15. Proposed Six-Year Leadership Agreement with the Greenlining Institute (Appendix 7)

15.1. Summary

SDG&E and SoCalGas signed a "Six-year Leadership" agreement with Greenlining as late-served Ex. SDG&E/SCG-280,⁴⁵ a proposed settlement. As discussed herein we will not adopt the settlement agreement under our settlement rules. The proposed agreement addresses two issues: corporate philanthropy by SDG&E and SoCalGas, and a commitment to improved diversity. In addition, in this section we will address two related issues, corporate image-enhancement funding and the funding included in the SDG&E and SoCalGas' revenue requirements for funding compliance with Commission guidelines on diversity as embodied in G.O. 156.

As discussed below we find that the Commission has no authority to make a lawful order to either SDG&E or SoCalGas to adopt the Greenlining agreement's provisions on philanthropy, and the agreement provides no specific enforcement provisions to improve the diversity of either SDG&E or SoCalGas and thus the agreement provides no public benefits exceeding those benefits already included in G.O. 156. No order by this Commission is necessary or lawful for SDG&E and SoCalGas to choose to honor the agreement with Greenlining as a matter of corporate policy.

With respect to corporate image-enhancement, we raise the issue here because, like philanthropy, such costs have long been deemed to be corporate shareholder costs and not recoverable from ratepayers. We raise the issue of existing funding for G.O. 156-related efforts because it is a way in which we can directly and measurably contribute to improving the diversity of operations for both SDG&E and SoCalGas.

15.2. Philanthropy

Philanthropy is not an allowable cost in SDG&E and SoCalGas' revenue requirement: this Commission cannot and will not include in rates collected from customers any payments by a regulated utility for philanthropic purposes.

The nature, amount and recipients of any shareholder philanthropic activities are not within the ratesetting scope of any general rate proceeding. In the most recent GRC for PG&E, PG&E entered into a voluntary accord which addressed some philanthropic issues but had no impact on the adopted test year revenue requirements or attrition mechanism (D.07-03-044). In the most recent GRC for SCE, the Commission found it had no authority to compel SCE or its parent Edison International (EIX) to take any involuntary action and stated:

For many reasons, including good corporate citizenship, social responsibility, and public perception, philanthropy is an important consideration for SCE/EIX and corporations in general. However, as we have previously indicated, we have no jurisdiction to order a change in SCE's giving practices.⁴⁶ Instead, we urge EIX/SCE to give due consideration to President Peevey's stated opinions and preferences in this area when determining its philanthropic goals. (D.06-05-016, mimeo., p. 183.)

The philanthropy portion of Ex. SDG&E/SCG-280 was excluded by ALJ ruling dated November 2, 2007 as beyond the scope of this proceeding, and we affirm that ruling.

Any action by SDG&E or SoCalGas involving shareholder money can only be a voluntary act of good corporate citizenship and social responsibility, or to influence public perception of the corporation and cannot be addressed within the broader parameters of the adopted test year rates as ordered by this Commission.

15.3. Diversity - Greenlining

We will not adopt the proposed settlement because the diversity portion is unenforceable rhetoric. The proposed settlement is an expression of SDG&E and SoCalGas' intentions to make progress in work force diversity and commit to "a minimum of 30% of its contracts to women, minorities and disabled veteran-owned businesses" (p. 2) within the next six years. SDG&E and SoCalGas make a similar six-year promise to improve the diversity of the work force. Such commitments are laudable but unenforceable within the rate case process, however, because these two commitments are made without recourse or penalty if either or both companies fall short.

We therefore deny the proposed settlement on diversity because it lacks specific enforceable objectives and has no quantifiable effect on test year or post-test year revenue requirements, and it is therefore not in the public interest. We nevertheless emphasize that SDG&E and SoCalGas are expected to be good corporate citizens and achieve the goals in GO 156.

It is within the discretion of SDG&E and SoCalGas' management to honor this commitment to Greenlining. There are no revenue requirements or tariff provisions related to this agreement which fall within our jurisdiction and authority and there is no enforceable order necessary for this agreement.

15.4. Corporate Image Enhancement

DRA proposed a disallowance of certain public affairs costs where it found the activity directed primarily to corporate image enhancement rather than providing any specific service or value to ratepayers.

We will not adopt this disallowance (regardless of the test year settlement) because we believe there is ratepayer benefit from access to the company in an informal setting. But we will require SDG&E and SoCalGas to maintain detailed contemporaneous documentation of the actual activities, the service or information provided, including data on the numbers of customers who receive this service or information, as a part of the documentation for the next GRC if the companies wish ratepayer funding for these activities. In effect, the companies are on notice that the bar has been raised and a more detailed justification is required for all public affairs and outreach expense to demonstrate genuine customer benefit that outweighs any incidental corporate image1 enhancement.

15.5. Funding of G.O.156-Related Efforts

SDG&E and SoCalGas presented testimony on efforts in response to GO 156 - Rules Governing the Development of Programs to Increase the Participation of Women, Minority and Disabled Veteran Business Enterprises in Procurement of Contracts from Utilities as Required by Public Utilities Code Sections 8281-8286 (WMDVBE)⁴⁷ and the diversity of the utility workforce. As a part of the revenue requirements for Test Year 2008, SDG&E and SoCalGas requested in the original applications additional funding for WMDVBE activities. There are no GRC obligations for SDG&E and SoCalGas to achieve specific WMDVBE goals or to reach specific goals in either vendor or employment diversity. The companies are expected to otherwise offer a discrimination-free workplace and comply with all civil rights, state and federal employment laws, etc. Thus, the Commission strongly urges SDG&E and SoCalGas - and all other jurisdictional utilities - to strive for work-force parity with the served-community for all levels of employees, officers, and directors, and to meet or exceed the GO 156 WMDVBE goals as adopted elsewhere by this Commission.

We do not adopt the Greenlining settlement on diversity, instead, we emphasize that all funding included in the adopted Test Year 2008 revenue requirements settlements that supports either WMDVBE activities, or work force diversity, must be fully and only utilized as adopted and not subject to diversion or reallocation as might reasonably happen with other funding to meet the actual operational needs of SDG&E and SoCalGas to provide safe and reliable service to ratepayers.

We expect the companies to make every effort to competently staff at all times the full forecast of positions for WMDVBE activities and diversity. Diversity is good public policy and we believe it is good for SDG&E and SoCalGas.⁴⁸ If SDG&E or SoCalGas fail to show the promised progress, or fail to fully expend all authorized funds for WMDVBE and work force diversity, then we will consider specific ratemaking mechanisms in the next GRC to return to ratepayers any unspent funds authorized in the future. We may also consider other enforcement options if SDG&E and SoCalGas are unable or unwilling to comply with the intent of the Commission's diversity goals in GO 156.

⁴⁵ On October 31, 2007, the Greenlining Institute filed a motion seeking leave to late file a bilateral agreement with SDG&E and SoCalGas.

⁴⁶ See D.04-07-022, Section 6.7.2.2.3. (Footnote 78 in D.06-05-016.)

⁴⁷ GO 156: "Purpose-These rules implement Pub. Util. Code § 8281-8286 which require the Commission to establish a procedure for gas, electric, and telephone utilities with gross annual revenues exceeding $25,000,000 and their Commission-regulated subsidiaries and affiliates to submit annual detailed and verifiable plans for increasing women, minority and disabled veteran business enterprises' (WMDVBE) procurement in all categories."

⁴⁸ For example on September 25, 2007, the Commission held its 5th annual En Banc Hearing on diversity issues affecting regulated utilities. The Commission introduced the California Aspire Achieve Lead Pipeline Project (CaAAL) - a joint partnership with California Public Employment Retirement System (CalPERS), California Department of Insurance (CDI), and the California State Bar.