Assignment of Proceeding
Loretta M. Lynch is the Assigned Commissioner and Myra J. Prestidge is the assigned ALJ and the presiding officer in this proceeding.
Findings of Fact
1. Almonds grow commercially in orchards and are enclosed by a hard shell, which is enclosed in a fuzzy hull.
2. Almonds must generally be hulled within 90 days of removal from the tree and must be both hulled and shelled for human consumption.
3. There is no market for in-hull almonds. Although the primary market is for hulled and shelled almonds, a smaller market exists for in-shell almonds.
4. Almond hulls can be sold as cattle feed in California.
5. California annually produces approximately 800,000 tons of almond hulls, which have a market value of approximately $100 per ton, or $80 million.
6. Almond shells can be sold as cattle bedding in California.
7. Complainants produce approximately 190,000 tons of almond shells annually, which may be sold for at least 1 cent per pound, or approximately $3,800,000 per year.
8. Almond growers may join a hulling and shelling cooperative or may contract with a private operator to have the almonds hulled and shelled.
9. Hulling and shelling cooperatives usually require almond growers to pay a fee to join, but sometimes return all or part of the value of the hulls and shells to the grower.
10. Hullers and shellers may also receive the hulls and shells, which may then be sold, as payment for their work.
11. Hulling and shelling is a highly mechanized process, which generally includes the following steps:
a. Removal of the almonds, still in their hulls and shells, from almond trees with a "shaker."
b. Drying of the almonds on the orchard floor for at least 7 to 10 days.
c. Sweeping of almonds from the almond floor using large mobile bins, which either have rotating paddle-like appendages to sweep the almonds into the bins or vacuums which suck the almonds into the bin.
d. Transportation of the almonds to the huller/sheller.
e. Separation of the almonds from dirt, twigs, leaves, etc., by putting the material through the series of vibrating screens.
f. Placement of the almonds on conveyor belts.
g. Moving the almonds through a series of shear rolls and/or a hulling cylinder to gradually crack, break open, fracture, or splinter the hulls and shells.
h. Movement of the almonds to a series of vibrating screens, which separate the unhulled, unshelled almonds from loose hulls and shells or pieces of hulls and shells.
i. Use of aspirators to blow away lighter pieces of hulls and shells as the almonds move along the conveyor belt.
j. Separation of unhulled/unshelled almonds from hulled and shelled almonds by gravity tables.
k. Putting any unhulled or unshelled almonds back through the shear rolls or hulling cylinders until the hull and shell are completely removed.
12. Hullers and shellers must generally put the almonds through 14 to 22 shear rolls before the hulls and shells are fully removed.
13. In the small percentage of cases in which the almonds are hulled but not shelled, the almonds generally go through only 7 or 8 shear rolls so that the shell remains intact.
14. The hulling and shelling process breaks, cuts into, cracks, fractures, and splinters the hulls and shells.
15. The PG&E tariff in relevant part states that a customer is entitled to an agricultural rate for electricity if at least 70 percent or more of the electricity used is for an "agricultural end-use."
16. The PG&E tariff defines "agricultural end uses" to include "growing crops, raising livestock, pumping water for irrigation, or other uses which involve production for sale, and which do not change the form of the product."
17. The parties do not dispute that Complainants use at least 70% of the electricity at their facilities for hulling and shelling operations.
18. Hulling and shelling changes the form of the almond because the almond is separated into three agricultural products, i.e., the almond meat, the hull, and the shell.
19. Hulling and shelling changes the form of the almond because the appearance of the almond is dramatically changed by the removal of the almond meat from the hull and shell, and the cracking, cutting, and breaking open of the hull and shell.
20. Hulling and shelling differs from the processing of raw milk found eligible for an agricultural rate in Producer's Dairy, because the processing of raw milk does not significantly change the appearance of the milk.
21. Hulling and shelling changes the form of the almond because the hulling and shelling equipment cuts into, cracks, breaks open, splinters, and fractures the hulls and shells.
22. Hulling and shelling differs from certain other agricultural activities that qualify for an agricultural rate under PG&E's tariff, such as removing the stems from raisins, cutting the leafy tops off of carrots, removing the outer leaves of cabbage and lettuce, and waxing apples, because these processes do not involve cutting into, breaking open, fracturing, or splintering the agricultural product.
23. Since there is a viable market for almond hulls to be used as cattle feed, and for shells to be used as cattle bedding, almond hulls and shells are agricultural products in their own right, not merely agricultural residue.
24. Our finding that hulling and shelling changes the form of the almond does not force almond producers to forego profitable markets in order to qualify for agricultural rates because there are viable markets for in-shell almonds, almond hulls and almond shells, in addition to the well-established market for hulled and shelled almond meats.
25. The existence of markets for almond hulls and shells enables hullers and shellers to operate viable businesses and may reduce hulling and shelling costs for almond growers.
1. Utility tariffs are administrative regulations that are subject to the same rules that govern the interpretation of statutes.
2. Ambiguities in a tariff must generally be resolved in favor of the ratepayer, but the Commission retains discretion to determine whether an interpretation of a tariff sought by a party is reasonable.
3. Eligibility for an agricultural rate under PG&E's tariff does not depend on whether the activity for which the electricity is used occurs on or off the property at which the agricultural product was raised or grown.
4. In determining whether an agricultural activity, other than raising crops or livestock or pumping water for irrigation, qualifies for an agricultural rate under PG&E's tariff, the Commission must determine whether the activity changes the form of the agricultural product.
5. Under Air Way Gins, whether an agricultural product has undergone a change in form due to processing is based on a before-and-after comparison of the constituent parts of the agricultural product, rather than the before-and-after comparison of the raw product as it is harvested from the field.
6. Under Air-Way Gins, the separation of an agricultural product into two or more constituent agricultural products, without damaging, tearing or cutting into, any of the products does not constitute a change in form under PG&E's tariff.
7. Under Air-Way Gins, some kinds of processing of an agricultural product, such as animal slaughtering and peach pitting, change the form of the product.
8. Under Air-Way Gins, severing, crushing or cutting into an agricultural product generally falls within a common-sense definition of a change in form.
9. Under Producer's Dairy and Air-Way Gins, the Commission must consider the existence of actual markets for the agricultural products, rather than theoretical markets, in determining whether a particular activity qualifies for an agricultural rate.
10. The Legislature did not intend agricultural customers to be forced to forego profitable markets for their products in favorable of less viable markets in order to qualify for an agricultural rate.
11. The role of an agricultural tariff is to provide discounted rates for customers engaged in truly agricultural activities.
12. Eligibility for an agricultural rate under PG&E's tariff must be based on the particular use of electricity involved and a reasonable, common-sense interpretation of the tariff based on its language, or if the language is ambiguous, the regulatory or legislative intent behind the tariff.
13. Under PG&E's tariff, a reasonable, common-sense definition of "change in form" would generally include, but would not be limited to, cutting into, breaking open, crushing, fracturing, splintering, or slicing the agricultural product.
14. Regarding the relevant agricultural products, Complainants' almond hulling and/or shelling operations effect a "change in form" within the meaning of the PG&E tariff. Consequently, Complainants' electricity consumption for these operations does not qualify for the agricultural rate under the PG&E tariff.
15. In Pub. Util. Code § 740.11, the Legislature urged the Commission to consider providing the option for agricultural commodity processors to be eligible for discounted agricultural rates, as consistent with other constitutional and statutory objectives, if to do so would not result in cost-shifting to other customer classes.
16. Complainants are not entitled to relief. Their complaint should be dismissed, and this proceeding should be closed, effective immediately.
IT IS ORDERED that:
1. The complaint is denied.
2. This proceeding is closed.
This order is effective today.
Dated _____________________, at San Francisco, California.
