III. Discussion

When one parses the repetitions, the redundancies, and the recondite theories of malfeasance set out in the complaint, it boils down to two alleged wrongs: (1) that PG&E was not willing to physically connect to the CPN Pipeline so that gas would flow in a timely manner to the Calpine merchant power plants; and (2) that PG&E would assess local transmission charges to the Calpine merchant power plants.

The physical interconnection issue has disappeared as PG&E and CPN Pipeline have entered into an agreement (Appendix B) whereby PG&E will construct the interconnection and gas will flow in a timely manner. The only remaining issue is the economic terms under which gas will flow. Simply put, will the Calpine merchant power plants have to pay PG&E's local transmission charges in addition to PG&E's backbone transmission charges?

In our opinion, a hearing is not necessary to resolve the local transmission charge issue. In D.99-11-023 in Application (A.) 99-04-010, we reviewed our standards for dismissing complaints and applications.

On a motion to dismiss a complaint, the legal standard against which the sufficiency of the complaint is measured is whether, taking the well-pleaded factual allegations of the complaint as true, the defendant is entitled to prevail as a matter of law. (E.g., MCI Telecommunications Corp. v. Pacific Bell, D.95-05-020, 59 Cal.P.U.C.2d 665, 1995 Cal.P.U.C. LEXIS 458, at p. *29-*30, citing Burke v. Yellow Cab Co. (1973) 76 Cal.P.U.C. 166.) In addition, the Commission may properly take official notice of, and consider, the files and records of court and Commission proceedings in ruling on a motion to dismiss. (E.g., Upper Kern Island Water Ass'n v. Kern Delta Water District, D.91-05-019, 40 Cal.P.U.C.2d 65, 1991 Cal.P.U.C. LEXIS 244, at p. *14; City of El Monte v. San Gabriel Valley Water Co., D.87-09-065, 25 Cal.P.U.C.2d 393, 1987 Cal.P.U.C. LEXIS 238.) (D.99-11-023 at p. 7.)

By assuming that the facts as alleged in the complaint are true for the purpose of deciding whether to grant a motion to dismiss, we assume that Complainant will be able to prove everything alleged in its complaint. We do not accept as true the ultimate facts, or conclusions, that Complainant alleges, for instance, that PG&E has violated its tariffs. After accepting the facts as stated, the Commission then merely looks to its own law and policy.

A.99-04-010 is pertinent to this complaint for reasons in addition to the standards of dismissal without hearing. In A.99-04-010, we had cause to review the Gas Accord. That application was brought by an entity known as Western Gas Resources - California, Inc. for a certificate of public convenience and necessity to operate a gas pipeline. Calpine Corporation appeared and stated it was part owner of the applicant. D.99-11-023 dismissed the application. Calpine Corporation's affiliate, CPN Pipeline is now before us, raising many of the same questions raised in A.99-04-010, most pertinent to this complaint the status of an end-user and its responsibility for the local transmission charge.

The Commission had approved PG&E's Gas Accord settlement agreement (D.97-08-055), and recognized its pertinency to resolve the issues in A.99-04-010:

The Gas Accord requires that on system end users, including noncore users, bypassing [PG&E's] local transmission system must still pay the tariff rate associated with it (Gas Accord § II.H.(1)(a), (e) and (f) as well as § III.H.(8)(b)) and WGRC in its complaint decries just this provision. (D.99-11-023 at p. 11.)

We observed that "regulated rates for natural gas local transmission and distribution remain the Commission's policy at this juncture, in order, among other reasons, to assure that the core does not unfairly carry the burden of these fixed costs of the utility with the obligation of universal service . . . ." And we considered, but saw "no need to decide whether the noncore can bypass PG&E's local transmission tariff entirely." (Id. p. 26.) PG&E argues, and we agree, that this Commission has repeatedly been asked to approve a backbone-only gas transportation rate, and that we have consistently declined.

In D.95-12-053, which declined to adopt a backbone-only rate of the type Complainants now advocate, we recognized multiple questions embedded within a policy choice regarding backbone-only rates on the PG&E pipeline system:

If we are asked to resolve this matter, there are a number of questions that need to be addressed before adopting a separate backbone-level rate. Some of the questions we have include: Who would be eligible for this rate? Would there be a single backbone rate or separate rates for the northern versus the southern backbone systems? How will rates be determined, embedded cost, capacity brokering, or LRMC principles? How will revenue shortfalls, if any, be handled? Should a distinction be made between customers who are currently directly connected to the backbone system versus those in the future who may choose to directly connect to the backbone system and bypass existing PG&E local transmission facilities? What is the magnitude of the cost shifting that may result from a separately tariffed backbone rate? (Re Pacific Gas and Electric Company, (1995) 63 CPUC 2d 414, 451.)

In 1997, the Commission approved the Gas Accord, which provided in several places that all on-system end-users must pay local transmission charges. The Gas Accord defined "on-system deliveries" as "any point at which deliveries are made to, or for ultimate delivery to ... end-use or wholesale loads located in PG&E's service territory."⁴ There is no dispute that the Calpine power plants are end users of gas located in PG&E's service territory. In 1999, we again confirmed that "the Gas Accord requires that on-system end-users, bypassing its local transmission system must still pay the tariff rate associated with it ...."⁵ Although Calpine Corporation asked us to reconsider those decisions on several occasions in 1998 and 1999, we have not done so.

Complainants argue that there is a factual dispute concerning whether the Calpine merchant power plants are "on-system end-users" within the meaning of the Gas Accord. However, paragraph 72 of the complaint alleges that "The Calpine merchant power plants, which are end-users, will not be `End-Use Customers' of PG&E; they will not receive any service from PG&E...." This assertion does not raise a factual dispute. Complainants admit that the power plants are end-users, and they do not dispute that the power plants are located within PG&E's service area. Thus, this issue is a legal one, not a factual one. As a legal issue, we refer to the Gas Accord, which clearly shows that end-users of gas are on-system if they operate in PG&E's territory and use the PG&E backbone system, whether or not they use PG&E's local transmission system. PG&E is transporting gas that will be used in the merchant power plants. Under the Gas Accord, therefore, the Calpine merchant power plants clearly are on-system end-users that must pay the local transmission charges.

The issue Complainants raise - backbone-only rates for electric generators - will be addressed in proceedings for the period after the current Gas Accord expires at the end of 2002. PG&E has recently initiated discussions with all interested parties pursuant to Rule 51 of the Commission's Rules of Practice and Procedure, in a process known as "Gas Accord II."

One important issue to be considered in the Gas Accord II proceeding is whether, and to what extent, local transmission charges should be unbundled from backbone transmission charges. A number of parties, including merchant generators, have made clear they would prefer that noncore customers located near the PG&E backbone pipeline be given the opportunity to structure their affairs based on a further unbundling of backbone and local transmission charges. Customers located away from the backbone, as well as customers who may bear any resulting shortfall in local transmission revenues, can be expected to oppose an unbundled backbone-only rate. Such a rate, it is claimed, would be a departure from our general policy of requiring utilities to charge average cost rates. Finally, it is not clear whether providing a lower gas rate for power plants located along the backbone pipeline, at a distance from PG&E's electric load centers, would provide appropriate incentives for siting power plants at other locations better suited to help maintain the reliability of the electric transmission grid.

To accede to Complainants' request would cause substantial cost shifting which involves complex policy choices, as to which numerous parties have divergent interests and points of view. (See, D.95-12-053, supra pp. 15-16.) We should not preempt the deliberations that will occur through the Gas Accord II process. The relief requested would provide more favorable treatment to specific merchant power plants that would obtain a distinct competitive advantage over other merchant generators in California by avoiding payment of local transmission charges which all other on-system merchant generators must pay. The consequences of granting such an advantage to Calpine are obvious.

A complaint case involving only two parties is not an appropriate forum for determining industry-wide policy. The consequences of granting an advantage to Calpine have not been studied. The more appropriate course for us is to defer the issue of backbone-only rate to the proceeding - "Gas Accord II" - which will establish the rates and terms of conditions for PG&E's pipeline system commencing January 1, 2003, the end of the current Gas Accord term. Calpine and all other interested parties, including competing electric generators and the representatives of other noncore and core ratepayer interests, will have ample opportunity to participate in those proceedings, and indeed the parties (including Calpine) are already engaged in ongoing multi-party meetings on these very issues.

Comments on Draft Decision

The draft decision of the ALJ in this matter was mailed to the parties in accordance with Section 311(g)(1) of the Public Utilities Code and Rule 77.7 of the Rules of Practice and Procedure.

Findings of Fact

1. For the purpose of ruling on PG&E's motion to dismiss the application, we assume that the facts set forth in Complainants' application are true, with the exception of ultimate facts.

2. The Commission's policy for PG&E's natural gas operations, at the present time, is set forth in the Gas Accord and requires end-users located in PG&E's service territory to pay the local transmission charge.

3. It is without dispute that the Calpine merchant power plants are end-users of natural gas and are located in PG&E's service territory.

4. The relief requested in the application, for the Calpine merchant power plants to be exempt from paying the local transmission charge, does not comport with Commission decisions and policy.

5. The relief requested by Complainants is exactly the same relief sought by Complainants' parent company, Calpine Corporation, in prior Commission proceedings, which had been denied. No facts have changed since those denials.

Conclusions of Law

1. There are no triable issues of fact. An evidentiary hearing is not necessary, and the preliminary determination that a hearing was needed is reversed.

2. The complaint should be dismissed immediately for failure to state a cause of action.

ORDER

IT IS ORDERED that:

1. The complaint is dismissed.

2. This proceeding is closed.

This order is effective today.

Dated ___________________, at San Francisco, California.

(SEE CPUC FORMAL FILES FOR APPENDICES A & B)