IV. Comments on Proposed Decision
The proposed decision (PD) of the ALJ in this matter was mailed to the parties on January 12, 2004, in accordance with Pub. Util. Code § 311(d) and Rule 77.1 of the Rules of Practice and Procedure. Comments were filed on February 2, 2004, and reply comments were filed on February 9, 2004.
A. PG&E
Except for one issue, PG&E states that it supports the PD so that consumers may realize the benefits of unbundling and competition. PG&E believes that the exclusion in Schedule G-BR of Kramer Junction interconnect as a secondary receipt point for the North Needles receipt point and North Needles (expansion) receipt point is discriminatory. PG&E states that:
"there is no lawful or rational basis for this treatment, which would result in undue discrimination against gas supplies from the Kern River Pipeline into SoCalGas' system, as compared to gas flowing form other pipelines in the Southwest."
PG&E proposes that Schedule G-BR be modified to include Kramer Junction as a secondary receipt point.
PG&E's concern may have merit. Unfortunately, PG&E did not explore this issue at evidentiary hearing (or at least has not identified in the record where this matter was explored). Consequently, we lack an evidentiary record to reach PG&E's conclusion that no rational basis exists for this treatment. No changes to the PD are necessary in response to PG&E's comments.
B. El Paso Natural Gas Company and Mojave
Pipeline Company
EPNG and Mojave both support the PD and implementation of the CSA. However, in response to an ACR dated January 20, 2004 that would permit SoCalGas to submit proposed changes to the CSA in this docket, EPNG and Mojave both raise objections to changing the CSA based on unilateral proposals.
EPNG and Mojave's concerns address an issue beyond the scope of this PD. The ACR addressed ex parte communications in which SoCalGas indicated that it planned to file a new application. In response, the ACR indicated that this docket may provide an expedited forum. Consistent with our rules and procedures, EPNG, Mojave, and other interested parties would have an opportunity to object to and submit alternate proposals to any new SoCalGas proposal the Commission may consider in the future. It is premature to address a proposal not yet before the Commission in this decision. EPNG and Mojave's comments do not require any change to the PD.
C. Watson Cogeneration Company and
Calpine Corporation
Watson and Calpine Corporation (Calpine) filed joint comments in support of the PD. Watson and Calpine assert that most parties, including SoCalGas, agree that a need exists for a system of firm tradeable capacity rights on the SoCalGas system. Although parties agree on the need for such a system, Watson and Calpine argue that the problem is that parties do not agree on ancillary issues. Watson and Calpine argue that the record in this case presents a perfect example of how contentious the ancillary issues can become. In order to avoid the time-consuming re-litigation of such issues, Watson and Calpine assert that the Commission should implement the CSA now and modify it as necessary in the future.
Watson and Calpine also observe that the CSA is modeled on PG&E's Gas Accord structure which has performed well in California since 1998. Although the Gas Accord has been modified since it was implemented in 1998, Watson and Calpine argue there is no reason that the CSA cannot be modified incrementally as well.
Concerning Edison's request for bidding rights to serve electric generation facilities, Watson and Calpine support Edison receiving the assignment of bidding rights for those electric generation facilities based on historical use, just as do all other generators on the SoCalGas system.
D. SoCalGas
1. Implementation Date
SoCalGas states that it cannot implement the CSA by April 1, 2004. We modify the PD, consistent with the request of SoCalGas to provide three and one-half months lead time from the effective date of this order to implement the CSA.
2. 2.44% In-Kind Fuel Charge
In its comments, SoCalGas concedes that neither the CSA nor D.01-12-018 explicitly authorizes a 2.44% in-kind fuel charge. However, SoCalGas reargues that Section 3.2.3.3 of the CSA concerning storage services supports its position. We make no substantive changes to the PD, but modify the text of the PD to respond more clearly to SoCalGas' argument.
SoCalGas also objects to the evidence offered by IP concerning communications with stakeholders "immediately following the issuance of D.01-12-018." SoCalGas implies that it was denied a fair hearing because it did not have notice prior to hearing that IP would take the position that SoCalGas never discussed the 2.44 in-kind fuel charge with stakeholders. Consequently, SoCalGas states it was denied an opportunity to review all communications to rebut IP's selected cross-examination exhibit. SoCalGas also contends that discussions with stakeholders have nothing to do with whether the 2.44% in-kind fuel charge is appropriate. SoCalGas also states that the PD would set a bad precedent that a utility's failure to discuss a particular item with stakeholders could impede implementation of a Commission decision.
SoCalGas misconstrues the weight given to the evidence presented by IP. First, a Commission directive can never be annulled by the fact that a utility may not discuss a particular decision directive with stakeholders following the issuance of a Commission decision (in fact, unless ordered to do so, a utility has no burden to discuss Commission decisions with stakeholders). In this instance, as SoCalGas admits, the proposed directive - the 2.44% in-kind fuel charge - was not explicitly authorized in the CSA or D.01-12-018. Consequently, an interpretation issue arose about the CSA. A cardinal principle of contract interpretation is that the intention of the parties be effectuated. Normally, the parties' intentions are clearly stated within the four corners of the document representing the agreement. In this instance, since the 2.44% in-kind fuel charge was not explicitly authorized in the CSA or D.01-12-018, IP's exhibits represented evidence concerning SoCalGas' intention. Given that IP's evidence of communication occurred "immediately following the issuance of D.01-12-018" the evidence carried more weight than what SoCalGas states years later was its intention or interpretation of the CSA. At hearing, SoCalGas had an opportunity during re-direct examination to rebut IP's evidence; therefore, SoCalGas was not prejudiced or denied a fair hearing.
3. Set-Aside Rights on North Coastal System
For California Gas Producers
SoCalGas as well as IP, ExxonMobil, and California Independent Petroleum Association all comment that the PD erred in reaching the conclusion that the CSA does not provide California gas producers set-aside rights. No party submitted an opposition to the position of the above parties in their reply comments.
In this proceeding, no party objected to the proposal of SoCalGas to provide set-aside capacity rights to California gas producers (ExxonMobil claimed it was entitled to such set-aside rights and we discuss its objections below). In this proceeding, the ALJ independently concluded that California gas producers were not entitled to set-asides as proposed by SoCalGas. We have reviewed the comments and agree that the PD erred in concluding that the CSA did not provide California gas producers set-aside capacity rights. We have modified the text of the PD and deleted language that indicated that California gas producers should not receive capacity set-aside rights.
However, the PD was correct in concluding that ExxonMobil's interpretation of the CSA provided a clear conflict with physical limitations of SoCalGas'. We leave unchanged the PD's conclusion denying ExxonMobil's request for set-aside rights.
4. Petition to Modify
SoCalGas reiterates it policy arguments for granting the Petition to Modify and also adds two speculative arguments. We address only SoCalGas' two new speculative arguments.
SoCalGas contends that the Commission may reexamine some of the terms and conditions and or some of the policies adopted in the CSA in future proceedings. In essence, SoCalGas argues that the Commission should reject the CSA based on what the Commission may decide to do in the future. Should the Commission decide to improve the terms and conditions of the CSA adopted in D.01-12-018 in an OIR or other future proceeding, the Commission will address such issues and any potential modifications to the CSA at that time. It is not legal or factual error to claim that a future Commission decision may necessitate changes to the CSA. SoCalGas also claims that the CSA no longer has the same amount of support as when it was originally adopted. Given the number of protests filed in response to SoCalGas ALs implementing the CSA and the amount of discord expressed at hearing, we believe this is a regulatory area that is difficult to obtain consensus. Consequently, in this instance and others, the popularity of a proposal does not constitute a legitimate claim of factual or legal error.
E. SCGC
1. Timing of Storage Services
SCGC appears to argue that the PD is factually incorrect by ignoring "the clear intent of the CSA to provide some modicum of protection for customers for at least the two-year transition period before SoCalGas shareholders would get the full benefit of no rate cap and 100 percent storage revenue retention." The PD did consider the intent of the signatories to the CSA contrary to SCGS' assertion. Moreover, the PD found that SCGS has not demonstrated how signatories or ratepayers would be harmed by moving to 100% risk / reward as envisioned and intended by the CSA. SCGC does not directly respond to this issue but rather refers to "positions that would be in the customers' interest" that SCGC has argued. Such generalities are insufficient to support a finding of legal or factual error. No changes are necessary in response to the comments of SCGC.
2. Variable Charges for Storage Services
SCGC asserts that the PD errs by allowing SoCalGas to charge variable charges for storage services. In support of its position, SCGC argues that the PD's reliance on Section 2.1.3.4 of the CSA is misplaced and Section 2.1.3.5 of the CSA should control. SCGC is correct in part and we modify the PD to reflect that SoCalGas may not impose variable charges for storage capacity not committed during the open season.
3. Seasonal Bids
SCGC reargues and amplifies on arguments previously made concerning seasonal bids. No changes to the PD are necessary.
4. Credit Payments for Backbone Capacity
We edit Conclusion of Law 39 to reflect SCGC's clarification consistent with SoCalGas' proposal.
5. Pooling Schedule G-POOL
SCGC points out that schedule G-POOL attached to the PD, inaccurately reflects SoCalGas' proposal to create only one pool, the citygate pool, on its system. We modify Schedule G-Pool to accurately reflect SoCalGas' proposal. We also add a new finding submitted by SoCalGas.
6. Petition to Modify
SCGC complains that the exclusion of consideration of issues concerning changed circumstances is legal error. As discussed below in response to concerns of DGS, the Assigned Commissioner has discretion to define the scope of a proceeding. In this instance, the Assigned Commissioner determined that an incremental approach should be taken to address changed circumstances. In many of our proceeding we have phased the consideration of issues. Such an approach is not legal error. SCGC also reargues issues previously raised in briefs and no change to the PD is necessary.
F. Coral
Coral offers "five reasons" for why the Commission should not implement the CSA. Coral's five reasons are premised on the belief that the PD does not meaningfully address the central policy question in this case which Coral articulates as "[d]oes the CSA continue to provide a reasonable market structure for the SoCalGas system."
We dismiss Coral's concerns as outside of the scope of comments per Rule 77.3 which requires comments to focus on factual, legal, technical errors. Coral's characterization of the purpose of this proceeding is erroneous. The scoping memo in this proceeding stated that:
"The issues to be considered in this proceeding are limited to the adoption of tariffs, as proposed in the compliance case of SoCalGas, for implementing D.01-12-018." (Scoping Memo at p. 4.)
Moreover, Coral admits that its five reasons are premised on evidence not even considered in this proceeding. Coral indicates that its "five reasons" are premised on what "the evidence would have shown" if a record had been developed to consider Coral's issue which was outside the scope of this proceeding.
Coral also argues that the PD fails to comply with Resolution G-3334. Again, Coral's characterization of this proceeding is erroneous. The scoping memo considered Resolution G-3334, the parties' proposals, resource and time constraints. The Scoping Memo opted to consider some of the issues raised by Coral in a separate track.
Lastly, Coral reargues its position that the Commission should grant the Petition for Modification of D.01-12-018. Coral cites no factual, legal or technical errors in its comments that need to be addressed or that would require a change to the PD.
G. Indicated Producers
1. California Producer Set-Asides
IP requests that the Commission reinstate the undisputed tariff provision establishing California producer set-asides. IP acknowledges that some general language in the CSA may have led to confusion concerning set-aside rights for California producers. However, IP identifies specific language in the CSA, which should be controlling, that specifically provides for set-aside rights for California producers. Language in the PD has been deleted that would have eliminated set aside rights for California Producers and tariff pages in Appendix B have been modified to provide set-asides for California producers. However, we disagree with IP that ExxonMobil should receive set-aside rights based on the conflict with physical capacity limitations on the SoCalGas system that would arise from IP's interpretation of the CSA.
2. Rights of Long-Term Contract Holders
IP's position concerning long-term contract holders is not clear.
IP states that some "Enhanced Oil Recovery contracts were entered into many years ago, well in advance of the CSA and the concepts and rights created by that document." Further, IP contests the PD's classification of IP's concerns as a contractual issues and the statement that this proceeding was not intended to resolve contract specific issues. IP states that:
"[t]his is not a contractual issue. Were it not for CSA implementation, the issue would not have arisen. ... Thus, this is an issue that is squarely and appropriately before the Commission."
It is not clear from IP's formulation what "issue" it is concerned about. It is not clear whether the issue IP raises is that the PD failed to classify certain contracts as "firm" versus "interruptible" or whether IP is claiming that the PD implements the CSA in a manner that improperly abrogates a contractual right bargained for by holders of Enhanced Oil Recovery contracts. We address both issues.
The PD properly stated that that this proceeding was not intended to resolve issues as to whether a specific contract is firm or interruptible. SoCalGas in its reply correctly observed that without examining the terms of a particular contract, the Commission cannot determine whether the contract contemplates firm or interruptible service. IP's potential claim that the PD failed to classify contracts is without merit.
IP's implied assertion that the PD abrogates the rights of existing Enhanced Oil Recovery contract holders is also without merit. Although this appears to be a new argument, a threshold failure of IP's argument is that it fails to clearly articulate what rights have been abrogated. Instead, IP emphasizes that "many of these contracts have rates that are higher than tariffed rates... ," consequently IP argues that such contract holders should have greater rights. IP cites no statute, case law or Commission decision for the premise that paying contract rates higher than tariff rates entitles a contract holder to rights greater than tariff customers. IP appears to ignore the possibility that a party to a contract may have entered into a bad or non-profitable agreement. Instead, IP appears to assert that "equity demands" that the Commission impose a limit on what Enhanced Oil Recovery contract holders pay for the "total cost" per unit of transportation that does not exceed the contract rates. Again, IP cites no statute, case law, or Commission decision for rewriting the terms and conditions of an existing contract not before the Commission. We are unable to grant IP the relief sought.
Lastly, in the alternative, IP requests that the Commission establish a forum for expeditiously resolving disputes. IP requests that SoCalGas notify all contract holders in writing of their contract rights in the open season within ten days of the effective date of the decision. Further, the Commission should permit the filing by the customer of an AL notice to the Commission's Energy Division (ED) of the dispute and provide SoCalGas with a five-day response period. The ED should then meet with the parties and rule on the dispute not later than 20-days following the response by SoCalGas. IP asserts that this process is necessary to ensure that contract holders know with finality their rights not fewer than 30-days preceding the first day of backbone transmission open season. SoCalGas has no objection to IP's proposal for resolving whether or not a long-term contract is "firm" or "interruptible" service.
Although SoCalGas has no objection to IP's proposal, we are concerned about creating a dispute resolution proceeding in such a hasty fashion. For instance, neither party has commented on the legality of transferring a substantive decision making process to the ED. Moreover, neither party has indicated whether it believes such a process should be binding without appeal. We decline to adopt IP's proposal absent such details. The PD invites SoCalGas to submit a proposal for resolution of contract disputes. We encourage IP and SoCalGas to jointly submit an advice letter that establishes a detailed proposal for resolving contract disputes.
3. Petition to Modify
IP also cites a "public interest" standard for reconsidering granting the petition to modify. IP cites no legal error or factual error in support of its position. Instead, IP takes issue with a single statement in the PD that the Commission is not "bound to constantly reconsider every decision it made." However, IP cites no statute, case law or Commission decision for the proposition that the Commission must "constantly reconsider" every decision it makes. Nonetheless, we will slightly modify the PD to make clear that an assertion of "change" alone in the regulatory market place does not constitute sufficient grounds to vacate a Commission decision.
H. ExxonMobil
ExxonMobil contends that the PD improperly denies set-asides to all California Gas producers. We agree and as discussed above, reverse this portion of the PD. Concerning ExxonMobil's claim that it should be entitled to set-asides we disagree for the primary reason set forth in the PD that ExxonMobil's interpretation is impossible to implement given physical capacity limitations.
I. Edison
Edison claims that the PD commits legal error by applying the wrong standard in rejecting Edison's proposal to use forecasted demand for determining bidding rights. Edison also claims that the PD commits legal error by failing to address the allocation of bidding rights in instances where CDWR tolling agreements are in place.
Concerning Edison's first claim of error, the PD denies Edison's request for the use of forecasted demand because it is inconsistent with the CSA. The PD observes that the "CSA provides no exemption for Edison to receive set-aside rights." Edison does not appear to dispute this interpretation of the CSA. Consequently, no legal or factual error has occurred.
Edison's second concern about allocation of bidding rights in instances where CDWR tolling agreements are in place warrant greater discussion. We have modified the PD to address Edison's concern consistent with testimony that was presented at evidentiary hearing by SoCalGas.
J. Department of General Services
DGS submitted comments that focused on the PD's rejection of the Petition to Modify. DGS asserts that the rejection of the petition is legally and factually flawed. The basis for such concerns however is not clear. Below we attempt to address the concerns of DGS.
DGS cites Resolution G-3334 for the proposition that SoCalGas submit a "comprehensive proposal on how to implement the GIR decision [D.01-12-018]." [In this proceeding, SoCalGas submitted a "compliance case" which implemented D.01-12-018 and was the subject of this proceeding.] Further, DGS also cites two other directives that were to describe new issues resulting from delay in implementing the CSA and for SoCalGas to present any other issue that SoCalGas deems relevant. DGS appears to assert that legal error occurred because the scope of this proceeding did not include the latter two.
The concerns of DGS are misplaced. The ALJ in this proceeding directed the parties in this proceeding to participate in two meet-and-confer meetings for the purpose of surveying potential issues prior to the submission of testimony by intervenors. Further, the ALJ advised parties that the assigned Commissioner would consider such issues.
Rule 6.3 of the Commission's Rules of Practice and Procedure specifically authorizes the assigned Commissioner to issue a scoping memo setting forth issues to be considered in a proceeding. The purpose of such a scoping memo is to manage proceedings. No legal error occurred in managing the issues to be considered in this proceeding.
DGS also believes that the potential for modification to the CSA from a recently issued OIR warrants vacating D.01-12-018. Although some modification to the CSA may occur after consideration of issues in the Commission's new gas OIR, R.04-01-025, the PD is neither legally nor factually flawed. Rather, D.01-12-018 is a decision duly adopted by the Commission that the Commission has a duty to enforce. Until such time as the Commission issues a decision in direct conflict with D.01-12-018, it not legal error for the Commission to implement D.01-12-018.
