III. Reimbursement-Positions of the Parties

ORA argues that requiring Citizens to reimburse the Commission for ORA's consultant costs is a proper exercise of the Commission's authority. ORA says that an Assigned Commissioner's Ruling (ACR), dated January 27, 1998, in Application (A.) 97-12-020 said that prior case law found no lack of such authority. The ACR observed that § 309.5(c) requires the Commission to provide ORA sufficient resources to ensure that ratepayer interests are fairly represented in all significant proceedings. Based on this determination, ORA says the Commission directed Pacific Gas and Electric Company (PG&E) to fund an outside contractor audit.

ORA contends that there is ample precedent for Commission orders directing utility-funded consultant services. It cites the following examples.

· In Decision (D.) 99-06-051, the Commission required Roseville Telephone Company (Roseville) to fund a verification/non-regulated operations audit, to be overseen by ORA, and allowed Roseville to apply for recovery of the costs as a Z-factor.

· In D.96-11-017, the Commission ordered an audit of PG&E's affiliate transactions in connection with a corporate reorganization proceeding. The cost was to be born by PG&E's shareholders.

· In D.99-02-013, ORA was ordered to retain an outside consultant to audit transactions between Pacific and Pacific Bell Communications (PBCom), regarding network services provided by Pacific, for compliance with the Commission's rules. The cost was to be born by PBCom.

· In R.01-09-001 and I.01-09-002, Verizon was ordered to pay for ORA's consultants to conduct an audit regarding, among other things, affiliate transactions, monitoring reports and cost allocation and accounting procedures.

ORA maintains that the audit is necessary because Citizens operates in 24 states, has subsidiaries operating in 48 states, and serves 130,000 access lines in California. ORA also says that Citizens is part of a holding company structure that allocates substantial corporate expenses to Citizens. In addition, ORA states that Citizens has not been audited by the Commission for 10 years, and an audit is needed to verify Citizen's earnings for sharing purposes. For these reasons, ORA represents that it needs to do an audit in order to adequately participate in this proceeding. It also says that it does not have the resources to perform the audit itself, or to pay consultants to do it. There are no other parties besides Citizens. As a result, ORA contends that, without funding for its consultants, the Commission will not be able to develop an adequate record in this proceeding.

Citizens argues that the Commission does not have the authority to require it to reimburse the Commission for ORA's consultant costs. It says that the Commission may exercise its authority only to the extent delegated by the California Constitution or the Legislature. It argues that nothing in the Constitution or the Public Utilities Code gives the Commission the authority to pass on such costs to the utilities it regulates. Citizens contends that where the Legislature intended to delegate such authority, it has explicitly provided such authority. As examples, it cites major utility merger applications, and environmental reviews pursuant to the California Environmental Quality Act. It also says that there is no explicit authorization by the Legislature to allow the Commission to recover ORA's consultant costs stemming from NRF audits. Citizens also argues that requiring it to pay such audit costs would circumvent the Legislature's oversight of the Commission through the state budget process. In addition, it argues that by creation of the Ratepayer Advocate Account, the Legislature has determined the appropriate funding for ORA.

For the above reasons, Citizens argues that the Commission cannot require it to pay for the costs of ORA's consultants. It also says that allowing it to recover the costs from ratepayers does not alter its analysis.

Citizens asks that, if the Commission does require it to pay for ORA's consultants, it be allowed to recover those costs from its ratepayers. In addition it asks that it be allowed to recover any internal costs it may incur in connection with the audit. Citizens also asks that the scope of the audit be limited consistent with the oversight and advocacy functions ORA was created to perform, and that a cost cap be imposed.