IV. Discussion

It is clear that the Commission has the authority to ensure the safety and reliability of a public utility's system. Public Utilities 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))

The issue before us today is whether the layoffs and cost cutting efforts of SCE and PG&E endanger the safety, service and reliability of the utility systems that they operate. 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.

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 believe we have to address the collective bargaining argument. It is sufficient for us to say that based on the testimony of the parties, the layoffs which SCE and PG&E have already engaged in, and the layoffs that are being contemplated in February 2001 and in the next two to four months, will not adversely affect the safety, service or reliability of the utility operations of either SCE or PG&E.8

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. Although the layoff of these workers will impact, to some extent, the operations of T&D, the call centers, meter reading, and personnel who could respond to large scale outages, we cannot state that their layoffs will have an adverse impact on the operations of SCE and PG&E. Most, if not all, of the permanent employees who work in these areas are not scheduled for layoffs in the coming months.

Neither SCE nor PG&E dispute that the layoffs and cost cutting measures 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 answering times for customer calls are increasing, while 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 leave less workers available to answer the phones. The deferral of certain maintenance or replacement programs may also cause short-term service reliability problems, and may cause more severe problems if the deferrals continue for a substantial period of time.

However, based on the record, we cannot conclude that the layoffs and other cost cutting measures that SCE and PG&E have implemented, or are presently contemplating for implementation over the next four months will adversely impact the safety, service and reliability of their utility operations.

In addition, we agree with SCE and PG&E that the Commission should avoid micromanagement of the cost cutting measures that they have already implemented or plan to implement in the next four months. Both PG&E and SCE acknowledge in their briefs that the Commission may involve itself in the management of a utility when it affects utility rates or service. We do not believe that the present cost cutting measures of SCE and PG&E merit our interference at this time. (See, In re Pacific Telesis Group, 71 CPUC2d 351,396 (1997) declaring that we intervene in personnel matters only if we perceive problems which are potentially unlawful or which might have harmful effects on labor practices, utility rates or service. See also, General Telephone Co. v. Public Utilities Commission, 34 Cal.3d 817,826-27 (1983).) As described above, and in the position of the parties, the cost cutting measures do impact service to some degree, and may impact safety and reliability if more drastic cuts are needed in the future or if further deferrals of maintenance or replacement programs are required. However, the point at which the cost cutting measures start to have harmful effects by having noticeable impacts or interference with the safety, service, and reliability of the operations of SCE and PG&E has not been reached yet. Given the extraordinary circumstances which SCE and PG&E find itself in, they should be given some leeway to manage their financial affairs, and to decide where it can best save on costs and where to apply those cost savings.9 (See, In re Pacific Telesis Group, supra, stating that utility managers should assume the risk of their operations rather than rely on the Commission's constant oversight.)

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 denied. However, we place SCE and PG&E on notice that if we perceive harmful effects about to occur, we will intervene. We also assert that we expect SCE and PG&E to provide safe and reliable service and will take enforcement action for any failure to do so.

The denial of CCUE's motion, however, does not end our interest in the cost cutting measures of SCE and PG&E. We remain concerned that if the financial crisis continues, that the need for more layoffs and more drastic cost reductions may be needed. In the event that occurs, the Commission must fulfill its duty to ensure that the safety, service and reliability of the utilities' operations are not compromised by those additional measures. Therefore, we will require SCE and PG&E to provide the Commission, and the parties to this proceeding, with updates regarding their cost cutting measures. If significant changes occur to their layoff plans or 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 five days of the change. If no significant changes occur, then SCE and PGE shall provide an update every month on the status of the layoffs and cost cutting measures. These updates shall continue until the President of the Commission issues a ruling terminating the update reporting requirement.

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 safety, service and reliability.

Due to the price of wholesale electricity and the problems that have resulted from that, SCE and PG&E have had to cut or reduce 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 authorize SCE and PG&E to establish a memorandum account to record the costs and savings associated with the layoffs and cost cutting measures that have already been implemented, and which will be implemented by the utilities. 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.10 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 account.

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, we agree that the current volume of calls that PG&E and SCE are experiencing exceed the average number of calls that they usually receive during the same period in previous years. There is no doubt that a large portion of the calls may be attributable to the electricity and gas problems that affect this state. Coupled with the reduction in overtime hours for call center personnel, the ASA time is likely to go up. We will therefore suspend the ASA time for call center calls to PG&E and to SCE for a period of three months from today's date. Further extensions of the temporary suspension of the ASA time may be granted in a ruling by the assigned ALJ, in consultation with the assigned Commissioner, after the filing of a motion in this docket detailing the reasons why an extension is needed.

As to PG&E's request to temporarily suspend the monthly meter read requirement in PG&E's Electric Rule 9 and Gas Rule 9, the same reasons for suspending the ASA time for the call centers apply to the monthly meter read. Although the reduction in meter readers affects the ability of SCE and PG&E to provide timely meter reads, thereby affecting service, the bi-monthly read will still bill actual usage in the second month. The alternate month will estimate usage based on prior usage.11 We will temporarily suspend the monthly meter reading requirement for PG&E and SCE for a period of four months from today, and permit PG&E and SCE to provide a bi-monthly meter read of its customers. A further extension of the temporary suspension of the monthly meter read may be granted in a ruling by the assigned ALJ, in consultation with the assigned Commissioner, after the filing of a motion in this docket detailing the reasons why an extension is needed.

Comments on Alternate Decision

Public Utilities Code § 311(e) provides for public review and comment for alternate decisions; however this period may be reduced under certain circumstances. Under Rule 77.7(f)(9) of its Rules of Practice and Procedure, the Commission may determine on its own motion that public necessity requires reduction of this 14-day period. 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 safety and reliability of the electrical transmission and distribution system, and the utilities' ability to respond to emergencies. Such circumstances could endanger the public health and welfare of the citizens of this state if the Commission did not act on the motion in a timely manner. Therefore, the 14-day review and comment period on this draft alternate decision is reduced. Comments shall be filed on March 5, 2001.

Findings of Fact

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. Notice that a draft decision on CCUE's motion was being considered at the February 8, 2001 Commission meeting, and at the subsequent continuation meeting, was provided in the Commission's agenda.

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. Based on the testimony of the parties, the layoffs which the utilities have already engaged in, and the layoffs that are being contemplated in February 2001 and in the next two to four months, will not adversely impact the safety, service or reliability of the utility operations of either SCE or PG&E.

9. Most of the layoffs that have already occurred affected contractors, hiring hall employees, and temporary and part-time workers.

10. The contemplated layoffs by SCE and PG&E appear to affect the same category of workers that have been laid off, and most of the permanent employees of SCE and PG&E appear to be unaffected by the contemplated layoffs.

11. Neither SCE or PG&E dispute that the layoffs and cost cutting measures have affected their operations.

12. SCE and PG&E acknowledge that answering times for customer calls are increasing, that 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, and the deferral of certain maintenance or replacement programs may cause short-term service reliability problems and may cause more severe problems if the deferrals continue for a substantial period of time.

13. Both utilities acknowledge that the Commission may involve itself in the management of a utility when it affects utility rates or service.

14. The present cost cutting measures of SCE and PG&E do not merit our interference at this time.

15. 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 safety, service and reliability that is no longer being offered.

16. 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.

17. The current volumes of calls that PG&E and SCE are now experiencing exceed the average number of calls that they typically receive during the same period in previous years.

18. The electricity and gas problems, and the cost cutting measures undertaken by the utilities are reasons for temporarily suspending the monthly meter reading requirement for PG&E and SCE for a period of four months.

19. Draft alternate decisions are generally subject to a 14-day review and comment period as provided for in Pub. Util. Code §311(e), but the period may be reduced in an unforeseen emergency situation.

Conclusions of Law

1. The Commission has the authority to ensure the safety and reliability of a public utility's system.

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. The point at which the cost cutting measures start to have noticeable impacts or interfere with the safety, service, and reliability of the operations of SCE and PG&E has not been reached yet.

4. CCUE's motion to prevent the layoffs of non-management employees as presently contemplated or already implemented by SCE and PG&E should be denied.

5. In the event the financial crisis continues and there are more layoffs and more drastic cost reductions, the Commission must fulfill its duty to ensure that the safety, service and reliability of the utilities' operations are not compromised by those additional measures.

6. SCE and PG&E should be directed to provide updates about their cost cutting measures on a monthly basis.

7. Based on the effects of the cost cutting measures, TURN's suggestion that appropriate ratemaking accounting devices be authorized to examine whether adjustments should be made, should be adopted.

8. SCE and PG&E should be authorized to establish a memorandum account to record the costs and savings associated with the layoffs and cost cutting measures that have already been implemented, and which will be implemented by the utilities.

9. The Commission should examine the costs and savings recorded in the memorandum account, their effect on the rate freeze and the revenue requirement, and determine whether adjustments should be made.

10. 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.

11. 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.

12. PG&E's request to temporarily suspend the ASA time for its call center should be granted for a period of three months, and a similar temporary suspension for SCE should be granted as well.

13. On the Commission's own motion, the 14-day public review and comment period on this alternate decision is reduced. Comments are due March 5, 2001.

O R D E R

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 denied.

2. PG&E and SCE shall file with the Docket Office and provide the Commission, and the parties to this proceeding, with updates regarding their cost cutting measures, as follows:

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:

4. The average speed of answer (ASA) time for calls to the customer call centers of PG&E and SCE, as set forth in Commission decisions and General Order 166 shall be temporarily suspended for a period of three months from today's date, and shall terminate on the last day of the third month unless extended as provided for below.

5. The requirement of a monthly meter read in PG&E's Electric Rule 9 and Gas Rule 9, and similar language, if any, in SCE's rule, shall be temporarily suspended for a period of four months from today, and shall terminate on the last day of the fourth month unless extended as provided for below, and on condition that customers continue to receive a monthly bill with estimated usage (based on prior usage) for one month, followed by actual usage based on a meter read in the subsequent month.

8 Our conclusion might be different if more massive layoffs take place than what the parties stated were being contemplated at this time. 9 We recognize that the cost cutting measures that SCE and PG&E have undertaken represent only a small fraction of their unpaid electricity procurement costs. However, that should not be the focus of our attention. 10 Parties should indicate in their comments whether a workshop would be helpful. 11 We are not persuaded that the use of estimated usage in alternating months will put customers above baseline since the usage is estimated from the prior months' usage. Nor are we persuaded that the bi-monthly meter reading will result in less conservation efforts being undertaken by the customer.

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