Derek Ray 7:41 p.m., March 13
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Z-Factor Back Story: SDG&E, CPUC, and the Meaning of Words
Aguirre Motion Denied to Remove Commissioner from Proceeding
So far, several media outlets have covered the Z-Factor split decision between California Public Utilities Commission’s assigned commissioner and his administrative law judge, respectively granting and denying San Diego Gas and Electric Company's preliminary Z-Factor A0908019 application for $29 million in rate fee hikes attributable to SDG&E's “surprise” at wildfire insurance rate increases after the 2007 San Diego County wildfire season.
So far, it appears that only SDG&E was surprised by the insurance rate increases. Obviously, Sempra Energy and SDG&E corporate executives who are routinely chauffeured to and from the Energia Costa Azul conference facility are unfamiliar with car insurance rates going up from reported involvement in traffic accidents; otherwise, they might have had some sort of clue that exploding and flaming overhead utility power equipment causing the largest mass evacuation of residents in county history might have had some real-world consequences for Sempra Energy shareholders and substantially increased payments for wildfire insurance after 2007.
What appears to have escaped mention in the media so far has been a motion by protestor Ruth Henrick's attorney Michael Aguirre to have the assigned commissioner removed from the proceeding.
The big question here should be this: what annoyed Aguirre so much that he felt it important to insert some motion into the record, a motion that was almost sure to fail but still be worth having its contents available to some group of judges on appeal?
Aguirre, formerly City Attorney of San Diego, became involved with SDG&E's wildfire-related applications before CPUC sometime before the April 2010 announcements of SDG&E and Sempra Energy settlements with CPUC and California Attorney General Jerry Brown on a wide range of issues, dating all the way back to the 2000 state energy crisis that ultimately cost Governor G. Davis his job over the high public payments required under electricity contracts negotiated immediately after the state's Enron-gamed electricity crisis. As those settlements were being announced, a KUSI Turko Files investigation revealed details unearthed by Aguirre relating to the cozy relationships between utility executives and CPUC commissioners, sometimes meeting in swank Hawaiian resorts or trendy San Francisco jazz clubs. In Superior Court, such meetings would be forbidden as unethical advantages over other parties not attending those private dinner meetings between commissioners and the potential and likely beneficiaries of commissioners' decisions.
From the beginning, Aguirre's mantra has been that ratepayers should not have to pay for liabilities that more properly belong to the utilities and utility shareholders. There is at least one significant CPUC decision on point here, one that has already seen its day on appeal and seems to be totally forgotten by California investor owned utility attorneys. With Commissioner T. Simon deciding in favor of SDG&E on A0908019, this appears to set up a double or triple-billing of ratepayers situation depending on outcomes in the related A0908020 Wildfire Expense Balancing Account (WEBA) application and SDG&E's recent general rate case application seeking a seven-percent rate hike in part for wildfire-related expenses.
According to the denied motion, Aguirre points out that during closing arguments in the A0908019 Z-Factor proceeding, each party was limited to a brief summation for what seemed to be their final statements to the assigned commissioner and his administrative law judge. The administrative law judge, basing her decision on the totality of evidence admitted at the time of the final statements, decided against SDG&E and denied approving the A0908019 application. However, after hearing an hour's worth of further SDG&E arguments in a later ex parte hearing, the assigned commissioner decided in favor of SDG&E without hearing other rebuttal evidence by other parties having previously made their prepared final statements on the record.
It appears that the thrust of Aguirre's arguments go to the ordinary construction of terms. SDG&E relied on a CPUC rule that provides access to commissioners at all times, but this rule appears to be general in nature and not specific to circumstances where final statements in a proceeding with a scheduled final hearing date had already been made, and the administrative law judge had already ruled to deny the main motion in the form of application A0908019 based on evidence admitted only up to the end of final statements. If CPUC's interpretations of its own rules of procedure are contrary to what ordinary reasonable people would interpret in the same circumstances, then perhaps an appeal by Aguirre may force some interpretive discipline on the commissioners as part of getting some relief from unfair rate increases for San Diego power consumers as well.
In other recent news, SDG&E had several debt and equity ratings dropped one notch in the past week or so by Fitch Ratings, with the issuance of a Negative Outlook advisory. There appears to be no direct relation between the timing of the Fitch Ratings ratings move and its SRE outlook advisory and the announcement of the split CPUC decision against SDG&E on A0908019. If there is, then we can trust Fitch Ratings to speak up for itself.
As a matter of disclosure, I have no financial interest in Sempra Energy or SDG&E financial paper of any sort, nor do I have any financial relationship with Fitch Ratings, JP Morgan, Royal Bank of Scotland, or Dubai World.
CPUC's D0201039 on First Priority Conditions for Utility Holding Companies to Infuse Capital to Owned Utilities is no longer available at on-line from CPUC. A link to a copy of the last known published version will be provided shortly. The decision is important for requiring holding companies such as Sempra Energy to infuse working and other capital into a held utility such as SDG&E. The decision is routinely ignored by utilities making rate hike application filings to CPUC.