V. Conclusion
It is undisputed that the Commission has jurisdiction over the electric utilities to impose and enforce conditions relating to the holding company structures. Likewise, it is undisputed that we have jurisdiction over the electric utilities to require them to secure the agreement of their respective holding companies in order to obtain reorganization approval. Yet the resulting agreements do not amount to an express jurisdictional grant, either from the Constitution or the Legislature, over the non-public utility holding companies. Subject matter jurisdiction cannot be created by waiver, estoppel or unclean hands based on the agreements. The Commission similarly cannot create subject matter jurisdiction by repeatedly stating that it never intended to give up jurisdiction which never existed anyway.
The agreements can still be enforced by continuing our proceeding solely against the electric utilities. The Commission can also file an action in superior court against the holding companies if necessary to enforce the agreements. While not conferring subject matter jurisdiction, the holding company agreements are still binding and enforceable in superior court. The subject motions for lack of jurisdiction should have been granted, and the respondent holding companies dismissed from our proceeding.
/s/ Henry M. Duque /s/ Richard A. Bilas
Commissioner Commissioner
January 9, 2002
San Francisco, California
Commissioner Geoffrey F. Brown, Concurring:
With this decision, the Commission has addressed the problem of defining its jurisdiction over holding companies of certain utilities. The Commission does not regulate all activities of such holding companies because they generally do not fall within the enumerated classes of Public Utilities in Article XII, Section 23 of the California Constitution or Section 216 P.U.C. Code. See Television Transmission v. P.U.C. (1956) 47 C 2d82, 84.85. However, in this decision, we find that under certain conditions, the P.U.C. has the authority (1) to define the obligations of a holding company to the utility with respect to agreements they have made at the time of their creation and (2) to enforce such obligations within the venue of the P.U.C. itself. It can exercise such authority by imposing binding conditions on the utility and the holding company expressing an intent to retain supervising authority to insure the fulfillment of the conditions. The conditions, of course, must relate to the operation of the utility for which the Commission has regulatory oversight.75
The utilities that are parties to this proceeding - SDG&E, PG&E, and Edison - all were authorized to spin-off and create holding companies. In doing so, the Commission required several conditions that were applicable to each utility and their soon-to-be created holding company. One such condition is the First Priority Condition which require each parent and the utility to give first priority to the capital requirements of the utility as determined to be necessary to meet its obligation to serve. The Commission is now seeking to define and possibly enforce that provision in a separate proceeding. [I.01-04-002]
Each utility agrees that the First Priority and any other provision contained in the orders establishing the parent companies is enforceable. However, they argue that they are enforceable only in a court of law, not within the Commission's quarters. The argument has a superficial appeal because it creates a clear demarcation of the Commission's jurisdiction. But it ignores the express power of the Commission to fashion orders in merger, acquisition or control activities of utilities as set forth in P.U.C. Section 854 [quoted in pertinent part]:
... "The Commission may establish by order or rule the definitions of what constitute merger, acquisition or control activities which are subject to this section"...
In other words, the Commission can define the groundrules for a utility's re-organization, and that would include the power to define what remains within its control. 854 goes onto say:
"No public utility organized or doing business under the laws of this state, and no subsidiary or affiliate of, or Corporation holding a controlling interest, shall aid or abet any violation of this Section"
That is to say, the holding companies must comply with the orders of the Commission relating to acquisitions, mergers and control activities as well what may be defined within the rest of 854.
In addition to this, P.U.C. Section 701 empowers the Commission not only "to supervise and regulate every utility" but also "To do all things, whether specifically designated in this part or addition thereto, which are necessary and convenient in the exercise of such power and jurisdiction." That, to my mind, means the P.U.C. can both set forth terms in a holding company order and retain such limited jurisdiction over the soon-to-be parent company to assure compliance with those terms. 76
The record expresses the Commission's intent to retain a limited jurisdiction over each of the holding companies. In 1986, when SDO (Sempra's predecessor) sought permission to spin-off from SDG&E as its parent, opponents of the reorganization warned the Commission that it would lose control of the holding company and be unable to enforce the terms and conditions of a holding company order RE: SDG&E [86-03-090] 20 CPUC 2d 660, 686 (1986). SDG&E responded by suggesting that a contract be signed between SDO and SDG&E containing the holding company terms with the P.U.C. as a third party beneficiary with enforceable rights. The Commission explicitly rejected this approach. Seeking to answer the fears of the opponents, the P.U.C. said:
"First, we reject the legal analysis of PSD and UCAN concerning this Commission's jurisdiction to enforce its orders. Section 854 vests in this Commission a broad authority to approve or deny applications for transfers of utility ownership or control. Implicit in this authority is the right to place reasonable conditions upon the transferor and/or transferee should a need for conditions be shown. SDG&E, on its own behalf and on behalf of SDO, itself argues this proposition. We cannot believe that the right to impose conditions carries with it no right to enforce those conditions; without the latter right, the former is meaningless. The contentions of PSD and UCAN to the contrary are not compelling.
"The Commission is empowered in myriad ways to secure compliance with its orders. The broad regulatory discretion described in the Public Utilities Act is ample evidence of that fact. SDG&E cites the most extreme example of our powers, the ability to pursue contempt remedies for regulatory law violations. SDG&E and SDO must, under the terms of Section 854, submit to the Commission's fullest authority if they in fact intend to consummate the transactions described in their application. Having so submitted, SDG&E and SDO need not execute their proposed contract; it would be a superfluous act in light of our existing authorities to pursue the enforcement of any of the foregoing adopted conditions.
"SDG&E, throughout its showing in this proceeding and in its brief, acknowledges the potential severity of the consequences which would attach to SDO's or its own disregard of the conditions adopted by this decision. We concur with SDG&E's analysis and warn the utility and its parent that we intend to hold them to their promises to cooperate and abide by our orders. Should there be any failure to honor either the letter or spirit of SDG&E's or SDO's commitment, we will not hesitate to utilize the full breadth of our constitutional and statutory authority as well as application of the alter-ego doctrine to ensure compliance." [Id. at 686-687]
The Commission in the foregoing passage is saying that there is no need for a contract, "it would be a superfluous act." It is superfluous because the Commission already has authority and the power to enforce its orders within its own venue, (which explains the reference to its contempt power and the specific references to its ability to hold the parent to the condition). Although SDG&E did not accept the conditions in 1986, the SDG&E decision became a template for the SCE and PG&E holding company orders in 1988 and 1995 respectively and the interim order approving a holding company for SDG&E in 1998. In all the orders, the 1986 SDG&E decision was specifically referenced. SCE [88-01-063] 27 CPUC 2d 347, 363-371 (1988); PG&E [96-11-017] 69 CPUC 2d 167, 193 (1996); RE SDG&E [95-12-018] 62 CPUC 2d 626, 635 (1995)
In sum, authorizing holding companies under specified terms and conditions of retained jurisdiction was part and partial of the Commission's acknowledged jurisdiction of regulating utilities.
/s/ GEOFFREY F. BROWN
GEOFFREY F. BROWN
Commissioner
San Francisco, California
January 9, 2002
75 The decision does not address whether there are other conditions in which the PUC has authority over conduct of a holding company. 76 Commissioner Duque's Alternate argued that Section 701 does not confer independent authority on the Commission citing Assembly of the State of California v. P.U.C. (1995) 48 Cal Rptr. 2d. 54. That is correct. However, if an order is pursuant to a valid statutory authority (Section 854, for instance), Section 701 gives the Commission a basis to set forth the means to exercise that authority. What Section 701 cannot do, as the court pointed out in Assembly v. P.U.C. supra at 64, is to contradict express legislative directives or express restrictions on Commission's authority. But in retaining jurisdiction here the Commission is not attempting to establish a new basis of authority. Rather, it is operating from an existing basis.
