ALJ/RAB-POD/tcg

PRESIDING OFFICER'S DECISION (Mailed 3/29/2005)

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

ENRON ENERGY SERVICES, INC. and ENRON ENERGY MARKETING CORP., Complainants, vs. PACIFIC GAS AND ELECTRIC COMPANY, Defendant.	Case 01-01-032 (Filed January 19, 2001)
ENRON ENERGY SERVICES, INC. and ENRON ENERGY MARKETING CORP., Complainants, vs. PACIFIC GAS AND ELECTRIC COMPANY, Defendant.	Case 01-09-011 (Filed September 6, 2001)

DECISION GRANTING THE MOTION OF COMPLAINANTS
AND DEFENDANT TO DISMISS COMPLAINTS AND
REFUND DEPOSITS TO COMPLAINANTS

Goodin, MacBride, Squeri, Ritchie & Day, LLP, by Michael B. Day and Jeanne B. Armstrong, for complainants.

Linda L. Agerter, and Peter Ouborg, for defendant.

DECISION GRANTING THE MOTION OF COMPLAINANTS
AND DEFENDANT TO DISMISS COMPLAINTS AND
REFUND DEPOSITS TO COMPLAINANTS

Background

A. C.01-01-032

On January 19, 2001, Enron Energy Services, Inc. and Enron Energy Marketing Corp. (Enron) filed a complaint against Pacific Gas and Electric Company (PG&E) alleging that PG&E had violated its tariffs by failing to remit to Enron amounts owing for direct access (DA) customers' credits.¹ (C.01-01-032, hereinafter the DA credit complaint). The DA credits accrued pursuant to PG&E's tariffs when energy prices skyrocketed in 2000 and 2001, causing credits for direct access customers to become larger than the utility's transmission and distribution (T&D) charges and resulting in negative customer bills. Instead of paying customers or their electric service providers (ESPs) these credits, PG&E reflected the credits on the customers' accounts.² As the energy crisis unfolded, these credits for DA customers, including Enron's customers, become larger and larger. As of the time of Enron's DA credit complaint, the credits potentially owing to direct access customers on ESP consolidated billing³ exceeded $400 million. On March 1, 2001, PG&E answered Enron's DA credit complaint, asserting four affirmative defenses.

· PG&E claimed that its rate freeze had been over since at least August 2000 and perhaps as early as May 2000. If the rate freeze had ended in 2000 as PG&E argued, no DA credit would have been owed to PG&E's direct access customers. In other words, the accumulated credits potentially owing to DA customers would not exist.

· PG&E submitted that the DA credits that had accumulated were not just and reasonable since they were based on the same wholesale prices determined by FERC to be unjust and unreasonable. Until FERC determined the just and reasonable prices, the amount of DA credits accumulated for direct access customers could not be finally established.

· Before ordering payment of the credits to ESPs, the Commission needed to clarify that PG&E could pay the credits to ESPs, rather than to their customers.

· Even if PG&E owed the credits, PG&E was in a severe financial situation as the company, Federal and California regulators, and elected officials all struggled to respond with timely and effective solutions to the wholesale electric supply crisis.

Subsequently, certain of these defenses were resolved or addressed by various events and regulatory actions:

· The CPUC ruled that PG&E's rate freeze ended on January 18, 2001.⁴ The effect of this ruling was to confirm that most of the DA credits were still owing.⁵

· Based on FERC's investigation of wholesale power prices in California, a reasonable estimation of adjusted DA credits was possible for purposes of settling this case.

· As a result of PG&E's bankruptcy filing, creditors, including ESPs and their customers, had the opportunity to file claims for DA credits. These claims were all resolved as part of PG&E's bankruptcy and factored into the PG&E/Enron settlement.

· The bankruptcy court (and the CPUC) approved a plan for PG&E's emergence from bankruptcy.

After PG&E filed for bankruptcy protection in April 2001, Enron submitted claims in PG&E's bankruptcy proceeding for the same DA credits that were the subject of the DA credit complaint. The DA credits thus came under the jurisdiction of the bankruptcy court as pre-petition debts of PG&E.

B. C.01-09-011

After Enron's direct access customers were returned to utility service beginning in February 2001, PG&E removed the DA credits from those customers' accounts. Leaving the credits would have amounted to a decision to return the credits directly to customers (rather than to Enron) since the credits would have offset bundled service charges. This was partly done since Enron's DA credit complaint had already been filed, laying direct claim to the credits.

In July 2001, Enron began to return many of these customers to DA service. Once on DA service, PG&E issued monthly T&D charges to Enron for these newly returned DA customers. Since the DA credits previously attributable to such customers continued to be in dispute with Enron, PG&E did not put the credits back on the bills, and these T&D charges were accordingly not offset by such credits. Enron refused to pay to PG&E the T&D charges, claiming that the prior DA credits needed to be restored by PG&E. On September 6, 2001, Enron filed another complaint case with the Commission asking the Commission to direct PG&E to restore the DA credits to the DA customer accounts (C.01-09-011, hereinafter the T&D complaint.)

Invoking PG&E's Electric Rule 10, Enron began to deposit the T&D charges into a Commission-administered escrow account pending resolution of the dispute. PG&E did not file an answer to the T&D complaint, because on advice of counsel, PG&E regarded the complaint as a violation of the automatic stay under its bankruptcy since it amounted to an attempt to recover a pre-petition debt, i.e., the DA credits. The amount on deposit, with interest, exceeds $22 million.

After Enron filed for bankruptcy, PG&E submitted claims in Enron's bankruptcy proceeding for the T&D charges, which claims were resolved pursuant to the parties' global settlement agreement.

C. The PG&E/Enron Settlement

The PG&E/Enron settlement was a comprehensive settlement resolving the majority of the claims between Enron and PG&E filed in the parties' respective bankruptcy proceedings. These claims totaled in excess of $1 billion and included the DA credit claims and the T&D claims. The parties were able to reach an agreement on the amount of DA credits owing: $229 million out of filed bankruptcy claims of $404 million. See Settlement, Sec. 2.2(a).⁶

Under the settlement, PG&E agreed that Enron "shall be entitled to all amounts in the CPUC escrow account" and agreed to cooperate with Enron in securing return of these funds to Enron. (Settlement, Section 4.6.) During the negotiations, the amount of the T&D charges owed by Enron to PG&E was not disputed. In reaching a settlement, PG&E treated the T&D charges as a dollar-for-dollar reduction in any amounts PG&E owed Enron for DA credits. Thus, a correct characterization of the settlement is that under the settlement Enron fulfilled its responsibility to reimburse PG&E in full for all the unpaid T&D charges.

The settlement was submitted for approval in both PG&E's and Enron's bankruptcy proceedings. It was approved on March 15, 2004 by PG&E's bankruptcy court and on April 20, 2004 by Enron's bankruptcy court. The PG&E bankruptcy court specifically ordered: "Pursuant to and subject to the provisions of Section 4.1 of the Settlement Agreement, PG&E shall have no interest in the CPUC Escrow Account." (Ordering Paragraph 7 of March 15 order.)

With respect to the DA credit complaint and the T&D complaint, Section 4.6 of the settlement requires that Enron file with the CPUC a request for a dismissal with prejudice.

D. The Parties' Request for Dismissal and Return to Enron of the Escrowed T&D Charges

After approval of the settlement by both bankruptcy courts, the parties submitted on April 28, 2004 a joint letter to the Commission requesting dismissal of the complaint cases, with prejudice, and requesting return of the escrowed monies to Enron. On the same day, Enron also filed a "Notice of Dismissal" of these cases. On August 12, 2004, Commissioner Wood issued an Assigned Commissioner's Ruling stating "the material presented by the parties in support of their request for dismissal does not provide me with sufficient information to determine if the dismissal is in the public interest. I am particularly concerned that the settlement does not violate Pub. Util. Code §§ 453(a) and 532."⁷ The parties were instructed to appear at a hearing "to present their settlement and show how the settlement resolves the issues raised in Case (C.) 01-01-032 and C.01-09-011." The hearing was held on November 9, 2004.