1, 2001, SoCalGas could not provide Tenby with such service because the Resolution precluded transfers to GN-10 service.

In response to Tenby's argument that "fairness and equity" require that the Resolution be interpreted in a manner favorable to Tenby, SoCalGas asserts that Tenby's version of the facts are irrelevant to the Commission's intent behind the Resolution. For example, SoCalGas asserts that the solicitation of Tenby for GN-10 service was not unusual, and that SoCalGas informed all of its noncore customers about available service options when asked. As for Tenby's allegation that it was "forced to scramble" during the last week of December 2000 to make arrangements to purchase gas, SoCalGas states that this was Tenby's fault because it was aware of the relief requested in the advice letters but failed to take timely action in the event the advice letters were granted.

Regarding Tenby's argument that the Resolution "adopted Tenby's protest," SoCalGas states that language of the Resolution was intended to address the two-tier system that SoCalGas had proposed in the advice letters, and "was not intended to permit Tenby, or any other customer who had requested core service or noncore core subscription service on or before December 11, 2000, to slip out from under the suspension ordered by Resolution G-3304." (A.01-12-042, SoCalGas Response, pp. 15-16.)

Tenby also argues that SoCalGas has interpreted the Resolution in a manner that affords SoCalGas a greater profit. SoCalGas asserts that any increase in transportation revenues caused by Tenby's switch from a noncore rate to a core rate would be credited to the Core Fixed Cost Account and not to SoCalGas' shareholders. As for Tenby's gas volumes, SoCalGas states that the volumes are relatively small, and the transfer of just Tenby to core service would not affect SoCalGas' gas commodity costs. However, if all the noncore customers in a position similar to Tenby are allowed to take core service without complying with any conditions that the Commission might adopt in A.01-01-021, this could raise SoCalGas' gas commodity portfolio prices. Thus, contrary to Tenby's assertion that SoCalGas is reciting a "parade of horribles," SoCalGas contends that it is merely presenting factual data about the impact of customers transferring from noncore service to core or core subscription service.

Tenby also asserts that SoCalGas prevented Tenby from returning to noncore service until February 1, 2002. SoCalGas states that its Rule No. 19 prohibits a transfer from one schedule to another except after 12 months of service under the schedule. Since Tenby did not start taking GN-10 service until February 1, 2001, Tenby was barred from returning to noncore service until February 1, 2002.

Tenby also referred to the draft decision in A.01-02-015. SoCalGas points out that the draft decision was taken off the Commission's agenda, and the issue is now before the Commission in A.01-01-021, which is the application SoCalGas filed in compliance with the Resolution.

Although the Energy Division's informal opinion stated that Tenby should be allowed to switch to GN-10 service because Tenby's request had been submitted in writing prior to the tariff deadline for establishing core subscription service beginning January 1, 2001, and before the Resolution was issued, SoCalGas contends that the informal opinion was based on the assumption that no other non-core customers had made such a request in writing.

On April 9, 2001, SoCalGas sent a letter to the Energy Division stating that the informal opinion did not provide SoCalGas with sufficient guidance on how other noncore customers, who had made requests similar to Tenby, should be treated. SoCalGas contends that the April 9, 2001 letter documents that a significant volume of SoCalGas' noncore transportation service requested core or core subscription service at least 20 days before January 1, 2001. SoCalGas asserts that many of these requests were in writing, and the Energy Division's informal opinion incorrectly assumed that Tenby was the only noncore transportation customer requesting core or core subscription service in writing. SoCalGas states that:

"If the Commission permits a transfer to core or core subscription service by any noncore transportation customer that requested such service prior to the effective date of the Resolution, without the need to comply with any conditions the Commission decides to adopt in A.01-01-021, there could be a significant volume of SoCalGas' noncore service that elects core or core subscription service to insure against future run-ups in the price of gas."

SoCalGas' April 9, 2001 letter requested the Commission to clarify whether these other customers should be permitted to switch effective January 1, 2001. Tenby responded to the April 9, 2001 letter. The Energy Division subsequently notified SoCalGas that it did not intend to address the matter further and would not prepare a Resolution for the Commission's consideration.

SoCalGas requests that the Commission clarify whether the effective date of Resolution G-3304 was intended to prevent noncore transportation customers from switching to core service effective January 1, 2001, regardless of whether the noncore customer requested core or core subscription service prior to the effective date of the Resolution.

SoCalGas requests that the Resolution be modified and clarified by including the following proposed finding of fact and ordering paragraph:

Proposed Finding of Fact
"To permit noncore customers of SoCalGas that are not actually receiving core or core subscription service as of the effective date of this resolution to transfer to core or core subscription service effective January 1, 2001 - even if they have requested core or core subscription service from SoCalGas within the time otherwise permitted in SoCalGas' tariffs - would adversely affect existing core and core subscription customers."

Proposed Ordering Paragraph
"Noncore customers of SoCalGas that are not actually receiving core or core subscription service as of the effective date of this resolution are not permitted to transfer to core or core subscription service effective January 1, 2001, even if they have requested core or core subscription service from SoCalGas within the time otherwise permitted by SoCalGas' tariffs." (A.01-12-050 Application, Proposed Modifications.)

If the Commission decides to exempt noncore transportation customers requesting core or core subscription service prior to the adoption of the Resolution or the 20-day cutoff in SoCalGas' tariffs, SoCalGas recommends that this exemption be done on a prospective basis only. SoCalGas contends that any new exemption should not be made retroactive to January 1, 2001 because these noncore transportation customers, who would now be deemed eligible, have probably already paid their gas supplier for the gas that they have purchased since January 1, 2001. Since SoCalGas has billed these customers only for noncore transportation service, it would not be appropriate to bill these customers for the gas that SoCalGas did not purchase on their behalf.