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EXH009-00359

GOVERNMENT
EXHIBIT
  2952
  Crim. No. H-04-25 (S-2)


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California Public Utilities Commission

505 Van Ness Avenue, San Francisco, CA 94102
415-703-2782

www.cpuc.ca.gov

EXH009-00360


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Content

Role and Responsibilities of the California Public Utilities Commission 1
Commission Decision-making 2

The Commissioners 3

CPUC Organization 6
CPUC Community Outreach and Consumer Assistance 10
Regulatory Achievements
  Energy 13

Telecommunications 19

Water 23

  Transportation 26
Consumer Protection and Enforcement 33

Utilities Safety 36

Office of Ratepayer Advocates 38
Annual Hearing/Decision Activity 41

EXH009-00361


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  Role and Responsibilities
  of the California Public Utilities Commission

Founded in 1911 by constitutional amendment as the state Railroad Commission, what is today the California
Public Utilities Commission has been responsible since then for ensuring that California utility customers have
safe, reliable utility service at reasonable rates, protecting utility customers from fraud, and establishing programs
and policies that contribute to a strong California economy. In fiscal year 2000-01, the industries that the
Commission regulates were paid $38 billion in rates.

From its roots in the national railroad expansion and the Populist-era drive to balance public and private
interests, the CPUC is recognized nationally for its innovative regulatory practices, and is a national leader
among state regulatory bodies.

The Commission regulates privately owned electric, natural gas, telecommunications, water, sewer, railroad, rail
transit, and passenger transportation companies. It does not regulate municipal or district-owned utilities, or
mutual water companies.

The Commission establishes rates for utility companies and has broad regulatory powers.It sets standards of
service and safety for utility and transportation services, monitors the reliability and safety of their operations,
oversees markets to prevent anti-competitive activity, oversees the merger and restructuring of utility corpora-
tions, and evaluates major utility investment proposals when utilities seek rate increases to finance those projects.
It works with other state and federal agencies to assure water quality, and protect the environment. And it
implements programs to assist low-income utility customers, and to provide telecommunications services for
customers with disabilities.

To produce and deliver vital products, such as telecommunications, gas, electricity, and water services, costs
money, so utilities have a right to charge consumers for what they use. Moreover, the owners and stockholders
of these utilities expect a return on their investments. The Commission ultimately serves as an intermediary,
balancing the public interest in obtaining adequate, reliable and safe products and services with utility stockhold-
ers' expectations of a fair profit on investment.

To protect consumers, the CPUC prosecutes unlawful utility marketing and billing activities, governs business
relationships between utilities and their affiliates, and resolves complaints by customers against utilities.

The CPUC also implements energy efficiency programs, and enforces the California Environmental Quality Act
as it applies to utility construction programs.

The CPUC participates in regional and multi-state issues forums to advocate California's interests, and helps
shape federal public policy by participating in federal proceedings when issues that affect California utility
customers' rates or services are at stake.

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  Commission Decision-making

  The Governor appoints the members of the Commission, which is made up of five persons, to six-year staggered
terms; each must be confirmed by the Senate. The Governor appoints one of the five to serve as President.
Commissioners make all final policy, procedural and other decisions.

  The Commissioners are supported in their work by a staff of 964 economists, engineers, auditors, investigators,
administrative law judges, accountants, lawyers, safety and transportation specialists and support personnel.

  The Commission has a variety of fact-finding and decision-making tools it may use separately or in combination.
It relies on evidentiary hearings when material issues of fact are in dispute, legislative-style and "paper" hearings
for policy considerations, and informal workshops for open discussion among technical experts. It establishes
its own procedures according to statute and to provide due process for those affected by its decisions. It has
quasi-legislative and quasi-judicial authority in that it establishes and enforces administrative regulations and, like
a court, may take testimony and subpoena witnesses and records.

  The Commission initiates investigations and rulemakings to explore broad policy issues, modify procedures,
investigate allegations of illegal utility activity or respond to legislative requirements. Regardless of the decision-
making tools applied, the Commission's decision-making process is open, and the Commissioners make the
ultimate decision. The Commission attempts to involve and make its decision-making processes accessible to
the public at large, while rigorously analyzing issues before it makes decisions. It encourages participation of all
affected parties in its decision-making process and provides a Work Plan that outlines the goals and priorities and
describes the proceedings and issues it will work on during the year.

  The Commission meets in public session approximately every two weeks to vote on an average of 50 items on
a publicly noticed agenda. In most cases, the agenda items are written documents developed from a body of
information open to public challenge and scrutiny, with opportunities for comment by interested stakeholders
and consumers. The exceptions are items considered in Executive Session which relate to agency litigation,
personnel, and other confidential administrative matters.

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Commissioners

  President Loretta Lynch

	
	
	

  Governor Gray Davis appointed Loretta Lynch to be President of the California
Public Utilities Commission on March 22, 2000.

  Since her appointment as Commission President, she coauthored a report in
August 2000 for the Governor that was among the first of its kind, providing a compre-
hensivc analysis of the causes of the State's energy crisis, the history of California's
deregulation experiment, and recommendations to solve the crisis. Since energy prices
spiked in early summer 2000, President Lynch has been a leader in the evolution of State
energy policies with regard to energy efficiency programs, financial protections for the 3
cash-strapped utilities, low income customer rate discounts, natural gas infrastructure, and
transmission line siting. She led the CPUC's efforts to protect California from anti-consumer proposals in
PG&E's federal bankruptcy proceeding, intervened before the Federal Energy Regulatory Commission on
issues relating to price gouging by power sellers, and developed legislation to address dozens of energy issues.
  Prior to her appointment to the CPUC, President Lynch was director of Governor Davis' Office of
Planning and Research (OPR).
  President Lynch holds a degree from Yale Law School, and prior to joining public service was a partner
in the litigation firm of Kcker & Van Nest.

  Henry M. Duque

  Henry M. Duque originally was appointed to an expired term at the California
Public Utilities Commission by Governor Pete Wilson on April 3, 1995. Governor Wilson
reappointed him to a full six-year term on December 17, 1996.
  Duquc is a member of the National Association of Regulatory Utility Commission-
ers (NARUC) and serves as a member of both the NARUC Water Committee and its 
Committee on International Relations, as NARUC representative to the American Water
Works Association Public Advisory Forum, and as a member of the NARUC Board of
Directors. He is also a member of the California Institute for Energy Efficiency (CIEE)
Research Board and of the National Drinking Water Advisory Council, which is chartered
by the United States Environmental Protection Agency.
  Prior to his appointment, Duque served as a senior executive for financial institutions and non-profit
organizations for most of his career in Los Angeles, and later in the San Francisco Bay Area
  Duque has a B.A. in political science from Stanford University and is a graduate of Indiana University's
Graduate School of Savings & Loan and the School of International Building Societies in Oxford, England.
He also did graduate work at the University of California Boalt School of Law.

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EXH009-00364


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Commissioners

  Josiah L. Neeper

  Josiah L. Neeper was appointed to the California Public Utilities Commission by
Governor Pete Wilson on September 20, 1995.
  Commissioner Nccpcr was an attorney practicing in both San Diego and Palo Alto.
He served clients from 1960-1995 as a labor relations advisor to management, an anti-trust
advisor to business, a business litigator, and as General Counsel both to the University of San
Diego and the Zoological Society of San Diego.
  He served the City of Los Angeles from 1972-1995 as a member, and more recently
as Chairperson, of its Employee Relations Board. He also served the City of San Diego, the
Port of San Diego and other local governments as an advisor on labor relations. He was an
Adjunct Professor in labor law for 20 years at the University of San Diego School of Law.
  He has also been active in community affairs, serving either as director or officer for the National Opera
Institute, San Diego's Old Globe Theater, San Diego Opera, Scripps Memorial Hospital, and other arts, health
care, and higher education institutions in San Diego and Los Angeles.
  Commissioner Nccpcr has a B.A. in economics from San Diego State College and a law degree from
UCLA School of Law.
  Mr. Necpcr's term ended on January 1, 2001.

  Richard A. Bilas

  Richard A. Bilas was appointed to the California Public Utilities Commission on
January 1, 1997, by Governor Pete Wilson, and was elected by his colleagues to serve as
President in 1998 and 1999.
  Bilas came to the Commission from the University of Oklahoma where he held the
John A. and Donnie Brock Chair in Energy Economics and Policy at Sarkeys Energy Center
from 1995 to 1996. Prior to that he was a Commissioner with the California Energy
Commission for eight years.
  He is a member of the editorial board of the Western Economic Association's
Contemporary Policy Issues, and the author of three books on economics. He is also a
member of the distinguished economic Mont Pelerin Society.
  He has been a faculty member at the University of Southern California, University of Colorado, Georgia
State University, and California State University - Bakersfield.
  Commissioner Bilas has an A.B. in mathematics from Duke University and a Ph.D in economics from
the University of Virginia, is a former Fulbright Scholar to the Philippines, and is a member of Phi Beta Kappa.
Commissioner Bilas resigned from the PUC on March 8, 2002.

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EXH009-00365


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--------------
Commissioners l

  Carl W Wood

  Carl W. Wood was appointed to the California Public Utilities Commission by
Governor Gray Davis on June 21, 1999.
  Wood worked 10 years in the steel mills of Indiana and California, completing his
apprenticeship as an industrial electrician in 1975, and later worked as an electrician at the
San Onofrc Nuclear Generating Station.
  In 1986, Wood was elected Business Agent (Chief Officer) of Utility Workers Union
of America (UWUA) Local 246, representing 2000 generating plant workers at Edison.
From 1987 to 1997 he also served on the National Executive Board of that union, and
in 1997, as UWUA National Deregulation Coordinator, testified before Congressional and
state legislative committees on the impacts of deregulation on reliability, consumer prices and worker protection.
From 1994 to 1999, Wood served as Secretary of the Coalition of California Utility Employees, a
coalition of unions representing electricity and gas utility workers. From 1998 to 1999, he also served as
Chairman of the Southern California Gas Workers Council, a coalition of local unions formed in 1998 to fight
deregulation in California's natural gas utility industry.
  He attended the University of California at Riverside, and was elected student body president for

1967-68.

  Geoffrey E Brown

  Geoffrey F. Brown was appointed to the California Public Utilities Commission by
Governor Davis in January 2001.
  Born in San Francisco, Commissioner Brown graduated from the University of
California at Berkeley 1964, and San Francisco Law School in 1970.
  Commissioner Brown was admitted to the Bar in January 1971 and practiced with
his father until joining the San Francisco Public Defender's Office in October of 1971.
Brown was elected as the Public Defender for the City and County of San Francisco
in 1978. He was reelected to this position in 1982, 1986, 1990, 1994 and 1998. Brown
also served as Chief Executive Officer of a public law firm that handled legal representation
of more than 20,000 people each year. In addition, Brown was an adjunct professor of law at Golden Gate
University Law School and the New College of California.

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EXH009-00366


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  CpUC
  Organization

PRESIDENT AND FOUR COMMISSIONERS

Office of Ratepayer Advocates	Executive Office
	Administrative Law Judges
Industry Divisions	Consumer Services/Enforcement
	Strategic Planning
Energy	
	Legal Division
Telecommunications	
	Public Advisor
Water	
	Communications Office
Rail & Carriers	

Information and Management Scrviccs

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EXH009-00367


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CPUC

  .~7
r

Organization

Commissioners make all final decisions. They are supported in their work by a staff of economists, engineers,
auditors, investigators, administrative law judges, accountants, lawyers, and safety and transportation specialists,
and support personnel.

The -CPUC is organized into industry divisions, an enforcement division, and a strategic planning group. The
Office of Ratepayer Advocates is an advocacy arm of the CPUC established by the Public Utilities Code to
r~.prescnt consumers in CPUC proceedings. The CPUC Public Advisor assists the public in participating in
Commission proceedings, and in resolving complaints against utilities.

(PUC headquarters is in San Francisco, and it has offices in Los Angeles, Sacramento and San Diego.

Executive Office

  The Executive Office is accountable to the Commission for assuring implementation of its decisions and
policies, and works in conjunction with Commissioners, Directors and staff to coordinate and facilitate the
handling of procedural matters and the internal operations of the Commission

Legal Division

  The Legal Division advises Commissioners, advisors and agency staff Staff attorneys review filings by public
utilities, appear in a wide variety of proceedings before the Commission and represent the Commission and the
State of California before state and federal courts and agencies.

Administrative Law, judge Division

  The Administrative Law Judge (ALJ) Division supports the Commission's decision-making process by
processing formal filings, facilitating alternative dispute resolution, conducting hearings, developing an adminis-
Lrative record, and preparing and coordinating the agendas for the Commission's biweekly decision-making
meetings.

Strategic Planning

  Strategic Planning assists the Commission in analyzing problems and adapting regulatory policies to meet
the needs of California's citizens and regulated industries by identifying important regulatory, industry or
organizational problems not addressed by other divisions, and reviewing industry trends and developments and
associated regulatory impacts.

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Energy Division

  The Energy Division advises the Commission whether to approve, deny, or modify all electric and natural
gas utility requests not assigned for hearing, oversees compliance of orders, provides technical assistance,
and advises and informs the Commission about major developments affecting energy utilities. It assists the
(')mmission in developing rules for and monitoring of competition, and economic regulation of remaining
monopoly services, and in implementing regulatory objectives and programs for California's electricity and
natural gas industries - with protection for consumers and those with special needs, assurance of continued safe,
reliable service, and consideration of environmental issues.

Telecommunications Division

  The Telecommunications Division assists the Commission in developing and implementing policies and
procedures to facilitate competition, when in the interest of consumers, in all telecommunications markets,
  and addressing regulatory changes required by state and federal legislation. Once telecommunications markets
are frilly competitive, with necessary consumer protections, its ongoing role will be to assist the Commission
in ensuring: the provision of telecommunications networks where there are many competing service providers
using a variety of technologies; ensuring fair, affordable, universal access to necessary. services, with special
emphasis on preserving universal access; developing clear rules and regulatory tools to allow flexibility without
compromising due process; and reducing or eliminating burdensome regulation.

Water Division

  The Water industry for the foreseeable future is likely to remain a natural monopoly. The Water Division
investigates rate increase requests from the 150 smaller (less than 10,000 service connections) investor-owned
ww ater and sewer service utilities, tracks compliance with Commission orders and assists the public in resolving
technical problems with water and sewer companies. Auditors assigned to the Water Division also perform
accounting, auditing, and financial analysis as requested by other industry divisions.

  Rail Safety and Carriers Division

  The Rail Safety and Carriers Division assists the Commission in promoting public safety and protecting
consumers through its regulatory authority over railroads and light rail transit systems, motor passenger carriers,
vessel carriers, and household goods carriers. The Division ensures they operate safely, legally, and in the
  public interest. It also maintains liability insurance filings of for-hire water vessels and commercial air carriers
operating only in California, and takes appropriate enforcement action against passenger carriers when they
  c ngage in unfair or illegal business practices harmful to consumers, and oversees railroad and light rail transit
system safety and operation and maintenance by reviewing safety plans, conducting safety inspections, and
investigating accidents.

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CPUC

Organization

Consumer Services

  The Consumer Services/ Enforcement Division assists the Commission in developing and enforcing consumer
protection rules in all regulated industries, facilitating consumer awareness in competitive markets by providing
information and education consumers need to make informed choices regarding competing service providers,
and alerting the Commission to consumer problems it needs to prevent or address. The Division also oversees
consumer education programs.

  The Division's Consumer Affairs Branch answers general questions about utility services and helps consumers
resolve informal complaints about utility service or unfair utility practices, and reports trends in consumer issues
and complaints to the Commission for possible action. The Utilities Safety Branch oversees the safety of and
inspects electric, propane, and natural gas systems to ensure that these systems operate safely. The Enforcement
Branch investigates utility practices for compliance with applicable tariffs, rules, and statutes, and provides
advocacy support on a selective basis for consumers filing formal complaints.

Public Advisor

  The Public Advisor's office provides information and assistance to people who want to participate in
Commission proceedings or who wish to file formal complaints regarding utility service. It also organizes public
participation hearings on key Commission proceedings around the State so that citizens can express their opinions
on issues of interest in their communities. In addition, Outreach Officers in Los Angeles and San Diego provide
public; community, and local government access to information about CPUC services and programs.

Information and Management Services Division

Time Information and Management Services Division integrates and facilitates CPUC employee and external
tirakeholder access to Commission information and documents, maintains and improves the Commission's
technological information resources, and provides administrative, fiscal and budget services to CPUC manage-
ment.

Dice of Ratepayer Advocates

  The Office of Ratepaycr Advocates (ORA) independently participates in Commission proceedings, workshops
and other forums with significant dollar impact on consumers and that address consumer protection issues,
development of fair rules for competition, service quality, rate levels, rate of return, and other significant policy
issues. ORA's mission, as defined by Senate Bill 960 in 1996 and embodied in Public Utilities Code 309.5, is to
"obtain the lowest possible rate for service consistent with reliable and safe service levels."

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  CPUC

  During 2000-2001, assistance to the public was principally provided by the Consumer Affairs Branch (CAB) in
the Consumer Services Division and by the Office of the Public Advisor in the CPUC Executive Office. The
events of 2000-2001 that are commonly called "the energy crisis" had major impacts on the workload of both
offices. Unprecedented numbers of written, electronic and telephone communications were received regarding
specific events in the crisis as well as general concerns about rising utility rates, customer service and a host of
policy; issues before the Commission.

  The Consumer Affairs Branch (CAB) handles specific complaints from residents and businesses about utility
service or billing. Representatives work with the consumers and the utilities to resolve disputes informally.
  The 2000-2001 period saw a large increase in consumer complaints relating to telecommunications and energy
utility services and billing as a result of energy deregulation and the recent proliferation of telecommunication
providers.

CAB solves over 90 percent of complaints informally. If, however, a customer is not satisfied with the result,
a formal complaint may be filed with the Commission. The Office of the Public Advisor provides procedural
assistance to customers who wish to file a formal complaint, which is then heard by an Administrative Law
Judge.

The Public Advisor's Office was created by legislation specifically to assist the public to participate in Commission
proceedings both through the formal complaint process and also as intervenors (parties) in Commission proceed-
ings. As such, it provides "The Guide to Public Participation" as well as staff assistance to individuals, ad
hoc groups, and established organizations who need help with procedural matters involved in participating
effectively.

  Over the years, the Public Advisor's Office, both in San Francisco and Los Angeles, has become the main point of
contact for consumers who need information on a Aide variety of subjects or who wish to register their opinion or
concerns with confidence that the Commissioners will be informed of their communication. During 2000-2001,
there were numerous periods when hundreds of calls, cards, emails or letters would be received in a day or a week
in the Public Advisor's Office on controversial issues such as the rate design, the rate spike in the San Diego Gas
& Electric service territory, or on other issues such as baseline. The Public Advisor's Office would obtain accurate
information from the relevant CPUC divisions, respond to the public as appropriate, keep count of form letter
communications and circulate the individual communications and totals of form letters to the Commissioners
  and their staffs on a regular basis. Those communications would then be forwarded to Central Files where they
became part of the permanent record of the related proceeding.

Another important responsibility of the Public Advisor's Office is to assist in organizing and running the
Public Participation Hearings (PPH), which are scheduled in local communities in connection with Commission
proceedings. Working with the Administrative Law Judge Division, CPUC technical staff and local communities,
the Public Advisor helps identify the most accessible locations and serves as on site staff to assist the public in
signing up to speaks at the hearings. Over 65 PPHs were held around the state during this period.

The 2000-2001 year was unprecedented in its challenges to the CPUC branches charged with assisting the public
and receiving and disseminating their comments, concerns and complaints in response to Commission actions
and to the headlines in the media.

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Community Outreach and Consumer Assistance

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  PUCc: -_
CC
  Community Outreach and Consumer Assistance

In meeting these challenges, the Consumer Affairs Branch, the Public Advisor's Office and the Public Informa-
tion Office have worked together successfully as the fiscal year ended to improve internal communication,
improve the quality and efficiency of responses and solutions, streamline public procedures, upgrade the
consumer portion of the CPUC website and build a strong team committed to helping the public in the best
possible ways. As a result of this experience, the Commission is planning to join the three offices together
in a new Communications Division signifying a strong CPUC commitment to responsiveness and assistance
to the citizens of California.

	2000
2001
	-

Consumer Information and Education

 The CPUC website provides information about CPUC programs and services available to the public. In
FY 2000-2001, the average number of visitors to the site was 2,500 per day. A comprehensive program to
update the Consumer Help section was undertaken in the fiscal year. Improvements in ease of access and
accuracy of information were immediately noticeable and are continuing.

 Electric Education Trust: Grants totaling $8.5 million have been awarded to 113 community-based
organizations statewide to provide consumer information on electric services, energy conservation, and low-
income customer discount programs. Grants totaling $400,000 were provided to local governments for
  the same purpose.

   CPUC outreach to community-based organizations and constituency groups is done in several languages,
and the CPUC has non-English-language and TTY services on consumer help lines and at public participa-
tion hearings.

   The CPUC Outreach Officers of the Public Advisor's Office, located in Los Angeles and San Diego, spoke
to dozens of organizations during 2000-2001, disseminating basic consumer information, explaining issues
relating to the energy crisis and assisting local and state government representatives with information. The
Outreach Officer in Los Angeles also prepared many consumer oriented handouts for CPUC staff to use
when meeting with the public

The Commission is an active participant in Operation Lifesaver, a non-profit educational program dedicated
to reducing and eliminating trespasser casualties on railroad right of way and accidents at highway railroad
grade crossings. The Commission's commitment to Operation Lifesaver remains strong through both
leadership and partnership. During the fiscal year the Commission appointed a full time Operation Lifesaver
coordinator to analyze data to determine hazardous locations and then marshal resources from within and
outside the agency to educate civic groups, schools, bus and truck drivers, and law enforcement personnel.
This leadership has melded the Commission commitment with that of 145 active presenters in California.
From July 2000 through June 2001, the combined effort resulted in 2,608 educational presentations to
201,000 recipients in the State.
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  CPUC
  Community Outreach and Consumer Assistance
Answering Consumer Questions and Resolving Complaints

 140,000 utility consumers phoned the CPUC with questions or concerns. Serious concerns were registered
as complaints, more than 47,000 of which were resolved, resulting in $2.2 million in utility bill adjustments
for customers.

 1,188 complaints were received from customers of household goods and passenger carriers of which 1,131
were closed, resulting in refunds of $265,200.

Assisting Public Participation in CPUC Proceedings

The Commission awards compensation to members of the public who participate in and contribute
substantively to CPUC decisions. In the fiscal year, the Commission awarded $2,672,860 in intervenor
compensation; it has awarded a total of $19.2 million over the past 20 years

Hearing Public Comment

 The CPUC, through the Office of the Public Advisor, solicited public ideas and comments on current energy
and telecommunications issues at 19 problem-solving sessions across the state in 2000-2001.

 CPUC Commissioners and staff participated in 20 Town Meetings statewide, which were sponsored by state
legislators, local government agencies, and civic organizations, dealing principally with energy issues.

 The Commission has several Advisory Boards composed of members representing consumers, utilities, and
community-based organizations, including: The Electric Education Trust Committee, Universal Lifeline
Telephone Service Administrative Committee, and the Deaf and Disabled Telephone Program Administrative
Committee. The purpose of these boards is to give advice to CPUC staff about these public program
operations.

 The Public Advisor's Office of the CPUC organized 65 Public Participation Hearings throughout the state
to enable individuals and groups to offer their opinion on the record about specific issues being addressed
by the Commission.

 The Public Advisor's Office functions as the Commission clearinghouse for citizen questions, opinions,
protests and complaints on issues before the Commission. The Public Advisor's Office responded to an
average of 1,000 phone calls and 2,500 emails and letters every month from consumers with questions,
protests, and complaints about issues before the Commission.

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I Regulatory Achievements

Energy

Fiscal Year 2000-2001 saw the Commission taking aggressive action to help the state through the worst
electricity crisis in its history. Due to actions by wholesale generators and providers of wholesale power,
California electricity consumers were hit with blackouts, unprecedented price increases, damage to the economy,
and great uncertainty about California's energy future. The Commission stepped up to the plate, protecting
utility operational health within the constraints of the law, protecting low-income customers, implementing new
energy efficiency measures and voluntary interruption programs to keep demand down, investigating wholesale
generators, inspecting plants taken out of service, recommending new transmission investments, ensuring an
orderly transition to the Department of Water Resources' (DWR) taking responsibility for buying power for
utility customers, and representing California's interests in key Federal regulatory forums.

The Commission continued its commitment to ensuring a healthy natural gas infrastructure providing service
at reasonable rates.

  tM
  . Electricity
Priorities
L-- Reduce California Electricity Rates and Increase System

  0 Setting Reasonable Rates and Protecting Consumers
0 Energy Efficiency Programs and Incentives
  o Improving System Reliability and Adding New Power Supplies
0 Promoting Utility Financial Integrity

F Industry Overview

  o 10,228,448 Customers
$16,781,152,000 in Revenue
  o 33,347 Miles of Transmission Lines
o: 162,768 Miles of Distribution Lines

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Regulatory Achievements

Responding to the Immediate Crisis

  2000-2001
61W.L_ -.00A

Wholesale electricity prices rose drastically throughout the summer of 2000 and into the fall. Because utility rates
continued to be frozen under the restructuring legislation passed in 1996, utilities were collecting far less in rates
than they were spending to buy power to keep the lights on. The Commission took a number of steps within the
constraints of the law to keep the utilities operating.

 Granted electric utilities long-term contract authority August 2000

  Beginning in 1999, the Commission consistently gave rapid approval to the utilities' participation in long-
term markets at the Power Exchange, to hedge the risks of relying on spot prices. When the wholesale
market began to show signs of manipulation and price spikes, Pacific Gas & Electric (PG&E) and Southern
California Edison filed on July 21, 2000 emergency motions for authority to enter into long-term bilateral
contracts outside the PX. The Commission granted the authority less than two weeks later, on August
  3. San Diego Gas & Electric (SDG&E) followed suit, and received authority to sign long-term bilateral .
contracts in September. The approvals carried with them the need for the utilities to submit to a standard
prudency review after contracting.

 Rate increases

Wholesale electricity prices rose steadily throughout the second half of 2000, putting increasing strain on
utility financial health and ability to serve. In December 2000, the Federal Energy Regulatory Commission
(FERC) unexpectedly removed wholesale price caps, causing prices to soar again and putting the utilities, still
under a legislated rate freeze, in a financially untenable spot. The Commission took immediate action, raising
prices for the two largest utilities by a temporary one cent per kilowatt-hour while conducting a thorough
financial audit of the utilities, and asking parties for legal analyses of the Commission's ability under the law to
raise rates still higher to cover the skyrocketing costs.

On March 27, 2001, after public hearings and legal briefing, the Commission again raised rates for customers of
PG&E and So Cal Edison, by an unprecedented average three cents per kilowatt-hour, making total rate increases
on average for the first three months of 2001 almost 40%. Mindful that such unprecedented rate increases would
damage the economy and impose hardship on low-income customers especially, the Commission exempted such
customers from the emergency rate increases. The Legislature had already exempted from any rate increases (after
January 7, 2001) residential usage up to 130% of Baseline, the quantity of gas and electricity which is necessary to
supply a significant portion of the needs of the average residential customer.

The rate increases hit business and agriculture hard, with impacts on the California economy that will be felt
for years to come.

  On April 8, 2001, after the Commission had already raised rates an average four cents, PG&E filed in federal
bankruptcy court for Chapter 11 protection.

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  Regulatory Achievements `
Implementing New Energy Efficiency and Demand-Reduction measures

The Commission continued its commitment to energy efficiency, allocating $384 million per year to programs
benefiting both large and small customers.

  Energy Efficiency

The Summer Initiative used unspent energy efficiency funding from prior years to create seven new statewide
programs and eight local projects. Appliance recycling, swimming pool efficiency programs, LED replacement
lamps for traffic signals and improvements in UC/USC campus energy usage were several examples of this
program that yielded 339 GWH of electricity, 448 million therms of natural gas and 160 MW of peak
demand.

  Expanded energy efficiency funding provided by the first extraordinary session of the legislature in 2001
resulted in an additional $97 million for purchase of energy efficient equipments and retirement of inefficient
appliances, and replacement of low-efficiency lighting systems. The Commission allocated these funds to
expand existing utility programs and through pilot programs to non-utilities such as the cities of San Francisco
and Berkeley to improve lighting systems in small retail and commercial buildings in a neighborhood-based
approach.

 Interruptible Programs

  In October 2000, the Commission opened a rulemaking to examine and coordinate the utilities' interruptible
programs, which compensate customers who are willing to lower their demand at times when the system
  is approaching its maximum capacity, especially for the summer of 2001. Phase I authorized three new
interruptible programs (Base Interruptible Program, Voluntary Demand Response Program and Optional
Binding Mandatory Curtailment) to augment the utilities' existing programs. A few months later, the Commis-
sion authorized two more programs (Scheduled Load Reduction Program and Rolling Blackout Reduction
Program) to further increase the utilities' array of programs available for customers. By end of June 2001, the
utilities had approximately 1,474 MWs of curtailable load from these programs.

In May 2001 the Commission added a new category of essential customers (Category M) to those customers who
are already exempt from rotating outages (hospitals, police, prisons, national defense agencies, etc.). To qualify
for Category M, customers were required to demonstrate to the Commission that their inclusion in a rotating
outage presents unacceptable jeopardy or imminent danger to public health and safety. The Commission granted
Category M status to 405 out of 9,500 applicants. Category M status will expire by September 2003.
Recommending New Transmission Investments

In March 2001, the Commission submitted to the Legislature a report titled "Relieving Transmission Constraints:
An Overview in Response to AB 970". The report identified 51 existing constraints on California's transmission
and distribution, and an additional 107 constraints that would affect the system's reliability from 2002 to 2005.
The report recommended that utilities complete 31 projects in 2001, costing $120 million, to address 38 of the 51
constraints and raise overall capacity by 3,000 MW.

In March 2001 the Commission directed PG&E to propose ways to upgrade the Path 15 transmission corridor in
central California and evaluate the environmental impacts.

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  Regulatory Achievements

  Facilitating DWR's Power Purchases in Behalf of Utility Customers

Beginning in February 2001, the Commission helped implement AB 1X 1, which permitted the Department
of Water Resources to buy power and provide service to the customers of regulated utilities. The Commission
established interim mechanisms to allow the utilities to deliver the DWR power and bill customers for DWR.

Representing California in Key Federal Forums

In September 2000, the Commission held hearings in San Diego to address skyrocketing electricity prices - the
first obvious manifestation of what would grow into the worst crisis in the history of the California electricity
industry. At the Commission's urging, both the FERC and the US Congress also held hearings in San Diego.
Throughout the year, the Commission participated actively in the FERC's investigation of wholesale prices in
California.

  tai v
  Natural Gas
4

  ~- Priorities

  c Reasonable Rates and Good Service
0 Adequate Natural Gas Supply
  o Prevent Market Abuse
  0 Promote Utility Financial Integrity
  0 Improve the Natural Gas Industry Market Structure

F- Industry Overview

  8,731,000 Customers
c $5,134,296,000 in Revenue
11,005 Miles of Transmission Lines
90,452 Miles of Distribution Lines

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 The CPUC reviewed 250 gas-related advice letters in 2000-2001. In April 2000 the Commission reduced
rates for SoCalGas and SDG&E customers by $200 million, equalizing gas rates to encourage investment
and improve efficiency in the southern California market.

 In September 2000, the CPUC approved a settlement between its Consumer Services Division and
SoCalGas related to the accuracy of information provided by the Company to the CPUC. The CPUC
required SoCalGas to make a payment of $3.5 million to the State's General Fund

 In January 2001, the Commission issued a report that evaluated the SoCalGas Company Gas Cost Incentive
Mechanism, which provides SoCalGas with an incentive to purchase gas at low cost. A decision is pending
on whether to continue the mechanism.

+ In May 2001, the CPUC found that SDG&E had overcharged small gas customers by $1.7 million, and
ordered that this money be returned to those customers.

  Adequate Natural Gas Supply and Infrastructure

   In July 2000, the Commission completed its approval of Lodi Gas Storage, a new gas storage field in
California. Operation is expected to begin in late 2001.

   In November 2000, the CPUC began an investigation into the adequacy of SoCalGas' and SDG&E's gas
transmission systems to serve customers. A CPUC decision in this proceeding is expected in 2002.

 In January 2001, to ensure PG&E's ability to purchase gas for delivery to its small gas customers, the
Commission authorized the utility to provide additional financial security to its own gas suppliers.

 The CPUC worked with SoCalGas to add 70 million cubic feet per day (MMcfd) of transmission capacity to
the SDG&E system in early 2001, and to begin work on 375 MMcfd of additional SoCalGas transmission
capacity, which was completed in early 2002.

 In April 2001, the CPUC held a major workshop on the adequacy of natural gas infrastructure in California.
The Commission is in the process of preparing a report to the Power Authority and Legislature, the
California's gas infrastructure needs which will assess demand over the next five years.

 In June 2001, the CPUC approved the closure of the SoCalGas Montebello Gas Storage Field. This storage
field was not needed and closing it added 50 Mmcfdgas supply to the SoCal Gas supply system and resulted
in a $44 million rate reduction for SoCalGas customers.

 In June 2001, the Commission approved capacity upgrades to SoCalGas' Aliso Canyon and La Goleta
Storage Fields, which will allow withdrawal of inexpensive cushion gas and produce significant cost savings.

 The CPUC approved an energy efficiency program with $62 million devoted to enhancing natural gas
efficiency.
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I Regulatory Achievements

Prevent Market Abuse

  P h.

  At the FERC, the CPUC is litigating a complaint against El Paso Natural Gas and its affiliates, alleging manipula-
tion of natural gas prices in California from March 1, 2000 through May 31, 2001. This price manipulation cost
Californian's at least $3.6 billion in higher gas cost prices, which in turn contributed to unreasonable wholesale
electricity prices. The FERC is expected to issue its final decision in this proceeding in 2002.

Improve the Natural Gas Industry Market Structure

 In the summer and fall of 2000, the CPUC completed its investigation into proposed options for
improving the gas market structure in southern California. The CPUC is expected to issue its final
decision on the revised market structure in late 2001.

 In March 2001, the CPUC initiated a proceeding to determine if the gas curtailment rules for PG&E
and SoCalGas were appropriate. The CPUC later found that at that time no changes to those rules were
needed. In February and May 2000, as part of its comprehensive investigation into improving the natural
gas industry structure and rules in California, the Commission approved measures to make PG&E's gas
transmission system more reliable and easier to use by its customers, and to allow for more competitive
opportunities in gas billing and metering.

 In June 2001, the CPUC adopted revised gas curtailment rules for SDG&E, to assure that SDG&E's
largest customers would be the first affected by any supply shortage.

 For 2001, the Commission adopted a "peaking rate" for SoCalGas, eliminating
the residual load service (RLS) tariff. The RLS tariff was viewed as being anti-
competitive towards new interstate pipelines.

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X
Regulatory Achievements

  Telecommunications
During 2000 and 2001, the Commission focused on consumer protections in a competitive telecom-
munications industry as it continues to examine policies that promote the development of competition
beneficial to consumers in California in order to promote lower prices, innovation and improved
service quality.

The number of carriers in the local markets continued to expand during the 2000/2001 period
although the economic downturn of mid-2001 saw many carriers merging or going out of business.
The wireless industry accounted for the largest growth area in the telecommunications markets.
Customer demand for wireless services, new market entrants and numerous calling plans and options
have resulted in a 50% increase in wireless subscribership for the fiscal year.

  .11 1
s

  ~-- Priorities

o Consumer Rights
O Universal Service
o Reasonable Rates
o Area Codes Management
o Approve New Services and Facilitate Competition

F Industry Overview

  35,932,275 Access Lines
58,454,217 Numbers Assigned
o $14,447,394,931 in Revenue
C 1,821 Certified Carriers

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a",
Regulatory .21N Achievements

  2000-2001 Consumer Rights

In early 2000, the Commission issued a rulemaking proceeding to establish consumer rights and consumer
protection rules applicable to all telecommunications utilities. Consumer rights were identified as the right to:

   Clear and complete disclosure of the terms and conditions of service,
 Choice of service vendor,
   Privacy of personal information and intrusive communications technology,
 Public participation in public policy proceedings,
   Oversight and enforcement of consumer rights by state and federal regulators, and
 Accurate bills and the opportunity of redress.

After numerous public participation hearings and industry and party input the Commission is expected to adopt
interim rules in July 2001. A final decision is expected in 2002.

The Commission is nearing completion of a telecommunications Consumer's Bill of Rights, designed to address
the issues raised above.

The Commission helped ensure that consumers are able to make informed decisions when purchasing telecom-
munications products and services by establishing new rules for notifying customers when carriers increase rates
or withdraw service. The Commission also requires carriers with revenues greater than $10 million per year to
make their tariffs available on the Internet.

Universal Service

The Public Programs listed below assure low rates and telecommunications services for all Californians (PU
Code Sections 270-281). Public Programs have served more than 30 million Californians, funded 3.8 million
access lines, assisted 4,200 community-based organizations, provided 400,000 pieces of equipment, and regulated
255,000 public payphoncs. This year $820 million in funds support:

 California Teleconnect Fund (CTF) -The CTF program funds discounts for information-age technologies to
qualifying public schools, libraries, municipal and county-owned hospitals and community-based organizations
providing job search services. The fund is capped at $55 million per year.

Deaf and Disabled Telecommunications Program (DDTP) - The DDTP provides telecommunication
devices for the deaf, at no cost, to certified deaf and hearing-impaired telephone subscribers, to any school
or organizations representing the deaf or hearing-impaired and to state agencies having significant contact
with the public. It also funds third-party intervention, providing deaf and hearing-impaired residents 24-hour
access to the public switched telephone network. The DDTP program also provides specialized telecom-
munications equipment to consumers with hearing, vision, mobility, speech and cognitive disabilities.

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  Regulatory Achievements

   Payphone Service Providers Enforcement (PSPE) - The PSPE provides enforcement of payphone rules
through inspections of payphones throughout the state.

  The California High Cost Funds -A er B (CHCF A e B) - The high cost funds subsidize telecommunica-
tions carriers for providing service in high cost areas of the state where the rates for the service do not cover
the costs. The CHCF-A provides supplemental revenue to the small local exchange carriers and also helps
reduce the disparity between their rates and those of the larger carriers. The CHCF-B provides supplemental
revenue to the larger telecommunication carriers such as SBC, Verizon and other designated carriers of last
resort.

  Reasonable Rates

  The Commission began its first comprehensive regulatory audit of Pacific Bell since implementation of the
New Regulatory Framework in 1990. The audit scope included a review and evaluation of Pacific Bell and its
affiliate procedures, policies, and practices for 1997, 1998 and 1999 regulatory periods. At stake are potentially
hundreds of millions of dollars. The findings and recommendations of this audit, which is expected to be
completed in early 2002, will be submitted to the Commission in a future rulemaking.

Managing Area Codes

The CPUC continues to protect consumers from the cost and confusion of unnecessary implementation of
new, area codes by assuring efficient use of numbers by carriers (Public Utilities Code sections 7930-7943).
With the implementation of number pooling where carriers meet their number resource needs with thousands
blocks instead of whole prefixes composed of 10,000 number blocks, wire line carriers have largely meet their
numbering needs through donated thousands blocks. The FCC will require wireless carriers to number pool
next year.

Pooling has saved 4,520,000 numbers and 11 area codes, encouraged carriers to return 444 unused prefixes
in 2000 and 559 prefixes in 2001, and extended the life of 13 area codes previously designated for split.
From 1997-1999 13 new area codes were established. Commission policies have resulted in no new area
codes since 1999.

The Commission completed 8 area code number utilization studies and 1 area code utilization audit during
this fiscal year.

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I Regulatory Achievements

New Services and Competition

The CPUC manages entry and exit by competitive telecommunications companies into the market to protect
consumers, and assure the benefits of emerging technologies and services. This year the Commission approved
100 new service and feature offerings, and 900 interconnection agreements between local exchange carriers and
competitors to permit competitors access to the network so that they can provide new services. Even with these
successes, there are other challenges which the Commission is addressing:

+ Unbundled Network Elements - In response to applications filed in February 2001 by competitive local
exchange carriers (CLECs) to lower the rates of telephone network facilities that CLECs lease from Pacific Bell
for use to offer their own competitive services, the CPUC initiated a proceeding to investigate the CLECs'
requests. The Unbundled Network Elements (UNEs), as these leased network facilities are commonly called,
were established in 1999 by the Commission. In their applications, the CLECs contend that the underlying
costs for these UNEs have undergone significant reductions in recent years. As a result, the prices for these
UNEs should correspondingly be lowered. The CPUC announced the consolidation of these applications
into a single proceeding for the purpose of reexamining the costs of the loop and switching UNEs

 Pacific Bell's Long Distance Application - In July 1999, Pacific Bell filed a "Notice of Intent" with the
CPUC that it would seek approval under the Section 271 of the 1996 Federal Telecommunications Act
(Act) to offer long distance services. The Act provides that the FCC may grant such authority to an ILEC
when it has opened its monopoly local market such that its competitors have a fair opportunity to compete
in the market. Because a competitive local market will ensure that consumers will enjoy more choices of
service providers, features and prices, the CPUC is investigating Pacific Bell's 271 compliance and when
concluded will advise the FCC of it's findings. In parallel and concurrently, the CPUC is assessing Pacific
Bell's compliance with California PU Code 709.2, which set out four similar conditions that ensure California
consumers will benefit from fair competition in both the local and long distance telecommunications markets.
In determining whether Pacific Bell's request to provide long distance service is in the public interest, the
CPUC has:

Adopted a comprehensive set of performance measurements, standards and business procedures to
monitor Pacific's non-discriminatory provision of services to CLECs.

Adopted UNE rates.

 Concluded a "third-party" test of whether Pacific gives CLECs the same access to its customer and
operating databases and network systems that it provides to itself and its affiliates.

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Regulatory Achievements

Water

Regulated water utilities in California consist of two types: large, corporate run utilities and small, family-owned
systems, many of which have problems with service quality, water quality or both. Large water systems are
those which have 10,000 service connections or more. Small systems are less than this with many under 1,000
service connections.

In 2000-2001, the Commission enhanced its commitment to water and service quality by increasing its outreach
to small companies that have not come in for rate increases recently. This program provides staff to assist the
small utilities in determining if they need an increase in rates to maintain or improve quality and how much
that increase should be. A key part of this effort is the Commission working more closely with the California
Department of Health Services and county health agencies to identify and rectify water quality problems before
they happen. The Commission is also partnering with the National Regulatory Research Institute to use
sophisticated analytical techniques to identify troubled systems early and step in to provide solutions.

1 Priorities

  Reliable, Reasonably-priced Water Service
Safe Water Quality
  Adequate Water Supply

F Industry Overview

  OO 6.8 million Customers
  o; 149 Water and 9 Sewer utilities
0 20% of California drinking water
$800,000,000 in Revenue

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Regulatory Achievements

Reliable, Reasonably-priced Water Service

  2000-2001

   Protecting the Town of Keene. When the Union Pacific threatened to cut water off to the town of
Keene, a water stop on UP's route, the CPUC obtained an order from the Kern County Superior Court
requiring the railroad continue water service to the residents of Keene, including the National Farm
Workers Service Center, until some other entity can take over.

 The Commission sets rates following audits to assure they are reasonable (PU Code Section 314.5).
In 2000-2001 the CPUC processed 295 water and sewer service advice letters, 79 of which resulted
in rate increases.

 The CPUC assists utilities in obtaining loans from the state Safe Drinking Water Revolving Fund to
upgrade their systems. In 2000-2001, 3 utilities received loans.

  The CPUC determined through audits that some utilities receiving loans had diverted to other purposes
customer payments meant to repay State Drinking Water Act loans. The Commission issued three Orders
to Show Cause why these systems should not be turned over to a court-appointed receiver to assure that
customer rate payments arc properly used to repay the loans.

Safe Water Quality

  Donner Lake - One of the most visible instances of water and service quality problems took place near
the town of Truckee, at Donner Lake Water Company. The owner of this small system had been trying
for years to build a water treatment plant to filter lake water to service his customers. Due to easement
problems, the company had not been able to secure a location for the plant or easements for the pipelines
it required. In the meantime the facilities of the system, which were old to begin with, began to fail with
increasing frequency until, during the summer of 2000, parts of the system, at the highest elevations,
actually had no water at all. The California Department of Health Services imposed a "boil-water"
notice. The customers, irate at being told to boil their water, demanded an explanation.

During a series of public meetings the two state agencies and the water company had to answer to the
citizens for known delays in finding problems and improving the system. Additionally, a nearby water
district, which had refused to buy the system ten years earlier, now expressed an interest in taking over.
This district had adequate groundwater to service the Donner Lake customers, without the filtration
plant. Through coordination with the Commission and the company, the District filed to condemn
the system, and took over operation in early 2001. Although the sale has not been consummated, the
customers now have a safe, reliable supply of water.

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I Regulatory Achievements I

  3 11
MUM

Water Quality Investigation - In March of 1998, in response to numerous civil lawsuits filed
in Los Angeles and Sacramento alleging the drinking water delivered by water utilities caused
death and personal injury to customers, the Commission opened an investigation. In Novem-
ber of 2000 the investigation terminated with the determination that, after reviewing 25 years
of water quality data, all but one of the large regulated utilities were in compliance with Federal
and State drinking water standards

A major outcome was the determination by the CPUC, after hearing, that, pursuant to the provisions of
the Constitution and the Public Utilities Code, it has jurisdiction to regulate the service of water utilities
with respect to the health and safety of that service.

 Terrorism - The CPUC has a program to determine vulnerabilities of water utilities to terrorist attack.
In conjunction with the American Water Works Association and the National Association of Water
Companies, it is developing guidelines for regulated utilities, and monitor utility implementation of
the guidelines.

Water Supply

 California suffers droughts about every 10 years and is overdue for one. The CPUC has developed a
set of conservation guidelines for water utilities, with rules that can be invoked, at the request of a
utility and with Commission approval, to institute mandatory rationing. In response to the droughts
of 1976 and 1988, the Commission has instituted policies that have produced 17.5 - 26% conservation
by water utilities.

   The CPUC is reviewing pump efficiencies, revising efficiency standards in light of the energy crisis to
incorporate national best practices, and encouraging pumping during off-peak hours - the associated
anticipated annual savings are 48,000,000 kWh and $6.8 million.

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Regulatory Achievements

Transportation

The Commission's regulatory role in the transportation sector is to promote public safety by ensuring that
railroads and rail transit systems safely, legally, and in the public interest. The Commission is the state's lead
agency with respect to railroad and transit safety. In addition, the Commission is responsible for licensing
and registering motor carriers of passengers and household goods and acts to prevent the unlawful business
practices of these entities.

Railroad Safety

  In September 2000, the Commission published its "Annual Report of Railroad Accidents Occurring in
California, Calendar Year 1999". This report, a compilation of railroad and rail transit accidents/incidents
and casualty data in California reported by the railroads to the Federal Railroad Administration (FRA), transit
agencies and the Commission, was distributed to state legislators, railroads, cities, counties, libraries and other
safety' interested parties.

  2000-2001

Rail Inspections

By law the Commission is required to establish minimum standards to ensure the inspection of railroad
locomotives, equipment and facilities in major railroad yards not less frequently than every 180 days, and of all
branch and main line track at least once every 12 months. In the fiscal year, staff fulfilled the plan requirements
and also conducted significant inspections of other railroad items such as, 31,114 units of equipment and 9,790
miles of track. In addition, staff conducted 228 inspections of facilities that handle hazardous materials, 1,192
inspections related to railroad operating rules, and 3,446 inspections of signal and train control systems. The
Commission also handled 143 complaints from railroad employees and the general public.

Rail Accident Investigations

  During this period, California freight railroads operated 32.19 million train miles, an increase of 2.2% over the
previous period. A total of 494 train accidents involving passenger and freight trains were reported, resulting in
100 fatalities. This compares to 507 accidents and 111 fatalities reported in the previous period.

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  Regulatory Achievements

Significant accidents investigated by the Commission during the fiscal year included:

On August 11, 2000, at 11:50 p.m. at an intermodal container transfer facility at the Port of Los
Angeles Terminal Island. A Pacific Harbor Line train was shoving cars westward when its lead rail
car struck and killed a Burlington Northern Santa Fe Railroad (BNSF) brakeman, assigned to a local
road switcher. At the completion of the accident investigation and analysis, the Commission effected
changes to improve safety and prevent future accidents. These included having all switch crews operate
on one radio frequency, establishing job briefings, and establishing rules to protect employees when
making shoves.

   On November 4, 2000, a westbound Amtrak Surfliner train traveling at 60 mph derailed three cars at a
Moorpark private crossing. The train hit and demolished a northbound flatbed truck pulling a loaded
chipper trailer. The truck driver was killed, the truck passenger sustained serious head injuries, and
  28 Amtrak passengers sustained minor injuries. Following the accident, in conjunction with Operation
Lifesaver Inc., the Commission initiated a series of bilingual presentations to farm laborers on safety
procedures at such crossings. The Commission also analyzed visibility to motorists at the location and had
dialogue with the railroad to ensure safety improvements at the crossing.

   On December 7, 2000, at 1:45 a.m., Amtrak Coast Starlight operating from Seattle to Los Angeles
collided with a tank car near Black Butte. The Central Oregon and Pacific Railroad (COPR) had failed
to secure the tank car on a passing track. As a consequence, the tank car had rolled onto other standing
cars causing one to roll off its trucks onto the main line. Amtrak derailed two locomotives and three cars.
There were six injuries to passengers and two injuries to the crew. UPRR and COPR made a commitment
to the Commission to increase efficiency testing in the area.

   On March 25, 2001, near Layton, south of Fresno, a BNSF freight train derailed 26 cars, causing more
than $400,000 in damages to railroad equipment and structures. The accident was caused by a systemic
equipment defect, and BNSF ordered system-wide speed restrictions on such cars pending a repair recall
for its entire fleet of such equipment.

On May 5, 2001, an eastbound UPRR freight train derailed 17 cars while pulling into the siding at
Rowen (14 miles east of Bakersfield). The train's rear helper locomotive had shut down while inside a
prior tunnel (No. 8). Because of the track curvature and train car make-up, the weight of the stalled
locomotive caused the cars to derail and roll down an embankment. Damage was $550,000. The carrier
determined that a computer software failure was responsible for shutting down the helper power and
immediately corrected it.

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  Regulatory Achievements

Railroad Safety Assessments

In addition to accident investigations and routine inspection activity, the Commission safety assessments constitute
an important element of its overall safety program. The Commission uses a "system safety" approach when con-
ducting safety assessments, analyzing the underlying systemic causes of accidents and regulatory non-compliance.
Assessment teams often include staff from the FRA in a cooperative approach to railroad safety. Assessments
involved the UPRR, the BNSF, and other railroads and shippers, including the following:

  Mechanical Assessment, UPRR, Roseville Yard - In January 2001 Commission and FRA inspectors con-
ducted rail car inspections at UPRR's Roseville Yard as a follow-up to a 12-month audit that began in
January 2000. The team inspected a total of 1,068 cars and found 105 of those cars to be defective (9.83%
defect ratio), down from 1,841 inspected with 265 defective (14.9% defect ratio) in February of 2000.
This was a significant improvement in rail-car maintenance achieved by the railroad over the period of the
yearlong audit.

Track Assessment, BNSF, Southern California - Commission and FRA Track inspectors conducted an inspec-
tion on BNSF between San Bernardino and Los Angeles during the week of March 19th, 2001. The
purpose of this assessment was to evaluate the railroads compliance with their track inspection program
as well as federal regulations dealing with the Track Safety Standards. Inspectors identified 452 defective
conditions on 323 miles of mainline and yard tracks. The assessment team submitted four violations of
federal regulations relating to record keeping and compelled BNSF to issue 27 slow orders on portions of
track where inspectors identified defective conditions.

   MechanicalAssessment, BNSF, Barstow Yard - Commission and FRA Motive Power and Equipment inspec-
tors gathered at Barstow during the first week in April 2001 for a comprehensive mechanical audit of
BNSF. A total of 1,430 locomotives and cars were inspected, with 295 found defective (20.63% defect
ratio). BNSF was advised to develop an action plan to address the high defect ratio, and the commission
will follow-up with an assessment to evaluate progress and, if necessary, consider additional enforcement
action.

   Cajon Pass Train Ride Assessment, BNSF - Commission and FRA Operating Practices inspectors conducted
a train ride safety assessment over Cajon Pass on BNSF track on April 23-27, 2001. After traveling
over 980 miles, inspectors found general regulatory compliance, but 22 exceptions were noted concern-
ing railroad employees deviating from railroad rules or federal regulations. The Commission instructed
BNSF to take immediate corrective action to train their crews on correct operating, radio and inspection
procedures.

   Comprehensive Hazard Materials Safety Assessments - The Commission worked with the FRA and other
agencies in three comprehensive Hazardous Materials Safety assessments, as follows: (1) April 23-27,
shipments of trailers-on-flat-car (TOFC) and containers-on-flat car (COFC) were examined at Ports of San
Francisco, Oakland, and Richmond; (2) May 21-25, over 1,000 cars were inspected at BNSF, Barstow;
(3) June 25-29, TOFC/COFC shipments were inspected at the Intermodal Container Transfer Facility in
Carson. Inspectors identified exceptions during all three of these assessments relating to improper paper-
work, placarding requirements, packaging problems and improper train placement. As a result of the
inspections, the Commission trained 11 new shippers on state and federal regulatory requirements follow-
ing a Hazardous Materials Shippers Training Needs Assessment.

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  Regulatory Achievements

   Locomotive Inspections, UPRR, Taylor Yard - On June 4-7, Commission and FRA Motive Power and Equip-
ment inspectors conducted inspections to assess compliance with locomotive safety standards at UPRR's
Taylor Yard in Los Angeles. The inspections disclosed 26 defective locomotives out of 33 inspected (71%
defect ratio). Since the initial team inspection, Commission and FRA staff conducted training sessions and
UPRR has developed a corrective action plan. Subsequent routine field inspections have not developed
satisfactory improvement and Commission and FRA inspectors are planning a follow-up assessment to
evaluate progress and, possible additional enforcement action.

Railroad Local Safety Hazard Sites

In 1997, in Decision 97-09-45, the Commission adopted local safety hazard site rules pursuant to Sections
765.5, 7711, and 7712 of the Public Utilities Code. These rules include requirements for track-train dynamics
(the cause of the Dunsmuir derailment), track standards, trackside defect detectors, site-specific training, train
securement, whistleblower protection, and end-of-train braking devices.

BNSF and UPRR challenged the Commissions decision in United States District Court, alleging that federal
statutes and regulations preempt the Commission's jurisdiction.

On July 20, 2000, the Court issued a ruling affirming that at least one of the sites identified in Commission
Decision 97-09-045 qualified as a local safety hazard site. Several of the Commission's rules could also apply to
other sites to prevent accidents and were not otherwise preempted under federal law. A few of the Commission's
key rules upheld by the court include:

  Rules Compliance: The Commission may require railroads to comply with their own train make-up
rules at certain identified sites.

   Track Train Dynamic (TTD) Performance Standards: The Commission's statistical and multi-faceted
methodology used to identify local safety hazard sites is sufficient. States need not prove that sites are
"unique," but they may identify sites even though it would be possible to address the hazard with a
national uniform standard.

The railroads have appealed the district court's decision and have requested that portions of the local safety
hazard site regulations affirmed by the district court be overturned. The matter is pending.

Federal Proceedings

The Commission continued to represent the state in ongoing federal rail safety related proceedings and was
actively involved in the FRA's Power Brake rulemaking in previous years. FRA issued its final rule in Spring
2001. that incorporated many of the Commission's recommendations, including devices to control emergency
braking situations on steep grades.

The Commission also filed comments in Surface Transportation Board (Board) Ex Parte 582 (Sub-No.1) "Major
Rail Consolidation Procedures." In this rulemaking proceeding, the Board is considering establishing new criteria
to evaluate proposed mergers between large carriers. In its comments, the Commission recommended that the
Board require merger applicants to adequately determine the full extent of any safety implications associated with
the merger, including those that may arise if the merged carrier will operate in a foreign country and possibly
outside the reach of federal and state safety authorities.
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  Re. ulator. Achievements

Rail/Highway Crossings

  _143

The Commission authorizes construction of new rail/highway crossings, closure of unnecessary crossings, and
construction of underpasses or overheads at dangerous crossings. There are over 50 railroad corporations using
over 10,000 public grade crossings located within 52 counties and 400 cities in California.

The Commission administers the grade crossing program by performing diagnostics reviews of all crossing-
related proposals, inspecting the design features of existing crossings, and recommending improvements at
existing and proposed crossings. To effectively monitor each crossing in California, the Commission maintains
several computer databases describing the design and safety characteristics and accident-related data pertaining
to each crossing. The accident data is evaluated on an annual basis to determine which crossings may be unsafe
and are in need of improvement. To help prevent the number of crossing-related accidents in California, the
Commission seeks the implementation of new technologies designed to enhance crossing safety.

The Commission reviewed over 120 applications during the fiscal year 2000-2001.

Section 130 Program - This program provides federal money for improvements to existing at-grade crossings
under Title 23 United States Code, Section 130 (23 U.S.C. 130). The program is a cooperative effort
between the Federal Highway Administration, California Department of Transportation (Caltrans), and the
Commission. Grade crossing improvements funded under the program include crossing gates, lights, bells,
and other warning devices. During fiscal year 2000/2001, Caltrans funded $10 million for local grade
crossing improvements and $5 million for state highway grade crossing projects.

 Grade Separation Program - Pursuant to federal Streets and Highways (S&H) Code Section 2452, the
Commission furnished a priority list for grade separation projects eligible for funding to the California
Transportation Commission (CTC) and Caltrans on July 1, 2001. The priority list is based on nominations
  submitted by cities, counties, the League of California Cities, the County Boards of Supervisors, Caltrans, or
any railroad company operating within the state. Projects for (1) grade separation of existing or proposed
crossings of city streets, county roads, or state highways, (2) grade crossings in need of elimination or
removal or relocation of streets or railroad tracks, or (3) existing separations in need of alteration or
reconstruction are eligible for funding. Funding for each project is limited to $5 million. The total amount
of funding available under the program is $15 million.

 Four-Quadrant Gate Systems - The Commission granted authority to the Los Angeles County
Metropolitan Transportation Authority (LACMTA) to implement an experimental four-quadrant
gate system. Installed at 124th Street in Los Angeles County (Los Angeles-Long Beach Blue Line),
the system has operated successfully for over two years. As a result, the Commission adopted the
four-quadrant gates system as a form of grade crossing protection. LACMTA, the Pasadena Gold
Line and the East Alameda Corridor plan to add four-quadrant gate systems at several grade crossings
within their territories.

  Automated Horn System - Senate Bill 1491 authorized the Commission to implement, as a pilot
program, the Automated Horn System (AHS). The AHS, or wayside horn, is designed to reduce
the adverse effects of train horn noise along approaches to grade crossings. The Commission, in
cooperation with several cities and railroads, is implementing the AHS at selected crossings and will
report the test findings to the Legislature by March 31, 2003.

Page 30

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EXH009-00391


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  Regulatory Achievements I

 In Roadway Warning Lights. The Commission is the lead agency on the Highway Railroad Crossing
Safety Experimental Project. As part of the project, the Commission will study the behavioral
characteristics of motorists who are alerted by in roadway warning lights. The Commission will
release its findings by March 2004.

Railroad Crossing Improvement Projects

 Alameda Corridor. The Alameda Corridor, a high-speed grade separated railroad freight track, will link
the Port of Los Angeles and Long Beach to railroad yards in Central Los Angeles. The Commission
worked with the Alameda Corridor Transportation Authority (ACTA) and local agencies to grade separate
several at-grade crossings to improve railroad access, motorist safety, traffic circulation and air quality.

Alameda Corridor East Project. The Commission oversaw the $912 million corridor-wide improvement
project, which covers a 35-mile traffic corridor through the San Gabriel Valley of Los Angeles County
between East Los Angeles and Pomona. The project, designed to relieve traffic congestions and safety
issues associated with an anticipated two-third increase in rail traffic between 1999 and 2019, will expand
global trade, increase commuter rail capacity, provide safety enhancement measures, and reduce motor
vehicle traffic.

Pasadena Blue Line Project. The Commission oversaw the two-phase Pasadena Blue Line (PBL)
project that will provide rail transit service from Los Angeles to eastern Los Angeles County. When
completed, the PBL will extend 37.7 miles from the Union Station in Downtown Los Angeles to
Claremont in eastern Los Angeles County. The Los Angeles County Metropolitan Transportation
Authority (LACMTA) will operate the trains and daily ridership is estimated at 30,000-38,000 opening
day, increasing to 68,000 by 2015.

Rail Transit Safety

The Commission is the designated oversight agency for the Federal Transit Administration's (FTA) safety
regulation of rail transit systems in California. The Commission's Rail Transit Safety staff review and approve the
system safety program plan of each rail transit agency, investigate accidents and hazardous conditions, approve
corrective action plans, and perform on-site triennial reviews of each rail transit agency's safety program. The
Commission carries out this program for the following rail transit agencies that come under FTA jurisdiction:

 Bay Area Rapid Transit District (BART)
 Los Angeles County Metropolitan Transportation Authority (LACMTA)
 Sacramento Regional Transit District (SRTD)
  San Diego Trolley, Inc. (SDTI)
 San Francisco Municipal Railway (SF MUNI)
 Santa Clara Valley Transportation Authority (SCVTA)

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  Regulatory Achievements

The Commission also provides safety oversight for Angel's Flight Funicular and for new systems being built at
the Port of Los Angeles (Red Car Line). In addition, the Commission will oversee safety for the San Francisco
International Airport (AirTrain People-Mover System).

During the past year the Commission performed triennial safety reviews of BART and LACMTA transit systems.
In addition, the Commission certified the safety of the SCVTA's Tasman East extension.

  Passenger/Household Goods Carriers

The Commission is responsible for licensing and registering various providers of for-hire and private transporta-
tion services within California.

F- Industry Overview

  c 230 Passenger Stage Corporations
0 3,100 Charter-Party Carriers
  2,300 Private Carriers of Passengers
0 20 Vessel Common Carriers
  c 250 For-Hire Vessel Operators
o 225 Commercial Air Operators
  c 1,100 Household Goods Carriers

The majority of the Commission's activities relate to the licensing of for-hire household goods and passenger
carriers. To obtain an operating permit or certificate, these carriers must file evidence of liability and workers'
compensation insurance, and meet safety, fitness and consumer protection standards. Permits and certificates are
subject to suspension and revocation if the carrier fails to maintain continuous insurance in effect or comply with
other statutory or Commission requirements:

Carrier Registration FY 2000/2001

Passenger Household Goods

Authorities issued (new) 1,017 122

Authorities issued (renewal) 766 --

Authority suspensions 3,659 914

Authority revocations 720 217

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rw
Consumer Protection and En orcement

The Commission facilitates consumer awareness in competitive markets by providing information and education
consumers need to make informed choices regarding competing service providers, monitors consumer problems
it needs to prevent or address, and investigates utility and transportation entities practices for compliance with
applicable tariffs, rules, and statutes.

In the utility area, which includes telecommunications and energy utilities, electric service providers, mobile
telephone service providers, and water utilities, the investigations focus primarily on violations that involve
consumer fraud and abuse, such as "slamming" (switching a customer from one telephone service provider
to another without the knowledge and consent of the customer) and "cramming" (placing charges on a
customer's phone bill for goods or services without the consent of the customer). In the transportation sector,
enforcement usually involves investigations into alleged violations by transportation entities, including household
goods movers, charter-party carriers of passengers and limousine operators.

Investigations may result in formal actions by the Commission, which issues Order Instituting Investigation
(011) and, where warranted, takes enforcement action such as suspension or revocation of operating authorities,
and ordering fines and restitution. Cases are sometimes referred to state and local prosecutors for further civil
or criminal prosecutions.

	2000
2001
	-

Utilities

   WorldCom, Inc., MCI WorldCom - On July 20, 2000, the California State Attorney General's Office and the
California Public Utilities Commission jointly filed a civil complaint (Case No. 313730) against WorldCom,
Inc. and MCI WorldCom Communications, Inc in the Superior Court of the State Of California, for the
County of San Francisco. This complaint alleges the following cause of actions: untrue or misleading
statements, unlawful, unfair or deceptive business practices, unauthorized switching of long distance and
local toll telephone service provider and the inclusion of unauthorized charges on a telephone subscribers'
bill. Other violations alleged in the complaint include the following: failure to adequately describe charges
on the telephone bill; failure to resolve consumer complaints within 30 days; failure to adequately staff the
toll free number for resolving disputes, and continuing to bill consumers for service after the service had
been terminated by the subscriber. Investigation of these companies is ongoing.

 Pacific Bell - Consumers had complained to the CPUC that Pacific Bell representatives consistently misled
them about least-cost service options. In October 2000, following its investigation, the CPUC levied a
$25 million fine against Pacific Bell for these abusive sales practices and ordered changes to Pacific Bell's
customer service practices.

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c :v a 1< 1S $
Consumer Protection and En orcement

   Qwest Communications Corporation (Qwest) and LCI International Telecommunications Corporation
(LCIT) - In November of 2000, the Commission issued an OII into the operations and practices
of Qwcst Communications in response to Pacific Bell having reported to the Commission that
  it had received 6,553 cramming complaints against Qwest for the years 1999 and 2000. The
Commission's investigation found that this was the largest reported number of cramming com-
plaints Pacific Bell reported for any company during these years. This investigation is currently
pending a final Commission decision.

 Coleman Enterprises & QAI - In December 2000, the Commission in Decision 00-12-050 adopted settle-
ment agreements wherein respondents Coleman Enterprises and QAI. agreed to pay $245,000 in restitu-
tion to 9,700 California customers and Coleman Enterprises agreed to surrender its certificate of public
convenience and necessity authorizing it to provide telephone interexchange services to California consum-
ers.

 Titan Communications - In March 2001, the Commission instituted an investigation into allegations made
by staff that Titan Communications obtained its Certificate of Public Convenience and Necessity to provide
interexchange long distance telephone service by making false statements on its application for operating
authority, investigation ongoing.

 Coral Communications - On April 19, 2001, the Commission found that Coral Communications crammed
consumers on a grand scale and fined the company $5.1 million. The Commission also ordered Coral
Communications and its billing aggregators to pay $4.6 million in restitution to California consumers.

 USPe C - In April 2001, the Commission found that USP&C failed to comply with its billing requirements
and ordered USP&C to pay a fine of $1.75 million, and also ordered all California local exchange carriers to
permanently cease providing billing and collections services to USP&C and its affiliates.

   Telmatch Telecommunications, Inc. - The Commission's investigation alleged that Telmatch Communications,
a long distance telephone service provider, billed over 120,000 California consumers for calling cards that
the consumers neither knowingly authorized nor received after the consumers filled out sweepstake entry
forms. A decision is pending.

   Accutel Communications, Inc. - The Commission's investigation alleged that Accutel Communications, a
long distance telephone service provider, billed 44,000 California consumers for services they had neither
authorized nor received. A decision is pending.

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EXH009-00395


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  Consumer Protection and En orcem entt

Transportation

Ace of Bace Moving Co. - Investigation disclosed that this household goods carrier did not provide the
required consumer protection information on moving documents; failed to provide all customers the written
Agreement for Service required as a consumer protection; did not respond to and resolve customers' claims
within the time required; failed to provide competent, trained and adequately supervised moving crews; held
hostage customers' belongings until customers paid amounts in excess of the original estimate; falsified an
insurance document; and refused to give Commission staff access to records. The case was submitted in June
2001 and a decision is expected in late 2001.

HafaAdai - Investigation disclosed that the carrier operated while his passenger carrier permit was revoked;
engaged a driver to drive a bus when that driver did not have a valid commercial driver's license; did not
enroll drivers in the required drug testing program and DMV Pull Notice program to ensure valid drivers'
licenses; failed to have workers' compensation insurance for employees; failed to report all bus equipment
to the Commission for required California Highway Patrol inspection; hired unlicensed sub-carriers; failed
to report all gross revenue and pay all fees to the Commission, and failed to register interstate authority
with the Commission. Additional investigation disclosed that the company, after the Commission issued
its formal investigation, continued its operations. The case was submitted in March 2001 and a decision
is expected in late 2001.

 Happy Tours - Investigation disclosed that the passenger carrier engaged bus drivers who did not have
  the required commercial driver's license; failed to have workers' compensation insurance for employees; and
did not enroll all drivers in a drug testing program and the DMV Pull Notice program to ensure valid
drivers' licenses. Information from California Highway Patrol Motor Carrier Inspectors disclosed that the
carrier represented an imminent safety risk to the public, including severe brake problems, leaking fuel tank,
exhaust leaks into bus passenger compartments, and passenger seats not bolted to the floor of the bus. A
decision is pending in this case.

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EXH009-00396


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i~a'~ M1
Utilities Safety

The Commission investigates gas and electric incidents that involve loss of life, serious injury, media attention,
fire, and property damage exceeding specific limits. The purpose of its investigations is to determine whether
violations of Commission orders contributed to the incident and whether to recommend changes in Commission
orders to prevent future incidents. Under contract with the US Department of Transportation, the Commission
inspects gas distribution facilities of utilities, master metered mobile home parks, and propane master tank
operators for compliance with federal regulations.

  2000-2001

Electric

The Commission inspects electric and communication utilities for compliance with itss general orders for
construction of overhead and underground lines. It investigates incidents meeting specified criteria such as
those involving injuries or significant property damage. It also investigates safety-related complaints from the
public. The Commission:

  0 investigated 287 electric incidents.

Gas

 performed 27 inspections of overhead electric lines and found 6,729 infractions.

 performed 7 inspections of underground electric lines and found 529 infractions.

 investigated 43 safety-related complaints from members of the public involving.

  The Commission inspects gas utilities for compliance with federal pipeline safety regulations. It also investigates
incidents meeting specified criteria such as release of gas and injury requiring overnight hospitalization and:

  0 investigated 73 gas incidents.

performed 33 inspections of gas utilities and found 120 infractions.

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EXH009-00397


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  Utilities Safety

Mobile Home Parks

The Commission inspects mastcr-metered mobile home parks, and propane master tank installations for compli-
ance with federal pipeline safety regulations. The Commission issues citations to master-metered mobile home
parks for refusal to correct infractions. In the fiscal year it:

 inspected 292 master-metered mobile home parks and found infractions at 251.

   cited 4 mobile home parks in 2000 and assessed $3,000 in fines.

   cited 19 mobile home parks in 2001 and assessed $14,250 in fines.

   inspected 77 propane master-tank operators and found infractions at 73.

Investigation of Merchant Power Plants

In mid-June 2000, California experienced its first rolling blackout, which resulted in shortage of electric supply
to citizens. In December, California again experienced rolling blackouts that occurred several times during the
month. Consequently, the Commission conducted over 900 field inspections of merchant power plants from
December 2000 to June 30, 2001 to ensure that scheduled and unscheduled (forced) outages reported by the
power plants were legitimate.

Playa del Rey Complaints

In August 2000, the Commission investigated three complaints from residents of Playa del Rey, located in
Southern California. The complainants allege that Southern California Gas Company's storage facilities and
reservoir were leaking natural gas into the atmosphere. In addition, the complainants alleged that abandoned
wells were leaking natural gas, creating a health and safety hazard to the residents and general public. The
three complaints have been consolidated into one complaint case. Another separate case involves the sale of land
containing abandoned wells by Southern California Gas Company and is being addressed by the Commission.

  Overhead Electric Lines/Underground Construction

On January 10, 2001, the Commission opened an OIR to revise Commission General Orders (GO) Numbers
95 and 128. GO 95, "Rules for Overhead Electric Line Construction" and GO 128, "Rules for Construction of
Underground Electric Supply and Communication Systems" formulate uniform requirements for overhead and
underground electric and communication line construction for the State of California.

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Office o Rate a er Advocates

The Office of Ratepayer Advocates (ORA) was created by the Legislature in 1985 (PU Code section 309.5)
to represent customers in CPUC proceedings with the goal of obtaining the lowest possible rates consistent
with safe, reliable service. Every year, ORA investigates 150 formal and 1200 informal rate increase (and other)
requests made by regulated companies.

The Director of ORA is the only CPUC division director appointed by the Governor, subject to confirmation,
and appears annually before the Legislature to report on ORA activities, staffing, and budget allocations. ORA
is part of the Commission for administrative purposes (budget, data processing, human resources) but develops
its policy positions independent from the Commission. ORA's $13 million budget is a separate line item in
the CPUC budget.

The Office of Ratepayer Advocates monitors regulated companies marketing practices to prevent abuses of
consumers, and to promote good service at fair rates. ORA provides analysis and advocacy to inform decision-
makers about the impacts of regulated company actions on consumers, and is often the only party representing
ratepayer interests in a number of proceedings. ORA recommendations have resulted in savings of over a billion
dollars in rates annually.

  2000-2001

Telecommunications

 ORA joined in charging Pacific Bell with using deceptive marketing practices and presented evidence of actual
sales staff conversations with customers that was key to the Commission's ordering the utility to stop the
unlawful activity and fining the company $25.5 million.

 ORA charged Pacific Bell with violating state laws, Commission orders, and its own tariff in deploying
prompted repeat dialing on residential customers' lines to interrupt the busy signal with an advertisement.
The Commission ordered the utility to remove the service or get customers' permission to continue to
play the prompt.

 Since the merger of SBC and Pacific Bell, Pacific Bell's residential customers have experienced longer
periods without dial tone waiting for the utility to make repairs. ORA charged that this deterioration
in service violated state laws and Commission orders. A pending Commission decision grants, in part,
ORA's complaint.

 The Commission agreed with ORA and required Roseville Telephone Company to share more than $4.2
million of 1998 and 1999 earnings with its customers.

 The Commission agreed with ORA to require Citizens Telephone to keep existing service guarantee rules
for new customers, freeze rates and charges for up to 5 years and extend telephone service to the previously
unserved Hoopa Valley Indian Tribe and the Yurok Indian Tribe reservations.

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  O ice o Rate a er Advocates

  ORA convinced the Commission to dismiss Pacific Bell's request for substantial rate increases for parts of
special services used by business and residential customers.

 ORA opposes Verizon's request to raise the monthly ceiling rate for residential and small business inside wire
repair services, maintaining that Verizon's market power over inside wire repair services remains dominant,
and that the company already recovers far more than its costs for these services.

Electricity
 ORA provided evidence to the Commission and called for a revenue requirement for utility-retained genera-
  tion $3.6-$7 billion lower than that PG&E proposed and $1.3 billion lower than SCE proposed.

 ORA challenged SDG&E's claim that contracts signed after December 1995 should only benefit sharehold-
ers. This is a $291 million issue now before the Commission.

 ORA was first to recommend that consumers who used less electricity should be exempted from recent
rate increases.

 ORA reviewed SDG&E's electricity procurement, and found that SDG&E had failed to adequately manage
risk. ORA and SDG&E have reached a settlement that would disallow $100 million of SDG&E's procure-

  ment costs.

 ORA's analysis of PG&E's $1.2 billion general rate case request provided the Commission with detailed
justification for a reduction of $800 million to that request.

 ORA recommended - and the Commission agreed - that PG&E should compensate customers for missed
service appointments.

Natural Gas

 ORA developed natural gas purchase incentive mechanisms to ensure that the utilities' procure gas supply at
the lowest possible cost. Ratepayer savings (based on comparisons to market based benchmarks) over the last
six to seven years have totaled: $46.7 million for SoCalGas customers, $10 million for SDG&E customers,
and $75 million for PG&E customers.

  ORA was one of the parties whose recommendation in the SoCalGas and SDG&E Biennial Cost Allocation
Proceedings was ultimately adopted by the Commission. It resolved various cost allocation issues and
resulted in a $204.2 million and $27.7 million reduction to gas rates on the SoCalGas and SDG&E systems,
respectively.

  ORA initiated a proposal, which resulted in a settlement adopted by the Commission to sell SoCalGas'
Montebello gas storage assets. This resulted in a one-time immediate annual rate reduction of $44.1 million,
with continuing annual savings of about $14 million.

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  Office o Ratepayer Advoca

 In winter 2000-2001, the Commission adopted ORA's proposal to protect SoCalGas residential and small
commercial gas ratepayers from tens of millions of dollars of potential rate increases by closing core
procurement to non-core customers.

 The Commission adopted ORA's proposed modifications to the methodology used to develop SDG&E's
core and non-core rates - this will reduce core procurement rates by $2 million annually.

Rate Relief and Program Assistance for Low-Income Customers

 ORA advocated that qualifying low-income customers should be exempt from electric rate increases resulting
from the energy crisis last winter, effectively increasing the standard 15% discount offered by the rate
assistance program to 22 - 59% for low-income customers, depending on their energy use.

 ORA supported efforts to involve low-income ratepayers in the CARE program. ORA also recommended,
and the Commission adopted, self-certification with random post-enrollment verification procedures to make
it easier to participate in the programs, and protested utility efforts that would have made it harder for these
customers to enroll in the programs.

 ORA advocated to ensure that low income energy efficiency (LIEE) programs were implemented in a fair
and cost effective way to ensure that resulting customer bill savings reduced hardship and made energy more
affordable. ORA worked closely with the Legislature to ensure passage of a bill that clarified that those
community-based organizations and contractors implementing the LIEE program would be selected based
on both cost-of-service and quality-of-service criteria.

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		Y'. r
Annual Hearin /Decision Activity		
		
UTILITY MATTERS HEA	RING DAYS	DECISIONS
1LF,CTRIC;ITY		
Agreement Approvals	4	5
Certificates/Transfers	12	14
Commission Investigations	25	29
Complaints	19	25
Financial Reviews	24	8
Lease of Property	0	10
Rate Requests	81	35
Mortgage/Issue Notes	0	8
Programs	17	8
Rulemakings	26	26
Miscellaneous	74	31
Total	282	199
NAUTRAL GAS		
Certificates/Transfers	3	6
Commission Investigations	12	6
Complaints	26	6
Mortgage/Issue Notes	0	4
Programs	1	2
Rate Requests	5	16
Rulcmakings	0	1
Miscellaneous	17	9
Total	64	50
TELECOMMUNICATIONS		
Agreement Approval	18	18
Certificates/Transfers	19	150
Commission Investigations	15	37
Complaints	31	46
Financial Reviews	0	2
NDI Registration	0	202
Rate Requests	1	2
Rulemakings	48	4
Miscellaneous	2	8
Total	134	389

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Annual Hearin /Decision Attivit			
		
UTILITY MATTERS HEARING DAYS	DECISIONS
WATER		
Agreement Approvals	2	1
Ccrtificatcs/Transfers	55	11
Commission Investigations	14	5
Complaints	6	12
Mortgage/Issue Notes	8	6
Rate Requests	46	9
Rulemakings	0	2
Miscellaneous	11	7
Total	142	5 3
TRANSPORT A'I"ION		
Certificates/Transfers	2	17
Commission Investigations	11	6
Complaints	11	10
Discontinuance	5	1
Expansion of Service	0	6
Grade Crossings	5	46
Household Goods Carrier	1	1
Passenger Stage	6	53
Rate Requests	2	3
Rulcmakings	0	1
Miscellaneous	3	11
Total	46	155
GRAND TOTAL	668	155

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EXH009-00403