7. Items Common to Operation and Maintenance

7.1. FERC Licensed Hydro

FERC-licensed hydroelectric facilities are exempt from some, but not all, sections of the GO. (D.04-05-018 at Ordering Paragraph 2.) PG&E and SCE recommend that the exemption be extended to Operation Standards, and be stated in the GO.

We agree. The same reasons that justify an exemption from Maintenance Standards similarly justify an exemption from Operation Standards (e.g., intergovernmental comity). (D.04-05-018 at mimeo., pages 7-9.) It is administratively desirable to state all relevant items in the GO in order to facilitate implementation of the program, including our adopted treatment of FERC-licensed hydro. This approach does not increase the burden on parties or the Commission should a change later be needed (i.e., a Commission order is needed whether it is to change a prior Commission decision or a GO). Thus, we make this change by adding GO § 3.5 to GO § 3 (Required Compliance).

7.2. Multiple Violations

Calpine, DENA and Reliant point out that: (a) Operation Standards 1-11 are similar to, or the same as, Maintenance Standards 1-11; (b) Operation Standard 17 involves records of operation that may overlap with recordkeeping required by Logbook Standards; and (c) some Standards and Guidelines (e.g., safety, clearances) are already regulated and enforced by other state and federal agencies. They assert that two or more violations should not be found when a GAO fails to comply with one Standard that is repeated in two places, or enforced by two or more government agencies.

We decline to make a generic determination here. Rather, the finding of one or more violations, and the assessment of one or more penalties, will be fact-specific.

For example, safety-and violation of a safety standard (e.g., Maintenance Standard 1 and Operation Standard 1)-may or may not be the same when it is maintenance-related or operations-related. It may be possible to perform maintenance safely, but operate unsafely, or vice versa, or to simultaneously fail to do both. Similarly, one safety violation may involve two different but necessary underlying actions to separately accomplish safe maintenance and safe operation (with each one identified in the individual Maintenance Plan and Operation Plan). As a result, one apparent violation may or may not actually be one violation, and may or may not justify more than one penalty. We are confident that a GAO will present (or make available to CPSD) all reasonable and necessary facts in each particular case to demonstrate and support whether one or two violations has occurred, and whether one or two penalties is a just and reasonable result.

We also point out that we have already provided several ways that sanctions may be mitigated. (GO 167, § 14.2.) These mitigation measures generally address the concerns expressed by GAOs here. For example, in determining sanctions we take into account penalties by other governmental agencies, contracts or other regulatory bodies for the same acts or omissions. (GO 167 § 14.2.3.) A GAO should bring such matters to our attention in an enforcement action.

7.3. GAO Management of Employees

Calpine asserts that the Commission should state its implementation and enforcement of Operation Standards will not interfere with the right of a GAO to manage its employees or business structures, including without limitation the right to hire, fire, reward and motivate its employees and structure its management. (Calpine Comments October 6, 2004, page 2.) We agree to the extent we adopt the Committee's position that:

"References within the Standards and Guidelines to `employees,"...'management," or other staffing descriptions are not intended to require a GAO to follow any particular organizational structure...Rather, a GAO is free to organize its work force in the manner it deems most appropriate." (Operations Standards, October 27, 2004, page 5.)

This interpretation should also apply to our implementation and enforcement of Maintenance Standards, and we do so.

We also affirm, with limited exception, that our implementation and enforcement of all GO 167 Standards will not interfere with the right of a GAO to manage its employees or internal business structures, including without limitation the right to hire, fire, reward and motivate its employees and structure its management. The exception is with respect to compliance with GO 167 Standards, and cooperation with the Commission. In particular, this involves our duty to protect public health and safety.

Specifically, we point out that a GAO, its employees and its contractors shall provide testimony under oath or submit to interviews concerning matters covered by GO 167. (GO § 11.2) Management may not manage its employees, hire, fire, reward or motivate its employees or structure its management in any way to restrict this duty. We repeat here, as we said before, that this does not override any constitutional or statutory privilege that may be properly invoked by the examined person. (D.04-05-018, mimeo., page 36.) We do not, however, authorize management to reward an employee for failing to comply with a CPSD request for testimony or an interview. (GO § 11.2.) Further, we will not tolerate retaliation by a GAO against an officer, employee, agent, contractor, subcontractor or customer for reporting a violation of the GO, or providing information during the course of an audit, inspection, or investigation. (GO § 12.2.)

Our interest is in protecting public health and safety. It is not in directing or limiting managements' decisions regarding internal business structures or employee relations.

7.4. Independent Business Judgment

Mirant recommends that in implementing the Operation Standards, the Commission should recognize and confirm that each GAO is free to make operating and investment decisions according to its own business goals, and based on its independent analyses of relative costs and benefits. Mirant asserts it is essential that the Commission and CPSD not attempt to second-guess decisions made by a GAO as it plans and operates it business. According to Mirant, the autonomy of a GAO to make decisions based on prudent and rational commercial operating practices is a principle that should be built into Commission implementation and enforcement policies.

We include this principle to the following extent. We implement and enforce GO 167 operation and maintenance standards in a manner such that each GAO has abundant, but not unlimited, authority to make its own business decisions. For example, a GAO may employ or not employ a range of policies and practices-including or not including various Guidelines-to satisfy each of the 18 Maintenance Standards and the 28 Operation Standards. A GAO is free to use its own business judgment as long as it complies with each adopted Standard.

Calpine shares Mirant's concern that implementation and enforcement of GO 167 standards may "interfere with a GAO's ordinary and reasonable business practices." (Calpine Comments, October 6, 2004, page 2.) We do not foresee this happening except, perhaps, if there is a conflict between private and public interests subject to GO 167-and in particular public health and safety.

When private business interests conflict with the public interest, the people of California have determined that the public interest controls. If a business practice believed reasonable by a GAO subject to GO 167 is unreasonable in the context of public health and safety, the public interest controls. Should private and public interests conflict, the Commission will implement and enforce GO 167 so that the public interest, public health and public safety prevail.

7.5. Confidential Information

Mirant contends that the Commission should not require GAOs to produce privileged and confidential information without adequate assurance that the Commission will maintain its confidentiality. We have already provided that assurance. (GO § 15.4.) Mirant offers nothing to convince us to change our prior decision.

Mirant asserts that existing GO 167 provisions impose an unreasonably high burden on a GAO to obtain confidential treatment of data. We are not persuaded. We have already considered the arguments for and against confidential treatment of data, and have found the proper balance in GO 167. We have determined, for example, that the GAO has the burden of proof. (GO § 15.4.1.) No facts or argument are stated that convince us to change this balance.