IV. Discussion
A. Overview
It is clear that the Commission has the authority to ensure the safety and reliability of a public utility's system. Pub. Util. Code § 451 provides in pertinent part that:
"Every public utility shall furnish and maintain such adequate, efficient, just, and reasonable service, instrumentalities, equipment, and facilities... as are necessary to promote the safety, health, comfort, and convenience of its patrons, employees, and the public."
The Commission may supervise and regulate every public utility in the state and may do all things, whether specifically designated in this part or in addition thereto, which are necessary and convenient in the exercise of such power and jurisdiction. (Pub. Util. Code § 701.) Also, the Legislature has found and declared that "the delivery of electricity over transmission and distribution systems is currently regulated, and will continue to be regulated to ensure system safety, reliability,... for all market participants. (Pub. Util. Code § 330(f).)
Pub. Util. Code § 761 provides in pertinent part:
"Whenever the commission, after a hearing, finds that the rules, practices, equipment, ... or service of any public utility, or the methods of ... distribution, transmission, storage, or supply employed by it, are unjust, unreasonable, unsafe, improper, inadequate, or insufficient, the commission shall determine and, by order or rule, fix the rules, practices, equipment, appliances, facilities, service, or methods to be observed, furnished, constructed, enforced, or employed."
We must consider whether the layoffs and cost cutting efforts of SCE and PG&E affect the ability of these utilities to furnish and maintain adequate, efficient, just and reasonable service, and whether such efforts endanger the safety, service and reliability of the utility systems that they operate. We must also consider whether these layoffs are justified given the utilities' acknowledgement that the cost cutting measures will not materially affect their financial condition. In addition, both CCUE and TURN have raised the issue that the cost cutting measures of SCE and PG&E have or will reduce the level of service and reliability, which the utilities have been compensated for in their revenue requirement to provide a certain level of service and reliability. TURN also raises the argument that costs incurred during the rate freeze cannot be recovered from the distribution rate component as a result of the utilities' cost cutting efforts.
B. Jurisdiction
Before discussing the above arguments, we first turn to the argument of SCE and PG&E that the Commission should deny CCUE's motion on the grounds that the Commission lacks jurisdiction to interfere in the collective bargaining agreements. We do not agree with the position of the utilities.
Although CCUE's motion involves the layoff of represented workers, the issue that concerns the Commission is whether the layoffs and cost cutting measures affect the utilities' provisioning of "adequate, efficient, just, and reasonable service" that "are necessary to promote the safety, health, comfort, and convenience of its patrons, employees, and the public." (Pub. Util. Code § 451.) The collective bargaining agreements cover, among other things, the terms and conditions of employment and layoffs. Surely, the Commission's authority to regulate the utilities in this regard should not be made subordinate to the collective bargaining agreements between the utilities and its represented workers. The various cases cited by the utilities do not address this kind of conflict, and are therefore distinguishable. We conclude that the collective bargaining agreements do not govern nor control this Commission's statutory duty to ensure that the SCE and PG&E provide adequate, efficient, just and reasonable service.
C. Quality of Service
Most of the layoffs that have already occurred affected contractors, hiring hall employees, and temporary and part-time workers. The layoffs contemplated by SCE for February 2001, and by PG&E in the next several months, appear to affect the same category of workers. Based on the pleadings and the testimony presented at the hearings, the layoff of these workers has adversely affected the T&D operations, the call centers, meter reading, and the number of personnel who could respond to large scale outages. As more layoffs occur, these kinds of impacts can be expected to continue.
Pub. Util. Code § 451 does not just mandate safe and reliable service. In addition, the utility is obligated to furnish and maintain adequate, efficient, just and reasonable service to promote the safety, health, comfort and convenience of its customers. As mentioned in the overview of the utilities' proposed plans, both SCE and PG&E have provided evidence that their layoffs will degrade the level of service in certain areas, including the following: lengthening the time for providing the connections necessary to provide service to new customers; lengthening the time for restoring service in the event of an outage or non-emergency service problem; providing actual meter reads on a bi-monthly basis and estimated usage in the other months; and lengthening the ASA time for the utilities' customer call centers. If more layoffs are allowed to take place, as contemplated by the utilities, this will further erode the ability of the utilities to provide adequate, efficient, just and reasonable service.
Neither SCE or PG&E dispute that the layoffs have affected the operations of their respective utilities. Although both SCE and PG&E contend that safety and reliability remain their primary concerns, they also acknowledge that ASA time for customer calls are increasing, and that overtime for call center workers and for field personnel are being reduced. The reduction of overtime for field personnel has or will result in delays in the restoration of service or lengthen the time to connect new customers. The reduction of overtime for call center workers leaves fewer workers available to answer the phones.
We are also concerned that some of the layoffs that have occurred, or that will occur shortly, are taking place during the winter. Winter typically brings a number of weather-related outages. Cost cutting measures which reduce the ability of call center operators to answer calls, and of field personnel to respond to outages and to restore service in a timely manner, do not maintain a level of adequate, efficient, just and reasonable service.
The move by SCE and PG&E to read meters on a bi-monthly basis is another cause for concern. Billing accuracy is especially important to customers when gas prices and rates are volatile and subject to change, and there have been recent electric rate increases. Without monthly reads of actual usage, customers will be uninformed about their actual usage during the estimated usage period. Customers will be unable to see the monthly impact of their usage as compared to "real time" rates. Also, customers will not be able to see the results of their conservation efforts on a monthly basis, especially if they reduce their actual usage for the month below the baseline amount. Furthermore, the lag period of two months before actual usage is billed will likely lead to an increase in the number of customer calls, and to disputes concerning the amount owed during a particular month. More calls and fewer available representatives to answer the calls will lead to a further decline in the level of service, and to more customer frustration.
Although footnote 2 of CCUE's motion suggests that it is not seeking to prevent the utilities from deferring certain maintenance or capital replacement programs, we are concerned that the proposed deferrals may also cause short-term service reliability problems for both PG&E and SCE, and may cause more severe problems if the deferrals continue for a substantial period of time. Based on the record, it does not appear that the deferral of these projects will result in inadequate, inefficient, unjust or unreasonable service at this time. However, if the financial crisis continues, the utilities acknowledge that problems are likely to result from the deferral of certain maintenance and capital replacement projects.
D. Financial Results
The utilities also acknowledge that the layoffs and other cost cutting measures will not improve their current financial condition. As CCUE points out in its brief and motion, the savings would barely make a dent in the cost of their wholesale electric costs. The savings resulting from the layoffs and other cost cutting measures, though significant in dollars, are nominal when the savings are compared to the size of the utilities' debts. However, the layoff savings have a real effect upon the level of service provided by PG&E and SCE.
Both PG&E and SCE acknowledge in their briefs that the Commission may involve itself in the management of a utility when necessary to ensure reasonable rates or service. Based on the record, we conclude that the layoffs that SCE and PG&E have implemented, and the reduction in overtime hours, have reduced the level of service below what customers reasonably expect as an adequate, efficient, just and reasonable level of service. That is, we conclude that the practices and services resulting from the layoffs and the cutback in overtime have resulted in inadequate, unjust and unreasonable service and practices. The upcoming proposed layoffs of both PG&E and SCE would further exacerbate the decline in the level of service. For the reasons stated above, CCUE's motion to prevent the layoffs of non-management employees, as presently contemplated or already implemented by SCE and PG&E, is granted.
E. Action on Past Layoffs
The granting of CCUE's motion does not end our inquiry into the layoffs and cost cutting measures of SCE and PG&E. Pursuant to Pub. Util. Code § 761, after the Commission finds that the practice or service of a public utility is unjust, unreasonable, inadequate or insufficient, the Commission shall determine, and by order or rule, fix the practice or service. In accordance with that code section, we shall rescind the layoffs that SCE and PG&E have implemented, or are in the process of implementing, and order SCE and PG&E to restore and staff those positions to the extent that the positions that were terminated affect the utilities' ability to: (1) fully staff their customer call centers; (2) read meters on a monthly basis for all customers; and (3) timely respond to service calls and outages, and to connect new customers. In addition, PG&E and SCE are directed to reinstate the use of overtime as necessary to enable customer call centers to handle the volume of incoming calls, and to permit field personnel to continue to connect new customers and respond to and remedy outages and other service-related problems in the same amount of time that existed prior to the utilities' financial problems. All future layoffs of utility personnel, contractors, or hiring hall personnel which affect the aforementioned services and practices shall be barred unless the utilities can substantiate that the layoffs will not prevent the utilities from furnishing and maintaining adequate, efficient, just and reasonable service.
F. Maintenance and Replacement
We will permit PG&E and SCE to proceed with the deferral of their maintenance and capital replacement projects at this time. However, we are concerned that if the financial crisis continues, the deferral of these projects may compromise the safety, service and reliability of the utilities' operations, or such deferrals may affect the utilities' provisioning of adequate, efficient, just and reasonable service. Therefore, we will require SCE and PG&E to provide the Commission, and the parties to this proceeding, with monthly updates regarding their cost cutting measures. However, if either PG&E or SCE contemplates a significant change to their cost cutting measures, which deviate from what was represented to the Commission in connection with this motion, then the utility shall be required to provide an update on the change and its effect within three days of the change. These monthly updates shall be provided on the first business day of every month, and shall continue until the President of the Commission issues a ruling terminating the reporting requirement.
G. Allocation And Rate Components
We are also concerned about the "rate freeze" effect of using cost cutting measures to pay for costs incurred during the rate freeze. In addition, we are concerned that ratepayers have been required to pay as part of their rates, certain rate components which reflect a certain and expected level of adequate, efficient, just and reasonable service.
Due to the price of wholesale electricity and the problems that have resulted from that, SCE and PG&E have cut, reduced or deferred certain expenditures. Some of these cost savings may be coming from certain rate components which ratepayers continue to pay for a level of safety, service, and reliability that is no longer being offered. Also, these cost savings are being used by the utilities to pay various costs on a day-to-day basis, including costs that have been incurred during the rate freeze. Based on those two effects, we will adopt TURN's suggestion that appropriate ratemaking accounting devices be adopted to examine whether the revenue requirement for each utility should be adjusted to reflect the cost savings resulting from reductions in service, and to examine whether the cost cutting measures result in the payment of costs incurred during the rate freeze.
We will therefore direct SCE and PG&E to establish a memorandum account to record the costs and savings associated with the cost cutting measures, that have already been implemented, and which will be implemented by the utilities, including any layoffs that do not affect the aforementioned areas. The Commission will then examine these costs and savings, their effects on the rate freeze and the revenue requirement, and determine whether adjustments should be made. This examination should take place when circumstances return to normal.
Since neither TURN's suggestion nor the utilities provided any specific details as to what costs or savings should be booked to a memorandum account, the parties to this proceeding should be provided with an opportunity to comment on the design of the memorandum account, and other accounting mechanisms that might be needed to make the adjustments. Should the parties desire, a workshop could be held to discuss these accounting mechanisms and possible adjustments.7 Parties may file comments on the design of the accounting mechanisms within 20 days from the mailing date of this decision, and reply comments within 30 days from the mailing date of this decision. The Commission will then issue another decision detailing what items should be recorded in the memorandum account and other accounting mechanisms.
H. Other Issues
PG&E has raised two other issues. First, PG&E requests that the ASA time requirements be temporarily suspended due to the high volume of calls received by PG&E's call center. Second, PG&E requests that the Commission temporarily suspend the requirement that meters be read once a month due to its cost cutting measures.
Based on the evidence presented at the hearing, and as discussed above, the layoffs and the restriction in overtime hours have reduced the level of service with respect to the answering of customer calls, and reading of customer meters on a monthly basis. The efforts of PG&E and SCE to lengthen the time for answering customer calls and to go to bi-monthly reading of meters is unacceptable. Such actions by PG&E and SCE would reduce the level of service below the § 451 requirement that the utilities furnish and maintain adequate, efficient, just and reasonable service. If PG&E and SCE are permitted to lengthen their ASA time or to engage in bi-monthly meter reads, the utilities would not be "maintaining" the level of service that they provided prior to the utilities' financial problems. Therefore, the request of PG&E to suspend the ASA time for call center calls, and to temporarily suspend the monthly meter read requirement, are denied. PG&E and SCE shall continue to abide by the ASA time mandated by the Commission, and to provide actual monthly meter reads for its customers.8
I. Review and Comment
Draft decisions are generally subject to a 30-day review and comment period as provided for in Pub. Util. Code § 311(g)(1). However, § 311(g)(2) provides that this 30-day period may be reduced or waived in an unforeseen emergency situation. Rule 77.7(f)(9) provides that the Commission may reduce the period for review if the Commission determines, on the motion of a party or on its own motion, that "public necessity" requires a reduction of the 30-day period for public review and comment. Public necessity includes a situation where the failure to adopt a decision before the expiration of the 30-day review and comment period would cause significant harm to the public health or welfare. The failure to timely act on CCUE's motion could result in the layoffs of a number of utility employees whose jobs affect the provisioning of adequate service to customers, including the ability to restore service after outages. Particularly in the height of the winter storm season, such circumstances could endanger the public health and welfare of the citizens of this state if the Commission does not act on the motion in a timely manner. Therefore, the 30-day public review and comment period on this draft decision is reduced.
The draft decision of the Administrative Law Judge (ALJ) in this matter was mailed to the parties on February 23, 2001 in accordance with Section 311(g)(1) of the Pub. Util. Code and Rule 77.7 of the Rules of Practice and Procedure. Interested parties were provided with the opportunity to file opening and reply comments to the draft decision.
1. CCUE filed an emergency motion on January 8, 2001 to prevent PG&E and SCE from laying off workers until the Commission has had a full opportunity to review such proposals.
2. Responses to CCUE's motion were filed by PG&E, SCE, Adams, and TURN.
3. An ACR was issued on January 23, 2001 directing PG&E and SCE to provide additional information about the impact of the proposed layoffs.
4. Hearings into CCUE's motion were held on February 2 and 5, 2001.
5. SCE's counsel represented that SCE was planning to issue layoff notices for its part-time or full-time employees on February 5 and 6, and that the layoffs would be effective two weeks later.
6. The Commission provided notice in its agenda that the Commission was planning to take action on CCUE's motion.
7. The Legislature has found and declared that the delivery of electricity over transmission and distribution systems is currently regulated, and will continue to be regulated to ensure system safety and reliability for all market participants.
8. The Commission's concern is whether the layoffs and cost cutting measures affect the utilities' provisioning of adequate, efficient, just, and reasonable service that are necessary to promote the safety, health, comfort, and convenience of its customers, employees, and the public.
9. The collective bargaining agreements cover, among other things, the terms and conditions of employment and layoffs.
10. Most of the layoffs that have already occurred affected contractors, hiring hall employees, and temporary and part-time workers.
11. The contemplated layoffs by SCE and PG&E in the upcoming months appear to affect the same category of workers that have already been laid off.
12. Based on the record in this proceeding, the layoff of these workers has adversely affected the T&D operations, the call centers, meter reading, and the number of personnel who could respond to large scale outages.
13. As more layoffs occur, these kinds of impacts can be expected to continue.
14. SCE or PG&E have provided evidence that their layoffs will degrade the level of service in certain areas, including the following: lengthening the time for providing connections to new customers; lengthening the time for restoring service in the event of an outage or non-emergency service problem; providing actual meter reads on a bi-monthly basis and estimated usage in the other months; and lengthening the ASA time for the utilities' customer call centers.
15. The reduction of overtime for field personnel and call center workers has or will result in delays in the restoration of service or connecting new customers, and answering customer calls.
16. Cost cutting measures which reduce the ability of call center operators to answer calls, and of field personnel to respond to outages and to restore service in a timely manner, do not maintain a level of adequate, efficient, just and reasonable service.
17. Billing accuracy is important to customers when gas prices and rates are volatile and subject to change, and when there have been recent electric rate increases.
18. Bi-monthly meter reads are likely to lead to an increase in the number of customer calls, and to disputes concerning the amount owed during a particular month.
19. With more customer calls, reduction of the number of available representatives to answer the calls will lead to a further decline in the level of service, and to more customer frustration.
20. The deferral of certain maintenance or capital replacement programs may cause short-term service reliability problems, and may cause more severe reality problems if the deferrals continue for a substantial period of time.
21. The savings from the layoffs and other cost cutting measures are nominal when compared to the size of the utilities' debts, but the layoffs have a real effect upon the level of service provided by PG&E and SCE.
22. Both utilities acknowledge that the Commission may involve itself in the management of a utility when necessary to ensure reasonable rates or service.
23. The layoffs that SCE and PG&E have implemented, and the reduction in overtime hours, have reduced the level of service below what customers reasonably expect as an adequate, efficient, just and reasonable level of service.
24. The upcoming proposed layoffs of both PG&E and SCE would further exacerbate the decline in the level of service.
25. Some of the cost savings that SCE and PG&E have made may be coming from certain rate components which ratepayers continue to pay for a certain level of adequate, efficient, just and reasonable service.
26. The cost savings are being used by the utilities to pay various costs on a day-to-day basis, including costs that have been incurred during the rate freeze.
27. If PG&E and SCE are permitted to lengthen their ASA time or to engage in bi-monthly meter reads, the utilities would not be maintaining the level of service that they provided prior to the utilities' financial problems.
28. Draft decisions are generally subject to a 30-day review and comment period as provided for in Pub. Util. Code § 311(g)(1), but may be reduced or waived in an unforeseen emergency situation.
29. The ALJ's draft decision was mailed to the parties for comment on February 23, 2001.
1. The Commission has the authority to ensure the safety and reliability of a public utility's system, and that the utility is providing adequate, efficient, just and reasonable service.
2. The Commission may supervise and regulate every public utility in the state and may do all things which are necessary and convenient in the exercise of such power and jurisdiction.
3. If the Commission finds after a hearing that the rules, practices or service of a public utility are unjust, unreasonable, unsafe, improper, inadequate or insufficient, the Commission shall fix the rules, practices or service.
4. The collective bargaining agreements do not govern nor control the Commission's statutory duty to ensure that the utilities provide adequate, efficient, just and reasonable service.
5. The practices and services resulting from the layoffs and the cutback in overtime have resulted in inadequate, unjust and unreasonable service and practices.
6. CCUE's motion to prevent the layoffs of non-management employees as presently contemplated or already implemented by SCE and PG&E should be granted, and the layoffs that have already been implemented should be rescinded, and the utilities should be ordered to restore and staff the positions to the extent that the terminated positions affect the utilities' ability to fully staff their customer call centers, read meters on a monthly basis, and to timely respond to service calls and outages and to connect new customers.
7. PG&E and SCE should be ordered to reinstate the use of overtime as necessary to enable customer call centers to handle the volume of incoming calls, and to permit field personnel to continue to connect new customers and respond to and remedy outages and other service-related problems in the same amount of time that existed prior to the utilities' financial problems.
8. All future layoffs which affect the aforementioned services and practices shall be barred unless the utilities can substantiate that the layoffs will not prevent the utilities from furnishing and maintaining adequate, efficient, just and reasonable service.
9. PG&E and SCE shall be allowed to proceed with the deferral of their maintenance and capital replacement projects at this time.
10. SCE and PG&E should be directed to provide monthly updates about their cost cutting measures, and updates regarding significant changes to their cost cutting measures.
11. Based on the effects of the cost cutting measures, TURN's suggestion that appropriate ratemaking accounting devices be authorized to examine the need for adjustments should be adopted.
12. SCE and PG&E should establish memorandum accounts to record the costs and savings associated with the permitted layoffs and cost cutting measures that have already been implemented, and which will be implemented by the utilities.
13. The Commission should examine the costs and savings recorded in each utility's memorandum account, their effect on the rate freeze and the revenue requirement, and determine whether adjustments should be made.
14. The parties should be provided with an opportunity to comment on the design of the memorandum account, and other accounting mechanisms that might be needed to make the adjustments.
15. A subsequent Commission decision should issue once parties have had the opportunity to comment on what items should be recorded in the memorandum account and other accounting mechanisms.
16. PG&E's request to temporarily suspend the ASA time for its call center, and that it be permitted to read meters on a bi-monthly basis, is denied. PG&E and SCE shall continue to abide by the ASA time mandated by the Commission, and to provide monthly meter reads for its customers.
17. On the Commission's own motion, the full 30-day public review and comment period on today's decision is reduced.
IT IS ORDERED that:
1. The January 8, 2001 emergency motion of the Coalition of California Utility Employees (CCUE) seeking to prevent the layoffs of non-management employees by Pacific Gas and Electric Company (PG&E) and Southern California Edison Company (SCE) is granted as set forth below.
a. The layoffs that PG&E and SCE have implemented, or are in the process of implementing, are rescinded to the extent that the positions that were terminated affect the respective utility's ability to: fully staff their customer call centers; read meters on a monthly basis for all customers; timely respond to service calls and outages; and to connect new customers.
(1) PG&E and SCE shall restore and staff the positions associated with the rescinded layoffs which affect the three aforementioned areas of service.
(2) PG&E and SCE shall provide in their first monthly update (as described in Ordering Paragraph 2) and additional updates as may be needed, a description of the positions which were previously terminated which affect the three areas of service, and provide an explanation as to whether the positions have been restored and staffed.
b. PG&E and SCE are directed to reinstate the use of overtime so that customer call centers can handle the volume of incoming calls, and so that field personnel can continue to connect new customers and respond to and remedy outages and other service-related problems in the same amount of time that existed prior to the utilities' financial problems.
(1) PG&E and SCE shall provide in their first monthly update, and additional updates as may be needed, a description of the overtime policies to address the service issues identified in Ordering Paragraph 1.b. above.
c. PG&E and SCE are barred from engaging in any other layoffs which affect the service areas identified in Ordering Paragraph 1.a. above.
(1) If PG&E and SCE wish to implement other layoffs which do not affect the aforementioned service areas, they should include in their monthly update a description of the number of positions to be laid off and why those terminated positions do not affect the service areas identified earlier.
2. PG&E and SCE shall file with the Docket Office, and provide the Commission and the parties to this proceeding, with a monthly update regarding their cost cutting measures, as follows:
a. Each utility shall be required to file on the first working day of every month, a monthly update on the status of their respective cost cutting measures. The first monthly update shall be due on April 2, 2001.
b. If significant changes occur to the cost cutting measures, which deviate from what was represented to the Commission in connection with CCUE's motion, then the utility shall be required to file an update on the change and its effect within three days of the change.
c. The President of the Commission may terminate the requirement that PG&E and SCE file monthly updates by issuing a ruling to that effect.
3. The suggestion of The Utility Reform Network to establish appropriate ratemaking accounting devices to examine whether the revenue requirement for PG&E and SCE should be adjusted to reflect the cost cutting savings resulting from the reductions in service, and to examine whether the cost cutting measures of PG&E and SCE result in the payment of costs incurred during the rate freeze, is adopted on the following terms and conditions:
a. PG&E and SCE are authorized and required to establish a memorandum account to record the costs and savings associated with the permitted layoffs and cost cutting measures that have already been implemented, and which will be implemented by the utilities, as noted in the text of this decision.
b. PG&E and SCE may be authorized in a future decision to establish other accounting mechanisms that may be needed to make possible adjustments as determined by the Commission.
c. The parties to this proceeding may file comments and reply comments on the design of the memorandum account, and other accounting mechanisms that might be needed to make possible adjustments.
(1) The comments shall be filed with the Docket Office within 20 days from the mailing date of this decision, and served on the service list.
(2) Reply comments shall be filed with the Docket Office within 30 days from the mailing date of this decision, and served on the service list.
d. Following the filing of the comments and reply comments, the Commission will issue a decision detailing what items should be recorded in the memorandum account and other accounting mechanisms.
e. The Commission shall hold a hearing in the future to examine the memorandum account and any other related accounts, to determine whether adjustments should be made as a result of the use of savings from the cost cutting measures undertaken by PG&E and SCE.
4. PG&E and SCE shall continue to abide by all Commission mandated average speed of answer times for their respective customer call centers, and shall continue to provide actual monthly meter reads for their customers.
This order is effective today.
Dated , at San Francisco, California.
7 Parties should indicate in their comments whether a workshop would be helpful. 8 We also note that PG&E's request is procedurally defective in that it is seeking to modify or waive an existing rule of order of the Commission without providing affected parties with a notice and an opportunity to be heard. (See Pub. Util. Code § 1708.)
